<PAGE>
As filed with the Securities and Exchange Commission on April 16, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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EQUISTAR CHEMICALS, LP
EQUISTAR FUNDING CORPORATION
(Exact name of each registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 2869 76-0550481
Delaware 2869 51-0388569
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
Gerald A. O'Brien
Vice President, Secretary
and General Counsel
1221 McKinney Street, Suite 700 1221 McKinney Street, Suite 700
Houston, Texas 77010 Houston, Texas 77010
(713) 652-4560 (713) 652-4560
(Address, including zip code, and (Name, address, including zip code, and
telephone number, telephone number,
including area code, of each including area code, of agent for service
registrants' principal executive for each registrant)
offices)
Copy to:
Darrell W. Taylor
Baker & Botts, L.L.P.
3000 One Shell Plaza
Houston, Texas 77002
(713) 229-1234
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable following the effectiveness of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the
"Securities Act"), check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
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Calculation of Registration Fee
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<TABLE>
<CAPTION>
Proposed
Title of each class of maximum offering Proposed
securities to be Amount to be price per share maximum aggregate Amount of
registered registered (1) offering price (1) registration fee
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<S> <C> <C> <C> <C>
8 1/2% Notes due 2004... $300,000,000 100% $300,000,000 $ 83,400
8 3/4% Notes due 2009... $600,000,000 100% $600,000,000 $166,800
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Total................. $900,000,000 $900,000,000 $250,200
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</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933, as amended.
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until the Registration Statement shall become effective
on such date as the Commission, acting pursuant to said Section 8(a), may
determine.
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<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and we are not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS Subject to completion, dated April 16, 1999.
Equistar Chemicals, LP
Equistar Funding Corporation
$900,000,000
Offers to Exchange
All Outstanding Registered
8 1/2% Notes due 2004 for 8 1/2% Notes due 2004
for
8 3/4% Notes due 2009 8 3/4% Notes due 2009
The new notes
. will be freely tradeable
. are substantially identical to the outstanding notes
. will accrue interest at the same rate per annum as the outstanding notes
payable semiannually in arrears on each February 15 and August 15, beginning
August 15, 1999
. will be unsecured and will rank equally with outstanding notes that are not
exchanged and all other unsecured and unsubordinated indebtedness
. will not be listed on any securities exchange or on any automated dealer
quotation system
The exchange offers
. expire at 5:00 p.m., New York City time, on , 1999,
unless extended
. are not conditioned on any minimum aggregate principal amount of outstanding
notes being tendered
In addition, you should note that
. all outstanding notes that are validly tendered and not validly withdrawn
will be exchanged for an equal principal amount of new notes that are
registered under the Securities Act of 1933
. tenders of outstanding notes may be withdrawn any time before the expiration
of the exchange offers
. the exchange of outstanding notes for new notes in the exchange offers will
not be a taxable event for U.S. federal income tax purposes
You should consider carefully the risk factors beginning on page 7 of this
prospectus before participating in the exchange offers.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the new notes or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is , 1999.
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<PAGE>
Each broker-dealer that receives new notes for its own account using the
registered exchange offers must acknowledge that it will deliver a prospectus
in connection with any resale of the new notes. The letter of transmittal
states that by acknowledging and delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of new notes
received in exchange for outstanding notes where the outstanding notes were
acquired by the broker-dealer as a result of market-making activities or other
trading activities. Equistar and Equistar Funding have agreed that, for a
period of 180 days after the exchange offers expire, they will make this
prospectus available to any broker-dealer for use in connection with any
resale. See "Plan of Distribution."
<PAGE>
Prospectus Summary
This summary highlights information from this prospectus, but does not
contain all information that is important to you. This prospectus includes
specific terms of the exchange offers, information about our business and
detailed financial data. We encourage you to read the detailed information and
financial statements and the related notes appearing elsewhere in this
prospectus in their entirety.
About Equistar
Equistar is one of the largest chemical producers in the world with total
1998 pro forma revenues of $5 billion and $7 billion of assets at the end of
1998. It is the world's second-largest, and North America's largest, producer
of ethylene, the world's most widely used petrochemical. Equistar is also the
largest producer of polyethylene and propylene in North America.
Equistar's petrochemicals segment manufactures and markets olefins,
oxygenated chemicals, aromatics and speciality chemicals. Equistar's olefins
are ethylene, propylene and butadiene and its oxygenated chemicals include
ethylene oxide, ethylene glycol, ethanol and methyl tertiary butyl ether.
Equistar's aromatics are benzene and toluene. Equistar's polymers segment
manufactures and markets polyolefins, including high density polyethylene, low
density polyethylene, linear low density polyethylene, polypropylene and
performance polymers. Equistar's performance polymers include enhanced grades
of polyethylene such as wire and cable resins, and polymeric powders.
Equistar was formed in December 1997 as a Delaware limited partnership owned
by Lyondell Chemical Company and Millennium Chemicals Inc. Lyondell contributed
substantially all of the assets of its petrochemicals and polymers business
segments. Millennium contributed substantially all of the assets of its
polyethlene and related products, performance polymers and ethyl alcohol
businesses. In May 1998, Lyondell, Millennium, Equistar and Occidental
Petroleum Corporation consummated a series of transactions to expand Equistar
through the addition of Occidental petrochemical assets. Lyondell's aggregate
interest in Equistar is 41%. Millennium's aggregate interest is 29.5%.
Occidental's aggregate interest is 29.5%.
About Equistar Funding
Equistar Funding, a wholly owned subsidiary of Equistar, is a Delaware
corporation formed for the sole purpose of facilitating the financing
activities of Equistar. The outstanding notes were co-issued by Equistar and
Equistar Funding. Equistar and Equistar Funding are also co-issuers of the new
notes.
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Summary of the Exchange Offers
On February 16, 1999, we completed the private offering of the outstanding
notes.
We entered into an exchange and registration rights agreement with the
initial purchasers in the private offering. We agreed to deliver this
prospectus to you and to use our best efforts to complete the exchange offers
within 180 days after the date we issued the outstanding notes. You are
entitled to exchange your outstanding notes for new notes with substantially
identical terms.
You should read the discussion under the headings "--Summary of Terms of the
New Notes" beginning on page 5 and "Description of the New Notes" beginning on
page 84 for further information regarding the new notes.
We summarize the terms of the exchange offers below. You should read the
discussion under the heading "The Exchange Offers" beginning on page 74 for
further information regarding the exchange offers and resale of the new notes.
The Exchange Offers......... We are offering to issue to you:
. new 8 1/2% notes due 2004 in exchange for your
outstanding 8 1/2% notes due 2004
. new 8 3/4% notes due 2009 in exchange for your
outstanding 8 3/4% notes due 2009
Expiration Date............. The exchange offers will expire at 5:00 p.m., New
York City time, on , 1999, or at a later
date and time to which we extend it. We may
choose to extend one of the exchange offers
without extending the other.
Withdrawal of Tenders....... You may withdraw your tender of outstanding notes
at any time before the expiration date.
Conditions to the Exchange We will not be required to accept outstanding
Offers..................... notes for exchange if the exchange offers would
violate applicable law or if any legal action has
been instituted or threatened that would impair
our ability to proceed with the exchange offers.
The exchange offers are not conditioned on each
other or on any minimum aggregate principal
amount of outstanding notes being tendered.
Please read the section "The Exchange Offers--
Conditions to the Exchange Offers" beginning on
page 76 for more information regarding the
conditions to the exchange offers.
Procedures for Tendering
Outstanding Notes..........
If your outstanding notes are held through The
Depository Trust Company and you wish to
participate in the exchange offers, you may do so
through the automated tender offer program of The
Depository Trust Company. If you tender under
this program, you will agree to be bound by the
letter of transmittal that we are providing with
this prospectus as though you had signed the
letter of transmittal. By signing or agreeing to
be bound by the letter of transmittal, you will
represent to us, among other things, that
. any new notes you receive will be acquired in
the ordinary course of your business
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<PAGE>
. you have no arrangement or understanding with
any person or entity to participate in the
distribution of the new notes
. if you are not a broker-dealer, you are not
engaged in and do not intend to engage in the
distribution of the new notes
. if you are a broker-dealer that will receive
new notes for your own account in exchange for
outstanding notes that were acquired as a
result of market-making activities, you will
deliver a prospectus, as required by law, in
connection with any resale of those new notes
. you are not our "affiliate," as defined in Rule
405 of the Securities Act of 1933, or, if you
are our affiliate, you will comply with any
applicable registration and prospectus delivery
requirements of the Securities Act of 1933
Guaranteed Delivery If you wish to tender your outstanding notes and
Procedures................. cannot comply, before the expiration date, with
the applicable procedures under the automated
tender offer program of The Depository Trust
Company, you must tender your outstanding notes
according to the guaranteed delivery procedures
described in "The Exchange Offers--Guaranteed
Delivery Procedures" on page 81.
U.S. Federal Income Tax
Considerations.............
The exchange of outstanding notes for new notes
in the exchange offers will not be a taxable
event for U.S. federal income tax purposes.
Please read "Federal Income Tax Considerations"
beginning on page 91.
Use of Proceeds............. We will not receive any cash proceeds from the
issuance of new notes.
3
<PAGE>
The Exchange Agent
We have appointed The Bank of New York as exchange agent for the exchange
offers. You should direct questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal and
requests for the notice of guaranteed delivery to the exchange agent addressed
as follows:
For Delivery by Mail:
For Overnight Delivery Only or by Hand:
The Bank of New York The Bank of New York
101 Barclay St., floor 7E 101 Barclay St.
New York, NY 10286 Corporate Trust Services Window
Attn: Reorg. Dept. Ground Level
New York, NY 10286
Attn: Reorg. Dept.
By Facsimile Transmission (for eligible institutions only):
(212) 815-6339
Attn:
or
(212) 815-4699
Attn:
To Confirm Receipt:
or
4
<PAGE>
Summary of Terms of the New Notes
The new notes will be freely tradeable and otherwise substantially identical
to the outstanding notes. The new notes will not have registration rights or
provisions for additional interest. The new notes will evidence the same debt
as the outstanding notes, and the outstanding notes and the new notes will be
governed by the same indenture.
Securities Offered.......... $300 million of 8 1/2% notes due 2004.
$600 million of 8 3/4% notes due 2009.
Co-Issuers.................. The new notes will be joint and several
obligations of Equistar and Equistar Funding.
Maturity Dates.............. The new 8 1/2% notes will mature on August 15,
2004.
The new 8 3/4% notes will mature on August 15,
2009.
Interest Payment Dates...... February 15 and August 15 of each year,
commencing August 15, 1999.
Limited Recourse............ None of Lyondell, Millennium, Occidental or any
of their subsidiaries or affiliates, other than
Equistar and Equistar Funding, are obligated to
pay the new notes.
Optional Redemption......... At any time, we may redeem any and all of the new
notes. We will pay a redemption price equal to
the greater of 100% of the principal amount of
the notes we redeem or a redemption price as
described under the heading "Description of New
Notes--Optional Redemption" on page 85. We will
also pay accrued and unpaid interest.
Sinking Fund................ None.
Ranking..................... The new notes:
. will be senior unsecured indebtedness of
Equistar and Equistar Funding
. will rank equal in right of payment with any
outstanding notes that are not exchanged and
with all of our existing and future unsecured
and unsubordinated indebtedness and senior to
any future subordinated indebtedness
Restrictive Covenants....... The outstanding notes have been and the new notes
will be issued under an indenture containing
restrictive covenants for your benefit. These
covenants restrict our ability to
. incur indebtedness secured by liens
. engage in sale and leaseback transactions
. sell all or substantially all of our assets or
merge with another entity
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Form of New Notes........... The new notes will be represented by one or more
permanent global securities deposited with The
Depository Trust Company. You will not receive
certificates for your new notes unless one of the
events described under the heading "Book Entry;
Delivery and Form--Certificated Notes" on page 94
occurs. Instead, beneficial ownership interests
in the new notes will be shown on, and transfers
of beneficial ownership will be effected only
through, book-entry records maintained by The
Depository Trust Company.
Rights Under Exchange and
Registration Rights
Agreement..................
If we fail to complete the exchange offers as
required by the exchange and registration rights
agreement, we will be obligated to pay additional
interest to holders of the outstanding notes.
Risk Factors
Please read "Risk Factors" beginning on page 7 and carefully consider the
risk factors before participating in the exchange offers.
Principal Executive Offices
Our principal executive offices are located at 1221 McKinney Street, Suite
700, Houston, Texas 77010 and our telephone number is (713) 652-7200.
6
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Risk Factors
You should carefully consider the risks below before participating in the
exchange offers. The risks and uncertainties described below are not the only
ones relating to the new notes or Equistar. Additional risks and uncertainties
not presently known to us or that we currently do not believe are material may
also impair our business operations.
If any of the following risks actually occurs, our business, financial
condition or results of operations, and your investment in the notes, could be
materially adversely affected.
Risk Factors Relating to the New Notes and the Exchange Offers
If you fail to exchange your outstanding notes, the existing transfer
restrictions will remain in effect; the market value of your outstanding notes
may be adversely affected because of a smaller float.
If you do not exchange your outstanding notes for new notes under the
exchange offers, then you will continue to be subject to the existing transfer
restrictions on the outstanding notes. In general, the outstanding notes may
not be offered or sold unless they are registered or exempt from registration
under the Securities Act of 1933 and applicable state securities laws. Except
as required by the exchange and registration rights agreement, we do not intend
to register resales of the outstanding notes.
The tender of outstanding notes under the exchange offers will reduce the
aggregate principal amount of the notes outstanding. This may have an adverse
effect upon, and increase the volatility of, the market price of any
outstanding notes that you continue to hold due to a reduction in liquidity.
There is no public market for the new notes, and we do not intend to list them
on any securities exchange or automated quotation system.
There is no existing public market for the new notes. We cannot provide any
assurance about
. the liquidity of any markets that may develop for the new notes
. your ability to sell your new notes
. the prices at which you will be able to sell your new notes
Future trading prices of the new notes will depend on many factors,
including prevailing interest rates, our operating results, ratings of the new
notes and the market for similar securities. The initial purchasers of the
outstanding notes have advised us that they presently intend to make a market
in the new notes after completion of the exchange offers. However, those
purchasers do not have any obligation to do so, and they may discontinue any
market-making activities at any time without any notice.
We do not intend to apply for listing of the new notes on any securities
exchange or for quotation of the new notes in any automated dealer quotation
system.
None of the partners of Equistar or their affiliates will have any liability
for payments of principal or interest on the new notes.
Our ability to make payments on the new notes is solely dependent upon
Equistar's ability to generate sufficient cash from operations. If we fail to
fulfill our obligations under the new notes or the indenture, you will not have
the right to recover against any of Equistar's partners, whether as a general
partner or limited partner or otherwise, or against the partners' respective
parents or other affiliates.
7
<PAGE>
Risk Factors Relating to Equistar's Business
The petrochemical and polymer industries are highly cyclical, and Equistar's
results will be affected by external factors beyond our control.
External factors beyond our control, such as general economic conditions,
competitor action, international events and circumstances and governmental
regulation in the United States and abroad, can cause volatility in feedstock
prices. These external factors can also cause fluctuations in demand for our
products as well as our prices and margins. In addition, these external factors
can magnify the impact of economic cycles on our business.
Equistar and its predecessors' historical operating results reflect the
cyclical and volatile nature of the petrochemical and polymer industries. The
petrochemical and polymer industries are mature, and industry margins are
sensitive to cyclical petrochemical supply and demand balances. The
petrochemical and polymer industries historically experience alternating
periods of tight supply, causing prices and profit margins to increase,
followed by periods when substantial additional capacity is added resulting in
oversupply and declining prices and profit margins. A number of our products
are highly dependent on durable goods markets, such as housing and automotive,
that are themselves particularly cyclical.
Changes in commodities prices cannot be controlled and will affect Equistar's
results.
Due to the commodity nature of most of Equistar's products, we are not
necessarily able to protect our market position by product differentiation, or
pass on cost increases to our customers. Accordingly, increases in raw material
and other costs do not necessarily correlate with changes in product prices,
either in the direction of the price change or in magnitude.
There is overcapacity in the petrochemical and polymer industries which results
in lower operating rates and margins.
Currently, there is overcapacity in the petrochemical and polymer
industries. Moreover, a number of participants in various segments of the
petrochemical and polymer industries have announced plans for expansion of
plant capacity. There can be no assurance that future growth in product demand
will be sufficient to utilize this additional, or even current, capacity.
Excess industry capacity may lower our operating rates and margins.
External factors will cause quarter-to-quarter results to vary.
Equistar's quarterly results may vary significantly depending on various
factors, most of which are out of our control, including
. changes in the prices of and demand for our products
. changes in feedstock costs
. changes in supply arrangements
. developments in foreign markets
. unanticipated expenses
. unscheduled downtime and maintenance
Actions we take will cause quarter-to-quarter results to vary.
The actual mix of operating rates at our facilities will impact the
comparison of period-to-period results. We commonly take actions that are
intended to yield long-term benefits, but may increase the variance of results
from quarter to quarter or even from year to year. For example, Equistar
regularly adjusts the operating
8
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rate of its facilities to optimize production costs and margins. Different
facilities may have differing operating rates from period to period depending
on many factors, such as feedstock costs, transportation costs and supply and
demand for the product produced at the facility during that period. As a
result, individual facilities may be operated below or above rated capacities
in any period.
We will incur costs of any temporary shut-downs of our facilities. Equistar
may idle a facility for an extended period of time because an oversupply of a
certain product and/or a lack of demand for that product makes production
uneconomical. These temporary shut-downs could last for several quarters, and
we will incur costs, including the expenses of the shut-down and restart of
these facilities that may affect quarterly results when shut-downs and start-
ups occur.
Equistar enters into exchange arrangements with other producers whereby
Equistar exchanges product in expectation of repayment in another period. If we
lend product to other producers, we will incur production costs, but will not
necessarily have corresponding increases in revenues and cash flow in the same
period. If we borrow product, we will see an increase in revenues and cash
flow, but will not necessarily incur the costs required to produce the product
in the same period. These exchange arrangements may also affect the comparison
of period to period results.
Equistar may be active in adding assets or in disposing of assets, which could
affect short-term results of operations.
The purchase or sale of assets may often affect the results of operations of
Equistar in the short term because of the costs associated with these
transactions. Equistar actively seeks opportunities to maximize the value of
its assets, including combining its assets with those of third parties to
operate more efficiently or create greater value. In many circumstances,
maximizing value will be achieved through the purchase or sale of assets or
through contractual arrangements or joint ventures.
We will require a significant amount of cash to service our indebtedness, and
our ability to generate cash depends on many factors beyond our control.
Our ability to make payments on and to refinance our indebtedness, including
the new notes, and to fund working capital and planned capital expenditures
will depend on our ability to generate cash in the future. Several factors
beyond our control will effect our ability to make these payments and
refinancings, including
. uncertainties associated with the United States and worldwide economies
. prices of feedstocks and products
. current and potential governmental actions
. operating interruptions including leaks, explosions, fires, mechanical
failure, transportation interruptions and spills, releases and other
environmental risks
Equistar's $1.25 billion five-year revolving credit facility requires that
Equistar maintain compliance with specified financial ratios and covenants. The
ability of Equistar to comply with these ratios and covenants may be affected
by events beyond its control. The failure of Equistar to comply with the
required covenants could permit the lenders to declare all borrowings
outstanding under the credit facility to be due and payable. If this were to
occur, Equistar cannot assure you that its assets would be sufficient to repay
the indebtedness under the credit facility. At the date of this prospectus, the
amount outstanding under the $1.25 billion revolving credit facility is $750
million.
We cannot assure you
. that Equistar's business will generate sufficient cash flow from
operations
. that further anticipated cost savings and operating improvements will be
realized
9
<PAGE>
. that future borrowings will be available under the $1.25 billion
revolving credit facility in an amount sufficient to enable us to pay our
indebtedness, including the new notes on or before maturity
. that we will be able to refinance any of our indebtedness on commercially
reasonable terms, if at all
Environmental compliance, cleanup and other requirements can significantly
impact Equistar's operations.
Equistar is subject to stringent environmental, health and safety laws and
regulations addressing air emissions, water discharges, generation, handling
and disposal of waste, and other aspects of its operations. Typically, these
laws provide for substantial fines and potential criminal sanctions for
violations. Several of these laws, including the Superfund law, also impose
extensive requirements relating to investigation and cleanup of contamination.
In addition, Equistar may face liability for alleged personal injury or
property damage due to exposure to chemicals at its facilities or chemicals
which it otherwise manufactures, handles or owns.
Equistar incurs capital and operating costs to comply with environmental,
health and safety laws and regulations. Although we believe Equistar is in
material compliance with environmental, health and safety laws and regulations,
from time to time Equistar receives and addresses notices of violation.
Environmental costs also may arise from changes in laws and regulations and
from identification of additional areas of contamination requiring
investigation or cleanup. We cannot predict with certainty the extent of
Equistar's future liabilities and costs under environmental, health and safety
laws and regulations, but expect that it will continue to be significant.
Year 2000 disruptions in operations of Equistar or third parties could
adversely affect Equistar.
Systems that do not properly recognize and process date-sensitive
information could generate erroneous data, or even fail, as the year 2000
approaches. Equistar is conducting reviews of its key computer systems and has
identified a number of systems that could be affected by the year 2000 issue.
Equistar is upgrading these systems to allow them to function properly. If
these steps are not completed successfully in a timely manner, Equistar's
operations and financial performance could be adversely affected through
disruptions in operations.
Disruptions in the operations of third parties could potentially disrupt
Equistar's operations as well. Equistar relies on services, energy and raw
materials from third parties who may or may not be adversely affected by the
year 2000 issue.
A change in control or exit of one or more of Lyondell, Millennium or
Occidental could adversely affect Equistar.
Any one or more of Lyondell, Millennium or Occidental may transfer control
of their interests in Equistar. We cannot predict how the transfer of a
partnership interest, or of control of an owner, to a third party could affect
the operation or business of Equistar. A change in control of any of Lyondell,
Millennium or Occidental would also mean a change in control of Equistar. There
is no substantive restriction on the ability of Lyondell, Millennium or
Occidental to engage in business combination transactions, such as mergers or
sales of a majority of assets, that would result in a change in control of any
one of them.
The $1.25 billion revolving credit facility provides that an event of
default occurs if Lyondell, Millennium and Occidental, collectively, cease to
own at least a majority interest in Equistar. An event of default under the
$1.25 billion revolving credit facility would permit the lenders to declare
amounts outstanding under the credit facility immediately due and payable and
to terminate certain lending obligations.
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Cautionary Statement
This prospectus is part of a registration statement we filed with the
Securities and Exchange Commission.
. You should rely on the information or representations provided in this
prospectus
. We have not authorized any person to provide information in this
prospectus other than that provided in this prospectus
. We have not authorized anyone to provide you with different information
. We are not making an offer of these securities in any jurisdiction where
the offer is not permitted
. You should not assume that the information in this prospectus is accurate
as of any date other than the date on the front of this document
Forward-Looking Information
Some of the statements contained in this prospectus, in particular under
the captions "Prospectus Summary," "Risk Factors," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and
"Description of Equistar's Business," are "forward-looking statements." We use
the terms "plan," "intend," "budget," "forecast," "will," "could" and "should"
and similar expressions to identify forward-looking statements. These
statements
. address activities, events or developments that we expect, believe,
anticipate or estimate will or may occur in the future
. are based on assumptions and analyses that we have made and that we
believe are reasonable
. are based on various risks and uncertainties, general economic and
business conditions, business opportunities that may be presented to and
pursued by us from time to time, changes in laws or regulations and other
factors, many of which are beyond our control
Any one of these factors, or a combination of these factors, could
materially affect our future results of operations and whether the forward-
looking statements ultimately prove to be accurate. Although we believe the
expectations reflected in these forward-looking statements are reasonable,
they do involve certain assumptions, risks and uncertainties, and we cannot
assure you that these expectations will prove to have been correct. These
forward-looking statements are not guarantees of our future performance, and
our actual results and future developments may differ materially from those
projected in the forward-looking statements. See "Risk Factors" beginning on
page 7.
We undertake no obligation to publically update or revise any forward-
looking statements, whether as a result of new information or otherwise. All
oral or written forward-looking statements attributable to us or persons
acting on our behalf are expressly qualified in their entirety by these
cautionary statements.
Use of Proceeds
We will not receive any cash proceeds from the issuance of the new notes.
In consideration for issuing the new notes, we will receive in exchange a like
principal amount of outstanding notes. The outstanding notes surrendered in
exchange for the new notes will be retired and canceled and cannot be re-
issued. Accordingly, issuance of the new notes will not result in any change
in our capitalization.
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Capitalization
The following table sets forth our capitalization as of December 31, 1998
. on a historical basis
. as adjusted to reflect the sale of the outstanding notes and the
application of the proceeds from that sale
We used the net proceeds to terminate the outstanding balance under the $500
million credit facility, to repay the $205 million of capital lease
obligations, repay indebtedness outstanding under the $1.25 billion revolving
credit facility and for partnership working capital. We will retire $150
million aggregate principal amount of 10.00% Notes upon their June 1999
maturity.
You should read this table in conjunction with "Selected Historical and Pro
Forma Financial and Operating Data of Equistar," "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the financial statements and the related notes and other financial
and operating data included elsewhere in this prospectus.
<TABLE>
<CAPTION>
December 31, 1998
----------------------
Historical As Adjusted
---------- -----------
(millions of dollars)
<S> <C> <C>
Cash and cash equivalents................................. $ 66 $ 66
====== ======
Long-term debt, including current maturities:
Capital lease obligations............................... $ 205 --
$1.25 billion revolving credit facility(a).............. 1,150 $ 765
$500 million facility(b)................................ 152 --
10.00% Notes due 1999................................... 150 --
9.125% Notes due 2002................................... 100 100
Medium-term notes (due 1999-2005)....................... 163 163
6.50% Notes due 2006.................................... 150 150
7.55% Debentures due 2026............................... 150 150
8 1/2% Notes due 2004................................... -- 300
8 3/4% Notes due 2009................................... -- 600
------ ------
Total long-term debt, including current maturities.... 2,220 2,228
------ ------
Partners' capital......................................... 3,885 3,885
------ ------
Total capitalization...................................... $6,105 $6,113
====== ======
Debt to total capitalization ratio........................ 36% 36%
====== ======
</TABLE>
- --------
(a) The aggregate amount outstanding under the bank credit facility as of April
1, 1999 was $750 million.
(b) Terminated in February 1999 following repayment of the outstanding balance
with proceeds from the offering of the outstanding notes.
12
<PAGE>
The Partners of Equistar
Lyondell
Lyondell is a global chemical company with leading market positions in all
of its major products, world-scale production capacity and low-cost operations.
Lyondell acquired its intermediate chemicals and derivatives business through
the acquisition of ARCO Chemical Company in July 1998. Lyondell had revenues on
a pro forma basis after the ARCO Chemical Company acquisition of $3.6 billion
for the year ended December 31, 1998, and $9.2 billion of assets at December
31, 1998. Lyondell is vertically integrated into its key raw materials through
its equity ownership in Equistar, LYONDELL-CITGO Refining LP and Lyondell
Methanol Company, L.P. Lyondell operates in four major businesses:
Intermediate Chemicals and Derivatives. Lyondell is the world's largest
producer of propylene oxide and a leading worldwide producer and marketer of
propylene oxide derivatives, including polyether polyols, propylene glycol,
propylene glycol ethers and butanediol. Propylene oxide is a key component in
the manufacture of urethanes and non-urethanes products. Lyondell also is the
world's second largest supplier of toluene diisocyanate, another key component
of urethanes. Lyondell is also a major producer of styrene monomer and tertiary
butyl alcohol, co-products of Lyondell's proprietary propylene oxide
technology. Lyondell utilizes most of its tertiary butyl alcohol to make methyl
tertiary butyl ether ("MTBE"), a gasoline blending component.
Petrochemicals and Polymers. Lyondell owns 41% of Equistar.
Refining (LCR). Lyondell owns 58.75 percent of LYONDELL-CITGO Refining,
which owns and operates North America's largest extra heavy crude coking
refinery, processing low cost 17(degrees) API crude oil. LYONDELL-CITGO
Refining processes large volumes of this extra heavy crude oil into premium
petroleum products such as reformulated gasoline, low sulfur diesel, jet fuel,
aromatics and lubricants. LYONDELL-CITGO Refining has a long-term crude oil
supply agreement with Petroleos de Venezuela, S.A., the national oil company of
Venezuela. LYONDELL-CITGO Refining was formed in 1993 as a joint venture with
CITGO Petroleum Corporation, an indirect wholly owned subsidiary of Petroleos
de Venezuela, S.A.
Methanol. Lyondell owns 75% of Lyondell Methanol, the third largest producer
of methanol in the United States. Lyondell Methanol was formed in December 1996
by Lyondell and MCN Investment Corporation, a major producer of natural gas,
the primary feedstock of methanol.
Millennium
Millennium is a major international chemical company, with leading market
positions in a broad range of commodity, industrial, performance and specialty
chemicals. Millennium had revenues of approximately $1.6 billion for the year
ended December 31, 1998, and approximately $4.1 billion of assets at December
31, 1998. Millennium's principal operations are grouped into four business
segments:
Titanium Dioxide and Related Products. Millennium is the second largest
producer of titanium dioxide ("TiO/2/") in the world, with manufacturing
facilities in the United States, the United Kingdom, France, Australia and
Brazil. TiO/2/ is a white pigment used for imparting whiteness, brightness and
opacity in a variety of consumer and industrial products, including paints and
coatings, plastics, paper and rubber. Millennium is also the largest merchant
producer of titanium tetrachloride in the United States and Europe.
Acetyls. Millennium is the second largest producer of acetic acid and vinyl
acetate monomer in the United States and a major producer of methanol in the
United States. Vinyl acetate monomer is used to produce adhesives, water-based
paints, textile coatings, paper coatings and a variety of polymer products.
Acetic acid is used to produce vinyl acetate monomer, terephthalic acid, which
is used to produce polyester for textiles and plastic bottles, and industrial
solvents.
13
<PAGE>
Specialty Chemicals. Millennium is the world's largest producer of terpene
fragrance chemicals, which are components blended together to make fragrances
and flavors used in detergents, soaps, personal care items, perfumes and food
products. Millennium is the world's second largest manufacturer of cadmium-
based pigments, used in engineered plastics, artists' colors, ceramics, inks
and other coatings and finishes. Millennium is also a major producer of silica
gel, a chemically and biologically inert form of silica. Silica gel is used to
reduce gloss and control flow in coatings and is used to stabilize and extend
the shelf life of beer, plastic films, powdered food products and
pharmaceuticals.
Equistar. Millennium owns 29.5% of Equistar.
Occidental
Occidental explores for, develops, produces and markets crude oil and
natural gas. Occidental also manufactures and markets a variety of basic
chemicals, including chlorine, caustic soda, polyvinyl chloride ("PVC"), vinyl
chloride monomer and ethylene dichloride, as well as specialty chemicals.
Occidental also has an interest in petrochemicals through its 29.5% ownership
interest in Equistar. Occidental had net sales of approximately $6.6 billion
for the year ended December 31, 1998, and approximately $15.3 billion of assets
at December 31, 1998. Occidental's principal business consists of two industry
segments:
Oil and Gas Operations. Through its subsidiaries and its 29% equity interest
in Canadian Occidental Petroleum, Ltd., Occidental produces or participates in
the production of crude oil, condensate and natural gas in the United States,
Bangladesh, Canada, Colombia, Ecuador, Oman, Pakistan, Peru, Qatar, Russia and
Yemen. Approximately 90% of Occidental's oil and gas assets are located in the
United States, Qatar, Yemen, Colombia and Peru. Occidental is continuing its
development programs for some of its existing fields in several of these
countries. Occidental is also conducting exploration activities in several of
these countries. At December 31, 1998, Occidental had total reserves of 1,066
million barrels of oil and 2,149 billion cubic feet of natural gas.
Chemical Operations. Occidental's chemical operations manufactures and
markets a variety of basic chemicals, including chlorine, caustic soda, PVC,
vinyl chloride monomer, ethylene dichloride, as well as specialty chemicals.
Chlorine and vinyl chloride monomer are used to produce PVC resins. Occidental
believes, based on statistics in chemical industry publications, that during
1998 it was the largest United States merchant marketer of chlorine and caustic
soda and the largest North American producer of chrome chemicals, potassium
hydroxide, chlorinated isocyanurate products, ethylene dichloride and antimony
oxide. Occidental also believes, based on these statistics, that it was the
second largest United States producer of vinyl chloride monomer, including
production of a joint venture in which Occidental participates, phenolic
molding compounds, sodium silicates and mercaptan warning agents. Occidental
was the third largest producer of PVC resins in North America. Occidental's
specialty chemicals business is a leading producer of sodium silicates, chrome
chemicals, ACL pool chemicals (chlorinated isocyanurates), phenolic
resins/molding compounds, mercaptans, antimony oxide and resorcinol.
Equistar. Occidental owns 29.5% of Equistar.
14
<PAGE>
Selected Pro Forma and Historical Financial and
Operating Data of Equistar
The table below shows selected pro forma and historical financial and
operating data for Equistar. The following selected historical income statement
and balance sheet data have been derived from financial statements of Equistar
which have been audited by PricewaterhouseCoopers LLP, independent accountants
(1) as of and for the year ended December 31, 1998 and (2) as of and for the
one month ended December 31, 1997. PricewaterhouseCoopers' report is included
elsewhere in this prospectus. The operating data have been derived from the
historical operating records of Equistar. Neither the historical financial data
nor the historical operating data are necessarily indicative of the future
results of operations of Equistar. The pro forma financial and operating data
are not necessarily indicative of the future results of operations of Equistar.
The selected pro forma and historical financial and operating data for
Equistar shown below highlight information found elsewhere in this prospectus.
They are not complete and may not contain all of the information that you
should consider. You should read the entire prospectus carefully, including the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section of this prospectus and the Equistar financial statements
and the related notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
For the one For the year For the year
month ended ended ended
December 31, December 31, December 31,
1997 1998(a) 1998(b)
------------ ------------ ------------
(pro forma)
<S> <C> <C> <C>
Income statement data (millions of
dollars):
Sales and other operating revenues...... $ 365 $4,363 $4,869
Cost of sales........................... 287 3,773 4,235
Selling, general and administrative
expenses............................... 21 273 279
Unusual charges......................... 42 35 35
------ ------ ------
Operating income........................ 15 282 320
Loss from equity investment............. -- -- 2
Interest expense, net................... 8 139 173
Other income............................ -- -- 5
------ ------ ------
Income before income taxes.............. 7 143 150
Provisions for income taxes............. -- -- --
------ ------ ------
Net income.............................. $ 7 $ 143 $ 150
====== ====== ======
Other operating data (millions of
dollars):
EBITDA(c)............................... $ 34 $ 550 $ 628
Cash flows from operating activities.... 102 846 N/A
Cash flows from investing activities.... (12) (212) N/A
Cash flows from financing activities.... (49) (609) N/A
Ratio of earnings to fixed charges(d)... 1.5x 1.7x 1.7x
Depreciation and amortization........... 19 268 305
Capital expenditures.................... 12 200 210
Balance sheet data (at end of period) (millions
of dollars):
Working capital, net.................... $ 856 $ 492 N/A
Total assets............................ 4,600 6,668 N/A
Total debt(e)........................... 1,548 2,220 N/A
Total partners' capital................. 2,718 3,885 N/A
Sales volumes (millions):
Selected petrochemical products:
Ethylene, propylene and other olefins
(lbs.)............................... 737 16,716 18,291
Aromatics (gallons)................... 17 271 281
Polymer products (lbs.)................. 167 6,488 6,488
</TABLE>
15
<PAGE>
- --------
(a) The Occidental contributed business was added to Equistar on May 15, 1998.
The actual amounts for the year ended December 31, 1998 include the
Occidental contributed business amounts from May 15, 1998 to December 31,
1998.
(b) The unaudited pro forma financial and operating data present the results of
Equistar as if the Occidental contributed business had been contributed as
of January 1, 1998.
(c) EBITDA is calculated as operating income plus depreciation and amortization
and other income. EBITDA should not be construed as a substitute for
operating income or a better indicator of liquidity than cash flows from
operating activities, which are determined according to generally accepted
accounting principles. Management included EBITDA to provide additional
information with respect to the ability of Equistar to meet its future debt
service, capital expenditure and working capital requirements. EBITDA is
not necessarily a measure of Equistar's ability to fund its cash needs.
Management believes that certain investors find the calculation of EBITDA a
useful tool for measuring the ability to service debt.
(d) For purposes of calculating the ratio of earnings to fixed charges, fixed
charges include interest expense, plus capitalized interest, and that
portion of non-capitalized rental expense deemed to be the equivalent of
interest. Earnings represent net income plus fixed charges, excluding
capitalized interest.
(e) Total debt is defined as long-term debt, current maturities of long-term
debt and capital lease obligations.
16
<PAGE>
Selected Historical Financial and Operating Data
of the Lyondell Contributed Business
The table below shows selected historical financial and operating data for
the Lyondell contributed business. The following selected historical income
statement and balance sheet data have been derived from financial statements of
the Lyondell contributed business which have been audited by
PricewaterhouseCoopers LLP, independent accountants (1) as of November 30, 1997
and for the eleven-month period then ended and (2) as of December 31, 1996 and
for the two years in the period then ended. PricewaterhouseCoopers' report is
included elsewhere in this prospectus. The selected historical income statement
data for the year ended December 31, 1994 and the balance sheet data as of
December 31, 1995 have been derived from financial statements of the Lyondell
contributed business, which have been audited by PricewaterhouseCoopers LLP,
independent accountants. The selected historical balance sheet data as of
December 31, 1994 have been derived from the historical financial records of
Lyondell. The operating data have been derived from the historical operating
records of Lyondell. Neither the historical financial data nor the historical
operating data are necessarily indicative of the future results of operations
of Equistar.
The selected historical financial and operating data shown below are not
complete. You should read the entire prospectus carefully, including the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section of this prospectus and the Lyondell contributed business
financial statements and the related notes included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
For the
For the year ended eleven months
December 31, ended
---------------------- November 30,
1994 1995 1996 1997
------ ------ ------ -------------
<S> <C> <C> <C> <C>
Income statement data (millions of
dollars):
Sales and other operating revenues...... $1,806 $2,509 $2,515 $2,715
Cost of sales........................... 1,449 1,869 2,135 2,153
Selling, general and administrative
expenses............................... 69 125 157 166
------ ------ ------ ------
Operating income........................ 288 515 223 396
Interest expense, net................... 73 76 65 50
------ ------ ------ ------
Income before income taxes.............. 215 439 158 346
Provision for income taxes.............. 78 162 56 127
------ ------ ------ ------
Net income.............................. $ 137 $ 277 $ 102 $ 219
====== ====== ====== ======
Other operating data (millions of
dollars):
EBITDA(a)............................... $ 323 $ 561 $ 290 $ 464
Cash flows from operating activities.... 11 318 79 156
Cash flows from investing activities.... (40) (476) (80) (49)
Cash flows from financing activities.... 29 158 1 (106)
Ratio of earnings to fixed charges(b)... 2.7x 4.1x 2.3x 4.4x
Depreciation and amortization........... 35 46 67 68
Capital expenditures.................... 40 476 80 49
Balance sheet data (at end of period)
(millions of dollars):
Working capital, net.................... $ 218 $ 69 $ 269 $ 352
Total assets............................ 834 1,306 1,494 1,532
Total debt(c)........................... 717 745 745 745
Total invested capital.................. (87) 320 423 536
Sales volumes (millions):
Selected petrochemical products:
Ethylene, propylene and other olefins
(lbs.)............................... 7,146 7,688 7,973 8,084
Aromatics (gallons)................... 178 175 188 176
Polymer products (lbs.)................. 616 1,598 2,136 1,985
</TABLE>
17
<PAGE>
- --------
(a) EBITDA is calculated as operating income plus depreciation and amortization
and other income. EBITDA should not be construed as a substitute for
operating income or a better indicator of liquidity than cash flows from
operating activities, which are determined according to generally accepted
accounting principles. Management included EBITDA to provide additional
information with respect to the ability of Equistar to meet its future debt
service, capital expenditure and working capital requirements. EBITDA is
not necessarily a measure of Equistar's ability to fund its cash needs.
Management believes that some investors find the calculation of EBITDA a
useful tool for measuring the ability to service debt.
(b) For purposes of calculating the ratio of earnings to fixed charges, fixed
charges include interest expense, plus capitalized interest, and that
portion of noncapitalized rental expense deemed to be the equivalent of
interest. Earnings represent net income plus fixed charges, excluding
capitalized interest.
(c) Total debt is defined as long-term debt, current maturities of long-term
debt and capital lease obligations.
18
<PAGE>
Selected Historical Financial and Operating Data
of the Millennium Contributed Business
The table below shows selected historical financial and operating data for
the Millennium contributed business. The following selected historical income
statement and balance sheet data have been derived from the financial
statements of the Millennium contributed business which have been audited by
PricewaterhouseCoopers LLP, independent accountants (1) as of November 30, 1997
and for the eleven-month period then ended and (2) as of December 31, 1996 and
for the two years in the period then ended. PricewaterhouseCoopers' report is
included elsewhere in this prospectus. The selected historical income statement
data for the year ended December 31, 1994 and the balance sheet data as of
December 31, 1995 have been derived from financial statements of the Millennium
contributed business, which have been audited by PricewaterhouseCoopers LLP,
independent accountants. The selected historical balance sheet data as of
December 31, 1994 have been derived from the historical financial records of
Millennium. The operating data have been derived from the historical operating
records of Millennium. Neither the historical financial data nor the historical
operating data are necessarily indicative of the future results of operations
of Equistar.
The selected historical financial and operating data shown below are not
complete. You should read the entire prospectus carefully, including the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section of this prospectus and the Millennium contributed business
financial statements and the related notes included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
For the
For the year ended eleven months
December 31, ended
---------------------- November 30,
1994 1995 1996 1997
------ ------ ------ -------------
<S> <C> <C> <C> <C>
Income statement data (millions of
dollars):
Sales................................... $1,645 $1,932 $1,860 $1,786
Cost of sales........................... 1,331 1,324 1,503 1,341
Selling, development and administrative
expenses............................... 104 113 109 136
------ ------ ------ ------
Operating income........................ 210 495 248 309
Interest expense, net................... 80 80 80 66
------ ------ ------ ------
Income before income taxes.............. 130 415 168 243
Provision for income taxes.............. 62 172 76 96
------ ------ ------ ------
Net income.............................. $ 68 $ 243 $ 92 $ 147
====== ====== ====== ======
Other operating data (millions of
dollars):
EBITDA(a)............................... $ 339 $ 627 $ 375 $ 434
Cash flows from operating activities.... 126 262 80 304
Cash flows from investing activities.... (38) (75) (127) (41)
Cash flows from financing activities.... (88) (187) 47 (263)
Ratio of earnings to fixed charges(b)... 1.7x 3.6x 2.0x 2.9x
Depreciation and amortization........... 129 132 127 125
Capital expenditures.................... 38 75 127 41
Balance sheet data (at end of period)
(millions of dollars):
Working capital, net.................... $ 247 $ 331 $ 363 $ 265
Total assets............................ 2,978 2,977 3,121 2,804
Total debt(c)........................... 1,016 1,013 1,009 4
Total invested capital.................. 1,633 1,692 1,835 2,724
Sales volumes (millions):
Selected petrochemical products:
Ethylene, propylene and other olefins
(lbs.)............................... 955 735 950 608
Aromatics (gallons)................... -- -- -- --
Polymer products (lbs.)................. 4,123 3,926 3,884 3,980
</TABLE>
19
<PAGE>
- --------
(a) EBITDA is calculated as operating income plus depreciation and amortization
and other income. EBITDA should not be construed as a substitute for
operating income or a better indicator of liquidity than cash flows from
operating activities, which are determined according to generally accepted
accounting principles. Management included EBITDA to provide additional
information with respect to the ability of Equistar to meet its future debt
service, capital expenditure and working capital requirements. EBITDA is
not necessarily a measure of Equistar's ability to fund its cash needs.
Management believes that some investors find the calculation of EBITDA a
useful tool for measuring the ability to service debt.
(b) For purposes of calculating the ratio of earnings to fixed charges, fixed
charges include interest expense, plus capitalized interest, and that
portion of non capitalized rental expense deemed to be the equivalent of
interest. Earnings represent net income plus fixed charges.
(c) Total debt is defined as long-term debt, current maturities of long-term
debt and capital lease obligations.
20
<PAGE>
Equistar Unaudited Pro Forma Income Statement Data
For the Year Ended December 31, 1998
The unaudited pro forma financial data shown below present the financial
results of Equistar as if
. the Occidental contributed business had been contributed as of January 1,
1998
. the change in interest expense resulting from Equistar's use of proceeds
from the issuance of the outstanding notes had occurred as of January 1,
1998
The unaudited pro forma financial data do not necessarily reflect the results
of operations of Equistar that would have resulted had these transactions
actually been consummated as of the dates indicated. The data shown below are
not necessarily indicative of the future results of operations of Equistar.
<TABLE>
<CAPTION>
Occidental
Contributed Pro Forma Pro Forma
Equistar Business(a) Adjustments Combined
-------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Income statement data
(millions of dollars):
Sales and other operating
revenues..................... $4,363 $506 $4,869
Operating costs and expenses:
Cost of goods sold.......... 3,773 457 $ 5(b) 4,235
Selling, general and
administrative expenses.... 273 6 279
Unusual charges............. 35 -- 35
------ ---- --- ------
Operating income.............. 282 43 (5) 320
Loss from equity investment... -- 2 2
Interest expense, net......... 139 39 (5)(c)(d)(e) 173
Other income.................. -- 5 5
------ ---- --- ------
Net income.................... $ 143 $ 7(f) $-- $ 150
====== ==== === ======
</TABLE>
- --------
(a) To reflect the results of the Occidental contributed business from January
1, 1998 to May 14, 1998, before its addition to Equistar.
(b) To reflect the additional depreciation expense for the period from January
1, 1998 to May 14, 1998 related to the increase in the fair value in excess
of the historical book basis of the Occidental contributed business over an
average useful life of 25 years.
(c) To reflect the elimination of $38 million of interest expense related to
debt not contributed to Equistar by Occidental.
(d) To reflect the interest expense of $16 million for the period from January
1, 1998 to May 14, 1998 related to the additional $700 million of debt that
was incurred upon consummation of the Occidental contribution.
(e) To reflect an interest expense increase related to the offering of the
outstanding notes offset by a decrease resulting from the use of proceeds,
which amounts to $17 million, net.
(f) Amount represents pretax income of the Occidental contributed business.
21
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following is not a complete description of Equistar's business affairs.
You should read it in conjunction with the historical financial statements and
the notes to those statements of Equistar and the Lyondell, Millennium and
Occidental contributed businesses, which are included in this prospectus.
Selected Pricing Information
The following graphs present industry pricing information for the periods
discussed below, based on published industry sources.
[Chart 1--Month-end average delivered-contract, monthly low price agreement
prices for Ethylene as reported by CMAI Monomers Market Report from January 1996
through December 1998. Chart indicates 1996 prices increased steadily, with an
annual average of the month-end prices of 23.33 cents per pound. 1997 prices
were relatively flat, although slightly decreasing, with an annual average of
the month-end prices of 27.42 cents per pound. 1998 prices declined steadily
with an annual average of the month-end prices of 21.17 cents per pound.
Selected month-end average prices are as follows: January 1996--19.75 cents per
pound, December 1996--26.25 cents per pound, December 1997--26.25 cents per
pound, December 1998--19.00 cents per pound.]
[Chart 2--Month-end average spot price WTS low prices for Crude Oil as
reported by Platts Oilgram Price Report from January 1996 through December 1998.
Chart indicates volatile, but increasing prices in 1996 with the chart's peak
occurring at $24.32 per barrel in December 1996. Annual average month-end prices
were $21.35 per barrel in 1996. Prices decreased in 1997 with an annual average
of the month-end prices of $19.35 per barrel. Prices declined steadily in 1998
with a low point of $10.02 per barrel in December 1998 and an annual average of
the month-end prices of $12.94 per barrel. Selected month-end average prices are
as follows: January 1996--$18.39 per barrel, December 1996--$24.32 per barrel,
December 1997--$17.13 per barrel, December 1998--$10.02 per barrel.]
For the Year Ended December 31, 1998 vs. the Year Ended December 31, 1997
The following discussion and analysis compares the historical results of
Equistar for the year ended December 31, 1998 with the combined historical
results of the Lyondell and Millennium contributed businesses for the eleven
months ended November 30, 1997 and Equistar for the one month ended December
31, 1997, which we refer to as the "Combined Businesses." These combined
results for the year ended December 31, 1997 are not intended to, and do not
represent, pro forma results of Equistar. In addition, they may not be
indicative of results that will be obtained in the future.
22
<PAGE>
Selected financial and operating information for Equistar for the year ended
December 31, 1998, for the Lyondell contributed business and the Millennium
contributed business for the eleven months ended November 30, 1997 and Equistar
for the one month ended December 31, 1997 is as follows:
<TABLE>
<CAPTION>
Lyondell Millennium
contributed contributed Combined
Equistar for business for business for Equistar for Businesses
the year the eleven the eleven the one for the year
ended months ended months ended month ended ended
December 31, November 30, November 30, December 31, December 31,
1998 1997 1997 1997 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Income statement data
(millions of dollars):
Sales and other
operating revenues..... $4,363 $2,715 $1,786 $365 $4,866
Cost of sales........... 3,773 2,153 1,341 287 3,781
Selling, general and
administrative
expenses............... 273 166 136 21 323
Unusual charges......... 35 -- -- 42 42
------ ------ ------ ---- ------
Operating income....... 282 396 309 15 720
Interest expense, net... 139 50 66 8 124
------ ------ ------ ---- ------
Income before income
taxes................. 143 346 243 7 596
Provision for income
taxes.................. -- 127 96 -- 223
------ ------ ------ ---- ------
Net income............. $ 143 $ 219 $ 147 $ 7 $ 373
====== ====== ====== ==== ======
Sales volumes
(millions):
Selected petrochemical
products:
Ethylene, propylene and
other olefins
(lbs.)................ 16,716 8,084 608 737 9,429
Aromatics (gallons).... 271 176 -- 17 193
Polymers products
(lbs.)................. 6,488 1,985 3,980 167 6,132
</TABLE>
Overview
Net income was $143 million for the year ended December 31, 1998 compared to
$373 million for 1997. The decline in net income from 1997 to 1998 was
primarily due to lower prices and margins in both the petrochemicals and
polymers segments. The decline in prices and margins began in the fourth
quarter of 1997 and continued throughout 1998. The decline was partially offset
by lower feedstock costs and increased sales volumes as a result of the
addition of the Occidental contributed business in May 1998.
The following tables for the petrochemicals and polymers segments show
selected income statement and operating data. Revenues include intersegment
sales. Cost of sales include intersegment purchases.
Petrochemicals Segment
<TABLE>
<CAPTION>
Lyondell Millennium
contributed contributed Combined
Equistar for business for business for Equistar for businesses
the year the eleven the eleven the one for the year
ended months ended months ended month ended ended
December 31, November 30, November 30, December 31, December 31,
1998 1997 1997 1997 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Income statement data
(millions of dollars):
Sales revenues.......... $3,463 $2,369 $1,213 $284 $3,866
Cost of sales........... 3,130 1,965 950 236 3,151
Selling expenses........ 14 26 4 1 31
------ ------ ------ ---- ------
Operating income........ $ 319 $ 378 $ 259 $ 47 $ 684
====== ====== ====== ==== ======
Sales volumes
(millions):
Selected petrochemical
products:
Ethylene, propylene and
other olefins (lbs.).. 16,716 8,084 608 737 9,429
Aromatics (gallons).... 271 176 -- 17 193
</TABLE>
23
<PAGE>
Revenues
Sales revenues for the petrochemicals segment decreased from $3,866 million
for 1997 to $3,463 million for 1998. The decrease of $403 million was due to
declines in industry sales prices. Sales prices are primarily driven by the
following three factors:
. the demand for products as a result of economic conditions in end-use
markets such as the auto industry, housing construction and consumer
durable and nondurable goods
. the operating rate of the installed capacity to produce olefins products
. the underlying cost of feedstocks
For olefins products, the decrease in sales prices was primarily
attributable to increased industry capacity and downward pressure on sales
prices as a result of lower feedstock costs. The sales price decreases were
partially offset by increased sales volumes as a result of the addition of the
Occidental contributed business in May 1998.
Cost of Sales
Cost of sales decreased from $3,151 million in 1997 to $3,130 million in
1998. The decrease was primarily due to declines in feedstock costs, which were
partially offset by slightly higher fixed costs and the addition of the
Occidental contributed business in May 1998.
Equistar's olefins feedstocks tend to follow the cost trends of crude oil
and natural gas. Crude oil prices began dropping in 1997 and continued to fall
throughout 1998, which resulted in lower feedstock costs for the petrochemicals
segment. Natural gas prices also dropped in early 1998 and remained at that
level throughout 1998.
Selling Expenses
Selling expenses decreased from $31 million in 1997 to $14 million in 1998.
The decrease was primarily due to lower personnel costs as a result of the
consolidation of operations.
Operating Income
Operating income decreased from $684 million in 1997 to $319 million in
1998. The decrease of $365 million primarily reflected lower product margins as
a result of declines in sales prices and slightly higher fixed costs. The
decrease was partially offset by lower feedstock costs and the addition of the
Occidental contributed business in May 1998.
Polymers Segment
<TABLE>
<CAPTION>
Lyondell Millennium
contributed contributed Combined
Equistar for business for business for Equistar for businesses
the year the eleven the eleven the one for the year
ended months ended months ended month ended ended
December 31, November 30, November 30, December 31, December 31,
1998 1997 1997 1997 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Income statement data
(millions of dollars):
Sales revenues.......... $2,058 $ 770 $1,557 $186 $2,513
Cost of sales........... 1,799 612 1,375 156 2,143
Selling expenses........ 82 76 53 8 137
------ ----- ------ ---- ------
Operating income ....... $ 177 $ 82 $ 129 $ 22 $ 233
====== ===== ====== ==== ======
Sales volumes
(millions):
Polymer products........ 6,488 1,985 3,980 167 6,132
</TABLE>
24
<PAGE>
Revenues
Sales revenues for the polymers segment decreased from $2,513 million for
1997 to $2,058 million for 1998. The decrease of $455 million is a result of
decreases in industry sales prices. Sales prices are primarily driven by the
following three factors:
. the demand for products as a result of economic conditions in end-use
markets such as the auto industry, housing construction and consumer
durable and nondurable goods
. the operating rate of the installed capacity to produce polymer products
. the underlying cost of feedstocks
For polymer products, the sales price decreases were a result of excess
industry supply and lower feedstock costs. The excess industry supply and
related sales price decreases began in the fourth quarter of 1997 and continued
throughout 1998. The decrease in sales prices was partially offset by an
increase in sales volumes.
Cost of Sales
Cost of sales was $1,799 million for 1998 as compared to $2,143 million for
1997. The primary feedstocks for the polymers segment are olefins, primarily
ethylene and propylene. During 1998, the industry sales price of ethylene and
propylene decreased steadily, which resulted in lower feedstock costs for the
polymers segment. This decrease was partially offset by an increase in sales
volumes.
Selling Expenses
Selling expenses were $82 million for 1998 as compared to $137 million for
1997. The decrease of $55 million was primarily due to lower personnel costs as
a result of the consolidation of operations.
Operating Income
Operating income decreased from $233 million in 1997 to $177 million in
1998. The decrease of $56 million is a result of lower product margins in 1998.
Polymer sales prices decreased throughout 1998, but were partially offset by
lower feedstock costs, resulting in lower margins.
Unallocated--Unusual Charges
Unusual charges were $35 million for 1998 and $42 million in 1997. The
amounts for 1997 include costs associated with the formation of Equistar in
December 1997 and consolidation of operations. The amounts for 1998 also
include costs associated with the formation of Equistar as well as costs
associated with the addition of the Occidental contributed business in 1998.
These costs were paid by Equistar and allocated to each partner according to
their ownership percentages.
Fourth Quarter 1998 vs. Third Quarter 1998
Net loss for the fourth quarter of 1998 was $51 million as compared to net
income for the third quarter of 1998 of $29 million. This decrease was
attributable to earnings declines in both the petrochemicals and polymers
businesses. In the petrochemicals segment, decreased ethylene and co-product
sales prices were only partially offset by lower feedstock prices. Also
contributing to the petrochemicals segment earnings decrease in the fourth
quarter was the turnaround of Equistar's LaPorte, Texas facility. Due to
current market conditions, Equistar elected to accelerate the timing and extend
the length of this turnaround to occur from November 13, 1998 to February 15,
1999, rather than as originally scheduled in the third quarter of 1999.
Earnings also decreased in polymers, primarily as a result of sales price
declines, which exceeded the price decrease of the ethylene feedstock. In
addition, the scheduled turnaround and expansion of Equistar's Victoria, Texas
facility had a negative impact on fourth quarter polymers earnings. The project
was completed during the fourth quarter of 1998 and increased the plant's
annual high density polyethylene ("HDPE") capacity by approximately 125 million
pounds.
25
<PAGE>
Financial Condition--Equistar
Operating Activities
Cash provided by operating activities totaled $846 million for the year
ended December 31, 1998. This was primarily attributable to income before
depreciation and reimbursements from Equistar's owners for payment of their
retained accounts payable balances. This amount also includes $130 million in
proceeds from the sale of accounts receivable primarily related to the
petrochemicals segment. See "Liquidity and Capital Resources--Accounts
Receivable."
Investing Activities
Equistar's capital expenditures were $200 million during the year ended
December 31, 1998. The most significant capital expenditures in 1998 related to
the following:
. the 480-million-pound HDPE resin expansion project at the Matagorda,
Texas facility, which has a targeted start-up in the third quarter of
1999
. the scheduled turnaround and expansion of the Victoria, Texas facility,
which was completed during the fourth quarter of 1998 and increased the
plant's annual HDPE capacity by approximately 125 million pounds
Financing Activities
Cash used in financing activities during the year ended December 31, 1998
consisted primarily of distributions to owners of $1.4 billion, offset by net
borrowings of $467 million and the repayment of the $345 million note
receivable from Lyondell. The distributions to owners consisted of $495 million
in distributions to Millennium and Occidental in the aggregate, as part of the
addition of Occidental to Equistar, which were funded by additional borrowings
of long-term debt, $345 million in distributions to Lyondell and Millennium in
the aggregate, related to the repayment of the note receivable from Lyondell,
$327 million in distributions to Lyondell and Millennium in the aggregate, for
payment of their retained accounts payable balances and the remaining amount
was distributions of available net operating cash. The borrowings were
primarily related to the acquisition of the Occidental contributed business.
Liquidity and Capital Resources
Cash Flows. Management believes business conditions will be such that cash
balances, cash flow from operations and existing lines of credit will be
adequate to meet future cash requirements for scheduled debt repayments.
Capital Expenditures. Equistar's capital expenditures for the one month
ended December 31, 1997 were $12 million. Capital expenditures for the year
ended December 31, 1998 were $200 million. Pro forma capital expenditures in
1998, including the Occidental contributed business, were $222 million.
Management plans to fund capital expenditures in 1999 from cash flow from
operations. The capital program for 1999 plans for the spending of $195
million, of which $106 million relates to projects which were started before
1999.
As part of ongoing operations, maintenance turnarounds are periodically
conducted on facilities. Although turnarounds on principal facilities are
usually scheduled well in advance, the timing of these turnarounds can be
accelerated or delayed because of numerous factors, some of which are beyond
Equistar's control.
Debt. In connection with its formation on December 1, 1997, Equistar entered
into a $1.25 billion revolving credit facility expiring November 2002 with a
group of banks. On June 12, 1998, Equistar entered into a $500 million credit
facility consisting of a $250 million revolving credit facility and a $250
million one-year term facility. Borrowings under the $1.25 billion revolving
credit facility currently bear interest depending on the type of borrowing made
by Equistar, at its option, at
. LIBOR, generally the London interbank market rate, or NIBOR, generally
the New York interbank market rate, plus, in each case, an applicable
margin and facility fee based on Equistar's long-term debt ratings as
established by Standard & Poor's Ratings Group and Moody's Investors
Service, Inc.
26
<PAGE>
. a base rate of either the Federal Funds rate plus 0.5% or a fixed rate of
interest offered by a lender
. a rate established by competitive bids submitted by the sponsoring banks
through a competitive auction feature
The $1.25 billion revolving credit facility is available for working capital
and general purposes as needed.
Millennium America Inc., a subsidiary of Millennium, provided limited
guarantees with respect to the payment of principal and interest on a total of
$750 million principal amount of indebtedness under the $1.25 billion revolving
credit facility. However, the lenders may not proceed against Millennium
America Inc. until they have exhausted their remedies against Equistar. The
guarantee will remain in effect indefinitely, but at any time after December 1,
2004, Millennium America Inc. may elect to terminate the guarantee if certain
events occur. In connection with the contribution of the Occidental contributed
business, an affiliate of Occidental agreed with Equistar to provide similar
limited guarantees to Equistar of $419.7 million principal amount of
indebtedness under the $1.25 billion revolving credit facility or any
refinancing. Equistar holds the Occidental guarantee.
The principal amounts outstanding, current interest rates and maturity dates
of the debt obligations of Equistar as of December 31, 1998 are as follows:
<TABLE>
<CAPTION>
Principal
Amount
Outstanding
Debt (in millions) Interest Rate Maturity
---- ------------- ------------------------ ------------------
<S> <C> <C> <C>
Capital lease
obligations(a)......... $ 205 6.34% March 2000
Bank Credit Facilities:
$500 million credit
facility(b).......... 152 LIBOR plus 0.625%(b) November 2002
$1.25 billion
revolving credit
facility(c).......... 1,150 LIBOR plus 0.5%(d)
Other Debt Obligations:
10.00% notes due
1999(e)(f)........... 150 10.00% June 1999
9.125% notes due
2002(e).............. 100 9.125% March 2002
Medium-term notes(e).. 163 Fixed rates ranging from Various dates from
9.50% to 11.30% February 2000 to
March 2005
6.50% notes due
2006(e).............. 150 6.50% February 2006
7.55% debentures due
2026(e).............. 150 7.55% February 2026
------
Total................. $2,220
======
</TABLE>
- --------
(a) Equistar repaid the capital lease obligations with proceeds from the
offering of the outstanding notes in February 1999.
(b) At December 31, 1998, the average interest rate for borrowings under the
$500 million credit facility was 6.1%. Equistar repaid the outstanding
balance under the $500 million credit facility of approximately $152
million in February 1999. Subsequently, the $500 million credit facility
was terminated.
(c) Equistar had net repayments of $400 million on this facility during the
first quarter of 1999. The aggregate amount outstanding under the bank
credit facility as of April 1, 1999 was $750 million.
(d) At December 31, 1998, the average interest rate under the $1.25 billion
revolving credit facility was 5.8%.
(e) Lyondell remains liable on these debt obligations assumed by Equistar in
connection with its formation.
(f) Equistar will retire $150 million aggregate principal amount of these notes
upon their June 1999 maturity.
Covenants. Under the covenant provisions of the bank credit facilities,
Equistar has agreed to, among other things
. maintain specified financial ratios, such as leverage and interest
coverage ratios
. refrain from creating some types of liens on its property or assets
27
<PAGE>
. refrain from entering into some types of sale and lease-back transactions
. refrain from allowing its subsidiaries to incur some types of debt or
issue certain types of preferred stock
. refrain from using the proceeds of the bank credit facilities for
purposes not permitted by the facilities
Equistar is in compliance with each of its financial covenants. The ability
of Equistar to meet its debt service obligations and to comply with the
covenants and financial requirements in the $1.25 billion revolving credit
facility will largely depend on
. the future performance of Equistar
. the availability of additional financing to repay and refinance bank debt
Both of these circumstances will be influenced by prevailing economic and
competitive conditions and to other factors beyond Equistar's control. The
breach of any of the covenants or financial requirements in the credit facility
could result in a default, which would permit the lenders to declare the loans
immediately payable and to terminate future lending commitments.
Accounts Receivable. In December 1998, Equistar entered into an accounts
receivable sales facility providing for the ongoing sale of accounts
receivable. The facility provided $130 million in proceeds in 1998. The
facility expires in December 1999. Equistar used the proceeds to reduce
outstanding debt under the $500 million credit facility. Fees associated with
the sale of accounts receivable totaled $0.4 million in 1998 and are included
as general and administrative expenses.
For the Eleven Months Ended November 30, 1997 vs. the Year Ended December 31,
1996
The following discussion and analysis compares the historical results of the
Lyondell contributed business and the Millennium contributed business for the
eleven months ended November 30, 1997 with the historical results of those
businesses for the year ended December 31, 1996.
Selected financial and operating information for the Lyondell contributed
business and the Millennium contributed business for the eleven months ended
November 30, 1997 and for the year ended December 31, 1996 is as follows:
<TABLE>
<CAPTION>
Lyondell Lyondell Millennium Millennium
contributed contributed contributed contributed
business for business for business for business for
the eleven the year the eleven the year
months ended ended months ended ended
November 30, December 31, November 30, December 31,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income statement data
(millions of dollars):
Sales and other operating
revenues.................. $2,715 $2,515 $1,786 $1,860
Cost of sales.............. 2,153 2,135 1,341 1,503
Selling, general and
administrative expenses... 166 157 136 109
------ ------ ------ ------
Operating income......... 396 223 309 248
Interest expense, net...... 50 65 66 80
------ ------ ------ ------
Income before income
taxes................... 346 158 243 168
Provision for income
taxes..................... 127 56 96 76
------ ------ ------ ------
Net income............... $ 219 $ 102 $ 147 $ 92
====== ====== ====== ======
Sales volumes (millions)
Selected petrochemical
products:
Ethylene, propylene and
other olefins (lbs.).... 8,084 7,973 608 950
Aromatics (gallons)...... 176 188 -- --
Polymers products (lbs.)... 1,985 2,136 3,980 3,884
</TABLE>
28
<PAGE>
Lyondell Contributed Business
Revenues
Sales and other operating revenues were $2.7 billion for the eleven months
ended November 30, 1997, compared to $2.5 billion in 1996. On an annualized
basis, sales and operating revenues increased 18%. This increase was due
primarily to increases in industry sales prices for ethylene and co-products.
Sales prices in the 1997 period showed significant increases over 1996 as
strong demand from the polymers markets resulted in a tighter balance of supply
and demand for olefins. Further, cost increases for olefins feedstocks over the
course of 1996 were reflected in olefins product prices in the 1997 period. In
addition, olefins sales volumes increased due to strong demand in the
downstream markets as well as planned and unscheduled industry turnarounds. On
an annualized basis, polymers revenues increased 7% due to higher industry
sales prices for polyethylene. These were partially offset by decreased
industry sales prices for polypropylene.
Cost of Sales
Cost of sales was $2.1 billion in both the 1997 period and in 1996. On an
annualized basis, cost of sales increased 10% due primarily to higher
production levels to meet demand for olefins and to increased polymers
feedstock costs caused by tight supply and demand in the olefins markets. These
increases were slightly offset by lower feedstock costs for olefins generally
due to lower crude oil prices.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased from $157 million in
1996 to $166 million in the 1997 period. This increase of 15% on an annualized
basis was primarily due to
. higher employee compensation due to headcount increases
. increased computer support costs related to software implementation
In addition, employee incentive compensation increased in 1997.
Operating Income
Operating income increased from $223 million in 1996 to $396 million in the
1997 period. On an annualized basis, the increase of 94% was due to higher
sales margins and sales volumes for olefins. Sales margins improved due to
higher olefins sales prices, resulting from strong demand in the downstream
markets for polyethylene and polypropylene, which also resulted in increased
sales volumes. Sales margins also benefited from lower petrochemical feedstock
costs. These increases were slightly offset by lower sales prices for
polypropylene due to additional industry capacity in 1997. There were also
higher polymers feedstock costs in 1997 due to tighter supply and demand in the
olefins markets.
Interest Expense, Net
Interest expense, net, decreased 15% on an annualized basis from 1996 to the
1997 period, primarily due to lower interest rates in 1997.
Income Taxes
The effective income tax rate during the 1997 period was 37.3% compared to
35.7% for 1996. The effective income tax rate increased in the 1997 period due
to the nondeductibility of executive compensation. State income tax was the
primary difference between the effective tax rate and the 35% federal statutory
rate during both years.
29
<PAGE>
Millennium Contributed Business
Revenues
Sales and other operating revenues were $1,860 million in 1996 compared to
$1,786 million in the 1997 period. On an annualized basis, sales increased 5%.
This increase was attributable to strong demand, both domestically and in the
export markets, coupled with tight supply, resulting in prices rising through
the third quarter. Prices began to slowly weaken in the fourth quarter of 1997
as expectations of new industry capacity coming on-stream and normal seasonal
slowdowns reduced demand and put pressure on prices.
Cost of Sales
Cost of sales was $1,503 million in 1996 compared to $1,341 million in the
1997 period. On an annualized basis, cost of sales decreased 3%. This decrease
was due to lower feedstock costs, which declined from peak 1996 levels, offset
by higher production levels resulting from strong demand in 1997. Feedstock
costs were on average 31% lower than the historical highs in 1996 as warmer-
than-normal winter weather reduced demand for natural gas and natural gas
liquids. These costs continued their decline in late 1997 as winter
temperatures remained above normal and crude oil inventories began building due
to decreased demand from Asian markets.
Operating Income
Operating income increased from $248 million in 1996 to $309 million in the
1997 period. On an annualized basis, the increase of 36% was primarily due to
an increase in average selling prices during the 1997 period coupled with lower
feedstock costs.
Interest Expense, Net
Interest expense decreased from $80 million in 1996 to $66 million in the
1997 period. This annualized decrease of 10% was a result of a decrease in
outstanding debt.
Income Taxes
The effective income tax rate during the 1997 period was 39.5% compared to
45.2% for 1996. Differences between the effective income tax rates arise from
the different levels of income along with the effect of goodwill amortization
and state income tax, which are not deductible for federal tax purposes.
Environmental, Health and Safety Matters
Equistar is subject to stringent environmental, health and safety laws and
regulations addressing air emissions, water discharges, generation, handling
and disposal of waste and other aspects of Equistar's operations. Equistar
devotes considerable efforts to comply with these laws and regulations, and in
so doing, it incurs significant capital expenditures and operating expenses.
It is difficult to predict the future development of these laws and
regulations or their impact on Equistar's operations and products. In
particular, the future effect of the Clean Air Act may be significant. However,
future effects of the Clean Air Act are dependent upon the development of
future regulations and interpretations as well as other factors, such as the
development of environmental control technologies. Equistar's MTBE sales may
also be materially adversely affected by pending or future changes in laws or
regulations. The presence of MTBE in some water supplies in California and
other states, due to gasoline leaking from underground storage tanks, and in
surface water from recreational watercraft has led to public concern that MTBE
may contaminate drinking water supplies, and thereby result in a possible
health risk. The Governor of California has announced an intention to eliminate
MTBE from gasoline sold in California by December 31, 2002. California is the
largest market for MTBE and if such intent were to be effected, sales prices of
MTBE would be adversely impacted. There have been claims that MTBE
. travels more rapidly through soil
30
<PAGE>
. is more soluble in water than most other gasoline components
. is more difficult and more costly to remediate
Heightened public awareness about MTBE has resulted in certain state and
federal legislative initiatives that have sought either to rescind the
oxygenate requirement for reformulated gasoline sold in California and other
states or restrict the use of MTBE. There is ongoing review of this issue and
the ultimate resolution of the appropriateness of using MTBE could result in a
significant reduction in Equistar's MTBE sales.
Equistar is also subject to liabilities and costs under Superfund and other
laws relating to investigation, cleanup or closure of former waste disposal
units or other areas of contamination. Investigation, cleanup and closure
responsibilities include both Equistar's facilities and third-party waste
facilities. Some Equistar facilities are currently undergoing assessment and
remedial actions under the Resource Conservation and Recovery Act. It is
difficult to predict how these liabilities and costs might be affected by
future changes, including more stringent cleanup standards and the discovery of
additional areas of contamination.
Under indemnification arrangements in the asset contribution agreements with
Lyondell, Millennium Petrochemicals Inc., a subsidiary of Millennium and the
contributing subsidiaries of Occidental, each of Lyondell, Millennium
Petrochemicals and the Occidental subsidiaries agreed to assume, and to
indemnify and defend Equistar against, some types of third-party claims and
liabilities which Equistar may incur relating to the pre-closing operation of
the contributed businesses. This obligation includes liabilities exceeding $7
million per contributed business asserted within the first seven years after
the date of the respective asset contributions.
In its financial statements, Equistar reserves for contingencies that are
probable and reasonably estimable, including those based upon unasserted
claims. Based on current matters described above, Equistar has not established
any reserves for potential environmental issues and does not anticipate any
material adverse effect upon its earnings, operations or competitive position
resulting therefrom. However, the amount or timing of future environmental
liabilities and costs cannot be predicted with certainty, and liabilities and
costs could be material in future quarterly or annual results of Equistar's
operations for that period.
Equistar spent $5 million in 1998 on environmental matters. Equistar
anticipates expenditures for environmental matters of $5 million in 1999 and $5
million in 2000.
Year 2000
Equistar uses many information technology or "IT" systems as well as non-IT
systems, such as manufacturing support and other systems, that could be
impacted by the "Year 2000 problem." The Year 2000 problem arises from computer
programs that have been written using two digits rather than four to designate
the year. Date-sensitive computer software may recognize a date using "00" as
the year 1900 rather than the year 2000, resulting in system failures or
miscalculations, potentially causing operational disruptions.
Equistar has a Year 2000 Steering Committee and has appointed
representatives, along with Lyondell and LYONDELL-CITGO Refining, to Lyondell's
Year 2000 Executive Sponsor Team. The Executive Sponsor Team provides oversight
to each member's steering committee. Equistar's steering committee is in the
process of completing an assessment of the state of readiness of the IT and
non-IT systems. The steering committee's assessments cover
. manufacturing systems, including laboratory information systems and field
instrumentation
. significant third-party vendor and supplier systems, including employee
compensation and benefit plan maintenance related systems
The steering committee is also beginning to assess the readiness of significant
customers and suppliers.
In May 1997, before the formation of Equistar, Lyondell commenced the first
major use of new software for business information systems it contributed to
Equistar. The new systems, based on enterprise software from SAP America, Inc.,
replaced older business systems and allowed employees at different locations to
share
31
<PAGE>
financial and operating information more effectively. Equistar is in the
process of replacing the business information systems for the operations
contributed by Millennium and Occidental with the same systems. In November
1998, Equistar completed a system-wide implementation of SAP America business
information systems for its polymers business and a portion of its
petrochemicals business. Full business information systems conversion will be
completed in the first half of 1999. The new systems and software are Year
2000-compatible, thus addressing the majority of Equistar's Year 2000 business
system requirements.
Equistar's Year 2000 assessment process consists of an inventory of Year
2000-sensitive equipment, an assessment of the impact of possible failures, a
determination of the required remediation actions and testing and
implementation of the solutions. The inventory, assessment and remediation
phases should be completed in 1999. The majority of the testing and final
implementation is scheduled to take place in 1999. The progress of these phases
as of December 31, 1998 is summarized as follows:
[Bar chart appears here disclosing the percentage completion of each of
inventory (99%), assessment (98%), remediation (89%), testing (39%)
and implementation (28%)]
As of December 31, 1998, Year 2000 spending and estimated spending by
Equistar is summarized as follows:
<TABLE>
<CAPTION>
(Millions of dollars)
<S> <C>
Spending through December 31, 1998................................... $ 1
Estimated additional spending........................................ 12
---
Total estimated spending(a)........................................ $13
===
Replacement of IT systems............................................ $ 2
Replacement of non-IT systems........................................ --
---
All other costs...................................................... 11
---
Total estimated spending(a)........................................ $13
===
</TABLE>
- --------
(a) Does not include amounts incurred in connection with implementation of the
SAP America related software, which addresses Year 2000 readiness in
Equistar's business information systems, and internal costs.
32
<PAGE>
The total estimated spending of $13 million represents the midpoint of the
estimated range between $11 million and $15 million. These spending estimates
will be refined as phases of the process are completed. Spending is funded by
cash generated from operations.
Management believes that all significant systems controlled by Equistar will
be Year 2000 ready in the last half of 1999. Equistar's operations are
dependent on a continuous supply of key services from raw material suppliers
and utility and transportation providers. While the steering committee is
assessing the readiness of third-party customers and suppliers, there can be no
assurance that third parties with whom we have a significant business
relationship will successfully test, reprogram and replace all of their IT and
non-IT systems on a timely basis. Equistar is developing contingency plans with
the assistance of an outside consultant. The final plans, when implemented, are
intended to avoid material interruption of core business operations through the
year 2000 and beyond, while ensuring safe operations and optimal financial
performance. The contingency planning will involve an analysis of critical
business processes and an identification of the most likely threats to these
processes. Solutions and alternatives will be developed for these internal or
external threats. Equistar expects to complete its analysis and plan
development by mid-year 1999 with implementation to be completed in the last
half of the year.
There is inherent uncertainty in the Year 2000 problem due to the
possibility of unanticipated failures by third-party customers and suppliers.
Accordingly, Equistar is unable, at this time, to assess the extent and
resulting materiality of the impact of possible Year 2000 failures on its
operations, liquidity or financial position. In a worst case scenario,
controlled plant shutdowns using Equistar's standard shutdown procedures might
be necessitated by failure of utility providers or suppliers or by internal
conditions affecting plant operability. Such events could have a material
adverse effect on Equistar's operations, liquidity or financial position. The
Year 2000 assessment process is expected to provide information that will
significantly reduce the level of uncertainty regarding the Year 2000 impact.
Management believes that the completion of the assessment and remediation plan
as scheduled will help minimize the possibility of any significant disruptions
of Equistar's operations.
Disclosure of Market Risk
Commodity Price Risk
A substantial portion of Equistar's products and feedstocks are commodities
whose prices fluctuate as market supply and demand fundamentals change.
Accordingly, product margins and the level of Equistar's profitability tend to
fluctuate with changes in the business cycle. Equistar tries to protect against
such instability through various business strategies. These strategies include
increasing the olefins plants' feedstock flexibility, entering into multi-year
processing and sales agreements and moving downstream into derivatives products
whose pricing is more stable. Equistar has not used derivative instruments for
commodity hedging purposes.
33
<PAGE>
Description of Equistar's Business
Equistar is one of the largest chemical producers in the world with total
1998 pro forma revenues of $5 billion and $7 billion of assets at the end of
1998. It is the world's second largest, and North America's largest, producer
of ethylene, the world's most widely used petrochemical. Equistar is also the
largest producer of polyethylene and propylene in North America.
Olefins, the generic name for ethylene and propylene, and their co-products
are basic building blocks used to create a wide variety of products. Ethylene
is used to produce polyethylene, ethylene oxide and its primary derivative,
ethylene glycol, ethylene dichloride and ethylbenzene. Polyethylene is used to
produce packaging film, trash bags and lightweight, high-strength plastic
bottles for milk, juices, shampoos and detergents. Propylene is used to produce
polypropylene, which is used in products such as plastic caps and other
closures, rigid packaging and carpet facing and backing. Substantially all of
Equistar's revenues are derived from sales in North America.
Equistar was formed to maximize the long-term cash flow and economic value
creation potential of its contributed businesses. Management believes that
Equistar's operations to date have provided and will continue to provide
opportunities for significant cost savings and expanded business opportunities,
leading to improved earnings and cash flow. The strengths inherent in the
combined businesses, including the multiple locations and feedstock flexibility
of its facilities, provide Equistar with competitive advantages that exceed
those which were available to Lyondell, Millennium and Occidental,
individually.
Equistar's Business Strategies
Equistar's business strategies include
. Achieving savings or "synergy" targets in earnings and cash flow by
operating the Lyondell Millennium and Occidental contributed businesses
as a single entity and continuing to reduce costs by focusing on
--aligning and optimizing processing units for improved on-stream time
and increased throughput capability
--maximizing the value of feedstock flexibility and olefins co-products
produced in the olefins operations
--lowering distribution costs through volume leverage
--reducing raw materials and other procurement costs
. Realizing maximum value from the strategic flexibility and optimization
potential inherent in Equistar's large number of plant sites, feedstock
flexibility and a broad selection of polymer products
. Focusing on capital projects designed to increase reliability and
undertaking cost efficient expansions of value-added product lines by
--realizing the benefits of its recently completed 125-million-pound
HDPE expansion at its Victoria facility by continuing to develop its
established sales base in high value products
--completing a 480 million pound HDPE resin expansion project at its
Matagorda facility for late 1999 start-up to support high molecular
weight HDPE film growth
. Pursuing a market strategy of expanding value-added businesses using
minimal capital by increasing production and sales volumes in key
markets, such as high and medium molecular weight HDPE film resins, value
and specialty injection molding resins and wire and cable resins
. Leveraging technology by
--pursuing research on alternative olefins feedstock technology as a
method to lower costs and gain competitive advantages
34
<PAGE>
--integrating Lyondell-contributed single-site catalyst proprietary
technology with Millennium-contributed process technologies, enabling
Equistar to produce higher margin, value-added polymer products
The following chart illustrates the feedstock flexibility of our olefins
plants, commonly referred to as "crackers," for ethylene production and the
breakdown of ethylene consumption.
[Flowchart showing the production path of feedstocks at Equistar's olefins
plants or "crackers," the plants' products and the downstream customers and
end-uses of the products appears here. Equistar's NGL crackers refine ethane,
propane and butane to produce ethylene. Equistar's Petroleum Liquid Crackers
refine condensate, naphtha, kerosene and diesel to produce ethylene.
Equistar's ethylene production is used as a feedstock by Equistar's ethylene
oxide and derivatives plants and its polymers operations, and by plants
operated by Lyondell, Millennium and Occidental. A portion of Equistar's
ethylene production is sold to unrelated third parties. Equistar uses ethylene
for the production of ethylene oxide and derivatives, the enduses of which
include detergents, industrial cleaners, polyester fiber, antifreeze and brake
fluid. Equistar's polymers operations use the ethylene to produce polyethylene
(LDPE, LLDPE and HDPE), which is used in grocery and trash bags, food
packaging films, plastics caps and closures, milk and water bottles, drink
cups and toys. Occidental uses ethylene to produce ethylene dichloride, which
is used in the manufacture of PVC drain pipe, vinyl flooring and siding.
Millennium uses ethylene in its vinyl acetate operations; vinyl acetate is
used in household adhesives, paint and ice bags. Lyondell uses ethylene for
the production of styrene, enduses of which include polystyrene cups, packages
and cutlery.
Equistar's petroleum liquid crackers also produce butadiene, aromatics,
gasoline, fuel oil and propylene. A portion of the propylene produced by
Equistar is used by Equistar's polymers operations and by Lyondell; the
balance is sold to unrelated third parties. Equistar's polymers operations use
the propylene to produce polypropylene which in turn is used in carpet fibers,
housewares and auto bumpers. Lyondell uses the propylene to produce propylene
oxide, which is used in polyurethane foam for furniture and insulation.]
For additional segment information, see Note 18 of Notes to the Audited
Financial Statements of Equistar Chemicals, LP.
Petrochemicals Segment
Overview
Petrochemicals are fundamental to many segments of the economy, including
the production of consumer products, housing components, automotive products
and other durable and nondurable goods. We produce petrochemicals, including
olefins, aromatics and oxygenated chemicals, at twelve facilities located in
six states. Olefins include ethylene, propylene and butadiene. Aromatics
include benzene and toluene. Oxygenated chemicals include ethylene oxide,
ethylene glycol, ethanol and MTBE. Our petrochemical products are used to
manufacture polymers and intermediate chemicals, which are used in a variety
of consumer and industrial products. Ethylene is the most significant
petrochemical in terms of worldwide production volume. Ethylene is also the
key building block for polyethylene and a large number of other chemicals,
plastics and synthetics.
35
<PAGE>
With the strong growth of end-use products derived from ethylene during the
past several decades, especially as plastics have developed into low-cost,
high-performance substitutes for a wide range of materials such as metals,
paper and glass, U.S. ethylene consumption has grown by an average annual rate
of approximately 4%.
The Chocolate Bayou, Corpus Christi and two Channelview, Texas olefins
plants use petroleum liquid feedstocks, including naphtha, condensates and gas
oils (collectively "Petroleum Liquids"), to produce ethylene. The cost of
ethylene production from Petroleum Liquids feedstocks has historically been
less than the cost of producing ethylene from natural gas liquids feedstocks,
including ethane, propane and butane (collectively "NGLs"). The use of
Petroleum Liquids results in the production of a significant amount of co-
products such as propylene, butadiene, benzene and toluene, and specialty
products such as dicyclopentadiene, isoprene, resin oil, piperylenes, hydrogen
and alkylate. Based upon independent third-party surveys, we believe our
Channelview facility is the lowest production cost olefins facility in North
America. Our Morris, Illinois, Clinton, Iowa, Lake Charles, Louisiana and
LaPorte, Texas plants are designed to use NGLs, which primarily produce
ethylene with some co-products such as propylene. In addition, we are currently
modifying the LaPorte plant to run certain Petroleum Liquids feedstocks. A
comprehensive pipeline system connects our plants along the Gulf Coast with
major olefins customers. Feedstocks are sourced both internationally and
domestically and are shipped via vessel and pipeline.
We produce ethylene oxide and its primary derivative, ethylene glycol, at
facilities located in Pasadena, Texas and through PD Glycol, a 50% joint
venture with DuPont de Nemours and Company, in Beaumont, Texas. The Pasadena
facility also produces other derivatives of ethylene oxide, principally ethers
and ethanolamine. Ethylene glycol is used in antifreeze and in polyester
fibers, resins and films. The other ethylene oxide derivatives are used in many
consumer and industrial end uses, such as detergents and surfactants, brake
fluids and polyurethane foams for seating and bedding.
We produce synthetic ethyl alcohol at the Tuscola, Illinois plant by a
direct hydration process that combines water and ethylene. Equistar also owns
and operates facilities in Newark, New Jersey and Anaheim, California for
denaturing ethyl alcohol. In addition, it produces small volumes of diethyl
ether, a byproduct of its ethyl alcohol production, at Tuscola. These ethyl
alcohol products are ingredients in various consumer and industrial products,
as described more fully in the table below.
The following table outlines our petrochemical products, annual rated
capacity and the primary uses for these products.
<TABLE>
<CAPTION>
PRODUCT RATED CAPACITY(a) PRIMARY USES
- ---------------------------------------------------------------------------
<S> <C> <C>
OLEFINS
- ---------------------------------------------------------------------------
Ethylene 11.5 billion pounds Ethylene is used as a feedstock to
manufacture polyethylene, ethylene
oxide, ethylene dichloride and ethyl
benzene. Polyethylene is used for films
for food packaging and trash bags and
for blow-molded plastic bottles for
milk, juices, shampoos and detergents.
Ethylene oxide is used to produce
ethylene glycol, which in turn is used
to produce antifreeze and polyester.
Ethylene dichloride is used to produce
polyvinyl chloride for pipe and other
vinyl products. Ethyl benzene is used to
produce styrene, which in turn is used
to produce polystyrene for food
packaging and drinking cups.
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
PRODUCT RATED CAPACITY(a) PRIMARY USES
- --------------------------------------------------------------------------------------
<S> <C> <C>
Propylene 5.0 billion pounds(b) Propylene is used to produce
polypropylene, acrylonitrile and
propylene oxide. Polypropylene is used
in products such as plastic caps,
closures, rigid packaging and carpet
facing and backing. Acrylonitrile is
used in clothing (acrylic fibers)
and high impact plastics (computers,
auto parts). Propylene oxide is used in
polyurethane foams for furniture and
insulation.
- --------------------------------------------------------------------------------------
Butadiene 1.2 billion pounds Butadiene is used to manufacture
styrene, butadiene, rubber and
polybutadiene rubber, which are used in
the manufacture of tires, hoses, gaskets
and other rubber products. Butadiene is
also used in the production of paints,
adhesives, nylon clothing, carpets and
engineered plastics.
- --------------------------------------------------------------------------------------
OXYGENATED PRODUCTS
- --------------------------------------------------------------------------------------
Ethylene Oxide and 1.1 billion pounds Ethylene oxide is used to produce
Equivalents ethylene oxide surfactants, industrial cleaners,
equivalents; 400 cosmetics, emulsifiers, paint, heat
million pounds as transfer fluids and ethylene glycol
pure ethylene oxide (polyester fibers and film, polyethylene
terephthalate ("PET") resin and
antifreeze).
- --------------------------------------------------------------------------------------
Ethylene Glycol 1 billion pounds Ethylene glycol is used to produce
polyester fibers and film, PET resin,
heat transfer fluids, paint and
automobile antifreeze.
- --------------------------------------------------------------------------------------
Ethylene Oxide 225 million pounds Ethylene oxide derivatives are used to
Derivatives produce paint and coatings, polishes,
solvents and chemical intermediates.
- --------------------------------------------------------------------------------------
MTBE 284 million MTBE is an octane enhancer and clean
gallons(c) fuel additive in reformulated gasoline.
- --------------------------------------------------------------------------------------
AROMATICS
- --------------------------------------------------------------------------------------
Benzene 301 million gallons Benzene is used to produce styrene,
phenol and cyclohexane. These products
are used in the production of nylon,
plastics, rubber and polystyrene.
Polystyrene is used in insulation,
packaging and drink cups.
- --------------------------------------------------------------------------------------
Toluene 66 million gallons Toluene is used as an octane enhancer in
gasoline, as a chemical feedstock for
benzene production and a core ingredient
in toluene diisocyanate, a compound in
urethane production.
- --------------------------------------------------------------------------------------
SPECIALTY PRODUCTS
- --------------------------------------------------------------------------------------
Dicyclopentadiene 80 million pounds DCPD is a component of inks, adhesives
("DCPD") and polyester resins for molded parts
such as tub and shower stalls and boat
hulls.
- --------------------------------------------------------------------------------------
Isoprene 105 million pounds Isoprene is a component of premium
tires, adhesive sealants and other
rubber products.
- --------------------------------------------------------------------------------------
Resin Oil 120 million pounds Resin oil is used in the production of
hot-melt adhesives, inks, sealants,
paints and varnishes.
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
PRODUCT RATED CAPACITY(a) PRIMARY USES
- --------------------------------------------------------------------------------
<S> <C> <C>
Piperylenes 100 million pounds Piperylenes are used in the production
of adhesives, inks and sealants.
- --------------------------------------------------------------------------------
Hydrogen 44 billion cubic feet Hydrogen is used by refineries to remove
sulfur from process gas in heavy crude
oil.
- --------------------------------------------------------------------------------
Alkylate 337 million Alkylate is a premium blending component
gallons(d) used by refiners to meet Clean Air Act
standards for reformulated gasoline.
- --------------------------------------------------------------------------------
Ethyl Alcohol 50 million gallons Ethyl alcohol is used in the production
of solvents as well as household,
medicinal and personal care products.
- --------------------------------------------------------------------------------
Diethyl Ether 5 million gallons Diethyl ether is used in laboratory
reagents, gasoline and diesel engine
starting fluid, liniments, analgesics
and smokeless gun powder.
</TABLE>
- --------
(a) Unless otherwise specified, represents rated capacity at January 1, 1999.
We calculated the term "rated capacity," as used in this table, by
estimating the number of days in a typical year that a production unit of a
plant is expected to operate, after allowing for downtime for regular
maintenance, and multiplying that number by an amount equal to the unit's
optimal daily output based on the design feedstock mix. Because the rated
capacity of a production unit is an estimated amount, the actual production
volumes may be more or less than the rated capacity.
(b) Does not include refinery-grade material or production from the product
flexibility unit at Equistar's Channelview facility, which can convert
ethylene and other light petrochemicals into propylene. This facility has a
current rated capacity of one billion pounds per year of propylene.
(c) Includes up to 44 million gallons/year of capacity, which is operated for
the benefit of LYONDELL-CITGO Refining.
(d) Includes up to 172 million gallons/year of capacity, which is operated for
the benefit of LYONDELL-CITGO Refining.
Feedstocks and Ethylene Purchases
Olefins feedstock cost is generally the largest component of total cost for
the petrochemicals business. Olefins plants with the flexibility to consume a
wide range of feedstocks are better able to maintain higher levels of
profitability during periods of changing energy and petrochemicals prices than
olefins plants that are restricted in their feedstock processing capability.
The primary feedstocks used in the production of olefins are Petroleum Liquids,
also referred to as "heavy feedstocks," and NGLs, also referred to as "light
feedstocks." As of January 1, 1999, approximately 44% of domestic ethylene
industry capacity was limited to NGL feedstocks. As of January 1, 1999,
approximately 56% of domestic capacity processed to some extent both NGLs and
Petroleum Liquids.
Petroleum Liquids have had a historical variable margin advantage over NGLs
such as ethane and propane. For example, using Petroleum Liquid feedstocks
typically generates between one and four cents additional margin per pound of
ethylene produced compared to using ethane. We have the capability to realize
this margin advantage at the Channelview, Corpus Christi and Chocolate Bayou
facilities. This variable margin advantage is expected to continue due to the
significantly higher capital cost for plants with the capability to process
both heavy feedstocks, or Petroleum Liquids, and their resulting co-products in
contrast to processing light feedstocks, or NGLs.
38
<PAGE>
The following chart illustrates, for the fourth quarter of 1998, our
percentage usage of heavy feedstocks and light feedstocks as compared with
industry usage, based on industry sources.
Pie chart appears here showing, for the fourth quarter of 1998, Equistar's
percentage usage of heavy feedstocks and light feedstocks as compared to
industry usage of heavy feedstocks and light feedstocks as shown below.
Heavy Feedstocks Light Feedstocks
-------------------------------------
Industry Crackers 29% 71%
Equistar Crackers 58% 42%
The Channelview facility is unusually flexible in that it can process 100%
Petroleum Liquids or up to 80% NGL feedstocks. The Corpus Christi plant can
process up to 70% Petroleum Liquids or up to 70% NGLs. The Chocolate Bayou
facility processes 100% Petroleum Liquids. Equistar's four other olefins
facilities currently process only NGLs. We are currently upgrading the LaPorte
facility to integrate the operations of the LaPorte and Channelview facilities.
The upgrade will permit the LaPorte facility to process 25% to 30% Petroleum
Liquids and the Channelview facility to process the co-products resulting from
the processing of Petroleum Liquids.
The majority of our Petroleum Liquids requirements are obtained under
contracts or on-the-spot market from a variety of third-party domestic and
foreign sources. We also purchase NGLs from a wide variety of domestic sources.
We obtain a portion of our olefins feedstock requirements from LYONDELL-CITGO
Refining at market-related prices.
In addition to producing our own ethylene, we assumed some agreements of an
affiliate of Millennium for the purchase of ethylene from Gulf Coast producers
at market prices. Ethylene purchase obligations under these contracts will
decline to zero at the end of 2000.
Marketing, Sales and Distribution
Ethylene produced by the LaPorte, Morris and Clinton facilities is generally
consumed as feedstock by the polymers operations at those sites. Ethylene and
propylene produced at the Channelview, Corpus Christi, Chocolate Bayou and Lake
Charles olefins plants are generally distributed by pipeline or via exchange
agreements to our Gulf Coast polymer and ethylene oxide facilities as well as
to other third parties. As of January 1, 1999 approximately 75% of the ethylene
we produced was consumed internally or sold to our affiliates based on current
market prices. See "Related Transactions."
39
<PAGE>
With respect to sales to third parties, we sell a majority of olefins
products to customers with whom Lyondell and Occidental have had long-standing
relationships. Sales to third parties generally are made under written
agreements. These written agreements typically provide for
. monthly negotiation of price
. customer purchase of a specified minimum quantity
. three- to six-year terms with automatic one- or two-year term extension
provisions
Some contracts may be terminated early if deliveries have been suspended for
several months
Ethylene oxide and ethylene glycol are sold under long-term contracts of
three to five years' duration to third-party customers, with pricing negotiated
on a quarterly basis to reflect market conditions.
Glycol ethers are sold primarily into the solvent and distributor markets
under one-year contracts at market prices, as are ethanolamines and brake
fluids.
Ethanol and ethers are sold to third-party customers under one-year
contracts at market prices.
We license MTBE technology under a license from an affiliate of Lyondell and
sell a significant portion of MTBE produced at one of our two Channelview units
to Lyondell at market-related prices. The production from the second unit is
consumed by LYONDELL-CITGO Refining for gasoline blending. MTBE produced at
Chocolate Bayou is sold to third parties at market-related prices.
We sell most of our aromatics production under contracts that have initial
terms ranging from two to three years and that typically contain automatic one-
year term extension provisions. These contracts generally provide for monthly
or quarterly price adjustments based upon current market prices. Aromatics
produced by LYONDELL-CITGO Refining, with the exception of benzene, are
marketed by Equistar for LYONDELL-CITGO Refining under contracts with similar
terms to its own. Benzene produced by LYONDELL-CITGO Refining is sold directly
to Equistar at market-related prices.
Most of the ethylene and propylene production of the Channelview, Chocolate
Bayou, Corpus Christi and Lake Charles facilities are shipped via a 1,430-mile
pipeline system which has connections to numerous Gulf Coast ethylene and
propylene consumers. This pipeline system, some of which we own and some of
which we lease, extends from Corpus Christi to Mont Belvieu to Port Arthur,
Texas as well as around the Lake Charles area. In addition, exchange agreements
with other olefins producers allow access to customers who are not directly
connected to our pipeline system. Some propylene is shipped by ocean-going
vessel. Ethylene oxide and its derivatives are shipped by rail car. Butadiene,
aromatics and other petrochemicals are distributed by pipeline, railcar, truck,
barge or ocean-going vessel.
Competition and Industry Conditions
The basis for competition in our petrochemicals products is price, product
quality, product deliverability and customer service. We compete with other
large domestic producers of petrochemicals, including
.BP Amoco Chemical Company
.Chevron Chemical Company
.Dow Chemical Company
.Exxon Chemical Company
.Huntsman Chemical Company
.Mobil Chemical Company
40
<PAGE>
.Phillips Petroleum Company
.Shell Chemical Company
.Union Carbide Corporation
The combined rated capacity of our olefins units at January 1, 1999 was
approximately 11.5 billion pounds of ethylene per year or approximately 18% of
total North American production capacity. Based on published rated production
capacities, we believe we are the largest producer of ethylene in North
America. North American ethylene rated capacity at January 1, 1999 was
approximately 62 billion pounds per year. Of the total ethylene production
capacity in the United States, approximately 95% is located along the Gulf
Coast. Approximately 80% of U.S. production capacity is owned by nine
manufacturers.
The following chart illustrates our production capacity position for
ethylene both in North America and worldwide as of January 1, 1998, based on
industry sources.
Bar chart appears here showing Equistar's production capacity position for
ethylene in North America and world wide as of January 1, 1998 as compared with
other producers as set forth below.
Ethylene Production Capacity
Billions Lbs./Year
North America
Producer Production Capacity
-------- -------------------
Equistar 11.5
Dow 7.1
Exxon 6.5
Shell 5.0
Nova 4.9
Phillips 4.6
Union Carbide 4.2
Chevron 3.3
Pemex 3.1
BP Amoco 3.0
Worldwide
Producer Production Capacity
-------- -------------------
Dow 11.9
Equistar 11.5
Shell 10.7
Exxon 9.8
Union Carbide 5.8
BP Amoco 5.6
SABIC 5.2
Nova 4.9
BASH 4.6
Phillips 4.6
Petrochemicals profitability is affected by the level of demand for
petrochemicals and derivatives along with vigorous price competition among
producers which may intensify due to, among other things, the addition of new
capacity. In general, weak economic conditions, either in the United States or
in the world and higher feedstock costs tend to reduce demand and/or put
pressure on margins. Capacity additions in excess of annual growth also put
pressure on margins. In addition, in recent years, industry consolidation has
occurred, a trend which we expect will continue. It is not possible to predict
accurately the changes in feedstock costs, market conditions and other factors
which will affect petrochemical industry margins in the future.
The petrochemicals industry has historically experienced significant
volatility in capacity utilization and profitability. Producers of olefins
primarily for merchant supply to unaffiliated customers typically experience
greater variations in their sales volumes and profitability in comparison to
more integrated competitors when industry supply and demand relationships are
at extremes. This is due primarily to a higher proportion of captive demand for
olefins derivatives production experienced by the more integrated competitors.
We currently consume or sell approximately 75% of our ethylene production to
downstream derivatives facilities owned by us or one of our partners, which has
the effect of reducing volatility.
41
<PAGE>
Our other major commodity chemical products also experience cyclical market
conditions similar to, although not necessarily coincident with, those of
ethylene.
Polymers Segment
Overview
Through twelve facilities located in four states, our polymers segment
manufactures a wide variety of polyolefins, including polyethylene,
polypropylene and various performance polymers.
We currently manufacture polyethylene using a variety of technologies at six
facilities in Texas and at our Morris and Clinton facilities. The Morris and
Clinton facilities are the only polyethylene facilities located in the Midwest.
These facilities enjoy a freight cost advantage over Gulf Coast producers in
delivering products to customers in the Midwest and on the East Coast of the
United States. Polyethylene is used in a wide variety of consumer products,
packaging materials and industrial applications.
Our Morris, Illinois and Pasadena, Texas facilities manufacture
polypropylene using propylene produced as a co-product of our ethylene
production and propylene purchased from third parties. Polypropylene is sold
for various applications in the automotive, housewares and appliance
industries. We also produce performance polymer products, which include
enhanced grades of polyethylene and polypropylene, at several of our polymers
facilities. We believe that, over a business cycle, average selling prices and
profit margins for performance polymers tend to be higher than average selling
prices and profit margins for higher volume commodity polyethylenes.
A letter of intent for the sale of our concentrates and compounds business
at our Crockett, Texas and Heath, Ohio facilities was announced on March 1,
1999. Concentrates and compounds are polyethylene compounds impregnated with
additives and/or pigments and sold to converters. The converters mix the
compounds with larger volumes of polymers, including polyethylene, to produce
various products.
We produce wire and cable resins and compounds at Morris, Illinois, La
Porte, Texas, Tuscola, Illinois, Crockett, Texas and Fairport Harbor, Ohio.
Wire and cable resins and compounds are used to insulate copper and fiber optic
wiring in power, telecommunication, computer and automobile applications.
42
<PAGE>
The following table outlines our polymers and performance polymers products,
annual rated capacity, the primary uses for these products and our brand names.
<TABLE>
<CAPTION>
RATED
PRODUCT CAPACITY(a) PRIMARY USES BRAND NAMES
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
POLYETHYLENE AND
POLYPROPYLENE
- -------------------------------------------------------------------------------------------------
High density 3.4 billion HDPE is used to manufacture grocery, ALATHON(R)
polyethylene ("HDPE") pounds(b) merchandise and trash bags; food Petrothene(R)
containers for items from frozen
desserts to margarine; plastic caps and
closures; liners for boxes of cereal and
crackers; plastic drink cups and toys;
dairy crates; bread trays and pails for
items from paint to fresh fruits and
vegetables; safety equipment such as
hard hats; house wrap for insulation;
bottles for household/industrial
chemicals and motor oil;
milk/water/juice bottles; and large
(rotomolded)
tanks for storing liquids like
agricultural and lawn care chemicals.
- -------------------------------------------------------------------------------------------------
Low density polyethylene 1.7 billion LDPE is used to manufacture food Petrothene(R)
("LDPE") pounds packaging films; plastic bottles for Acrythene(R)
packaging food and personal care items; (EMA)
dry cleaning bags; ice bags; pallet Ultrathene(R)
shrink wrap; heavy-duty bags for mulch (EVA)
and potting soil; boil-in-bag bags;
coatings on flexible packaging products;
and coating on paper board such as milk
cartons. Specialized forms of LDPE are
Ethyl Methyl Acrylate ("EMA"), which
provides adhesion in a variety of
applications, and Ethylene Vinyl Acetate
("EVA"), which is used in foamed sheets,
bag-in-box bags, vacuum cleaner hoses,
medical tubing, clear sheet protectors
and flexible binders.
- -------------------------------------------------------------------------------------------------
Linear low density 1.1 billion LLDPE is used to manufacture garbage and Petrothene(R)
polyethylene ("LLDPE") pounds lawn/leaf bags; housewares; lids for
coffee cans and margarine tubs; and
large (rotomolded) toys like outdoor gym
sets.
- -------------------------------------------------------------------------------------------------
Polypropylene 680 million Polypropylene is used to manufacture KromaLon(R)
pounds fibers for carpets, rugs and upholstery; Petrofil(R)
housewares; automotive battery cases; Petrothene(R)
automotive fascia, running boards and KromaLux(R)
bumpers; grid-type flooring for sports KromaTex(R)
facilities; fishing tackle boxes; and Flexathene(R)
bottle caps and closures.
- -------------------------------------------------------------------------------------------------
PERFORMANCE POLYMERS
- -------------------------------------------------------------------------------------------------
Wire and Cable Resins (c) Wire and cable resins and compounds are Petrothene(R)
and Compounds(d) used to insulate copper and fiber optic
wiring in power, telecommunication,
computer and automobile applications.
- -------------------------------------------------------------------------------------------------
Polymeric Powders (c) Polymeric powders are component products Microthene(R)
in structural and bulk molding
compounds; and parting agents and
filters for appliance, automotive and
plastics processing industries.
- -------------------------------------------------------------------------------------------------
Concentrates and 150 million Concentrates and compounds provide color Spectratech(R)
Compounds(d) pounds in film, bottles and foam sheets; the
"slip" that keeps film from sticking
together; flame retardancy; resistance
to UV radiation; and the "gas bubbles"
to make foamed plastic products.
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
RATED
PRODUCT CAPACITY(a) PRIMARY USES BRAND NAMES
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Polymers for Adhesives, (c) Polymers are components in hot-metal- Petrothene(R)
Sealants and Coatings adhesive formulations for case, carton Ultrathene(R)
and beverage package sealing; glue
sticks; automotive sealants; carpet
backing; and adhesive labels.
- -----------------------------------------------------------------------------------------------
Reactive Polyolefins (c) Reactive polyolefins are functionalized Plexar(R)
polymers used to bond nonpolar and polar
substrates in barrier food packaging;
wire and cable insulation and jacketing;
automotive gas tanks; and metal coating
applications.
- -----------------------------------------------------------------------------------------------
Liquid Polyolefins (c) Liquid polyolefins are a diesel fuel Vynathene(R)
additive to inhibit freezing.
</TABLE>
- --------
(a) Unless otherwise specified, represents rated capacity at January 1, 1999.
We calculate "rated capacity," as used in this table, by estimating the
number of days in a typical year that a production unit of a plant is
expected to operate, after allowing for downtime for regular maintenance,
and multiplying that number by an amount equal to the unit's optimal daily
output based on the design feedstock mix. Because the rated capacity of a
production unit is an estimated amount, the actual production volumes may
be more or less than the rated capacity.
(b) We increased our HDPE capacity by approximately 125 million pounds in 1998.
A 480-million-pound HDPE resin expansion project at the Matagorda facility
has a targeted start-up in the third quarter of 1999. The idling of a
portion of the Port Arthur facility effective March 31, 1999 resulted in a
decrease in capacity of 300 million pounds at the end of the first quarter
of 1999.
(c) These are enhanced grades of polyethylene and are included in the capacity
figures for HDPE, LDPE and LLDPE above, as appropriate.
(d) A letter of intent for the sale of our concentrates and compounds business
at our Crockett, Texas and Heath, Ohio facilities has been entered into.
Research and development for our polymers segment is conducted in
laboratories at our Cincinnati, Ohio facility and at pilot plants in Matagorda,
Texas and Morris, Illinois. These facilities provide product and process
technology support for the polymers segment and its customers. See "--Research
and Technology; Patents and Trademarks."
Feedstocks
With the exception of the Chocolate Bayou polyethylene plant, our
polyethylene and polypropylene production facilities can receive their ethylene
and propylene directly from our petrochemical facilities. The feedstock is sent
via our olefins pipeline system at our own production at the site. The
polyethylene plants at Chocolate Bayou, LaPorte, Port Arthur and Pasadena are
pipeline-connected to third parties and can receive ethylene via exchanges or
purchases. The polypropylene facility at Morris also receives propylene from a
third party.
Marketing, Sales and Distribution
Our polymers products are primarily sold to an extensive base of established
customers, many under term contracts typically having a duration of one to
three years. The remainder is generally sold without contractual term
commitments. In either case, in most of the continuous supply relationships
prices may be changed upon mutual agreement with our customers.
Polymers are primarily distributed via railcar. We own or lease, under long-
term lease arrangements, approximately 10,000 railcars for use in our polymers
business. We sell our polymers products in the United States primarily through
our own sales organization. The sales organization generally engages sales
agents to market its products in the rest of the world.
44
<PAGE>
Competition and Industry Conditions
The basis for competition in our polymers products is
. product performance
. product quality
. product deliverability
. customer service
. price
We compete with other large producers of polymers, including Chevron
Chemical Corporation, Dow Chemical Company, Eastman Chemical Company, Exxon
Chemical Company, Formosa Plastics, Huntsman Chemical Company, NOVA
Corporation, Phillips Petroleum Company, Solvay Polymers, Total Fina, Union
Carbide Corporation and Westlake Polymers. Polymers profitability is affected
by the worldwide level of demand for polymers along with vigorous price
competition, which may intensify due to, among other things, new domestic and
foreign industry capacity. In general, weak economic conditions either in the
United States or elsewhere in the world tend to reduce demand and put pressure
on margins. It is not possible to predict accurately the changes in feedstock
costs, market conditions and other factors that will affect polymers industry
margins in the future.
Based on published rated industry capacities, we are the largest producer of
polyethylene in North America and a leading domestic producer of polyolefins
powders, compounds, wire and cable resins, and polymers for adhesives. The
combined rated capacity of our polyethylene units as of January 1, 1999 was
approximately 6.2 billion pounds per year or approximately 18% of total
industry capacity in North America. There are 19 other North American producers
of polyethylene, including Chevron Chemical Company, Dow Chemical Company,
Exxon Chemical Company, Phillips Petroleum Company, Solvay Polymers and Union
Carbide Corporation. Our polypropylene capacity, 680 million pounds per year as
of January 1, 1999, represents just under 5% of the total North American
polypropylene capacity. There are 14 other North American competitors in the
polypropylene business, including BP Amoco Chemical Company, Exxon Chemical
Company, Montell Polyolefins BV and Total Fina.
The following chart illustrates our production capacity position for
polyethylene and polypropylene, or "polyolefins" for 1998, based on industry
sources.
Bar chart appears here showing Equistar's production capacity position for
polyethylene and polypropylene, or "polyolefins" for 1998 as compared with other
leading North American producers as set forth below.
Leading North America Polyolefins Producers
Millions Lbs./Year
Producer Production Capacity
Equistar 6,845
Exxon 6,844
Union Carbide 4,450
Dow 4,380
Montell 3,550
Phillips 2,927
Chevron 2,635
Solvay 2,490
Nova 2,284
Fina 2,143
Huntsman 1,985
Mobile 1,941
BP Amoco 1,820
Formosa 1,739
Eastman 1,067
Westlake 1,018
45
<PAGE>
Properties
Our principal manufacturing facilities and principal products are detailed
below. All of these facilities are wholly owned by Equistar unless otherwise
noted.
<TABLE>
<CAPTION>
Location Principal Products
-------- ------------------
<S> <C>
Beaumont, Texas(a)...... Ethylene Glycol
Channelview, Texas(b)... Ethylene, Propylene, Butadiene, Benzene,
Toluene, DCPD, Isoprene, Resin Oil, Piperylenes,
Alkylate and MTBE
Corpus Christi, Texas... Ethylene, Propylene, Butadiene and Benzene
Chocolate Bayou, HDPE
Texas(c)...............
Chocolate Bayou, Ethylene, Propylene, Butadiene, Benzene,
Texas(c)(d)............ Toluene, DCPD, Isoprene, Resin Oil and MTBE
Crockett, Texas(e)...... Wire and Cable Resins and Compounds,
Concentrates and Compounds
LaPorte, Texas.......... Ethylene, Propylene, LDPE, LLDPE, HDPE and
Liquid Polyolefins
Matagorda, Texas........ HDPE
Pasadena, Texas(f)...... Ethylene Oxide and Ethylene Glycol and other EO
derivatives
Pasadena, Texas(f)...... Polypropylene and LDPE
Port Arthur, Texas(g)... LDPE and HDPE
Victoria, Texas(d)...... HDPE
Lake Charles, Ethylene and Propylene
Louisiana(h)...........
Morris, Illinois........ Ethylene, LDPE, LLDPE and Polypropylene
Tuscola, Illinois....... Ethyl Alcohol, Diethyl Ether, Wire and Cable
Resins and Compounds and Polymeric Powders
Clinton, Iowa........... Ethylene, LDPE and HDPE
Fairport Harbor, Wire and Cable Resins and Compounds
Ohio(h)................
Heath, Ohio(e).......... Wire and Cable Resins and Compounds,
Concentrates and Compounds
Anaheim, California..... Denatured Alcohol
Newark, New Jersey...... Denatured Alcohol
</TABLE>
- --------
(a) The Beaumont facility is owned by PD Glycol, a partnership owned 50% by
Equistar and 50% by DuPont de Nemours and Company.
(b) The Channelview facility has two ethylene processing units. Lyondell
Methanol owns a methanol plant located within the Channelview facility on
property leased from Equistar. A third party owns and operates a facility
on land leased from Equistar that is used to purify hydrogen from Lyondell
Methanol's methanol plant. We also operate a styrene maleic anhydride unit
and a polybutadiene unit which are owned by a third party and are located
on property leased from Equistar within the Channelview facility.
(c) Millennium and Occidental each contributed a facility located in Chocolate
Bayou. These facilities are not on contiguous property.
(d) The land is leased. The facility is owned.
(e) A letter of intent for the sale of the concentrates and compounds business
at these facilities has been entered into.
(f) Occidental and Lyondell each contributed facilities located in Pasadena.
These facilities are primarily on contiguous property, and we plan to
operate them as one site to the extent practicable. These facilities are
operated in conjunction with the LaPorte facility.
(g) A substantial portion of the HDPE capacity was idled on March 31, 1999, and
could be restarted when market conditions warrant.
(h) The facilities and land are leased.
46
<PAGE>
We also own a storage facility, a brine pond and a tract of vacant land in
Mont Belvieu, Texas, located approximately 15 miles east of the Channelview
facility. Storage capacity for up to approximately 13 million barrels of NGL
feedstocks, ethylene, propylene and other hydrocarbons is provided in salt
domes at the Mont Belvieu facility. We operate an additional 3 million barrels
of ethylene and propylene storage on leased property in Markham, Texas.
We use an extensive olefins pipeline system, some of which we own and some
of which we lease, extending from Corpus Christi to Mont Belvieu to Port Arthur
and around the Lake Charles area. We own other pipelines in connection with our
Morris, Clinton, Tuscola, Chocolate Bayou, Matagorda, Victoria, Corpus Christi
and LaPorte facilities. We own and lease several pipelines connecting the
Channelview facility, the refinery owned by LYONDELL-CITGO Refining and the
Mont Belvieu storage facility; these pipelines are used to transport
feedstocks, butylenes, hydrogen, butane, MTBE and unfinished gasolines. We also
own a barge docking facility near the Channelview facility capable of berthing
eight barges and related terminal equipment for loading and unloading
feedstocks and products. We own or lease, under long-term lease arrangements,
approximately 10,000 railcars for use in our business.
We sublease our executive offices and corporate headquarters from Lyondell
in downtown Houston, Texas. In addition, we own facilities which house the
Morris and Cincinnati research operations. We also lease sales facilities and
storage facilities, primarily in the Gulf Coast area, from various third
parties for the handling of products.
Research and Technology; Patents and Trademarks
We maintain a significant research and development facility in Cincinnati,
Ohio. The Cincinnati facility features more than 30 plastics processing lines,
all of commercial or semi-commercial size, allowing our engineers and
technicians to evaluate polyolefins products under conditions similar to a
customer's plant. We also have additional research facilities in Morris,
Illinois, Matagorda, Texas and Plano, Texas. Product development efforts are
aimed at tailoring products to meet specific customer needs.
The Channelview facility employs proprietary technology owned by Lyondell to
convert ethylene and other light petrochemical streams into propylene. We are
conducting a research project to investigate alternative feedstocks for use at
the Channelview, Chocolate Bayou and/or Corpus Christi facilities. These
alternative feedstocks could significantly lower costs and provide an
additional competitive advantage at these facilities.
Recent polymers industry announcements relate to the development of single-
site catalysts. Successful development and commercialization of these catalysts
are expected to result in enhanced polymer properties. We are conducting a
broad search to evaluate outside technology and are concentrating in-house
research in an effort to identify and develop single-site catalysts for use in
the production of polyolefins resins. We hold several United States patents and
the rights to certain patents pending in connection with research and
development efforts in this area. We are not dependent upon obtaining or
retaining any particular patent, and believe the failure to receive or retain
any individual patent would not have a material effect on operations.
We use numerous technologies in our operations, many of which are licensed
from third parties. Significant licenses we hold include
. BP Amoco fluid bed polyethylene process for the production of both
LLDPE and HDPE
. Unipol process for the production of LLDPE
. other licenses for the production of polyethylene and polypropylene
We are not dependent on the retention of any particular license and believe
that the loss of any individual license would not have a material adverse
effect on operations.
47
<PAGE>
We acquired rights to numerous recognized brand names from Lyondell and
Millennium Petrochemicals Inc., a wholly owned subsidiary of Millennium, in
connection with the formation of Equistar. The brand names are ALATHON(R),
KromaLon(R), Petrothene(R), Ultrathene(R), Vynathene(R) and Microthene(R). Our
rights to use these trademarks are perpetual as long as we actively use the
trademarks. We are not dependent upon any particular trademark and believe the
loss of any individual trademark would not have a material adverse effect on
operations.
Employee Relations
As of December 31, 1998, we employed approximately 5,000 full-time
employees. We also use the services of independent contractors in the routine
conduct of our business. Approximately 365 hourly workers are covered by
collective bargaining agreements. We believe that our relations with our
employees are good.
Management
Members of the Partnership Governance Committee, Executive Officers of Equistar
and Directors and Executive Officers of Equistar Funding
All of Equistar management's functions are the responsibility of the
partnership governance committee. The partnership governance committee is
comprised of nine members. Each general partner may appoint three members to
the partnership governance committee. The partnership governance committee has
delegated responsibility of day-to-day operations to the executive officers of
Equistar.
The current members of the partnership governance committee are
. Dan F. Smith, President and Chief Executive Officer of Lyondell and
Equistar and co-chairman of the partnership governance committee
. William M. Landuyt, Chairman and Chief Executive Officer of Millennium
and co-chairman of the partnership governance committee
. Dr. Ray R. Irani, Chairman and Chief Executive Officer of Occidental
Petroleum and co-chairman of the partnership governance committee
. John E. Lushefski, Senior Vice President and Chief Financial Officer of
Millennium
. Jeffrey R. Pendergraft, Executive Vice President and Chief Administrative
Officer of Lyondell
. Kevin DeNicola, Vice President, Corporate Development of Lyondell
. George Robbins, President and Chief Executive Officer of Millennium
Specialty Chemicals
. Stephen I. Chazen, Executive Vice President of Occidental
. J. Roger Hirl, President and Chief Executive Officer of Occidental
Chemical Corporation.
48
<PAGE>
The following table sets forth the names and ages of the executive officers
of Equistar and the executive officers and directors of Equistar Funding.
Officers of Equistar are chosen from time to time by vote of the partnership
governance committee. Directors of Equistar Funding are elected annually and
hold office until a successor is elected. Officers of Equistar Funding are
chosen from time to time by vote of its board of directors.
<TABLE>
<CAPTION>
Name Age Partnership Position
---- --- --------------------
<S> <C> <C>
Dan F. Smith.............. 52 Chief Executive Officer of Equistar and Equistar
Funding; Director of Equistar Funding
Eugene R. Allspach........ 51 President and Chief Operating Officer of
Equistar and Equistar Funding; Director of
Equistar Funding
John R. Beard............. 46 Senior Vice President, Manufacturing of Equistar
Kelvin R. Collard......... 41 Vice President and Controller of Equistar and
Equistar Funding; Director of Equistar Funding
Clifton B. Currin, Jr..... 44 Vice President, Supply and Optimization of
Equistar
J. R. Fontenot............ 46 Vice President, Research and Engineering of
Equistar
Brian A. Gittings......... 52 Senior Vice President, Petrochemicals of
Equistar
Jeffrey L. Hemmer......... 40 Vice President, Information Systems and Business
Process Improvement of Equistar
Alan Houlton.............. 52 Vice President, Customer Supply Chain of
Equistar
Gerald A. O'Brien......... 46 Vice President, General Counsel and Secretary of
Equistar and Equistar Funding
Myra J. Perkinson......... 47 Vice President, Human Resources of Equistar
W. Norman Phillips, Jr.... 43 Senior Vice President, Polymers of Equistar
</TABLE>
Mr. Smith has been Chief Executive Officer of Equistar since December 1997.
Mr. Smith has been a Director of Lyondell since 1988, President and Chief
Executive Officer since December 1996 and a member of the LYONDELL-CITGO
Refining partnership governance committee since July 1993. Mr. Smith was
President and Chief Operating Officer of Lyondell from 1994 to December 1996.
Before 1994, Mr. Smith held various senior executive positions with Lyondell
and Atlantic Richfield Company, including Executive Vice President and Chief
Financial Officer of Lyondell, Vice President, Corporate Planning of ARCO and
Senior Vice President in the areas of management, manufacturing, control and
administration for Lyondell and the Lyondell Division of ARCO.
Mr. Allspach has been President and Chief Operating Officer of Equistar
since December 1997. Mr. Allspach served as Group Vice President, Manufacturing
and Technology for Millennium Petrochemicals from 1993 to 1997. Before 1993,
Mr. Allspach held various senior executive positions with Millennium, including
Group Vice President, Manufacturing and Manufacturing Services and Vice
President, Specialty Polymers and Business Development.
Mr. Beard has been Senior Vice President, Manufacturing of Equistar since
May 1998. He was Vice President, Manufacturing of Equistar from December 1997
to May 1998. Mr. Beard previously served as Vice President, Petrochemical
Manufacturing of Lyondell from May 1995 to December 1997. Mr. Beard served as
Vice President in the areas of quality, supply, planning and evaluations of
Lyondell from 1992 to May 1995.
Mr. Collard has been a Vice President of Equistar since July 1998. Mr.
Collard has been the Controller of Equistar since December 1997. From May 1989
to December 1997, Mr. Collard held various senior manager positions with
Lyondell and ARCO, including Controller of ARCO Coal Company, manager of
accounting policy of ARCO and manager of financial reporting and internal
control of Lyondell. Before May 1989, Mr. Collard was an audit manager for
Coopers & Lybrand.
Mr. Currin has been Vice President, Supply and Optimization of Equistar
since May 1998. Mr. Currin previously served as Vice President, Corporate
Development of Lyondell from December 1997 to May 1998.
49
<PAGE>
Before May 1998, Mr. Currin served as Vice President of Lyondell with
responsibilities in the areas of strategic development, petrochemicals business
management and olefins.
Mr. Fontenot has been Vice President, Research and Development and
Engineering of Equistar since September 1998. Mr. Fontenot previously served as
Vice President, Engineering of Lyondell from December 1997 to September 1998.
Mr. Fontenot served as Vice President, Technology of Lyondell from January 1997
to December 1997 and as Director of Technology of Lyondell from 1995 to January
1997. Before 1995, Mr. Fontenot held various positions in operations,
evaluation and technology for Lyondell.
Mr. Gittings has been Senior Vice President, Petrochemicals of Equistar
since August 1998 and was Vice President, Oxygenated Chemicals of Equistar from
May 1998 to August 1998. Before that, he was Vice President and General
Manager, Isocyanurates for Occidental Chemicals, where he had previously served
as Vice President and General Manager, Ethylene Oxide and Derivatives.
Mr. Hemmer has been Vice President, Information Systems and Business Process
Development of Equistar since August 1998. He was Director of Business Process
Improvement of Equistar from December 1997 to August 1998. Mr. Hemmer also had
been Director, Engineering and Licensing for Millennium Petrochemicals from
October 1996 to December 1997. Before October 1996, he was manager of
polyethylene process and engineering technology for Exxon Chemical.
Mr. Houlton has been Vice President, Customer Supply Chain of Equistar since
December 1997. He previously served as Vice President, Manufacturing for
Millennium Petrochemicals, with responsibility for Millennium Petrochemicals'
11 manufacturing and compounding operations, beginning in October 1993.
Mr. O'Brien has been Vice President, General Counsel and Secretary of
Equistar since December 1997. Mr. O'Brien previously served as associate
general counsel of Lyondell, where his responsibilities included joint
responsibility for the management of the legal department and responsibility
for a variety of legal department functions, including mergers and
acquisitions, general corporate, finance and securities.
Ms. Perkinson has been Vice President, Human Resources of Equistar since
December 1997. Ms. Perkinson served as Vice President, Human
Resources/Communications of Millennium Petrochemicals beginning in November
1991, in which position she was responsible for all human resources, employee
labor relations functions and the administration of all of Millennium
Petrochemicals' compensation, benefits and communications programs.
Mr. Phillips has been Senior Vice President, Polymers of Equistar since
August 1998. He was previously Vice President, Petrochemicals of Equistar from
December 1997 to August 1998. Mr. Phillips previously served as Vice President,
Polymers of Lyondell from January 1997 to December 1997. Mr. Phillips
previously served as Vice President of Lyondell with responsibilities in the
areas of marketing and operations from 1993 to January 1997.
50
<PAGE>
Compensation
Summary Compensation Table
The table below provides information regarding the compensation awarded to
or earned by Equistar's Chief Executive Officer and the next four most highly
compensated executive officers, each of whom earned $100,000 or more in
combined salary and bonus during the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
Other Annual All Other
Name and Principal Salary Bonus Compensation Compensation
Position ($) ($) ($)(a) ($)(b)
------------------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Dan F. Smith(c)......... (c) (c) (c) (c)
Chief Executive Officer
Eugene R. Allspach...... $335,531 $321,600 $11,344 $48,641
President & Chief
Operating Officer
W. Norman Phillips,
Jr..................... $256,188 $185,640 $ 9,845 $39,039
Senior Vice President
John R. Beard........... $237,128 $161,800 $ 5,491 $31,347
Senior Vice President
J. R. Fontenot.......... $213,496 $111,200 $ 8,988 $40,251
Vice President
</TABLE>
- --------
(a) Includes imputed income in respect of the Long-Term Disability Plan and tax
gross-ups in respect of financial counseling reimbursements. Actual
reimbursement for financial counseling in 1998 is included in the "All
Other Compensation" column above. "Tax gross-ups" refers to the additional
reimbursement paid to a recipient to cover the federal income tax
obligations associated with the underlying benefit, including an additional
amount based on maximum applicable income tax rates.
(b) Includes contributions to the Executive Supplementary Savings Plan,
incremental executive medical plan premiums, financial counseling
reimbursements and certain amounts in respect of the Executive Life
Insurance Plan, as follows:
<TABLE>
<CAPTION>
Mr. Mr. Mr. Mr.
Allspach Phillips Beard Fontenot
-------- -------- ------- --------
<S> <C> <C> <C> <C>
Executive Supplementary Savings Plan....... $27,103 $20,495 $18,970 $17,080
Incremental Medical Plan Premiums.......... $ 8,441 $ 8,441 $ 8,441 $ 8,441
Financial Counseling Reimbursement......... $11,742 $ 7,107 $ 0 $12,525
Executive Life Insurance Plan.............. $ 1,355 $ 2,996 $ 3,936 $ 2,205
</TABLE>
(c) Mr. Smith serves as the Chief Executive Officer of both Lyondell and
Equistar. Mr. Smith does not receive any compensation from Equistar.
Equistar pays a fee to Lyondell in recognition of Mr. Smith's services. See
"Related Transactions--Agreement Regarding Services of Chief Executive
Officer."
Long-Term Incentive Plan
In 1998 Equistar adopted a performance-driven, long-term incentive plan, or
LTIP, for selected key employees. Awards are based on whether Equistar reaches
its performance and financial goals in two critical areas: economic value added
and the achievement of synergies. Economic value added measures Equistar's cash
flow performance in excess of a capital charge, which is calculated by
multiplying the capital invested in Equistar by Equistar's weighted average
cost of capital. Synergies include both one-time and ongoing potential savings
from operating the Lyondell, Millennium and Occidental contributed businesses
together. Synergy targets include
. aligning and optimizing processing units for improved on-stream time and
increased throughput capability
. maximizing the value of feedstock and olefins co-products
51
<PAGE>
. lowering distribution costs
. reducing feedstocks and other procurement costs
. reducing the amount of staffing services required by each contributed
business
The partnership governance committee approves all awards based on its
assessment of Equistar's operating performance in the preceding year in the
areas of synergy attainment and economic value added.
Equistar assigns each LTIP participant a target award percentage for the
year based on that participant's salary, position and any other factors
Equistar deems appropriate. Each LTIP participant's award for the year is
determined by multiplying his/her target award percentage by an award multiple
determined by the partnership governance committee, the product of which is
multiplied by his/her base pay. The award multiple for 1998 was based on the
achievement of a four-year rolling average economic value added of $160 million
and the achievement of net synergies of $50 million.
Awards will be paid only to LTIP participants who are actually employed at
year-end. Those LTIP participants whose employment terminates due to death,
disability or retirement before the end of the year will be paid a pro rata
portion of their award based on the number of full months completed while
actively employed. LTIP participants hired after the first of the year are
eligible to receive a pro rata award based on the number of full months
completed during the year.
Awards consist of a combination of annual or current cash and deferred cash
compensation. The relative percentages of current cash and deferred cash
components are based on the LTIP participant's salary range. The percentage of
deferred cash compensation as compared with current cash compensation increases
as the LTIP participant's salary increases. The current portion of the award is
disclosed under the "Expected Bonus" column of the Summary Compensation Table
above. The deferred cash portion of the award is paid out over three
consecutive years, one-third each year, beginning approximately one year from
the payment of the related annual cash component. The payout amounts for the
deferred compensation component may be adjusted upward, with no cap, or
downward, capped at 20%, based on Equistar's ongoing results with respect to
synergies over that three-year period. Awards are adjusted one percentage point
for every percentage point of synergy gained or lost during the award period.
The following table details the amount of the deferred compensation
component of the 1998 award to the four most highly paid executive officers as
well as their estimated future payouts resulting from such award under the
LTIP.
Long-Term Incentive Plan--Awards In Last Fiscal Year
<TABLE>
<CAPTION>
Performance
or Other Estimated Future Payouts under
Number of Period Non-Stock Price-Based Plans
Shares, Units Until ------------------------------
or Other Maturation Threshold Target(b) Maximum(c)
Name Rights ($)(a) or Payout ($) ($) ($)
---- ------------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Dan F. Smith............ (d) (d) (d) (d) (d)
Eugene R. Allspach...... $462,384 (e) $369,907 $462,384 --
W. Norman Phillips,
Jr..................... $265,221 (e) $212,177 $189,810 --
John R. Beard........... $245,419 (e) $196,335 $245,419 --
J. R. Fontenot.......... $189,810 (e) $151,848 $189,810 --
</TABLE>
- --------
(a) Award is denominated in dollars. Amounts represent deferred compensation
component of 1998 award. Current portion is disclosed under the "Bonus"
column of the Summary Compensation Table above.
(b) Assumes current 1999 target of achievement of synergies of $200 million.
The partnership governance committee may revise targets for 1999 upward or
downward.
(c) Award is not capped.
(d) Mr. Smith does not receive any compensation from Equistar. Equistar pays a
fee to Lyondell in recognition of Mr. Smith's services. See "Related
Transactions--Agreement Regarding Services of Chief Executive Officer."
(e) Long-term compensation awards with respect to 1998 will be paid in annual
increments of one-third beginning in March 2000.
52
<PAGE>
Annual Pension Benefits
Pension Plan
In 1998, Equistar adopted a pension plan available to all full-time or
regular part-time Equistar employees and those employees on an approved long-
term disability leave of absence. The pension plan is fully funded by Equistar.
Employees are not required, nor are they allowed, to contribute to the pension
plan. Participation began for former Lyondell, Millennium and Occidental
employees on their first day of service with Equistar. All other employees are
eligible on the first day following 12 months of service with Equistar or any
predecessor company. Participation in the pension plan ends on the earliest of
the day the employee
. quits, retires, is discharged or dies
. is absent from work more than 12 consecutive months
. is no longer eligible for benefits
Benefits are not reduced for social security or other amounts.
Annual retirement benefit under the pension plan is calculated by
multiplying
. the pension plan participant's years of service to Equistar after January
1, 1998, by
. Final Average Earnings as defined below, by
. the Benefit Percentage as shown below
"Final Average Earnings" is the pension plan participant's highest average
monthly base pay received for any 36 consecutive months during the last 120
months of continuous service with Equistar or Lyondell, Millennium or
Occidental. For pension plan participants with less than 36 months of
continuous service with Equistar or Lyondell, Millennium or Occidental, Final
Average Earnings is the average of all monthly base pay, including salary
earned with Equistar, Lyondell, Millennium or Occidental.
The Benefit Percentage applicable to each pension plan participant is based
on the participant's age when he begins to receive benefits, as shown in the
following table:
<TABLE>
<CAPTION>
Benefit
Beginning Benefits Age Percentage
---------------------- ----------
<S> <C>
Under 35....................................................... 3%
35-39.......................................................... 4%
40-44.......................................................... 5%
45-49.......................................................... 6%
50-54.......................................................... 9%
55-59.......................................................... 13%
60 and over.................................................... 15%
</TABLE>
The estimated annual benefit payable upon retirement at age 65, normal
retirement age under the pension plan, for the four most highly compensated
officers is as follows:
<TABLE>
<CAPTION>
Estimated
Annual
Benefit
Name at Age 65
---- ---------
<S> <C>
Eugene R. Allspach.............................................. $31,182
W. Norman Phillips, Jr.......................................... $49,079
John R. Beard................................................... $42,621
J. R. Fontenot.................................................. $43,360
</TABLE>
53
<PAGE>
Supplemental Executive Retirement Plan
Equistar offers a Supplemental Executive Retirement Plan ("SERP") to senior
managers and executive officers who receive a retirement benefit under the
pension plan and have had the amount of that benefit reduced due to required
limitations under the Internal Revenue Code of 1986, as amended, or under the
Employee Retirement Income Security Act, as amended ("ERISA"). Calculation of
benefits under the SERP is based on all of the following:
. base wage
. salary deferrals
. annual incentive awards
Equistar bears all costs of the SERP, including administration of the SERP.
SERP participants are not allowed to contribute to the SERP. The SERP provides
for two types of supplementary benefits: deferral/incentive supplements and
qualification limitation supplements.
Deferral/Incentive Supplements. Participants are eligible for a
deferral/incentive supplement under the SERP if their Excess Retirement
Benefit, as defined below, is a positive amount. The monthly amount of
supplemental benefits is calculated by multiplying the SERP participant's
Excess Retirement Benefit by a fraction based on his/her years of service. For
purposes of this paragraph, Excess Retirement Benefit is
. the amount the SERP participant would have received at retirement as a
basic allowance from the pension plan if it included the SERP
participant's awards and deferred compensation, minus
. the amount of monthly retirement allowance the SERP participant is
actually entitled to receive at retirement under the pension plan
The total annual benefit payable to each SERP participant, including payment
under the pension plan, shall not exceed 65% of the greater of
. the SERP participant's final base pay, exclusive of deferrals, and most
recent annual incentive pay, or
. the highest average base pay plus annual incentive pay during a 36-month
consecutive period out of 120 months of service with Equistar or
Lyondell, Millennium or Occidental
Qualification Limitation Supplements. SERP participants are eligible for a
qualification limitation supplement if their Excess Retirement Benefit, as
defined below, is a positive amount. The monthly amount of qualification
limitation supplement benefit is calculated by multiplying the SERP
participant's Excess Retirement Benefit by a fraction based on the SERP
participant's years of service. For purposes of this paragraph, Excess
Retirement Benefit is
. the amount of monthly allowance the SERP participant would have received
as a base allowance under the pension plan had the amount not been
limited or reduced due to requirements under the Internal Revenue Code of
1986, as amended, or ERISA, minus
. the amount of monthly allowance the SERP participant is actually entitled
to receive at retirement
SERP participants may elect to receive their SERP benefit in any form
available for payment of their normal retirement benefit, provided that the
same form of payment is elected for all supplementary benefits. If the SERP
participant elects a form of annuity for these supplementary benefits, the SERP
participant must elect the same form of annuity under the pension plan.
Benefits are not reduced for social security or other amounts.
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The estimated annual benefit payable upon retirement at age 65, normal
retirement age under the SERP, for each of the four most highly compensated
officers is as follows:
<TABLE>
<CAPTION>
Estimated
Annual
Benefit
Name at Age 65
---- ---------
<S> <C>
Eugene R. Allspach.............................................. $94,958
W. Norman Phillips, Jr.......................................... $84,449
John R. Beard................................................... $64,695
J. R. Fontenot.................................................. $51,105
</TABLE>
Executive Severance Arrangements
In connection with the formation of Equistar and to ensure the continued
dedication of executive officers, Equistar assumed obligations under severance
agreements executed by Lyondell and Millennium with their executives who agreed
to join Equistar.
The severance agreement between Equistar and Eugene Allspach, which was
assumed by Equistar from Millennium, provides for Mr. Allspach's receipt of
payments and benefits described below in the event of his termination before
January 1, 2001. Benefits under Mr. Allspach's severance agreement apply if he
is terminated
. by Equistar without cause
. as a result of a Constructive Termination for Good Reason
Notice of Constructive Termination for Good Reason, as defined in Mr.
Allspach's severance agreement, can be given by Mr. Allspach if Equistar does
any of the following:
. assigns him to any duties or responsibilities not comparable to his
duties or responsibilities when he joined Equistar or reduces his
responsibilities or position
. relocates Equistar's principal executive offices outside a 25-mile radius
of its current location or requests Mr. Allspach's transfer, in writing,
to a new location
. reduces Mr. Allspach's annual base salary or comparable benefits to a
level below the annual base salary or benefits he received when joining
Equistar
. fails to continue any bonus plan, program or arrangement in which Mr.
Allspach participates or changes Mr. Allspach's status under any bonus
plan, program or arrangement
. fails to comply with any material provision of Mr. Allspach's severance
agreement
In the event Mr. Allspach is entitled to receive benefits under his
severance agreement, Equistar agrees to provide the following rights and
benefits:
. a lump-sum payment in cash equal to three times his annual earnings plus
any unreimbursed business expenses and any base salary, bonus, vacation
pay or other deferred compensation accrued or earned under law or
according to Equistar's policies
. additional pension benefits by crediting Mr. Allspach with three
additional years of age and service
. an amount equal to three years of the maximum employer contribution to a
qualified or nonqualified 401(k) plan, assuming the executive deferred
the maximum amount and continued to earn his then current salary
. continuation of insurance and other benefits for 36 months following
termination
. financial counseling for a period of one year
. out-placement services and assistance, not to exceed $40,000
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. any other amounts or benefits due under then applicable employee benefit
incentive or equity plans of Equistar applicable to him
Mr. Allspach would also receive an additional payment equal to the amount of
excise tax imposed under the Internal Revenue Code of 1986, as amended, plus
any federal, state or local taxes incurred as a result of the payment. As a
result, he would be in the same position after payment of the excise tax as he
would have been if he were not subject to the excise tax at all.
The severance agreements between Equistar and each of Messrs. Phillips,
Beard and Fontenot were assumed by Equistar from Lyondell. These severance
agreements provide for Messrs. Phillips, Beard and Fontenot's receipt of
payments and benefits described below in the event of their termination before
January 1, 2000. Benefits under their severance agreements apply if any one of
Messrs. Phillips, Beard or Fontenot is terminated
. by Equistar without cause
. as a result of Constructive Termination for Good Reason
Notice of Constructive Termination for Good Reason can be given by Messrs.
Phillips, Beard or Fontenot if Equistar does any of the following:
. assigns him to any duties or responsibilities not comparable to his
duties or responsibilities when he joined Equistar or reduces his
responsibilities or position
. reduces the level of benefits or compensation provided to him below the
comparable level of benefits or compensation payable to similarly
situated executives at Equistar
. relocates his principal office outside a 50-mile radius of its current
location over his written complaint
In the event Messrs. Phillips, Beard or Fontenot is entitled to receive
benefits under his severance agreement, Equistar agrees to provide the
following rights and benefits:
. all nonvested stock options provided under Lyondell's long-term incentive
plan becomes 100% vested and fully exercisable, notwithstanding any
agreement to the contrary
. a lump-sum payment in cash equal to three times his annual earnings,
provided that if he is within 24 months of normal retirement, the payment
he is entitled to receive shall be multiplied by the number of months
remaining and divided by 24
. additional pension benefits by crediting him with five additional years
of age and service
. the full amount of contributions and earnings accrued or credited his
account balance under Lyondell's Executive Deferral Plan
. continuation of insurance and other benefits for 24 months following
termination
. financial counseling for a period of one year
. out-placement services and assistance, not to exceed $40,000
. any other amounts or benefits due under employee benefit incentive or
equity plans of Equistar to which he is are entitled
Compensation of Partnership Governance Committee Members
Members of the partnership governance committee do not receive any
compensation from Equistar for their service.
Indemnification Arrangements
The partnership governance committee has provided for the indemnification of
Equistar's executive officers. Executives are entitled to indemnification with
respect to all matters to which Section 145 of the
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General Corporation Law of the State of Delaware may relate, as if Section 145
were applicable to a partnership. The right to indemnification and payment of
expenses incurred in defending a proceeding in advance of its final disposition
is not exclusive of any other right which the executive may have or hereafter
acquire under any statute, agreement or otherwise, both as to action in that
executive's official capacity and as to action in any other capacity by holding
this office. The indemnification right continues after the executive ceases to
serve as an Equistar officer or to serve another entity at the request of
Equistar. Equistar may elect to enter into indemnification agreements with each
of its executive officers and with any other persons as the partnership
governance committee may designate. In addition, Equistar may elect to maintain
liability insurance to protect itself and any executive officer of Equistar or
another partnership, corporation, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not Equistar would have the
power to indemnify this person against expense, liability or loss under the
laws of the State of Delaware.
Ownership
Equistar
Equistar is a limited partnership wholly owned by Lyondell Petrochemical
L.P. Inc. ("Lyondell LP"), Millennium Petrochemicals LP LLC ("Millennium LP"),
Occidental Petrochem Partner 1, Inc. ("Occidental LP1") and Occidental
Petrochem Partner 2, Inc. ("Occidental LP2"), as the limited partners, and
Lyondell Petrochemical G.P. Inc. ("Lyondell GP"), Millennium Petrochemicals GP
LLC ("Millennium GP") and Occidental Petrochem Partner GP, Inc. ("Occidental
GP"), as the general partners. The following information is given with respect
to the partners' interests in Equistar as of the date of this prospectus.
<TABLE>
<CAPTION>
Nature of Percentage
Beneficial Partnership
Name and Address of Beneficial Owner Ownership Interest
------------------------------------ --------------- -----------
<S> <C> <C>
Lyondell LP................................... Limited Partner 40.180%
300 Delaware Ave.
Wilmington, DE 19801
Millennium LP................................. Limited Partner 28.910%
230 Half Mile Road
Red Banks, NJ 00770
Occidental LP1................................ Limited Partner 6.623%
10889 Wilshire Blvd.
Los Angeles, CA 90004
Occidental LP2................................ Limited Partner 22.876%
10889 Wilshire Blvd.
Los Angeles, CA 90004
Lyondell GP................................... General Partner 0.820%
1221 McKinney Street
Houston, TX 77010
Millennium GP................................. General Partner 0.590%
230 Half Mile Road
Red Banks, NJ 00770
Occidental GP................................. General Partner 0.001%
10889 Wilshire Blvd.
Los Angeles, CA 90004
</TABLE>
Lyondell owns 100% of the outstanding capital stock of each of Lyondell LP
and Lyondell GP. Lyondell has pledged its interests in each Equistar partner
under its bank credit facility. Millennium owns 100% of the outstanding capital
stock of each of Millennium LP and Millennium GP. Occidental owns 100% of the
outstanding capital stock of each of Occidental LP1, Occidental LP2 and
Occidental GP.
Equistar Funding
All of the outstanding capital stock of Equistar Funding is owned by
Equistar.
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<PAGE>
Description of the Partnership Agreement
The partnership agreement of Equistar governs, among other things,
ownership, cash distributions, capital contributions and management of
Equistar. The following is a summary of the material provisions of the
partnership agreement. This summary is qualified in its entirety by reference
to the full and complete text of the partnership agreement, which is available
upon written request as provided under "Available Information."
General
Lyondell GP, Lyondell LP, Millennium GP and Millennium LP entered into the
partnership agreement as of October 10, 1997. PDG Chemical Inc., Occidental LP1
and Occidental LP2 became parties to the partnership agreement as of May 15,
1998. PDG Chemical Inc. withdrew from Equistar as of June 30, 1998, and
Occidental GP became a general partner on the same date. Equistar will continue
in existence until its dissolution as provided in the partnership agreement.
The three general partners of Equistar are Lyondell GP, Millennium GP and
Occidental GP. Lyondell GP is a direct, wholly owned subsidiary of Lyondell.
Millennium GP is an indirect, wholly owned subsidiary of Millennium. Occidental
GP is an indirect, wholly owned subsidiary of Occidental.
Governance
A partnership governance committee manages and controls the business,
property and affairs of Equistar, including the determination and
implementation of Equistar's strategic direction. The general partners exercise
their authority to manage and control Equistar only through the partnership
governance committee. The partnership governance committee consists of nine
members, called representatives, three of whom are representatives of Lyondell
GP, three of whom are representatives of Millennium GP and three of whom are
representatives of Occidental GP.
In general, the approval of two or more representatives acting for Lyondell
GP will be necessary and sufficient for the partnership governance committee to
take any action. This means, in effect, that Lyondell's representatives have
the ability to control the partnership governance committee and, as a result,
Equistar, except where the approval of Millennium's and Occidental's
representatives is required. See "--Unanimous Voting Requirements." Even though
ordinary actions by the partnership governance committee may be approved by two
representatives of Lyondell GP, the partnership governance committee may not
take any action at a meeting with respect to any matter that was not reflected
on an agenda that was properly delivered to all of the representatives in
advance, unless at least one of each of Millennium GP's and Occidental GP's
representatives is present. The participation rights of any general partner's
representatives may be curtailed to the extent that the general partner or its
affiliates cause a default under the partnership agreement.
Unanimous Voting Requirements
Unless approved by two or more representatives of each of Lyondell GP,
Millennium GP and Occidental GP, the partnership governance committee may not
directly or indirectly take, or commit to take, the actions described below.
Equistar, any subsidiary of Equistar or any person acting in the name of or on
behalf of any of them, directly or indirectly, may not take or commit to take,
whether in a single transaction or a series of related transactions
. to cause Equistar, directly or indirectly, to engage, participate or
invest in any business outside the scope of its business as described in
the partnership agreement
. to approve any strategic plan, as well as any amendments or updates to
the strategic plan, including the annual update described under "--
Strategic Plans and Annual Budgets; Deadlock Provisions" below
. to authorize any disposition of assets having a fair market value
exceeding $30 million in any one transaction or a series of related
transactions not contemplated in an approved strategic plan
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<PAGE>
. to authorize any acquisition of assets or any capital expenditure
exceeding $30 million that is not contemplated in an approved strategic
plan
. to require capital contributions to Equistar within any fiscal year if
the total of contributions required from the partners within that year
would exceed $100 million or the total of contributions required from the
partners within that year and the immediately preceding four years would
exceed $300 million. This does not apply to
--contributions contemplated by the asset contribution agreements
--the Lyondell, Millennium and Occidental contributed businesses
--an approved strategic plan
--requirements made to achieve or maintain compliance with certain laws
. to authorize the incurrence of debt for borrowed money, unless
--the debt is to refinance all or a portion of Equistar's credit
facilities as contemplated below
--after giving effect to the incurrence of the debt, and any related
transactions, Equistar would be expected to have an "investment grade"
debt rating by Moody's and S&P, or
--the debt is incurred to refinance the public or bank debt assumed or
incurred by Equistar as contemplated by documents relating to the
formation of Equistar and the contribution of the Occidental
contributed business or to refinance any such refinancing debt
and in the case of each of the three exceptions above, the agreement
relating to the debt does not provide that the transfer by a partner of
its partnership interests, or a change of control with respect to any
partner or any of its affiliates, would
--constitute a default under the debt instruments
--otherwise accelerate the maturity of the debt
--give the lender or holder any "put rights" or similar rights with
respect to the debt instrument
. to authorize a refinancing that would not satisfy provisions relating to
the Millennium guaranteed debt and the Occidental guaranteed debt
. to make borrowings under one or more of Equistar's bank credit
facilities, uncommitted lines of credit or any credit facility, or debt
instruments that refinances all or any portion of Equistar's credit
facility or facilities, at any time, if as a result of any borrowing, the
aggregate principal amount of all borrowings outstanding at the time
would exceed the sum of $1.75 billion
. to enter into interest rate protection or other hedging agreements, other
than hydrocarbon hedging agreements in the ordinary course of business
. to enter into any capitalized lease or off-balance sheet financing
arrangements involving payments, individually or in the aggregate, by it
in excess of $30 million in any fiscal year
. to cause Equistar or any subsidiary of Equistar to issue, sell, redeem or
acquire any partnership interests in Equistar or other equity securities,
or any rights to acquire, or any securities convertible into or
exchangeable for, partnership interests or other equity securities
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. to make cash distributions from Equistar in excess of Available Net
Operating Cash, as defined below, or make noncash distributions, except
as provided in the partnership agreement in respect of a dissolution or
liquidation
. to appoint or discharge executive officers based on the recommendation of
the Chief Executive Officer
. to approve material compensation and benefit plans and policies, material
employee policies and material collective bargaining agreements for
Equistar's employees
. to initiate or settle any litigation or governmental proceedings if the
effect would be material to the financial condition of Equistar
. to change the independent accountants for Equistar
. to change Equistar's method of accounting as adopted in the partnership
agreement or to make certain tax elections referred to in the partnership
agreement
. to create or change the authority of any auxiliary committee
. to merge, consolidate or convert Equistar or any of its subsidiaries with
or into any other entity, other than a wholly owned subsidiary of
Equistar
. to engage in bankruptcy and reorganization actions such as
--filing a petition in bankruptcy or seeking any reorganization,
liquidation or similar relief on behalf of Equistar or any subsidiary
--consenting to the filing of a petition in bankruptcy against Equistar
or any subsidiary
--consenting to the appointment of a receiver, custodian, liquidator or
trustee for Equistar or any subsidiary or for all or any substantial
portion of its property
. to exercise any of the powers or rights described below with respect to a
business conflict involving
--LYONDELL-CITGO Refining, its successors or assigns
--Lyondell Methanol, its successors or assigns
--any other affiliate of either Lyondell GP, Millennium GP or
Occidental GP, if the affiliate's actions with respect to the conflict
circumstance are not controlled by Lyondell, Millennium or Occidental,
other than a business conflict involving the exercise of any rights
and remedies with respect to a default under any agreement that is the
subject of the conflict
. to repay any of the indebtedness that is guaranteed by the Millennium
America Guarantee before December 1, 2004, or refinance any Millennium
guaranteed debt before December 1, 2004, if any of the principal amount
of debt refinancing the guaranteed debt would be due and payable after
December 1, 2004; provided, however, that if the Millennium guaranteed
debt continues to be guaranteed by Millennium America or its successors
after December 1, 2004, then the term of the debt shall not exceed 365
days
. to repay any of the indebtedness that is guaranteed by the Occidental
guarantee before June 14, 2005, other than through refinancing, or
refinance any Occidental guaranteed debt before June 14, 2005, if any of
the principal of the debt refinancing the Occidental guaranteed debt
would be due and payable after June 14, 2005; provided, however, that if
the Occidental guaranteed debt continues to be guaranteed by an affiliate
of Occidental or its successors after June 14, 2005, then the term of the
debt shall not exceed 365 days
Although unanimous approval by all nine members of the partnership
governance committee is never required, the requirements described above are
referred to as "unanimous voting requirements" because two representatives of
each of the general partners must agree on any action taken in respect of the
enumerated matters.
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Transactions with Affiliates
Except as described above under "Unanimous Voting Requirements," if a
business conflict caused by any transaction or dealing between Equistar, or any
of its subsidiaries, and one or more of Equistar's general partners, or any of
their affiliates occurs, the other general partners will have sole and
exclusive power, at the expense of Equistar,
. to control all decisions, elections, notifications, actions, exercises or
nonexercises and waivers of all rights, privileges and remedies provided
to, or possessed by, Equistar with respect to the conflict, and
. if any potential, threatened or asserted claim, dispute or action about a
conflict occurs, to retain and direct legal counsel and to control,
assert, enforce, defend, litigate, mediate, arbitrate, settle, compromise
or waive any and all claims, disputes and actions
Accordingly, any action by the partnership governance committee with respect to
a conflict, except as described above, will require the approval of at least
two representatives of the uninvolved general partners.
Officers
The executive officers of Equistar consist of a Chief Executive Officer, a
President and Chief Operating Officer and others as determined from time to
time by the partnership governance committee. See "Management." Except for the
Chief Executive Officer, the approval of at least two representatives of each
of Lyondell GP, Millennium GP and Occidental GP is required to appoint or
discharge executive officers, based upon the recommendation of the Chief
Executive Officer. However, any of Lyondell GP, Millennium GP or Occidental GP
may, by action of two or more of its representatives, remove from office any
executive officer of Equistar, including the Chief Executive Officer, who
takes, or causes Equistar to take, any action described above under "--
Unanimous Voting Requirements" without the required approval of two or more
representatives of each of Lyondell GP, Millennium GP and Occidental GP.
The Chief Executive Officer holds office for a five-year term, assuming he
does not resign or die and is not removed. Upon the expiration of his term or
earlier vacancy, Lyondell GP will designate the Chief Executive Officer,
provided that this person shall be reasonably acceptable to Millennium GP and
Occidental GP. The Chief Executive Officer will not be required to be an
employee of Equistar. The Chief Executive Officer may be removed at any time by
action of the partnership governance committee, meaning that the approval of
two representatives of Lyondell GP is required to effect a removal.
The Chief Executive Officer of Equistar has general authority and
discretion, comparable to that of a chief executive officer of a publicly held
Delaware corporation of similar size, to direct and control the business and
affairs of Equistar, including, without limitation, its day-to-day operations
in a manner consistent with the annual budget and the most recently approved
strategic plan. The Chief Executive Officer takes steps to implement all orders
and resolutions of the partnership governance committee. The Chief Executive
Officer also establishes salaries or other compensation for the other executive
officers of Equistar consistent with plans approved by the partnership
governance committee.
Strategic Plans and Annual Budgets
Equistar is managed under a five-year strategic plan which is updated
annually under the direction of the Chief Executive Officer and presented for
approval by the partnership governance committee no later than 90 days before
the start of the first fiscal year covered by the updated plan. The strategic
plan must be approved each year by at least two representatives of each of
Lyondell GP, Millennium GP and Occidental GP. The strategic plan establishes
the strategic direction of Equistar, including
. plans relating to capital maintenance and enhancement
. geographic expansion, acquisitions and dispositions
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. new product lines
. technology
. long-term supply and customer arrangements
. internal and external financing
. environmental and legal compliance
. plans, programs and policies relating to compensation and industrial
relations
In addition, the executive officers of Equistar prepare an annual budget for
each fiscal year. Each annual budget includes an operating budget and capital
expenditure budget. Each annual budget must be consistent with the information
for its fiscal year included in the most recently approved strategic plan.
Unless otherwise provided in the most recently approved strategic plan, each
annual budget utilizes a format and provides a level of detail consistent with
Equistar's previous annual budget.
If for any fiscal year the partnership governance committee fails to approve
an updated strategic plan, for that year and each subsequent year before the
approval of an updated strategic plan, the executive officers of Equistar will
prepare an annual budget consistent with the projections and other information
for that year included in the strategic plan most recently approved. The Chief
Executive Officer, acting in good faith, shall be entitled to modify any annual
budget
. to satisfy current contractual and compliance obligations
. to account for other changes in circumstances resulting from the passage
of time or the occurrence of events beyond Equistar's control
The Chief Executive Officer is not authorized to cause Equistar to proceed with
capital expenditures to accomplish capital enhancement projects except to the
extent that the expenditures would enable Equistar to continue or complete any
capital project reflected in the last strategic plan that was approved by the
partnership governance committee.
Deadlock Provisions
After a strategic plan and an annual budget have been approved by the
partnership governance committee, or an annual budget has been developed as
described above in cases where an updated strategic plan has not yet been
approved, the Chief Executive Officer is authorized, without further action by
the partnership governance committee, to cause Equistar to make expenditures
consistent with the updated strategic plan and annual budget, provided that all
internal control policies and procedures, including those regarding the
required authority for certain expenditures, shall have been followed.
If the partnership governance committee has not agreed upon and approved an
updated strategic plan by 12 months after the beginning of the first fiscal
year that would have been covered by the plan, then Lyondell GP, Millennium GP
and Occidental GP are required to submit to a nonbinding dispute resolution
process. The partners are required to continue the dispute resolution process
until
. agreement is reached by the general partners, acting through their
representatives on an updated strategic plan, or
. at least 24 months have elapsed since the beginning of the first fiscal
year that was to be covered by the first updated strategic plan for which
agreement was not reached
Once 24 months have elapsed, one general partner will determine and notify
the other general partners in writing that no agreement resolving the dispute
is likely to be reached. Following receipt of notice, any general partner may
elect to dissolve Equistar.
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Distribution of Available Net Operating Cash
Equistar shall distribute to the partners, as soon as practicable following
the end of each month, all Available Net Operating Cash, as defined below. On a
cumulative basis
. distributions are to be made to the extent of cumulative profits to the
partners in the ratio of the percentage interest owned by each partner
. the remaining distributions are to be made to Equistar's limited partners
in the ratio of their percentage interest
See "Ownership."
"Available Net Operating Cash" is defined in Equistar's partnership
agreement, at the relevant time of determination, as
. all cash and cash equivalents on hand at Equistar as of the most recent
month's end, plus the excess, if any, of Equistar's targeted level of
indebtedness over Equistar's actual indebtedness as of that month's end,
less
. the Projected Cash Requirements, if any, of Equistar as of that month's
end, as determined by Equistar's executive officers
Equistar's targeted level of indebtedness is shown in the most recently
updated strategic plan. Equistar's actual indebtedness is determined according
to generally accepted accounting principles and represents all short term and
long term debt.
"Projected Cash Requirements" means, for the 12-month period following any
month's end, the excess, if any, of the sum of
. forecast capital expenditures, plus
. forecast cash payments for taxes, debt service, including principal and
interest payment requirements and other noncash credits to income, plus
. forecast cash reserves for future operations or other requirements over
the sum of
. forecast net income of Equistar, plus
. the sum of forecast depreciation, amortization, other noncash charges to
income, interest expense and tax expenses, in each case to the extent
deducted in determining net income, plus
. forecast decreases in working capital or minus forecast increases in
working capital, plus
. the forecast cash proceeds of disposition of assets, net of expenses,
plus
. an amount equal to the forecast net proceeds of debt financings and
capital contributions
Projected Cash Requirements for Equistar shall be calculated consistently
with the most recently updated strategic plan, except to the extent Equistar's
executive officers determine that changes in Equistar's financial condition,
results of operations, assets, business or prospects make a change advisable,
in which case Equistar shall promptly advise the general partners regarding the
basis for the change.
Distributions to the partners of cash or property arising from a liquidation
of Equistar will be made according to the capital account balances of the
partners.
Any amount otherwise distributable to a partner as described above will be
applied by Equistar to satisfy any of the following obligations that are owed
by a partner or its affiliate to Equistar and that are not paid when due,
unless otherwise agreed by the general partners not involved with a business
conflict as described under "--Transactions with Affiliates" above
. for a partner's failure to pay any interest or principal when due on any
indebtedness for borrowed money of the partner or its affiliate to
Equistar
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. for a partner's failure or the failure of its affiliate to make any
indemnification payment required by its asset contribution agreement that
has been finally determined to be due
. for a partner's failure to make any capital contribution required by the
partnership agreement, other than as required by its asset contribution
agreement
Indemnification
Equistar has agreed, to the fullest extent permitted by applicable law, to
indemnify, defend and hold harmless each partner, its affiliates and its
respective officers, directors and employees. This indemnification is from,
against and in respect of any liability which that person may sustain, incur or
assume as a result of, or relative to, any third-party claim arising out of or
in connection with the business, property or affairs of Equistar. This
indemnification does not apply to the extent that it is finally determined that
the third-party claim arose out of or was related to actions or omissions of
the indemnified partner, its affiliates or any of their respective officers,
directors or employees acting in those capacities constituting a breach of
Equistar's partnership agreement or any related agreement. This indemnification
obligation is not intended to, nor will it, affect or take precedence over the
indemnity provisions contained in any related agreement.
Transfers and Pledges
Without the consent of the partnership governance committee, no partner may
transfer less than all of its interest in Equistar. If an Equistar limited
partner and its affiliated general partner desire to transfer, via a cash sale,
all of their units, they must give written notice to Equistar and the other
partners stating
. their desire to transfer their partnership interests
. the cash purchase price
. all other terms on which they are willing to sell
Delivery of this initial notice will constitute the irrevocable offer by the
selling partners to sell their partnership interest. The nonselling partners
shall have the option, exercisable by delivering written acceptance notice of
the exercise to the selling partners within 45 days after receiving notice of
the sale, to elect to purchase all of the partnership interests of the selling
partners on the terms described in the initial notice. If all of the other
nonselling partners deliver notice of acceptance, then all of the partnership
interests shall be transferred in proportion to the partners' current
percentage interest unless otherwise agreed. If less than all of the nonselling
partners deliver notice of acceptance, the partner who delivers notice of
acceptance will have the option of purchasing all of the partnership interests
up for sale. The notice of acceptance will set a date for closing the purchase
which is not less than 30 nor more than 90 days after delivery of the notice of
acceptance, subject to extension. The purchase price for the selling partners'
partnership interests will be paid in cash. The cash shall be delivered at the
closing.
If the nonselling partners do not elect to purchase the selling partners'
partnership interests within 45 days after the receipt of initial notice of
sale, the selling partners will have a further 180 days during which they may
consummate the sale of their units to a third-party purchaser. The sale to a
third-party purchaser must be at a purchase price and on other terms that are
no more favorable to the purchaser than the terms offered to the Equistar
partners. If the sale is not completed within the 180-day period, the initial
notice will be deemed to have expired, and a new notice and offer shall be
required before the selling partners may make any transfer of their partnership
interests.
Before the selling partners may consummate a transfer of their partnership
interests to a third party under the partnership agreement, the selling
partners will demonstrate the suitability of the proposed purchaser as an
Equistar partner. The person willing to serve as the proposed purchaser's
guarantor must have outstanding indebtedness that is rated investment grade by
Moody's Investors Service, Inc. and Standard & Poor's Corporation. If the
proposed guarantor has no rated indebtedness outstanding, it shall provide an
opinion from a
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nationally recognized investment banking firm that it could be reasonably
expected to obtain suitable ratings. In addition, a partner may transfer its
partnership interests only if
. the transferee executes an appropriate agreement to be bound by the
partnership agreement
. the transferor and/or the transferee bears all reasonable costs incurred
by Equistar in connection with the transfer
. the guarantor of the transferee delivers an agreement to the ultimate
parent entity of the nonselling partners and to Equistar substantially in
the form of the parent agreement
A partner will not in any transaction or series of actions, directly or
indirectly, pledge all or any part of its partnership interest. However, a
partner may at any time assign its right to receive distributions from Equistar
so long as the assignment does not purport to assign any
. right of the partner to participate in or manage the affairs of Equistar
. right of the partner to receive any information or accounting of the
affairs of Equistar
. right of the partner to inspect the books or records of Equistar
. any other right of a partner under the partnership agreement or the
Delaware Revised Uniform Limited Partnership Act
In addition, except for any restrictions imposed by the parent agreement,
nothing in Equistar's partnership agreement will prevent the transfer or pledge
by the owner of any capital stock, equity ownership interests or other security
of the partner or any affiliate of a partner.
Business Opportunities
Except as described below, each partner's affiliates are free to engage in
or possess an interest in any other business of any type and to avail
themselves of any business opportunity available to it without having to offer
Equistar or any partner the opportunity to participate in that business. If a
partner's affiliate desires to initiate or pursue an opportunity to undertake,
engage in, acquire or invest in a "related business," that partner or its
affiliate will offer Equistar the business opportunity.
When a proposing partner offers a business opportunity to Equistar, Equistar
will elect to do one of the following within a reasonably prompt period:
. acquire or undertake the business opportunity for the benefit of Equistar
as a whole, at the cost, expense and benefit of Equistar
. permit the proposing partner to acquire or undertake the business
opportunity for its own benefit and account without any duty to Equistar
or the other partners
If the business opportunity is in direct competition with the then-existing
business of Equistar, then the proposing partner and Equistar shall, if either
so elects, seek to negotiate and implement an arrangement whereby Equistar
would either
. acquire or undertake the competing opportunity at the sole cost, expense
and benefit of the proposing partner under a mutually acceptable
arrangement. Under the arrangement, the competing opportunity will be
treated as a separate business within Equistar. The proposing partner
bears costs, expenses and benefits of the separate business
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or
. enter into a management agreement with the proposing partner to manage
the competing opportunity on behalf of the proposing partner. The
management agreement will be on terms and conditions mutually acceptable
to the proposing partner and Equistar.
If Equistar and the proposing partner do not reach agreement as to an
arrangement, the proposing partner may acquire or undertake the competing
opportunity for its own benefit and account without any duty to Equistar or the
other partners.
In addition, if the business opportunity constitutes less than 25% of an
acquisition of or investment in assets, activities, operations or businesses
that is not otherwise a related business, then a proposing partner may acquire
or invest in a business opportunity without first offering it to Equistar. The
25% figure is based on annual revenues for the most recently completed fiscal
year. After completion of the above acquisition or investment, the proposing
partner must offer the business opportunity to Equistar under the terms
described above. If Equistar elects to pursue the business opportunity, it will
be acquired by Equistar at its fair market value as of the date of the
acquisition.
Equistar will permit the first general partner and its affiliates to acquire
or undertake a Business Opportunity, and the business opportunity shall be
treated in the same manner as if the general partners and its affiliates were a
proposing partner with respect to the business opportunity if
. Equistar is presented with an opportunity to acquire or undertake a
business opportunity that it determines not to acquire or undertake
. the representatives of one general partner, but not the other general
partners, desire that Equistar acquire or undertake the business
opportunity
Description of the Parent Agreement
Lyondell, Millennium, Occidental, Occidental Chemical Corporation, Oxy CH
Corporation and Equistar are parties to an amended and restated parent
agreement and, along with Occidental Chemical Holding Corporation, an
assignment and assumption agreement. The parent agreement, as modified by the
assignment and assumption agreement, provides for, among other things, a
guarantee of the obligations of their respective subsidiaries by each of
Lyondell, Millennium and Occidental Chemical Holding (the "Guarantor Parents"),
transfer restrictions with respect to the stock of the subsidiaries that hold
the direct interests in Equistar (the "Partner Sub Stock") and a requirement to
present specified business opportunities to Equistar. The following is a
summary of the material provisions of the parent agreement as modified by the
assignment and assumption agreement, which is available upon written request as
provided under "Available Information."
Guarantee of Obligations Under the Partnership Agreement and Related Party
Agreements
Each of the Guarantor Parents has guaranteed, undertaken and promised to
cause the due and punctual payment and the full and prompt performance of all
of the amounts to be paid and all of the terms and provisions to be performed
or observed by or on the part of its Affiliated Obligors, as defined below,
under various agreements, including, without limitation, the partnership
agreement and the asset contribution agreements, by its respective
subsidiaries. The subsidiaries are as follows:
. Lyondell GP and Lyondell LP in the case of Lyondell (the "Lyondell
Partner Subs")
. Millennium GP and Millennium LP in the case of Millennium (the
"Millennium Partner Subs")
. Occidental GP, Occidental LP1 and Occidental LP2 in the case of
Occidental Chemical Holding (the "Occidental Partner Subs")
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The Occidental Partner Subs, Lyondell Partner Subs and Millennium Partner Subs,
and any other direct or indirect subsidiary of any of the Guarantor Parents
that are parties to the other agreements defined below are collectively
referred to as the "Affiliated Obligors." The guarantee extends, according to
the terms of the other agreements, as follows:
. in the event that its Affiliated Obligors fail in any manner whatsoever
to timely pay, perform or observe any of the terms and provisions of
other agreements, the Guarantor Parent will
--itself duly and punctually pay, or fully and promptly perform or
observe, as the case may be, the terms and provisions, or
--cause the same to be duly and punctually paid, or fully and promptly
performed or observed
. in each of the above, the Guarantor Parent will act as if the Guarantor
Parent were itself the obligor with respect to the terms and provisions
under other agreements
Insofar as the foregoing relates to the obligations of an Affiliated Obligor
under Equistar's partnership agreement, no Guarantor Parent will be required to
make, or cause a Partner Sub to make, any contribution to Equistar that the
Partner Sub is not otherwise required to make under terms of Equistar's
partnership agreement concerning required capital contributions. Insofar as
this paragraph applies to agreements other than the partnership agreement and
the parent agreement, the term "Affiliated Obligors" will not include Equistar
nor any partner of Equistar in its capacity as a partner. The provisions of
this and the foregoing paragraphs will not apply to terms and provisions of
other agreements that are within the scope of the following paragraph.
Equistar's partnership agreement sets forth definitions of "Conflicted
General Partner" and "Nonconflicted General Partner," and provides that the
Nonconflicted General Partners have certain exclusive rights to control
Equistar with respect to any Conflict Circumstance. Without limiting the rights
of its Partner Sub under the partnership agreement, and without prejudice to
any rights, remedies or defenses Equistar may have in any other agreement or
Conflict Circumstance, each of Lyondell, Millennium and Occidental Chemical
Holding has agreed to cause its Partner Sub
. to cause Equistar to pay, perform and observe all of the terms and
provisions of other agreements to be paid, performed or observed by or on
the part of Equistar under the agreements, according to their terms to
the extent that the Partner Sub is a Nonconflicted General Partner and is
thereby entitled to cause the payment, performance and observance of the
terms and provisions
. except to the extent inconsistent with its obligations above, to abide by
its obligations as a Nonconflicted General Partner with respect to any
conflict circumstance arising in connection with any other agreement
according to the terms of the partnership agreement that apply; each of
Lyondell's, Millennium's or Occidental Chemical Holding's responsibility
for a failure of Equistar to pay, perform or observe its obligations
under the other agreements shall be limited to the circumstances in which
Equistar's failure to so pay, perform or observe its obligations under
the other agreements was directly caused by an act or failure to act by
its Partner Sub
Nothing in this paragraph shall require Lyondell, Millennium or Occidental
Chemical Holding to make or cause the Partner Sub
. to cure or mitigate any inability of Equistar to make any payment or to
perform or observe any terms and provisions under any other agreements
. to cause Equistar to require from the Partner Subs any cash contributions
in respect of any payment, performance or observance involving a conflict
circumstance
. to make any contribution to Equistar that the Partner Sub is not
otherwise required to make under terms of the partnership agreement
concerning required capital contributions
See "Description of the Partnership Agreement--Transactions with Affiliates."
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Restrictions on Transfer of Partner Sub Stock
Without the consent of each of Lyondell, Millennium, Oxy CH and Occidental
Chemical (the "Ownership Parents"), none of Lyondell, Millennium, Occidental
Chemical or Oxy CH may transfer less than all of its Partner Sub Stock. Unless
such transfer is otherwise permitted under the parent agreement, no Ownership
Parent may transfer its Partner Sub Stock for consideration other than cash.
However, each of Lyondell, Millennium, Oxy CH or Occidental Chemical may
transfer all, but not less than all, of its Partner Sub Stock, if the transfer
is in connection with
. a merger, consolidation, conversion or share exchange of the Ownership
Parent, or
. a sale or other disposition of
--the Partner Sub Stock, plus
--other assets representing at least 50% of the book value of the
Ownership Parent's assets excluding the Partner Sub Stock, as
reflected on its most recent audited consolidated or combined
financial statements.
Following the consummation of any transaction involving Oxy CH or Occidental
Chemical, the Partner Sub Stock held directly or indirectly by Oxy CH and
Occidental Chemical on the date of the parent agreement shall be held by the
same transferee or one or more transferees that are wholly owned affiliates of
each other or of a common parent entity.
Any transfer of Partner Sub Stock by any Ownership Parent is only permitted
if the acquiring, succeeding or surviving entity, if any,
. succeeds to and is substituted for the transferring Ownership Parent with
the same effect as if it had been named in the parent agreement
. executes an instrument agreeing to be bound by the obligations of the
transferring Ownership Parent under the parent agreement, with the same
effect as if it had been named in the instrument
The transferring Ownership Parent may be released from its guarantee
obligations under the parent agreement after the successor parent agrees to be
bound by the Ownership Parent's obligations.
Unless a transfer is permitted under the provisions described above, any
Ownership Parent desiring to transfer all of its Partner Sub Stock to any
person, including another Ownership Parent or any affiliate of an Ownership
Parent, will give written notice to Equistar and each of the other Ownership
Parents. The notice will state
. the selling parent's desire to transfer its Partner Sub Stock
. the cash purchase price
. all other terms on which it is willing to sell
Each offeree parent will have the option to elect to purchase all of its
proportional share, in the case of both of the limited partner and general
partner, of all of the Partner Sub Stock of the selling parent. The option to
purchase is on the terms described in the initial notice of sale. If one of the
selling parents, but not the other, elects to so purchase, the selling parent
shall give written notice thereof to the offeree parent electing to purchase,
and that parent shall have the option to purchase all of the Parent Sub Stock
held by the selling parent, including the Partner Sub Stock it has not
previously elected to purchase. Any election by an offeree parent not to
purchase all of the Partner Sub Stock shall be deemed a rescission of the
parent's original notice of acceptance and an election not to purchase any of
the Partner Sub Stock of that selling parent. If one or both of the offeree
parents do not elect to purchase all of the selling parent's Partner Sub Stock
within 45 days after the receipt of the initial notice or within 15 days after
the receipt of the notice to an offeree parent electing to purchase, if
applicable, the selling parent will have a further 180 days during which it
may, subject to the
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provisions of the following paragraph, consummate the sale of its Partner Sub
Stock to a third-party purchaser. The sale to a third-party purchaser may be at
a purchase price and on other terms that are no more favorable to the purchaser
than the initial terms offered to the offeree parents. If the sale is not
completed within the further 180-day period, the initial notice of sale will be
deemed to have expired and a new notice and offer shall be required before the
selling parent may make any transfer of its Partner Sub Stock.
Before the selling parent may consummate a transfer of its Partner Sub Stock
to a third party under the parent agreement, the selling parent shall
demonstrate to the other Ownership Parents that the proposed purchaser, or the
person willing to serve as its guarantor as contemplated by the terms of the
parent agreement, has outstanding indebtedness that is rated investment grade
by either Moody's or S&P. If such proposed purchaser or the other person has no
rated indebtedness outstanding, that person shall provide an opinion from
Moody's, S&P or from a nationally recognized investment banking firm that it
could be reasonably expected to obtain a suitable rating. Moreover, an
Ownership Parent may transfer its Partner Sub Stock, under the previous
paragraph, only if all of the following occur:
. the transfer is accomplished in a nonpublic offering in compliance with,
and exempt from, the registration and qualification requirements of all
federal and state securities laws and regulations
. the transfer does not cause a default under any material contract which
has been approved unanimously by the partnership governance committee and
to which Equistar is a party or by which Equistar or any of its
properties is bound
. the transferee executes an appropriate agreement to be bound by the
parent agreement
. the transferor and/or transferee bears all reasonable costs incurred by
Equistar in connection with the transfer
. the transferee, or the guarantor of the obligations of the transferee,
delivers an agreement to each of the other Ownership Parents and Equistar
substantially in the form of the parent agreement
. the proposed transferor is not in default in the timely performance of
any of its material obligations to Equistar
In no event may any Ownership Parent transfer the Partner Sub Stock of any
of its Partners Subs to any person unless the Ownership Parent simultaneously
transfers the Partner Sub Stock of its other Partner Sub or Subs to the person
or a wholly owned affiliate of the person or a common parent.
Competing Business
If any of Lyondell, Millennium or Occidental Chemical, Oxy CH or Occidental
Chemical Holding or any of their affiliates desires to initiate or pursue any
opportunity to undertake, engage in, acquire or invest in a business
opportunity, it shall agree to offer that business opportunity to Equistar
under the terms and conditions in the partnership agreement as if it were the
"proposing partner," as described above in "Description of The Partnership
Agreement--Business Opportunities." Equistar will have the rights and
obligations arising from the offer of the Business Opportunity granted by the
partnership agreement. See "Description of the Partnership Agreement--Business
Opportunities."
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Related Transactions
Asset Contributions by Lyondell and Affiliates of Millennium and Occidental
Both Lyondell and Millennium Petrochemicals entered into separate asset
contribution agreements on December 1, 1997, providing for the contribution of
the Lyondell and Millennium contributed businesses. Wholly owned subsidiaries
of Occidental (the "Occidental Subsidiaries") entered into an asset
contribution agreement with Equistar on May 15, 1998, with respect to the
transfer of the Occidental contributed business, a portion of which transfer
was accomplished through a merger of an Occidental Subsidiary with and into
Equistar. Among other things, the asset contribution agreements required
representations and warranties by the contributor regarding the transferred
assets and indemnification of Equistar by the contributor. These agreements
also provide for the assumption by Equistar of, among other things
. third-party claims that are related to preclosing contingent liabilities
that are asserted before December 1, 2004, as to Lyondell and Millennium
Petrochemicals or May 15, 2005, as to the Occidental Subsidiaries, to the
extent the aggregate amount does not exceed, in the case of each of
Lyondell, Millennium and the Occidental Subsidiaries, $7 million
. third-party claims related to preclosing contingent liabilities that are
asserted for the first time after December 1, 2004, as to Lyondell and
Millennium Petrochemicals or May 15, 2005, as to the Occidental
Subsidiaries
. some obligations for indebtedness
. liabilities for products sold after December 1, 1997, as to Lyondell and
Millennium Petrochemicals or May 15, 1998, as to the Occidental
Subsidiaries, regardless of when manufactured
. some long-term liabilities
Lyondell, Millennium Petrochemicals and the Occidental Subsidiaries entered
into Master Intellectual Property Agreements and other related agreements with
respect to intellectual property with Equistar. These agreements provide for
. the transfer of intellectual property of Lyondell, Millennium
Petrochemicals and the Occidental Subsidiaries related to the businesses
each contributed to Equistar
. rights and licenses to Equistar with respect to intellectual property
retained by Lyondell, Millennium Petrochemicals or the Occidental
Subsidiaries that was not solely related to the business of Equistar but
is useful in that business
. rights and licenses from Equistar to Lyondell, Millennium Petrochemicals
and the Occidental Subsidiaries with respect to intellectual property
transferred to Equistar that Lyondell, Millennium Petrochemicals and the
Occidental Subsidiaries may use in connection with their other businesses
Lyondell, Millennium Petrochemicals and the Occidental Subsidiaries each
entered into various other conveyance documents with Equistar to effect their
asset contributions as provided for in their respective contribution
agreements.
Loans by Millennium and Occidental
In May 1998, in connection with Occidental's entry into Equistar, Equistar
executed promissory notes to Millennium in the principal amount of $75.0
million and to Occidental in the principal amount of $419.7 million. Each of
the notes provided for the annual accrual of interest based on a year of 360
days and actual days elapsed at an interest rate equal to LIBOR plus 0.6%.
These notes were paid in full in June 1998 with borrowings under Equistar's
bank $500 million credit facility and $1.25 billion revolving credit facility.
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Loan by Equistar to Lyondell
In December 1997, Lyondell's subsidiary that is a limited partner in
Equistar executed a promissory note to Equistar in the principal amount of $345
million as part of its capital contribution to Equistar. The note provided for
the annual accrual of interest based on a year of 360 days at a rate of LIBOR
plus 0.5%. Lyondell had the right to prepay any portion of the principal and
interest due without penalty or premium. This note was repaid in full in July
1998, and the proceeds were distributed to Lyondell and Millennium.
Transactions with Lyondell Methanol
Equistar provides operating and other services for Lyondell Methanol under
the terms of existing agreements that were assumed by Equistar from Lyondell,
including the lease to Lyondell Methanol by Equistar of the real property on
which its methanol plant is located. Under the terms of those agreements,
Lyondell Methanol pays Equistar a management fee of $6 million per year and
will reimburse some expenses of Equistar at cost. Equistar sells natural gas to
Lyondell Methanol at prices generally representative of Equistar's cost.
Lyondell Methanol purchased natural gas in the amounts of $44 million for 1998
and $4 million for December 1997. All of the foregoing agreements with Lyondell
Methanol are expected to continue on terms similar to those described above.
Transactions with LYONDELL-CITGO Refining
In connection with the formation of Equistar, Lyondell's rights and
obligations under the terms of its product sales and feedstock purchase
agreements with LYONDELL-CITGO Refining were assigned to Equistar. Accordingly,
refinery products, including propane, butane, naphthas, heating oils and gas
oils, are sold by LYONDELL-CITGO Refining to Equistar as feedstocks, and some
olefins by-products are sold by Equistar to LYONDELL-CITGO Refining for
processing into gasoline. Net payments from LYONDELL-CITGO Refining to Equistar
in connection with these product sales and feedstock purchase agreements was
$92 million for 1998 and $1 million for December 1997.
Equistar and LCR are also parties to
. tolling arrangements under which some of LYONDELL-CITGO Refining's
coproducts are transmitted to Equistar and processed by Equistar, with
the resulting product being returned to LYONDELL-CITGO Refining
. terminalling and storage obligations
. agreements for Equistar to perform some marketing services for LYONDELL-
CITGO Refining
Aggregate payments under these various services agreements of $15 million
were made by LYONDELL-CITGO Refining to Equistar with respect to 1998. No
payments were made for December 1997.
All of the agreements between LYONDELL-CITGO Refining and Equistar are on
terms generally representative of prevailing market prices. All of the
foregoing agreements with LYONDELL-CITGO Refining are expected to continue on
terms similar to those described above.
Services and Shared-Site Agreements with Lyondell, Millennium and Occidental
Lyondell has agreed to provide some types of corporate, general and
administrative services to Equistar, including legal, treasury, risk
management, tax services and employee benefit plan administration. Equistar has
also agreed to provide services to Lyondell, including health, safety and
environmental services, human resource services, information services and legal
services. Depending on the nature of the services, a fixed price may be paid or
costs reimbursed. As a consequence of services being provided by Equistar to
Lyondell and by Lyondell to Equistar, a net payment is made by Equistar to
Lyondell of approximately $90,000 per month. These service agreements are
expected to continue on terms substantially similar to those described above.
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Equistar and Millennium Petrochemicals have entered into a variety of
operating, manufacturing and technical service agreements related to the
business of Equistar and the vinyl acetate monomer, acetic acid, synthesis gas
and methanol businesses retained by Millennium Petrochemicals. These agreements
include the provision by Equistar to Millennium Petrochemicals of materials
management, utilities, fuelstreams, office space, health, safety and
environmental services and computer services. These agreements also include the
provision by Millennium Petrochemicals to Equistar of operational services,
including waste water treatment, fuelstreams and barge dock access and
services. As a consequence of services being provided by Equistar to Millennium
Petrochemicals and by Millennium Petrochemicals to Equistar, net payments were
made by Millennium Petrochemicals to Equistar of $5 million with respect to
1998. No payments were made for December 1997. In the case of product sales,
prices are generally market-related. In the case of services, prices are
usually based on an allocation of costs according to anticipated relative
usage. Equistar also purchases relatively small amounts of vinyl acetate
monomer from Millennium Petrochemicals. Millennium Petrochemicals purchases
relatively small amounts of hydrogen and natural gas from Equistar. Except for
modifications resulting from Millennium's recent sale of its synthesis gas and
methanol businesses, these service and product sales agreements are expected to
continue on terms similar to those described above.
On May 15, 1998, Occidental Chemical and Equistar entered into an operating
agreement under which Occidental Chemical agreed to operate and maintain the
Occidental contributed business and to cause third parties to continue to
provide equipment, products and commodities in connection with the Occidental
contributed business upon substantially the same terms and conditions as
provided before the transfer of the Occidental contributed business. Under the
terms of the operating agreement, Equistar agreed to reimburse Occidental
Chemical for its costs in connection with the services provided to Equistar and
to pay Occidental Chemical an administrative fee. The operating agreement
terminated according to its terms on June 1, 1998. During the term of the
operating agreement, Equistar paid Occidental Chemical an administrative fee of
$1 million in connection with the services Occidental Chemical rendered to
Equistar under the agreement.
On June 1, 1998, Occidental Chemical and Equistar entered into a transition
services agreement. Under the terms of the transition services agreement,
Occidental Chemical agreed to provide to Equistar services in connection with
the transferred businesses, including services related to accounting, payroll,
office administration, marketing, transportation, purchasing and procurement,
management, human resources, customer service and technical services. In
consideration for the services provided by Occidental Chemical under the
agreement, depending on the service, Equistar is required to either
. pay Occidental Chemical a fixed fee for their services according to the
terms of the transition services agreement, or
. reimburse Occidental Chemical for all reasonable, direct, out-of-pocket
costs that are incurred by Occidental Chemical in connection with
providing their services
The transition services agreement provides that the parties must mutually agree
as to which payment option they wish to use. Between June 1, 1998 and December
31, 1998, Equistar paid Occidental Chemical $6 million in connection with
services provided under the agreement. The transition services agreement
expires by its terms on June 1, 1999.
Equistar and Occidental Chemical have entered into a toll processing
agreement, dated as of May 15, 1998, whereby Equistar has retained the services
of Occidental Chemicals's facilities in Ashtabula, Ohio, for the processing of
Glycol Ether TM into Glycol Ether TM Borate Ester material for brake or clutch
fluid. Under the terms of the agreement, Equistar procures from Occidental
Chemical its total requirements of Glycol Ether TM Borate Ester, up to a
maximum of 1 million pounds in any calendar quarter. The agreement requires
Occidental Chemical to process Glycol Ether TM into Glycol Ether TM Borate
Ester exclusively for Equistar. The fee for the processing is $0.35 per pound
of Glycol Ether TM Borate Ester until April 30, 1999. After April 30, 1999, the
fee may be adjusted based on a price index according to the terms of the
agreement. Between May 15, 1998 and December 31, 1998, Equistar paid Occidental
Chemical $124,000 under the
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agreement. The initial term of the agreement ends on December 31, 2001, but
will continue from year to year unless terminated effective December 31 of the
relevant year by either party upon at least 12 months' written notice.
Occidental Ethylene Sales Agreement
Equistar and Occidental Chemical entered into an ethylene sales agreement,
dated May 15, 1998. Under the terms of the ethylene sales agreement, Occidental
Chemical has agreed to purchase an annual minimum amount of ethylene from
Equistar equal to 100% of the ethylene feedstock requirements of Occidental
Chemical's United States plants. The ethylene feedstock is exclusively for
internal use in production at these plants less any quantities up to 250
million pounds tolled according to the provisions of the agreement. Internal
use in production is estimated to be 2 billion pounds per year at the time of
signing the agreement.
Equistar's maximum supply obligation in any calender year under the ethylene
sales agreement is 2.55 billion pounds. Upon three years' notice from either
party to the other, the ethylene sales agreement may be "phased down." No phase
down may commence before January 1, 2009. According to the phase down
provisions of the agreement, the annual minimum requirements specified in the
agreement must be phased down over at least a five-year period. As a result,
the annual required minimum cannot decline to zero before December 31, 2013,
unless specified force majeure events occur.
The ethylene sales agreement provides that each month Occidental Chemical
will pay a price approximately equal to Equistar's quarterly quantity weighted
average net ethylene final transaction price for sales to third parties.
Fifteen percent of the purchased quantity of ethylene within each month, up to
25 million pounds, will be priced at the lower of a reference publication spot
price, the "low spot price" (United States) in the Monomers Market Report for
the month of deliveries or the quarterly quantity weighted average price above.
Between May 15, 1998 and December 31, 1998, Equistar received aggregate
payments from Occidental Chemical of $171 million under the ethylene sales
agreement.
Other Product Sales to Related Parties
Equistar sells ethylene to Millennium at market-related prices under an
agreement entered into in connection with the formation of Equistar. Under this
agreement, Millennium is required to purchase 100% of its ethylene requirements
for its La Porte, Texas facility, estimated at 300 million pounds per year, up
to a maximum of 330 million pounds per year. Millennium has the option to
increase the amount purchased up to 400 million pounds per year beginning
January 1, 2001. The initial term of the contract expires December 1, 2000. The
contract automatically renews annually. Either party may terminate on one
year's notice. If Millennium elects to increase its purchases under the
contract, however, a party must provide two years' notice of termination. The
pricing terms under this agreement are similar to the ethylene sales agreement.
Millennium paid $40 million to Equistar for ethylene for 1998. Millennium paid
$5 million to Equistar for ethylene for December 1997.
Lyondell has purchased ethylene and propylene from Equistar since its
formation on price terms comparable to those of the ethylene sales agreement.
Lyondell paid $21 million to Equistar for ethylene for 1998. Lyondell paid $3
million to Equistar for ethylene for December 1997. Lyondell paid $29 million
to Equistar for propylene for 1998 and $4 million to Equistar for propylene for
December 1997. Lyondell and Equistar contemplate entering into agreements
concerning sales by Equistar to Lyondell of ethylene, propylene, benzene,
ethylene oxide and methanol. In the case of ethylene, propylene, benzene and
ethylene oxide, the contracts are expected to be requirements contracts, less
amounts Lyondell is required to purchase under outstanding agreements, at
market-related prices. A wholly owned subsidiary of Lyondell licenses MTBE
technology to Equistar. This subsidiary also purchases a significant portion of
the MTBE produced by Equistar at one of its two Channelview units at market-
related prices.
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Related Party Leases
Equistar subleases office space for its headquarters and administrative
functions from Lyondell, under which Equistar paid $5 million for the office
space for 1998. Equistar paid $234,000 for the office space for December 1997.
Millennium subleases administrative office space from Equistar. Millennium paid
$504,000 for 1998 and $42,000 for December 1997 under the sublease agreement.
Agreement Regarding Services of Chief Executive Officer
Dan F. Smith serves as the Chief Executive Officer of both of Lyondell and
Equistar and is a director of Lyondell. Mr. Smith receives no compensation from
Equistar. Under an agreement between Equistar and Lyondell, Equistar pays
Lyondell a monthly amount in respect of Mr. Smith's services. In 1998, Equistar
paid Lyondell $1.2 million. In December 1997, Equistar paid Lyondell $100,000.
After December 31, 1998, Equistar will pay an amount equal to 125% of Eugene
Allspach's estimated cash compensation as compensation to Lyondell for the
services rendered by Mr. Smith. See "Management--Members of the Partnership
Governance Committee, Executive Officers of Equistar and Directors and
Executive Officers of Equistar Funding" and "Compensation."
The Exchange Offers
Purpose and Effect of the Exchange Offers
We entered into an exchange and registration rights agreement with the
initial purchasers of the outstanding notes in which we agreed to file a
registration statement relating to our offers to exchange the outstanding notes
for new notes. We also agreed to use our reasonable best efforts to complete
the offers within 180 days after February 16, 1999. We are offering the new
notes under this prospectus to satisfy those obligations under the exchange and
registration rights agreement.
However, the SEC has recently proposed the repeal of its interpretations
permitting the use of a registration statement in connection with exchange
offers such as ours. We cannot predict whether the SEC will act on this
proposal prior to completion of the exchange offers. If those interpretations
are repealed before the exchange offers are completed, holders of outstanding
notes will not be able to receive new notes pursuant to the exchange offers.
Rather, we will be required to register the outstanding notes under a shelf
registration statement, in connection with resales by the holders. Holders will
be required to deliver a prospectus to the purchasers and will be subject to
certain of the civil liability provisions under the Securities Act in
connection with such resales.
We will file with the SEC a shelf registration statement to cover resales of
outstanding notes if
. any changes in law or applicable interpretations by the staff of the SEC
do not permit us to effect the exchange offers as contemplated by the
exchange and registration rights agreement
. any outstanding notes validly tendered under the exchange offers are not
exchanged for new notes within 180 days after February 16, 1999
. any initial purchaser so requests with respect to the outstanding notes
not eligible to be exchanged for new notes in the exchange offers
. any applicable law or interpretations do not permit any holder of
outstanding notes to participate in the exchange offers
. any holder of outstanding notes that participates in the exchange offers
does not receive freely transferable new notes in exchange for tendered
outstanding notes
. we so elect
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If we are required to file a shelf registration statement, we will use our
reasonable best efforts to cause the SEC to declare effective the shelf
registration statement. We will also use our reasonable best efforts to keep
the shelf registration statement effective for up to two years after February
16, 1999. We will have the ability to suspend the shelf registration statement
for no more than (a) 45 days during the first 12-month period after February
16, 1999, and (b) 90 days during any subsequent 12-month period (a "Suspension
Period"), if we determine, in our reasonable best judgment upon written advice
of counsel, that continued effectiveness would require disclosure of
confidential information or interfere with any financing, acquisition,
reorganization or other material transaction involving Equistar.
If we fail to comply with deadlines for completion of the exchange offers,
we will be required to pay additional interest to holders of the outstanding
notes. Please read the section captioned "The Exchange and Registration Rights
Agreement" for more details regarding the exchange and registration rights
agreement.
To exchange an outstanding note for transferable new notes in the exchange
offers, the holder of that outstanding note will be required to make the
following representations:
. any new note the holder receives will be acquired in the ordinary course
of business
. the holder has no arrangements or understandings with any person to
participate in the distribution of the outstanding notes or the new notes
within the meaning of the Securities Act
. if the holder is not a broker-dealer, that holder is not engaged in and
does not intend to engage in the distribution of the new notes
. if the holder is a broker-dealer that will receive new notes in exchange
for outstanding notes acquired for its own account as a result of market-
making activities or other trading activities, that holder will deliver a
prospectus, as required by law, in connection with any resale of the new
notes
. the holder is not our "affiliate," as defined in Rule 405 of the
Securities Act, or, if it is an affiliate, that it will comply with the
registration and prospectus delivery requirements of the Securities Act
to the extent applicable
Resale of New Notes
Based on interpretations of the SEC staff in "no action letters" issued to
third parties, we believe that each new note issued under the exchange offers
may be offered for resale, resold and otherwise transferred by the holder of
that new note without compliance with the registration and prospectus delivery
provisions of the Securities Act if
. the holder is not our "affiliate" within the meaning of Rule 405 under
the Securities Act
. the new note is acquired in the ordinary course of the holder's business
. the holder does not intend to participate in the distribution of new
notes
If a holder of outstanding notes tenders in the exchange offers with the
intention of participating in any manner in a distribution of the new notes,
that holder
. cannot rely on these interpretations by the SEC staff
. must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction
Unless an exemption from registration is otherwise available, any security
holder intending to distribute new notes should be covered by an effective
registration statement under the Securities Act containing the selling security
holder's information required by Item 507 of Regulation S-K under the
Securities Act. This prospectus may be used for an offer to resell, resale or
other retransfer of new notes only as specifically described in this
prospectus. Only broker-dealers that acquired the outstanding notes as a result
of market-making activities or other trading activities may participate in the
exchange offers. Please read the section captioned "Plan of Distribution" for
more details regarding the transfer of new notes.
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Terms of the Exchange Offers
Upon the terms and subject to the conditions described in this prospectus
and in the letter of transmittal, we will accept for exchange any outstanding
notes properly tendered and not withdrawn before the expiration date. We will
issue $1,000 principal amount of new notes in exchange for each $1,000
principal amount of outstanding notes surrendered under the exchange offers.
Outstanding notes may be tendered only in integral multiples of $1,000. The
exchange offers are not conditioned upon any minimum aggregate principal amount
of outstanding notes being tendered for exchange.
As of the date of this prospectus, $300 million aggregate principal amount
of 8 1/2% notes due 2004 and $600 million aggregate principal amount of 8 3/4%
notes due 2009 are outstanding. This prospectus and the letter of transmittal
are being sent to all registered holders of outstanding notes. There will be no
fixed record date for determining registered holders of outstanding notes
entitled to participate in the exchange offers.
We intend to conduct the exchange offers according to the provisions of the
exchange and registration rights agreement, the applicable requirements of the
Securities Act and the Securities Exchange Act of 1934 and the rules and
regulations of the SEC. Outstanding notes that are not tendered for exchange in
the exchange offers will remain outstanding and continue to accrue interest and
will be entitled to the rights and benefits the holders have under the
indenture relating to the notes and the exchange and registration rights
agreement.
We will be deemed to have accepted for exchange properly tendered
outstanding notes when we have given oral or written notice of the acceptance
to the exchange agent and complied with the applicable provisions of the
exchange and registration rights agreement. The exchange agent will act as
agent for the tendering holders for the purposes of receiving the new notes.
Holders tendering outstanding notes in the exchange offers will not be
required to pay brokerage commissions or fees or, subject to the instructions
in the letter of transmittal, transfer taxes with respect to the exchange of
outstanding notes. We will pay all charges and expenses, other than some
applicable taxes as described below, in connection with the exchange offers. It
is important for holders to read the section labeled "--Fees and Expenses" for
more details regarding fees and expenses incurred in the exchange offers.
We will return any outstanding notes that we do not accept for exchange for
any reason without expense to the tendering holder as promptly as practicable
after the expiration or termination of the exchange offers.
Expiration Date
The exchange offers will expire at 5:00 p.m., New York City time on
, 1999, unless, in our sole discretion, we extend one or both of
the exchange offers.
Extensions, Delay in Acceptance, Termination or Amendment
We expressly reserve the right, at any time or at various times, to extend
the period of time during which an exchange offer is open. During any
extensions, all outstanding notes previously tendered will remain subject to
the exchange offer, and we may accept them for exchange.
To extend an exchange offer, we will notify the exchange agent orally or in
writing of any extension. We will also make a public announcement of the
extension no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date.
If any of the conditions described below under "--Conditions to the Exchange
Offers" have not been satisfied, we reserve the right, in our sole discretion
. to delay accepting for exchange any outstanding notes
. to extend either or both of the exchange offers
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. to terminate either or both of the exchange offers
by giving oral or written notice of a delay, extension or termination to the
exchange agent. Subject to the terms of the exchange and registration rights
agreement, we also reserve the right to amend the terms of the exchange offers
in any manner.
Any delay in acceptance, extension, termination or amendment will be
followed, as promptly as practicable, by oral or written notice to the
registered holders of the outstanding notes. If we amend an exchange offer in a
manner we determine to constitute a material change, we will promptly disclose
the amendment by means of a prospectus supplement. The supplement will be
distributed to the registered holders of the outstanding notes. Depending upon
the significance of the amendment and the manner of disclosure to the
registered holders, we will extend an exchange offer if the exchange offer
would otherwise expire during that period.
Without limiting the manner in which we may choose to make public
announcements of any delay in acceptance, extension, termination or amendment
of either or both of the exchange offers, we will have no obligation to
publish, advertise or otherwise communicate any public announcement, other than
by making a timely release to the Dow Jones News Service.
Conditions to the Exchange Offers
Despite any other term of the exchange offers, if in our reasonable judgment
either of the exchange offers, or the making of any exchange by a holder of
outstanding notes, would violate applicable law or any applicable
interpretation of the staff of the SEC
. we will not be required to accept for exchange, or exchange any new notes
for, any outstanding notes
. we may terminate either or both of the exchange offers as provided in
this prospectus before accepting any outstanding notes for exchange
In addition, we will not be obligated to accept for exchange the outstanding
notes of any holder that has not made
. the representations described under "--Purpose and Effect of the Exchange
Offers," "--Procedures for Tendering" and "Plan of Distribution"
. other representations as may be reasonably necessary under applicable SEC
rules, regulations or interpretations to make available to us an
appropriate form for registration of the new notes under the Securities
Act
We expressly reserve the right to amend or terminate either or both of the
exchange offers, and to reject for exchange any outstanding notes not
previously accepted for exchange, upon the occurrence of any of the conditions
to the exchange offers specified above. We will give oral or written notice of
any extension, amendment, nonacceptance or termination to the holders of the
outstanding notes as promptly as practicable. These conditions are for our sole
benefit, and we may assert them or waive them in whole or in part at any time
or at various times in our sole discretion. If we fail at any time to exercise
any of these rights, this failure will not mean that we have waived our rights.
Each right will be deemed an ongoing right that we may assert at any time or at
various times. In addition, we will not accept for exchange any outstanding
notes tendered and will not issue new notes in exchange for any outstanding
notes if, at that time, any stop order has been threatened or is in effect with
respect to (1) the registration statement of which this prospectus is a part or
(2) the qualification of the indenture relating to the notes under the Trust
Indenture Act of 1939.
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Procedures for Tendering
How to Tender Generally
Only a holder of outstanding notes may tender their outstanding notes in the
exchange offers. To tender in the exchange offers, a holder must
. complete, sign and date the letter of transmittal, or a facsimile of the
letter of transmittal
. have the signature on the letter of transmittal guaranteed if the letter
of transmittal so requires
. mail or deliver the letter of transmittal or a facsimile of the letter of
transmittal to the exchange agent before the expiration date
. comply with the automated tender offer program procedures of DTC
described below
In addition, one of the following must occur:
. the exchange agent must receive outstanding notes along with the letter
of transmittal
. the exchange agent must receive, before the expiration date, a timely
confirmation of book-entry transfer of the outstanding notes into the
exchange agent's account at DTC according to the procedure for book-entry
transfer described below or a properly transmitted agent's message
. the holder must comply with the guaranteed delivery procedures described
below
To be tendered effectively, the exchange agent must receive any physical
delivery of the letter of transmittal and other required documents at its
address provided above under "Prospectus Summary--The Exchange Agent" before
the expiration date. The tender by a holder that is not withdrawn before the
expiration date will constitute an agreement between the holder and us
according to the terms and subject to the conditions described in this
prospectus and in the letter of transmittal.
The method of delivery of outstanding notes, the letter of transmittal and
all other required documents to the exchange agent is at the holder's election
and risk. Rather than mail these items, we recommend that holders use an
overnight or hand delivery service. In all cases, holders should allow
sufficient time to assure delivery to the exchange agent before the expiration
date. Holders should not send the letter of transmittal or outstanding notes to
us. Holders may request their brokers, dealers, commercial banks, trust
companies or other nominees to effect the above transactions on their behalf.
Tendering Through DTC's Automated Tender Offer Program
The exchange agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may use DTC's automated tender offer
program to tender. Participants in the program may, instead of physically
completing and signing the letter of transmittal and delivering it to the
exchange agent, transmit their acceptance of the exchange offers
electronically. They may do so by causing DTC to transfer the outstanding notes
to the exchange agent according to its procedures for transfer. DTC will then
send an agent's message to the exchange agent.
The term "agent's message" means a message transmitted by DTC, received by
the exchange agent and forming part of the book-entry confirmation, stating
that
. DTC has received an express acknowledgment from a participant in its
automated tender offer program that is tendering outstanding notes that
are the subject of book-entry confirmation
. the participant has received and agrees to be bound by the terms of the
letter of transmittal or, in the case of an agent's message relating to
guaranteed delivery, that the participant has received and agrees to be
bound by the applicable notice of guaranteed delivery
. the agreement may be enforced against the participant
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How to Tender if You Are a Beneficial Owner
If you beneficially own outstanding notes that are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and you wish
to tender those notes, you should contact the registered holder promptly and
instruct it to tender on your behalf. If you are a beneficial owner and wish to
tender on your own behalf, you must, before completing and executing the letter
of transmittal and delivering your outstanding notes, either
. make appropriate arrangements to register ownership of the outstanding
notes in your name
. obtain a properly completed bond power from the registered holder of
outstanding notes
The transfer of registered ownership may take considerable time and may not be
completed before the expiration date.
Signatures and Signature Guarantees
You must have signatures on a letter of transmittal or a notice of
withdrawal described below guaranteed by
. a member firm of a registered national securities exchange
. a member of the National Association of Securities Dealers, Inc.
. a commercial bank or trust company having an office or correspondent in
the United States
. an "eligible guarantor institution" within the meaning of Rule 17Ad-15
under the Securities Exchange Act of 1934
The above must be a member of one of the recognized signature guarantee
programs identified in the letter of transmittal, unless the outstanding notes
are tendered
. by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the letter
of transmittal and the new notes are being issued directly to the
registered holder of the outstanding notes tendered in the exchange for
those new notes
. for the account of a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the
United States, or an eligible guarantor institution
When Endorsements or Bond Powers are Needed
If the letter of transmittal is signed by a person other than the registered
holder of any outstanding notes, the outstanding notes must be endorsed or
accompanied by a properly completed bond power. The bond power must be signed
by the registered holder as the registered holder's name appears on the
outstanding notes and a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the
United States, or an eligible guarantor institution must guarantee the
signature on the bond power.
If the letter of transmittal or any outstanding notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, those persons should so indicate when signing. They should also
submit evidence of their authority to deliver the letter of transmittal
satisfactory to us unless we waive this requirement.
Determinations Under the Exchange Offers
We will determine in our sole discretion all questions as to the validity,
form, eligibility, time of receipt, acceptance of tendered outstanding notes
and withdrawal of tendered outstanding notes. Our determination will
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be final and binding. We reserve the absolute right to reject any outstanding
notes not properly tendered or any outstanding notes our acceptance of which
would, in the opinion of our counsel, be unlawful. We also reserve the right
to waive any defects, irregularities or conditions of tender as to particular
outstanding notes. Our interpretation of the terms and conditions of the
exchange offers, including the instructions in the letter of transmittal, will
be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of outstanding notes must be cured
within the time we shall determine. Neither we, the exchange agent nor any
other person will be under any duty to give notification of defects or
irregularities with respect to tenders of outstanding notes, and none of the
aforementioned will incur liability for failure to give notification. Tenders
of outstanding notes will not be deemed made until any defects or
irregularities have been cured or waived. Any outstanding notes received by
the exchange agent that are not properly tendered and as to which the defects
or irregularities have not been cured or waived will be returned to the
tendering holder, unless otherwise provided in the letter of transmittal, as
soon as practicable following the expiration date.
When We Will Issue New Notes
In all cases, we will issue new notes for outstanding notes that we have
accepted for exchange under the exchange offers only after the exchange agent
timely receives
. outstanding notes or a timely book-entry confirmation of the outstanding
notes into the exchange agent's account at DTC
. a properly completed and duly executed letter of transmittal and all
other required documents or a properly transmitted agent's message
Return of Outstanding Notes Not Accepted or Exchanged
If we do not accept any tendered outstanding notes for exchange for any
reason described in the terms and conditions of the exchange offers or if
outstanding notes are submitted for a greater principal amount than the holder
desires to exchange, the unaccepted or nonexchanged outstanding notes will be
returned without expense to their tendering holder. In the case of outstanding
notes tendered by book-entry transfer into the exchange agent's account at DTC
according to the procedures described below, the nonexchanged outstanding
notes will be credited to an account maintained with DTC. These actions will
occur as promptly as practicable after the expiration or termination of the
exchange offers.
Your Representations to Us
By signing or agreeing to be bound by the letter of transmittal, you will
represent that, among other things
. any new notes that the holder receives will be acquired in the ordinary
course of its business
. the holder has no arrangement or understanding with any person or entity
to participate in the distribution of the new notes
. if the holder is not a broker-dealer, the holder is not engaged in and
does not intend to engage in the distribution of the new notes
. if the holder is a broker-dealer that will receive new notes for its own
account in exchange for outstanding notes that were acquired as a result
of market-making activities, the holder will deliver a prospectus, as
required by law, in connection with any resale of the new notes
. that holder is not our "affiliate," as defined in Rule 405 of the
Securities Act, or, if the holder is an affiliate, that holder will
comply with any applicable registration and prospectus delivery
requirements of the Securities Act
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Book-Entry Transfer
The exchange agent will make a request to establish an account with respect
to the outstanding notes at DTC for purposes of the exchange offers promptly
after the date of this prospectus. Any financial institution participating in
DTC's system may make book-entry delivery of outstanding notes by causing DTC
to transfer the outstanding notes into the exchange agent's account at DTC
according to DTC's procedures for transfer. Holders of outstanding notes who
are unable to deliver confirmation of the book-entry tender of their
outstanding notes into the exchange agent's account at DTC or all other
documents required by the letter of transmittal to the exchange agent on or
before the expiration date must tender their outstanding notes according to the
guaranteed delivery procedures described below.
Guaranteed Delivery Procedures
Any holder wishing to tender its outstanding notes but whose outstanding
notes are not immediately available or who cannot deliver its outstanding
notes, the letter of transmittal or any other required documents to the
exchange agent or comply with the applicable procedures under DTC's automated
tender offer program before the expiration date may tender if
. the tender is made through a member firm of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or
correspondent in the United States or an eligible guarantor institution
. before the expiration date, the exchange agent receives from the member
firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., commercial bank or trust company
having an office or correspondent in the United States, or eligible
guarantor institution, either a properly completed and duly executed
notice of guaranteed delivery by facsimile transmission, mail or hand
delivery or a properly transmitted agent's message and notice of
guaranteed delivery
--stating the holder's name and address, the registered number(s) of
the holder's outstanding notes and the principal amount of outstanding
notes tendered
--stating that the tender is being made
--guaranteeing that, within five business days after the expiration
date, the letter of transmittal or a facsimile of the letter of
transmittal, together with the outstanding notes or a book-entry
confirmation, and any other documents required by the letter of
transmittal will be deposited by the eligible guarantor institution
with the exchange agent
. the exchange agent receives the properly completed and executed letter of
transmittal or a facsimile of the letter of transmittal, as well as all
tendered outstanding notes in proper form for transfer or a book-entry
confirmation, and all other documents required by the letter of
transmittal, within five business days after the expiration date
Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to a holder if it wishes to tender its outstanding notes according to the
guaranteed delivery procedures described above.
Withdrawal of Tenders
Except as otherwise provided in this prospectus, any holder may withdraw its
tender at any time before 5:00 p.m., New York City time, on the expiration date
unless previously accepted for exchange. For a withdrawal to be effective
. the exchange agent must receive a written notice of withdrawal at one of
the addresses listed above under "Prospectus Summary--The Exchange Agent"
. the withdrawing holder must comply with the appropriate procedures of
DTC's automated tender offer program system
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Any notice of withdrawal must
. specify the name of the person who tendered the outstanding notes to be
withdrawn (the "Depositor")
. identify the outstanding notes to be withdrawn, including the
registration number or numbers and the principal amount of the
outstanding notes
. be signed by the Depositor in the same manner as the original signature
on the letter of transmittal used to deposit those outstanding notes or
be accompanied by documents of transfer sufficient to permit the trustee
for the outstanding notes to register the transfer into the name of the
Depositor withdrawing the tender
. specify the name in which the outstanding notes are to be registered, if
different from that of the Depositor
If outstanding notes have been tendered under the procedure for book-entry
transfer described above, any notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawn outstanding
notes and otherwise comply with the procedures of DTC.
Equistar will determine all questions as to the validity, form, eligibility
and time of receipt of notice of withdrawal, and Equistar's determination shall
be final and binding on all parties. Equistar will deem any outstanding notes
so withdrawn not to have been validly tendered for exchange for purposes of the
exchange offers.
Any outstanding notes that have been tendered for exchange but are not
exchanged for any reason will be returned to their holder without cost to the
holder, or, in the case of outstanding notes tendered by book-entry transfer
into the exchange agent's account at DTC according to the procedures described
above, the outstanding notes will be credited to an account maintained with DTC
for the outstanding notes. This return or crediting will take place as soon as
practicable after withdrawal, rejection of tender or termination of the
exchange offers. Holders may retender properly withdrawn outstanding notes by
following one of the procedures described under "--Procedures for Tendering"
above at any time on or before the expiration date.
Fees and Expenses
We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, we may make additional solicitation by
telegraph, telephone or in person by our officers and regular employees and the
officers and regular employees of our affiliates.
We have not retained any dealer-manager in connection with the exchange
offers and will not make any payments to broker-dealers or others soliciting
acceptances of the exchange offers. We will, however, pay the exchange agent
reasonable and customary fees for its services and reimburse it for its related
reasonable out-of-pocket expenses. We may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this prospectus, letter of transmittal
and related documents to the beneficial owners of the outstanding notes and in
handling or forwarding tenders for exchange.
We will pay the cash expenses to be incurred in connection with the exchange
offers, including
. SEC registration fees
. fees and expenses of the exchange agent and trustee
. accounting and legal fees and printing costs
. related fees and expenses
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We will pay all transfer taxes, if any, applicable to the exchange of
outstanding notes under the exchange offers. The tendering holder, however,
will be required to pay any transfer taxes, whether imposed on the registered
holder or any other person, if
. certificates representing outstanding notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of
outstanding notes tendered
. tendered outstanding notes are registered in the name of any person other
than the person signing the letter of transmittal
. a transfer tax is imposed for any reason other than the exchange of
outstanding notes under the exchange offers.
If satisfactory evidence of payment of any transfer taxes payable by a note
holder is not submitted with the letter of transmittal, the amount of the
transfer taxes will be billed directly to that tendering holder.
Transfer Taxes
If a holder tenders its outstanding notes for exchange, it will not be
required to pay any transfer taxes. However, if a holder instructs us to
register new notes in the name of, or requests that outstanding notes not
tendered or not accepted in the exchange offers be returned to, a person other
than that holder, in that holder's capacity as the registered tendering holder,
that holder will be required to pay any applicable transfer tax.
Consequences of Failure to Exchange
Holders who do not exchange their outstanding notes for new notes under the
exchange offers will remain subject to the existing restrictions on transfer of
the outstanding notes. In general, a holder may not offer or sell the
outstanding notes unless they are registered under the Securities Act or if the
offer or sale is exempt from registration under the Securities Act and
applicable state securities laws. Except as required by the exchange and
registration rights agreement, we do not intend to register resales of the
outstanding notes under the Securities Act. Based on interpretations of the SEC
staff, holders may offer for resale, resell or otherwise transfer new notes
issued in the exchange offers without compliance with the registration and
prospectus delivery provisions of the Securities Act, if
. they are not our "affiliate" within the meaning of Rule 405 under the
Securities Act
. they acquired the new notes in the ordinary course of their business
. they have no arrangement or understanding with respect to the
distribution of the new notes to be acquired in the exchange offers
If a holder tenders in the exchange offers for the purpose of participating
in a distribution of the new notes, it
. cannot rely on the applicable interpretations of the SEC
. must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction
Accounting Treatment
We will not recognize a gain or loss for accounting purposes upon the
consummation of the exchange offers. We will amortize expenses of the exchange
offers over the term of the new notes under generally accepted accounting
principles.
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Other
Participation in the exchange offers is voluntary, and holders of
outstanding notes should carefully consider whether to accept. Those holders
are urged to consult their financial and tax advisors in making their own
decision on what action to take.
We may, in the future, seek to acquire untendered outstanding notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. We have no present plans to acquire any outstanding notes that
are not tendered in the exchange offers or to file a registration statement to
permit resales of any untendered outstanding notes.
Description of the New Notes
General
The new notes will be issued, and the outstanding notes were issued, under
an indenture dated January 15, 1999, that we entered into with The Bank of New
York, as trustee. We supplemented the indenture to establish the terms of the
notes. The terms of the notes include those stated in the indenture, the
supplemental indentures and those made part of the indenture by the Trust
Indenture Act of 1939, as amended. The Indenture does not limit the aggregate
principal amount of securities that can be issued thereunder and does not limit
our right to issue additional notes of either series at either time.
We have summarized below selected provisions of the notes and the indenture,
as supplemented. The summary is not complete. For a complete description, you
should refer to the indenture and the notes filed as exhibits to this
registration statement which includes this prospectus. See "Available
Information." Capitalized terms used in this summary are defined below under
"--Definitions."
The outstanding 8 1/2% notes and the new 8 1/2% notes will constitute a
single class of debt securities under the indenture. The outstanding 8 3/4%
notes and the new 8 3/4% notes will constitute a separate single class of debt
securities under the indenture. If the exchange offers contemplated by this
prospectus are consummated, holders of the applicable series of outstanding
notes who do not exchange those notes for new notes in the exchange offers will
vote together with holders of new notes for all relevant purposes under the
indenture. Accordingly, when determining whether the required holders have
given any notice, consent or waiver or taken any other action permitted under
the indenture, any outstanding notes that remain outstanding after the exchange
offers will be aggregated with the applicable series of new notes. All
references herein to specified percentages in aggregate principal amount of a
series of notes outstanding shall be deemed to mean, at any time after the
exchange offers are consummated, percentages in aggregate principal amount of a
series of outstanding notes and the applicable series of new notes then
outstanding.
The form and term of the new notes are the same as the form and term of the
outstanding notes they will replace, except that
. we will register the new notes under the Securities Act
. the new notes, once registered, will not bear legends restricting
transfer
. holders of the new notes will not be entitled to some rights under the
exchange and registration rights agreement, including our payment of
additional interest for failure to meet specified deadlines, which
terminate when the exchange offers are consummated
The new notes will be issued solely in exchange for an equal principal amount
of outstanding notes. As of the date of this prospectus, $300 million aggregate
principal amount of 8 1/2% notes and $600 million aggregate principal amount of
8 3/4% notes are outstanding. See "The Exchange Offers."
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Ranking
The outstanding notes are, and the new notes
. will be senior unsecured indebtedness of Equistar and Equistar Funding
. will rank equal in right of payment with any outstanding notes that are
not exchanged and with all of our existing and future unsecured and
unsubordinated indebtedness and senior to any future subordinated
indebtedness
Maturity and Interest
The 8 1/2% notes will mature on February 15, 2004. The 8 3/4% notes will
mature on February 15, 2009. Interest on both the 8 1/2% notes and the 8 3/4%
notes began to accrue on February 16, 1999. We
. will pay interest semiannually on February 15 and August 15 of each year,
beginning August 15, 1999
. will pay interest to the person registered as owner of the notes on the
February 1 or August 1 preceding the interest payment date
. will compute interest based on a 360-day year consisting of twelve 30-day
months
Optional Redemption
At any time, we may redeem any or all of either series of new notes. We will
pay a redemption price equal to the greater of the principal amount of the
series of notes being redeemed or, as determined by a Quotation Agent, the sum
of the present values of the remaining scheduled payments of principal and
interest on the series of notes to be redeemed discounted to the date of
redemption on a semiannual basis, assuming a 360-day year consisting of twelve
30-day months at the Adjusted Treasury Rate. We will also pay accrued but
unpaid interest.
Notice of redemption will be mailed between 30 and 60 days before the
redemption date to each holder of the new notes to be redeemed. Interest will
cease to accrue on the new notes or the portions of the new notes called for
redemption on and after the redemption date unless we default in payment of the
redemption price.
Restrictive Covenants
We have agreed to two principal restrictions on our activities for the
benefit of the holders of the outstanding notes and the new notes. In the
description of these covenants, all references to "us" or "our" mean Equistar
Chemicals, LP and any of its Subsidiaries, unless the context clearly indicates
otherwise.
Limitation on Liens
We have agreed that Equistar will not, and will not permit any Restricted
Subsidiary to, issue, assume or guarantee any indebtedness for borrowed money
secured by any liens upon any Restricted Subsidiary unless we secure the notes
equally and ratably with or prior to the other indebtedness secured by the
lien. This covenant has exceptions that permit
. liens affecting property of a corporation existing at the time it becomes
a Subsidiary or at the time it is merged into or consolidated with
Equistar
. liens on property existing at the time of its acquisition or incurred to
secure payment of all or part of its purchase price or to secure debt
incurred before, at the time of or within 24 months after its acquisition
for the purpose of financing all or part of the purchase price
. liens on our property existing on the date of the indenture
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. liens on any property to secure all or part of the cost of construction
or improvements on that property or debt incurred to provide funds for
any such liens in a principal amount not exceeding the cost of the
construction or improvements
. liens which secure only an indebtedness owed to us by a Subsidiary
. liens in favor of the United States or any state within the United
States, or any department, agency, instrumentality, or political
subdivision of any U.S. jurisdiction, to secure partial progress, advance
or other payments under any contract or statute or to secure any
indebtedness incurred for the purpose of financing all or any part of the
purchase price or cost of constructing or improving the property subject
thereto, including, without limitation, liens to secure debt of the
pollution control or industrial revenue bond type
. liens required by any contract or statute to permit our performance of
any contract or subcontract made by us with or at the request of the
United States of America, any state or any department, agency or
instrumentality or political subdivision of either the United States or
any state
. any extension, renewal or replacement, or successive extensions, renewals
or replacements, in whole or in part, of any lien referred to in the
foregoing exceptions or of any debt secured thereby, provided that the
principal amount of debt secured thereby shall not exceed the greater of
the following:
-- the principal amount of debt so secured
-- the fair market value of the underlying property or assets to which
that lien relates at the time of the extension, renewal or replacement
and that the extension, renewal or replacement lien shall be limited to
all or part of substantially the same property which secured the lien
extended, renewed or replaced, including improvements on the property
If Equistar so determines, it may also equally and ratably secure any other
indebtedness or other obligation then existing and any other indebtedness or
obligation created after that time.
Notwithstanding the foregoing provisions of "--Limitation on Liens,"
Equistar and any one or more Restricted Subsidiaries may issue, assume or
guarantee debt secured by liens, that would otherwise be subject to the
foregoing restrictions if
. the aggregate principal amount of such secured debt, plus
. the aggregate outstanding principal amount of all of other debt of
Equistar and the Restricted Subsidiaries which would otherwise, not
including debt permitted to be secured under the exceptions described
above, be subject to the foregoing restrictions, plus
. the aggregate Value of the Sale and Lease-Back Transactions in existence
at that time, not including Sale and Lease-Back Transactions as to which
Equistar has complied with (b) of "--Limitation of Sale and Lease-Back
Transactions,"
does not at any one time exceed 15% of the Consolidated Net Tangible Assets of
Equistar and its consolidated Subsidiaries.
Limitation on Sale and Lease-Back Transactions
We have agreed that Equistar will not, and will not permit any Restricted
Subsidiary to, enter into any Sale and Lease-Back Transactions with any person
unless at least one of the following applies:
(a) Equistar or the Restricted Subsidiary would be entitled, under "--
Limitation on Liens," to incur debt in a principal amount equal to or
exceeding the Value of the Sale and Lease-Back Transaction, secured by
a lien on the property to be leased, without equally and ratably
securing the notes
(b) Within four months after the effective date of the Sale and Lease-Back
Transaction, whether made by Equistar or a Restricted Subsidiary,
Equistar applies to the voluntary retirement of Funded Debt an
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amount equal to the Value of the Sale and Lease-Back Transaction, less
the principal amount of notes delivered, within four months after the
effective date of the arrangements, to the trustee for retirement and
cancellation and the principal amount of other Funded Debt voluntarily
retired within that four-month period, excluding retirements of notes
and other Funded Debt as a result of conversions or under mandatory
sinking fund or prepayment provisions or by payment at maturity
Events of Default
The following are events of default with respect to the notes:
. our failure to pay interest on the notes for 30 days
. our failure to pay principal or premium on the notes
. our failure to observe or perform any other covenant or agreement in the
indenture for 60 days after written notice by the trustee or by the
holders of at least 25% in aggregate principal amount of the outstanding
debt securities under the indenture affected thereby
. bankruptcy, insolvency or reorganization events
If an event of default with respect to notes occurs and is continuing,
either the trustee or the holders of at least 25% in aggregate principal
amount of the outstanding notes or, if applicable, 25% in aggregate principal
amount of the outstanding debt securities affected thereby, may declare the
principal of and the accrued but unpaid interest immediately due and payable.
At any time after a declaration of acceleration with respect to notes has been
made, but before a judgment or decree for payment of money has been obtained
by the trustee, the holders of a majority in aggregate principal amount of the
notes may rescind the acceleration and its consequences if they comply with
specified conditions.
The holders of a majority in aggregate principal amount of the outstanding
debt securities under the indenture have the right to waive certain existing
or past defaults under the indenture.
The indenture provides that, subject to the duty of the trustee during
default to act with the required standard of care, the trustee is under no
obligation to exercise any of its rights or powers under the indenture at the
request or direction of any holders, unless such holders offer reasonable
indemnity to the trustee. As long as the requirements concerning
indemnification are satisfied, the holders of a majority in aggregate
principal amount of the outstanding affected debt securities under the
indenture have the right in most cases to direct the time, method and place of
conducting any proceeding for any remedy available to the trustee under the
indenture or exercising any trust or power conferred on the trustee.
We are required to give the trustee a certificate stating whether or not we
are in default under the indenture and, if so, specifying all defaults and the
nature of all defaults every year.
Consolidation, Merger and Sale of Assets
We have agreed that each of Equistar and Equistar Funding will not
consolidate with or merge into, or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its assets, to anyone unless
each of the following conditions is satisfied:
. immediately after giving effect to the transaction, no default or event
of default will have happened and be continuing, and
. either Equistar or Equistar Funding shall be the continuing partnership
or corporation, as applicable, or the successor is
--organized under the laws of the United States, one of the states of
the United States or the District of Columbia and
--assumes by supplemental indenture all our obligations under the
indenture and the notes, and
. we deliver to the trustee an officers' certificate and opinion of counsel
stating that the transaction complies with these conditions
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Modification and Waiver
We and the trustee may amend or supplement the indenture, with the consent
of the holders of not less than a majority in aggregate principal amount of all
series of outstanding debt securities that are issued under the indenture and
affected by the amendment or supplement. Without the consent of the holder of
each outstanding note, we may not
. reduce the principal or premium or change the stated maturity of the
principal or premium of any note
. reduce the amount of debt securities under the indenture whose holders
must consent to an amendment or supplement to the indenture
. make any change in the percentage of principal amount of debt securities
under the indenture necessary to modify or waive any default
. reduce the rate of or change the time for payment of interest on any note
. impair the right to institute suit for the enforcement of any payment on
any note
The holders of a majority in aggregate principal amount of outstanding notes
affected by a covenant have the right to waive Equistar's compliance with some
of the covenants contained in the indenture.
We and the trustee may modify and amend the indenture without the consent of
any holder of notes
. to evidence a successor obligor under the indenture
. to add covenants or events of default for the benefit of the holders
. to secure the debt securities under the indenture
. to establish the form or terms of debt securities under the indenture
. to provide for the acceptance of appointment by a successor trustee or
facilitate the administration of the trusts under the indenture by more
than one trustee
. to cure any ambiguity or inconsistency in the indenture, provided such
modification or amendment does not adversely affect in any material
respect the interests of the holders of the notes
. to supplement any of the provisions of the indenture to the extent
necessary to permit or facilitate defeasance and discharge of any series
of notes, provided such modification or amendment does not adversely
affect in any material respect the interests of the holders of the notes
. to make any other change that does not adversely affect the rights of any
holder
Defeasance and Covenant Defeasance
The indenture provides that we may elect either
. to defease and be discharged from any and all obligations with respect to
all or a portion of the notes of any series (legal defeasance) except for
the obligations
--to register the transfer or exchange of notes
--to replace temporary, mutilated, destroyed, lost or stolen notes of
the series
--to maintain an office or agency in respect of the series of notes
--to hold moneys for payment in trust
or
. to be released from our obligations with respect to restrictive and other
covenants, and any omission to comply with these obligations will not
constitute a default or an event of default with respect to the notes
(covenant defeasance)
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In either case, upon our irrevocable deposit with the trustee, or other
qualifying trustee, in trust, of
. an amount in cash
. government obligations that, through the payment of principal and
interest according to their terms, will provide money in an amount, or
. a combination of the above
The amount deposited must be sufficient to pay the principal of and premium,
if any, on, and interest, if any, to stated maturity, or redemption, on the
notes, on the scheduled due dates.
We are required to deliver to the trustee an opinion of counsel stating
that the holders of these notes proposed to be defeased will not recognize
income, gain or loss for United States federal income tax purposes as a result
of legal defeasance or covenant defeasance. The opinion must also state that
holders will be subject to United States federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if legal defeasance or covenant defeasance had not occurred. The opinion, in
the case of legal defeasance, must refer to and be based upon a ruling of the
Internal Revenue Service or a change in applicable United States federal
income tax law occurring after the date of the indenture.
Payment
We are required to maintain an office or agency in each payment location
for the notes and may from time to time designate additional offices or
agencies, at which the principal of and premium, if any, on and interest, if
any, on the notes will be payable. Payments will be made in New York City, and
we will initially designate the office of the agent of the trustee in New York
City as an office where the principal, premium and interest will be payable.
We reserve the option to pay interest, if any, on the notes by
. check mailed to the registered holder at their address
. wire transfer to an account located inside the United States maintained
by the registered holder.
We may designate additional offices or agencies, approve a change in the
location of any office or agency and, except as provided above, rescind the
designation of any office or agency at any time.
Moneys we pay to the trustee or a paying agent for the payment of
principal, premium, if any, or interest, if any, on any note that remains
unclaimed for two years after the principal, premium or interest becomes due
and payable will be repaid to us. After that time, the holder of the note,
subject to applicable abandoned property or similar laws, will be an unsecured
general creditor and may look only to us for payment.
Transfer and Exchange
Subject to the terms of the indenture, notes may be presented for
registration of transfer and for exchange
. at each office or agency required to be maintained by us for payment of
each series, as described under "--Payment"
. at each other office or agency that we may designate from time to time
Registration of transfers and exchanges will be effected if the transfer agent
is satisfied with the evidence of ownership and identity of the holder making
the request and if the transfer form is duly executed. No service charge will
be made for any registration of transfer or exchange of notes, but we may
require you to pay any tax or other governmental charge incurred in connection
with the transfer or exchange.
In the event of any redemption in whole or in part, we will not be required
. to register the transfer of or exchange new notes of any series during a
period beginning at the opening of business 15 days before any selection
of notes of that series to be redeemed and ending at the close of
business on the date the relevant notice of redemption is mailed
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. to register the transfer of or exchange of any note or portion of any
note called for redemption, except the unredeemed portion, if any, of a
note being redeemed in part
. to register the transfer of or exchange of any note that has been
surrendered for repayment at the option of the holder, except the
portion, if any, of the note not to be so repaid
Definitions
We have provided below a summary of capitalized terms used in this summary
description of the notes. The indenture contains the full definition of all
these terms.
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue,
expressed as a percentage of its principal amount equal to the Comparable
Treasury Price for the redemption date, plus 0.25%, in the case of each of the
8 1/2% notes and the 8 3/4% notes.
"Comparable Treasury Issue" means the United States Treasury security
selected by a Quotation Agent as having a maturity comparable to the remaining
term of the notes to be redeemed that would be utilized, at the time of
selection and according to customary financial practice, in pricing new issues
of corporate notes of comparable maturity to the remaining term of the notes.
"Comparable Treasury Price" is calculated with respect to any redemption
date as follows:
. the average of the bid and asked prices for the Comparable Treasury
Issue, expressed in each case as a percentage of its principal amount, on
the third business day preceding the redemption date, as shown in the
daily statistical release, or any successor release, published by the
Federal Reserve Bank of New York and designated "Composite 3:30 p.m.
Quotations for U.S. Government Securities"
. if the release, or any successor release, is not published or does not
contain prices on the business day,
--the average of the Reference Treasury Dealer Quotations for the
Redemption Date, or
--if we obtain only one Reference Treasury Dealer Quotation, the
Reference Treasury Dealer Quotation
"Consolidated Net Tangible Assets" means the total amount of assets, less
applicable reserves and other properly deductible items, after deducting the
following:
. all current liabilities excluding any which are by their terms extendible
or renewable at the option of the obligor to a time more than 12 months
after the time as of which the amount is being computed
. all goodwill, trade names, trademarks, patents, purchased technology,
unamortized debt discount and other like intangible assets, all as
specified on the most recent quarterly balance sheet of Equistar and
computed according to generally accepted accounting principles
"Funded Debt" means indebtedness of either Equistar or Equistar Funding,
including notes, provided that notes may only be redeemed according to "--
Optional Redemption," maturing by their terms thereof more than one year after
their original creation and ranking at least pari passu with the notes.
"Quotation Agent" means one of the Reference Treasury Dealers appointed and
certified to the trustee.
"Reference Treasury Dealer" means each of Chase Securities Inc.,
NationsBanc Montgomery Securities LLC, ABN AMRO Incorporated, BNY Capital
Markets, Inc., First Chicago Capital Markets, Inc. and J.P. Morgan Securities
Inc. and their respective successors. If any of the foregoing cease to be a
primary U.S. Government Securities dealer in New York City, we will substitute
another Government Securities dealer and certify to the trustee.
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"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as we
determine and certify to the trustee, of the bid and asked prices for the
Comparable Treasury Issue, expressed in each case as a percentage of its
principal amount, quoted in writing to us by the Reference Treasury Dealer at
5:00 p.m. on the third Business Day preceding the redemption date.
"Restricted Property" means
. any plant for the production of petrochemicals owned by Equistar or a
Subsidiary, except
--related facilities which in the opinion of the partnership governance
committee are transportation or marketing facilities
--any plant for the production of petrochemicals which in the opinion of
the partnership governance committee is not a principal plant of
Equistar and its Subsidiaries
. any shares of capital stock or indebtedness of a Restricted Subsidiary
owned by Equistar or a Subsidiary
"Restricted Subsidiary" means any Subsidiary which owns any Restricted
Property.
"Sale and Lease-Back Transaction" means any arrangement with any person,
other than Equistar or a Subsidiary, or to which any such person is a party,
providing for the leasing to Equistar or a Restricted Subsidiary for a period
of more than five years of any Restricted Property which has been or is to be
sold or transferred by Equistar or such Restricted Subsidiary to such person
or to any other person, other than Equistar or a Subsidiary, to which funds
have been or are to be advanced by such Person on the security of the leased
property.
"Subsidiary" means any corporation that at least a majority of the
outstanding securities of which having ordinary voting power to elect a
majority of the board of directors of such corporation, whether or not any
other class of securities has or might have voting power by reason of the
happening of a contingency, is at the time owned or controlled directly or
indirectly by Equistar and/or one or more Subsidiaries.
"Value" means, with respect to a Sale and Lease-Back Transaction, the
amount equal to the greater of
. the net proceeds of the sale or transfer of the property leased under a
Sale and Lease-Back Transaction, or
. the fair value, in the opinion of the partnership governance committee,
of the property at the time of entering into a Sale and Lease-Back
Transaction, in either case divided first by the number of full years of
the term of the lease and then multiplied by the number of full years of
the term remaining at the time of determination, without regard to any
renewal or extension options contained in the lease
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Federal Income Tax Considerations
The following summary fairly describes the material United States federal
income tax consequences expected to apply to the exchange of outstanding notes
for new notes. This summary is based upon the provisions of the Internal
Revenue Code of 1986, as amended, the final, temporary and proposed regulations
promulgated under the Internal Revenue Code, and administrative rulings and
judicial decisions now in effect. All of the above are subject to change or
different interpretations, possibly with retroactive effect. This discussion is
for general information only and does not purport to address all of the
possible federal income tax consequences or any other federal, or any state,
local or foreign, tax consequences of the acquisition, ownership and
disposition of the outstanding notes or new notes. It is limited to investors
who hold the outstanding notes and the new notes as capital assets and does not
address the federal income tax consequences that may be relevant to particular
investors in light of their unique circumstances or to certain types of
investors, such as dealers in securities, insurance companies, financial
institutions, foreign corporations, partnerships or trusts, nonresident alien
individuals, and tax-exempt entities, who may be subject to special treatment
under the federal income tax law.
An exchange of the outstanding notes for the new notes under the exchange
offers will not constitute a taxable event for federal income tax purposes. As
a result, holders who exchange their outstanding notes for new notes will not
recognize in income any accrued and unpaid interest on the new notes by reason
of the exchange. An exchanging holder will have the same adjusted basis and
holding period in the new notes as it had in the outstanding notes immediately
before the exchange.
Holders should consult their own tax advisor as to the particular tax
consequences to them of exchanging outstanding notes for new notes in the
exchange offers, including the applicability and effect of any state, local, or
foreign tax laws and or recent or possible future changes in the tax laws.
The Exchange and Registration Rights Agreement
In connection with the issuance of the outstanding notes, we entered into an
exchange and registration rights agreement. Under the exchange and registration
rights agreement, we agreed to
. file a registration statement with the SEC on or before 60 days after
February 16, 1999
. use our reasonable best efforts to cause the registration statement to be
declared effective under the Securities Act within 150 days after
February 16, 1999
. use our reasonable best efforts to cause the exchange offers to be
consummated within 180 days following February 16, 1999
. keep the exchange offers open for acceptance for a period of not less
than 30 calendar days after the date notice of the exchange offer is
mailed to holders of the outstanding notes
. accept for exchange all outstanding notes duly tendered and not validly
withdrawn under the exchange offers according to the terms of the
registration statement and letter of transmittal
As soon as practicable after the exchange offers registration statement
becomes effective, we will offer the holders of outstanding notes who are not
prohibited by any law or policy of the SEC from participating in these exchange
offers the opportunity to exchange their outstanding notes for exchange notes
registered under the Securities Act that are substantially identical to the
outstanding notes, except that the exchange notes will not contain terms with
respect to transfer restrictions, registration rights and additional interest.
The exchange and registration rights agreement also provides that we
. shall make available for a period of 180 days after the consummation of
the exchange offers a prospectus meeting the requirements of the
Securities Act to any broker-dealer for use in connection with any resale
of any new notes
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. shall pay all expenses incident to the exchange offers, including the
expense of one counsel to the holders of the notes, and will indemnify
certain holders of the notes, including any broker-dealer, against
certain liabilities, including liabilities under the Securities Act
A broker-dealer which delivers a prospectus to purchasers in connection with
resales will be subject to various civil liability provisions under the
Securities Act and will be bound by the provisions of the exchange and
registration rights agreement, including some of the indemnification rights and
obligations.
We will use our reasonable best efforts to file with the SEC a shelf
registration statement to cover resales of the outstanding notes by those
holders who provide required information in connection with that shelf
registration statement under the following circumstances:
. if any changes in law, SEC rules or regulations or applicable
interpretations of these laws, rules or regulations by the staff of the
SEC do not permit us to effect the exchange offers as contemplated by the
exchange and registration rights agreement
. if the exchange offers are not consummated within 180 days after February
16, 1999
. if any initial purchaser of the outstanding notes so requests but only
with respect to any outstanding notes acquired directly by them
. if any holder of the outstanding notes notifies us that it is not
permitted to participate in the exchange offers or would not receive
fully tradeable new notes in the exchange offers
We will use our reasonable best efforts to keep the shelf registration
statement, if filed, effective for a period of two years after February 16,
1999. We have the ability to suspend the shelf registration statement for no
more than
. 45 days during the first 12-month period after February 16, 1999, and
. 90 days during any subsequent 12-month period
if we determine, in our reasonable best judgment upon the written advice of
counsel, that continued effectiveness would require disclosure of confidential
information or interfere with any financing, acquisition, reorganization or
other material transaction involving Equistar.
If a registration default occurs, we will be obligated to pay additional
interest to each holder of outstanding notes at a rate equal to 0.25% per
annum. If this registration default is not cured within 90 days, the interest
rate increases to 0.50% per annum. A registration defaults occurs if
. the registration statement is not filed with the SEC within 60 days of
February 16, 1999
. the registration statement or shelf registration statement is not
declared effective within 150 days of February 16, 1999
. the exchange offers are not consummated within 180 days of February 16,
1999
. the shelf registration statement is filed and declared effective within
180 days of February 16, 1999, but ceases to be effective
Following the cure of a registration default, additional interest will cease to
accrue. Additional interest does not accrue during a suspension period.
If you desire to tender your outstanding notes, you will be required to make
to us the representations described under "The Exchange Offers--Purpose and
Effect of the Exchange Offers" and "--Procedures for Tendering" to participate
in the exchange offers. In addition, we may require you to deliver information
to be used in connection with the shelf registration statement to have your
notes included in the shelf registration statement and benefit from the
provisions regarding additional interest described in the preceding paragraphs.
A
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holder who sells outstanding notes under the shelf registration statement
generally will be required to be named as a selling security holder in the
related prospectus and to deliver a prospectus to purchasers. A holder will
also be subject to the civil liability provisions under the Securities Act in
connection with the sales and will be bound by the provisions of the exchange
and registration rights agreement that are applicable to a holder, including
indemnification obligations.
The description of the exchange and registration rights agreement contained
in this section is a summary only, does not purport to be complete, and is
qualified in its entirety by reference to all provisions of the exchange and
registration rights agreement. The exchange and registration statement is filed
as an exhibit to the registration statement of which this prospectus is a part.
Book-Entry; Delivery and Form
The new notes will initially be represented by one or more permanent global
notes in definitive, fully registered book-entry form (the "Global Notes") that
will be registered in the name of Cede & Co., as nominee of DTC. The Global
Notes will be deposited, on behalf of the acquirors of the new notes
represented thereby, with a custodian for DTC for credit to the respective
accounts of the acquirors or to such other accounts as they may direct at DTC.
See "The Exchange Offers--Book-Entry Transfer."
The Global Notes
We expect that under procedures established by DTC
. upon deposit of the Global Notes with DTC or its custodian, DTC will
credit on its internal system a portion of the Global Notes that shall be
comprised of the corresponding respective amounts of the Global Notes to
the respective accounts of persons who have accounts with the depository
. ownership of the notes will be shown on, and the transfer or ownership
will be effected only through, records maintained by DTC or its nominee,
with respect to interests and records of participants and with respect to
interests of persons other than participants
So long as DTC or its nominee is the registered owner of the Global Notes,
DTC or its nominee, as the case may be, will be considered the sole owner or
holder of the notes represented by the Global Notes for all purposes under the
indenture. Except as provided below, owners of beneficial interests in Global
Notes
. will not be entitled to have notes represented by Global Notes registered
in their names
. will not receive or be entitled to receive physical delivery of
certificated notes
. will not be considered the owners or holders of the Global Notes under
the indenture for any purpose, including with respect to the giving of
any direction, instruction or approval to the trustee
Payments of the notes represented by Global Notes will be made to DTC, or
its nominee, as the registered owner. None of Equistar, Equistar Funding, the
trustee or the paying agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interest in the Global Notes or for maintaining, supervising or
reviewing any records relating to beneficial ownership interest under the
indenture.
We expect that DTC or its nominees, upon receipt of any payment on the notes
represented by the Global Notes, will credit participants' accounts with
payments in amounts proportionate to their respective beneficial interest in
the Global Notes as shown in the records of DTC or its nominee. We also expect
that participants will be governed by standing instructions and customary
practice as is now the case with securities held for the accounts of customers
registered in the names of nominees for the customers. Payment will be the
responsibility of the participants.
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Transfers between participants in DTC will be effected according to DTC's
procedures and will be settled in same-day funds. Transfers between
participants in Euroclear or Cedel will be effected in the ordinary way
according to their respective rules and operating procedures. If a holder
requires physical delivery of a certificated security for any reason, including
to sell notes to persons in states that require physical delivery of the
security or to pledge the security, a holder must transfer its interest in the
Global Notes according to the normal procedures of DTC, Euroclear or Cedel and
the procedures in the indenture.
Subject to compliance with the transfer restrictions applicable to the
notes, cross-market transfers between the participants in DTC, on the one hand,
and Euroclear or Cedel participants, on the other hand, will be effected
through DTC according to DTC's rules on behalf of Euroclear or Cedel, as the
case may be, by its respective depositary. Cross-market transactions will
require delivery of instructions to Euroclear or Cedel, as the case may be, by
the counter party in that system according to the rules and procedures and
within the established deadlines, in Brussels time, of such system if the
transaction meets its settlement requirements. Euroclear or Cedel, as the case
may be, will deliver instructions to its respective depositary to take action
to effect final settlement on its behalf by delivering or receiving interests
in the relevant Global Notes in DTC and making or receiving payment according
to normal procedures for same-day funds settlement applicable to DTC. Euroclear
participants and Cedel participants may not deliver instructions directly to
the depositaries for Euroclear or Cedel.
Because of time zone differences, the securities account of a Euroclear or
Cedel participants purchasing an interest in a Global Note from a participant
in DTC will be credited, and any crediting will be reported to the relevant
Euroclear or Cedel participant during the note settlement processing day
immediately following the settlement date of DTC. The note settlement day must
be a business day for Euroclear and Cedel. Cash received in Euroclear or Cedel
as a result of sales of interest in a Global Note by or through a Euroclear or
Cedel participant to a participant in DTC will be received with value on the
settlement date of DTC but will be available in the relevant Euroclear or Cedel
cash account only as of the business day for Euroclear or Cedel following DTC's
settlement date.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures to
facilitate transfers of interests in the Global Notes among participants in
DTC, Euroclear and Cedel, they are under no obligation to perform or to
continue to perform procedures, and procedures may be discontinued at any time.
Neither we nor the trustee will have any responsibility for the performance by
DTC, Euroclear or Cedel or their respective participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Description of DTC
The description of the operations and procedures of DTC, Euroclear and Cedel
is provided below solely as a matter of convenience. These operations and
procedures are solely within the control of the respective settlement systems
and are subject to change by them from time to time. Neither we nor the initial
purchasers takes any responsibility for these operations or procedures, and
investors are urged to contact the relevant system or its participants directly
to discuss these matters.
DTC has advised that it is
. a limited purpose trust company organized under the laws of the State of
New York
. a "banking organization" within the meaning of the New York Banking Law
. a member of the Federal Reserve System
. a "clearing corporation" within the meaning of the Uniform Commercial
Code, as amended
. a "clearing agency" registered under Section 17A of the Securities
Exchange Act of 1934, as amended
95
<PAGE>
DTC was created to hold securities for its participants and facilitates the
clearance and settlement of securities transactions between participants
through electronic book-entry changes to the accounts of its participants,
thereby eliminating the need for physical transfer and delivery of
certificates.
DTC's participants include securities brokers and dealers, including the
initial purchasers, banks and trust companies, clearing corporations and
certain other organizations. Indirect access to DTC's system is also available
to other entities such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly. Investors who are not participants may beneficially own
securities held by or on behalf of DTC only through participants or indirect
participants.
Certificated Notes
Interest in the Global Notes may be exchanged for certificated securities if
. we notify the trustee in writing that DTC is no longer willing or able to
act as a depositary or DTC ceases to be registered as a clearing agency
under the Exchange Act and a successor depositary is not appointed within
90 days of notice or cessation
. we, at our option, notify the trustee in writing that we elect to cause
the issuance of notes in certificated form under the indenture
. other events occur as provided in the indenture
Upon the occurrence of any of the events described in the preceding sentence,
we will cause the appropriate certificated securities to be delivered.
Neither Equistar, Equistar Funding nor the trustee shall be liable for any
delay by DTC or any participant or indirect participant in identifying the
beneficial owners of the related notes, and each person may conclusively rely
on, and shall be protected in relying on, instructions from DTC for all
purposes, including with respect to the registration and delivery, and the
respective principal amounts, of the notes to be issued.
Plan of Distribution
Based on interpretations by the staff of the SEC in no action letters issued
to third parties, we believe that you may transfer new notes issued under the
exchange offers in exchange for the outstanding notes if
. you acquire the new notes in the ordinary course of your business
. you are not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a
distribution of new notes
Broker-dealers receiving new notes in the exchange offers will be subject to a
prospectus delivery requirement with respect to resales of the new notes.
We believe that you may not transfer new notes issued under the exchange
offers in exchange for the outstanding notes if you are
. our "affiliate" within the meaning of Rule 405 under the Securities Act
. a broker-dealer that acquired outstanding notes directly from us
. a broker-dealer that acquired outstanding notes as a result of market-
making or other trading activities without compliance with the
registration and prospectus delivery provisions of the Securities Act
To date, the staff of the SEC has taken the position that participating
broker-dealers may fulfill their prospectus delivery requirements with respect
to transactions involving an exchange of securities such as this exchange
offers, other than a resale of an unsold allotment from the original sale of
the outstanding notes, with
96
<PAGE>
the prospectus contained in the exchange offers registration statement. In the
exchange and registration rights agreement, we have agreed to permit
participating broker-dealers use of this prospectus in connection with the
resale of new notes. We have agreed that, for a period up to 180 days after the
expiration of the exchange offers, we will make this prospectus, and any
amendment or supplement to this prospectus, available to any broker-dealer that
requests these documents in the letter of transmittal. In addition, until
, 1999, all dealers effecting transactions in the new notes may be
required to deliver a prospectus.
If you wish to exchange your outstanding notes for new notes in the exchange
offers, you will be required to make representations to us as described in "The
Exchange Offers--Purpose and Effect of the exchange Offer" and "--Procedures
for Tendering--Your Representations to Us" of this prospectus and in the letter
of transmittal. In addition, if you are a broker-dealer who receives new notes
for your own account in exchange for outstanding notes that were acquired by
you as a result of market-making activities or other trading activities, you
will be required to acknowledge that you will deliver a prospectus in
connection with any resale by you of new notes.
We will not receive any proceeds from any sale of new notes by broker-
dealers. Broker-dealers who receive new notes for their own account in the
exchange offers may sell them from time to time in one or more transactions
. in the over-the-counter market
. in negotiated transactions
. through the writing of options on the new notes or a combination of
methods of resale
. at market prices prevailing at the time of resale
. at prices related to prevailing market prices or negotiated prices
Any resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any broker-dealer or the purchasers of any new notes. Any broker-dealer
that resells new notes it received for its own account in the exchange offers
and any broker or dealer that participates in a distribution of new notes may
be deemed to be an "underwriter" within the meaning of the Securities Act. Any
profit on any resale of new notes and any commissions or concessions received
by any persons may be deemed to be underwriting compensation under the
Securities Act. The letter of transmittal states that, by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
We have agreed to pay all expenses incidental to the exchange offers other
than commissions and concessions of any brokers or dealers. We will indemnify
holders of the outstanding notes, including any broker-dealers, against some
liabilities, including liabilities under the Securities Act, as provided in the
exchange and registration rights agreement.
Legal Matters
Baker & Botts, L.L.P., Houston, Texas, counsel for Equistar and Equistar
Funding, has issued an opinion about the legality of the new notes.
97
<PAGE>
Experts
The following financial statements included in this prospectus have been so
included in reliance on the reports of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting
. of Equistar as of and for the year ended December 31, 1998, and as of
December 31, 1997, and for the one month then ended
. of the Lyondell contributed business
--as of November 30, 1997
--as of December 31, 1996
--for the eleven-month period ended November 30, 1997
--for each of the two years in the period ended December 31, 1996
. of the Millennium contributed business
--as of November 30, 1997
--as of December 31, 1996
--for the eleven-month period ended November 30, 1997
--for each of the two years in the period ended December 31, 1996
The financial statements included in this prospectus and elsewhere in the
registration statement, to the extent and for the periods indicated in their
report appearing on page F-55, have been audited by Arthur Andersen LLP,
independent public accountants, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
Available Information
Neither Equistar nor Equistar Funding currently files reports with the SEC
or delivers annual reports to security holders under the Exchange Act. We will
provide without charge, upon written request, a copy of any information that is
required to enable resales of the notes to be made under Rule 144A under the
Securities Act, a copy of the exchange and registration rights agreement as
described under "Exchange Offers" and "The Exchange and Registration Rights
Agreement" and copies of other documents as described under "Description of the
Partnership Agreement" and "Description of the Parent Agreement." Written
requests for this information should be addressed to Equistar Chemicals, LP at
1221 McKinney Street, Houston, Texas 77010, Attention: Gerald A. O'Brien.
98
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Equistar Chemicals, LP:
Audited Financial Statements
Report of Independent Accountants..................................... F-2
Balance Sheets as of December 31, 1998 and 1997....................... F-3
Statements of Income for the year ended December 31, 1998 and the one
month ended December 31, 1997........................................ F-4
Statements of Partners' Capital for the year ended December 31, 1998
and the one month ended December 31, 1997............................ F-5
Statements of Cash Flows for the year ended December 31, 1998 and the
one month ended December 31, 1997.................................... F-6
Notes to Financial Statements......................................... F-7
Lyondell Contributed Business:
Audited Financial Statements
Report of Independent Accountants..................................... F-24
Balance Sheets as of November 30, 1997 and December 31, 1996.......... F-25
Statements of Income and Invested Capital for the eleven months ended
November 30, 1997 and years ended December 31, 1996 and 1995......... F-26
Statements of Cash Flows for the eleven months ended November 30, 1997
and years ended December 31, 1996 and 1995........................... F-27
Notes to Financial Statements......................................... F-28
Millennium Contributed Business:
Audited Financial Statements
Report of Independent Accountants..................................... F-36
Balance Sheets as of November 30, 1997 and December 31, 1996.......... F-37
Statements of Income for the eleven months ended November 30, 1997 and
years ended December 31, 1996 and 1995............................... F-38
Statements of Changes in Invested Capital for the eleven months ended
November 30, 1997 and year ended December 31, 1996................... F-39
Statements of Cash Flows for the eleven months ended November 30, 1997
and years ended December 31, 1996 and 1995........................... F-40
Notes to Financial Statements......................................... F-41
Occidental Contributed Business:
Unaudited Financial Statements
Balance Sheet as of March 31, 1998.................................... F-46
Statement of Operations and Invested Capital for the three months
ended March 31, 1998................................................. F-47
Statement of Cash Flows for the three months ended March 31, 1998..... F-48
Notes to Financial Statements......................................... F-49
Audited Financial Statements
Report of Independent Accountants..................................... F-55
Balance Sheets as of December 31, 1997 and 1996....................... F-56
Statements of Operations and Invested Capital for the years ended
December 31, 1997, 1996 and 1995..................................... F-57
Statements of Cash Flows for the years ended December 31, 1997, 1996
and 1995............................................................. F-58
Notes to Financial Statements......................................... F-59
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partnership Governance Committee
of Equistar Chemicals, LP:
In our opinion, the accompanying balance sheets and the related statements
of income, of partners' capital and of cash flows present fairly, in all
material respects, the financial position of Equistar Chemicals, LP (the
"Partnership") at December 31, 1998 and 1997, and the results of its operations
and its cash flows for the year ended December 31, 1998 and for the period from
December 1, 1997 (inception) to December 31, 1997, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Partnership's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Houston, Texas
February 26, 1999
F-2
<PAGE>
EQUISTAR CHEMICALS, LP
BALANCE SHEETS
Millions of dollars
<TABLE>
<CAPTION>
December 31
----------------
1998 1997
------- -------
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................... $ 66 $ 41
Accounts receivable:
Trade, net................................................ 376 428
Related parties........................................... 111 36
Receivables from partners................................... 3 150
Inventories................................................. 549 513
Prepaid expenses and other current assets................... 25 24
------- -------
Total current assets.................................... 1,130 1,192
------- -------
Property, plant and equipment................................. 5,847 3,690
Less accumulated depreciation and amortization................ (1,772) (1,572)
------- -------
4,075 2,118
Investment in PD Glycol....................................... 55 --
Goodwill, net................................................. 1,151 1,139
Deferred charges and other assets............................. 257 151
------- -------
Total assets.................................................. $ 6,668 $ 4,600
======= =======
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable:
Trade..................................................... $ 264 $ 154
Related parties........................................... 15 18
Payables to partners........................................ 9 63
Current maturities of long-term debt........................ 150 36
Other accrued liabilities................................... 200 65
------- -------
Total current liabilities............................... 638 336
------- -------
Obligations under capital leases.............................. 205 --
Long-term debt................................................ 1,865 1,512
Other liabilities and deferred credits........................ 75 34
Commitments and contingencies
Partners' capital:
Partners' capital........................................... 3,885 3,063
Note receivable from Lyondell LP............................ -- (345)
------- -------
Total partners' capital................................. 3,885 2,718
------- -------
Total liabilities and partners' capital....................... $ 6,668 $ 4,600
======= =======
</TABLE>
See notes to financial statements.
F-3
<PAGE>
EQUISTAR CHEMICALS, LP
STATEMENTS OF INCOME
Millions of dollars
<TABLE>
<CAPTION>
For the period
For the from December 1,
year ended 1997 (inception)
December 31, to December 31,
1998 1997
------------ ----------------
<S> <C> <C>
Sales and other operating revenues:
Unrelated parties............................... $3,818 $338
Related parties................................. 545 27
------ ----
4,363 365
------ ----
Operating costs and expenses:
Cost of sales:
Unrelated parties............................. 3,313 261
Related parties............................... 460 26
Selling, general and administrative expenses.... 273 21
Unusual charges................................. 35 42
------ ----
4,081 350
------ ----
Operating income................................ 282 15
Interest expense.................................. (156) (10)
Interest income................................... 17 2
------ ----
Net income........................................ $ 143 $ 7
====== ====
</TABLE>
See notes to financial statements.
F-4
<PAGE>
EQUISTAR CHEMICALS, LP
STATEMENTS OF PARTNERS' CAPITAL
For the year ended December 31, 1998 and for the period from December 1, 1997
(inception) to
December 31, 1997
Millions of dollars
<TABLE>
<CAPTION>
Lyondell Millennium Occidental Total
-------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Balance at December 1, 1997
(inception).......................... $ -- $ -- $ -- $ --
Capital contributions at inception:
Net assets.......................... 763 2,048 -- 2,811
Note receivable from Lyondell LP.... 345 -- -- 345
Net income............................ 4 3 -- 7
Distributions to partners............. (57) (43) -- (100)
------ ------ ------ -------
Balance at December 31, 1997.......... 1,055 2,008 -- 3,063
------ ------ ------ -------
Capital contributions:
Net assets.......................... -- -- 2,097 2,097
Other............................... (14) 9 8 3
Net income (loss)..................... 84 64 (5) 143
Distributions to partners............. (512) (460) (449) (1,421)
------ ------ ------ -------
Balance at December 31, 1998.......... $ 613 $1,621 $1,651 $ 3,885
====== ====== ====== =======
</TABLE>
See notes to financial statements.
F-5
<PAGE>
EQUISTAR CHEMICALS, LP
STATEMENTS OF CASH FLOWS
Millions of dollars
<TABLE>
<CAPTION>
For the period
For the year from December 1,
ended 1997 (inception)
December 31, to
1998 December 31, 1997
------------ -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income..................................... $ 143 $ 7
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................. 268 19
Loss on disposition of property, plant and
equipment.................................... 8 --
Equity in losses of investment in PD Glycol... 3 --
Changes in assets and liabilities, net of the
effects of assets contributed:
Decrease (increase) in accounts receivable... 105 (100)
Decrease (increase) in receivables from
partners.................................... 147 (101)
Decrease (increase) in inventories........... 133 (5)
Increase in accounts payable................. 40 188
(Decrease) increase in payables to partners.. (63) 54
Increase in other accrued liabilities........ 122 48
Net change in other working capital
accounts.................................... 2 (15)
Other........................................ (62) 7
------- -----
Net cash provided by operating activities... 846 102
------- -----
Cash flows from investing activities:
Additions to property, plant and equipment..... (200) (12)
Proceeds from disposition of property, plant
and equipment................................. 3 --
Contributions and advances to affiliates....... (15) --
------- -----
Net cash used in investing activities....... (212) (12)
------- -----
Cash flows from financing activities:
Borrowings of long-term debt................... 757 50
Repayments of long-term debt................... (290) --
Proceeds from payment of note receivable by
Lyondell...................................... 345 --
Cash contributions from partners............... -- 1
Distributions to partners...................... (1,421) (100)
------- -----
Net cash used in financing activities....... (609) (49)
------- -----
Increase in cash and cash equivalents........... 25 41
Cash and cash equivalents at beginning of
period......................................... 41 --
------- -----
Cash and cash equivalents at end of period...... $ 66 $ 41
======= =====
</TABLE>
See notes to financial statements.
F-6
<PAGE>
EQUISTAR CHEMICALS, LP
NOTES TO FINANCIAL STATEMENTS
1. Formation of the Company and Operations
Pursuant to a partnership agreement (the "Partnership Agreement") Lyondell
Chemical Company ("Lyondell") and Millennium Chemicals, Inc. ("Millennium")
formed Equistar Chemicals, LP ("Equistar" or the "Partnership"), a Delaware
limited partnership, which commenced operations on December 1, 1997. From
December 1, 1997 to May 15, 1998, the Partnership was owned 57 percent by
Lyondell and 43 percent by Millennium. Lyondell owns its interest in the
Partnership through two wholly-owned subsidiaries, Lyondell Petrochemical G.P.
Inc. ("Lyondell GP") and Lyondell Petrochemical L.P. Inc. ("Lyondell LP").
Millennium also owns its interest in the Partnership through two wholly-owned
subsidiaries, Millennium Petrochemicals GP LLC ("Millennium GP") and Millennium
Petrochemicals LP LLC ("Millennium LP").
On May 15, 1998, the Partnership was expanded with the contribution of
certain assets from Occidental Petroleum Corporation ("Occidental") (see Note
3). These assets include the ethylene, propylene and ethylene oxide ("EO") and
EO derivatives businesses and certain pipeline assets held by Oxy
Petrochemicals Inc. ("Oxy Petrochemicals"), a 50 percent interest in a joint
venture between PDG Chemical Inc. ("PDG Chemical") and Du Pont de Nemours and
Company ("PD Glycol"), and a lease to the Partnership of the Lake Charles,
Louisiana olefins plant and related pipelines held by Occidental Chemical
Corporation ("Occidental Chemical") (collectively, the "Occidental Contributed
Business"). Occidental Chemical, Oxy Petrochemicals and PDG Chemical are
wholly-owned, indirect subsidiaries of Occidental. The Occidental Contributed
Business included olefins plants at Corpus Christi and Chocolate Bayou, Texas,
EO/ethylene glycol and EO derivatives businesses located at Bayport, Texas,
Occidental's 50 percent ownership of PD Glycol, which operates a polyglycol
plant at Beaumont, Texas, 1,430 miles of owned and leased ethylene/propylene
pipelines, and the lease to the Partnership of the Lake Charles, Louisiana
olefins plant and related pipelines.
In exchange for the Occidental Contributed Business, two subsidiaries of
Occidental were admitted as limited partners and a third subsidiary was
admitted as a general partner in the Partnership for an aggregate partnership
interest of 29.5 percent. In addition, the Partnership assumed approximately
$205 million of Occidental indebtedness and the Partnership issued a promissory
note to an Occidental subsidiary in the amount of $419.7 million, which was
subsequently paid in cash in June 1998. In connection with the contribution of
the Occidental Contributed Business and the reduction of Millennium's and
Lyondell's ownership interests in the Partnership, the Partnership also issued
a promissory note to Millennium LP in the amount of $75 million, which was
subsequently paid in June 1998. These payments are included in distributions to
partners in the accompanying statements of partners' capital and of cash flows.
The consideration paid for the Occidental Contributed Business was determined
based upon arms-length negotiations between Lyondell, Millennium, and
Occidental. In connection with the transaction, the Partnership and Occidental
also entered into a long-term agreement for the Partnership to supply the
ethylene requirements for Occidental Chemical's U.S. manufacturing plants.
After completion of this transaction, the Partnership is owned 41 percent by
Lyondell, 29.5 percent by Millennium and 29.5 percent by Occidental, through
its wholly-owned subsidiaries Occidental Petrochem Partner GP Inc. ("Occidental
GP"), Occidental Petrochem Partner 1, Inc. ("Occidental LP1") and Occidental
Petrochem Partner 2, Inc. ("Occidental LP2").
The Partnership owns and operates the petrochemicals and polymers businesses
contributed by Lyondell, Millennium, and Occidental (the "Contributed
Businesses") which consist of 20 manufacturing facilities on the U.S. Gulf
Coast and in the U.S. Midwest. The petrochemicals segment manufactures and
markets olefins, oxygenated chemicals, aromatics and specialty chemicals.
Olefins include ethylene, propylene and butadiene, and oxygenated chemicals
include ethylene oxide, ethylene glycol, ethanol and methyl tertiary butyl
ether ("MTBE"). The petrochemicals segment also includes the production and
sale of aromatics including benzene and toluene. The polymers segment
manufactures and markets polyolefins, including high-density polyethylene
F-7
<PAGE>
EQUISTAR CHEMICALS, LP
NOTES TO FINANCIAL STATEMENTS--(Continued)
("HDPE"), low-density polyethylene ("LDPE"), linear low-density polyethylene
("LLDPE"), polypropylene, and performance polymers, all of which are used in
the production of a wide variety of consumer and industrial products. The
performance polymers include enhanced grades of polyethylene, including wire
and cable resins, concentrates and compounds, and polymeric powders.
The Partnership Agreement provides that Equistar is governed by a
Partnership Governance Committee consisting of nine representatives, three
appointed by each partner. Most of the significant decisions of the Partnership
Governance Committee require unanimous consent, including approval of the
Partnership's Strategic Plan and annual updates thereof.
Pursuant to the Partnership Agreement, net income is allocated among the
partners on a pro rata basis based on their percentage ownership of the
Partnership. Distributions are made to the partners based on their percentage
ownership of the Partnership. Additional cash contributions required by the
Partnership will also be based on the partners' percentage ownership of the
Partnership.
2. Summary of Significant Accounting Policies
Revenue Recognition--Revenue from product sales is generally recognized upon
delivery of products to the customer.
Cash and Cash Equivalents--Cash equivalents consist of highly liquid debt
instruments such as certificates of deposit, commercial paper and money market
accounts purchased with an original maturity date of three months or less. Cash
equivalents are stated at cost, which approximates fair value. The
Partnership's policy is to invest cash in conservative, highly rated
instruments and limit the amount of credit exposure to any one institution. The
Partnership performs periodic evaluations of the relative credit standing of
these financial institutions which are considered in the Partnership's
investment strategy.
The Partnership has no requirements for compensating balances in a specific
amount at a specific point in time. The Partnership does maintain compensating
balances for some of its banking services and products. Such balances are
maintained on an average basis and are solely at the Partnership's discretion.
As a result, none of the Partnership's cash is restricted.
Accounts Receivable--The Partnership sells its products primarily to
companies in the petrochemicals and polymers industries. The Partnership
performs ongoing credit evaluations of its customers' financial condition and,
in certain circumstances, requires letters of credit from them. The
Partnership's allowance for doubtful accounts, which is reflected in the
accompanying balance sheet as a reduction of accounts receivable, totaled $3
million at December 31, 1998. The Partnership had no allowance for doubtful
accounts recorded at December 31, 1997.
Inventories--Inventories are stated at the lower of cost or market. Cost is
determined on the last-in, first-out ("LIFO") basis except for materials and
supplies, which are valued at average cost.
Property, Plant and Equipment--Property, plant and equipment are recorded at
cost. Depreciation of property, plant and equipment is computed using the
straight-line method over the estimated useful lives of the related assets,
ranging from 5 to 30 years.
Upon retirement or sale, the Partnership removes the cost of the assets and
the related accumulated depreciation from the accounts and reflects any
resulting gains or losses in the statement of income. The Partnership's policy
is to capitalize interest cost incurred on debt during the construction of
major projects exceeding one year.
F-8
<PAGE>
EQUISTAR CHEMICALS, LP
NOTES TO FINANCIAL STATEMENTS--(Continued)
Turnaround Maintenance and Repair Expenses--Cost of major repairs and
maintenance incurred in connection with turnarounds of units at the
Partnership's manufacturing facilities are deferred and amortized on a
straight-line basis until the next planned turnaround, generally five to seven
years.
Deferred Software Costs - Costs to purchase and develop software for
internal use are deferred and amortized on a straight-line basis over 10 years.
The Partnership amortized $6 million and less than $1 million of deferred
software costs for the year ended December 31, 1998 and during the period from
December 1, 1997 (inception) to December 31, 1997, respectively.
Goodwill--Goodwill includes goodwill contributed by Millennium and goodwill
recorded in connection with the contribution of Occidental's assets. Goodwill
is being amortized using the straight-line method over forty years. Management
periodically evaluates goodwill for impairment based on the anticipated future
cash flows attributable to the related operations. Such expected cash flows, on
an undiscounted basis, are compared to the carrying value of the tangible and
intangible assets, and if impairment is indicated, the carrying value of
goodwill, and if necessary other related assets, is adjusted. Management
believes that no impairment exists at December 31, 1998. The Partnership
amortized $31 million and $3 million of goodwill for the year ended December
31, 1998 and during the period from December 1, 1997 (inception) to December
31, 1997, respectively. Accumulated amortization of goodwill was $166 million
and $135 million at December 31, 1998 and 1997, respectively.
Investment in PD Glycol--Equistar holds a 50 percent interest in a joint
venture with Du Pont de Nemours and Company that owns an ethylene glycol
facility in Beaumont, Texas. This investment was contributed by Occidental in
1998. The investment in PD Glycol is accounted for under the equity method.
Environmental Remediation Costs--Expenditures related to investigation and
remediation of contaminated sites, which include operating facilities and waste
disposal sites, are accrued when it is probable a liability has been incurred
and the amount of the liability can reasonably be estimated. Estimates have not
been discounted to present value. Environmental remediation costs are expensed
or capitalized in accordance with generally accepted accounting principles.
Pension and Other Postretirement Benefit Plans--During 1998, the Partnership
adopted Statement of Financial Accounting Standards ("SFAS") No. 132,
Employers' Disclosures about Pensions and Other Retirement Benefits. The
provisions of SFAS No. 132 revise employers' disclosures about pension and
other postretirement benefit plans. It does not change the measurement or
recognition of these plans. SFAS No. 132 standardizes the disclosure
requirements for these plans, to the extent practicable.
Exchanges--Finished product exchange transactions, which involve homogeneous
commodities in the same line of business and do not involve the payment or
receipt of cash, are not accounted for as purchases and sales. Any resulting
volumetric exchange balances are accounted for as inventory in accordance with
the normal LIFO valuation policy. Exchanges settled through payment and receipt
of cash are accounted for as purchases and sales.
Income Taxes--The Partnership is not subject to federal income taxes as
income is reportable directly by the individual partners; therefore, there is
no provision for income taxes in the accompanying financial statements.
Use of Estimates--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 amount of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-9
<PAGE>
EQUISTAR CHEMICALS, LP
NOTES TO FINANCIAL STATEMENTS--(Continued)
Segment and Related Information - In 1998, the Partnership adopted SFAS No.
131, Disclosures about Segments of an Enterprise and Related Information. SFAS
No. 131 supercedes SFAS No. 14, Financial Reporting for Segments of a Business
Enterprise, replacing the "industry segment" approach with the "management"
approach. The management approach designates the internal organization that is
used by management for making operating decisions and assessing performance as
the source of the Partnership's reportable segments. SFAS No. 131 also requires
disclosures about products and services, geographic areas and major customers.
The adoption of SFAS No. 131 did not affect the results of operations or the
financial position of the Partnership (see Note 18).
Reclassifications--Certain 1997 amounts have been restated to conform to
classifications adopted in 1998.
3. Addition of Occidental Contributed Business
On May 15, 1998, the Partnership was expanded with the contribution of
certain assets from Occidental. The acquisition was accounted for using the
purchase method of accounting and, accordingly, the results of operations for
these assets are included in the accompanying statement of income prospectively
from May 15, 1998. The consideration paid for the Occidental Contributed
Business was approximately $2.1 billion and was allocated to the assets
contributed and liabilities assumed based on the estimated fair values of such
assets and liabilities at the date of the contribution. The fair value of the
assets contributed and liabilities assumed by the Partnership on May 15, 1998
is as follows:
<TABLE>
<CAPTION>
Millions of dollars
-------------------
<S> <C>
Total current assets.............................................. $ 281
Property, plant and equipment..................................... 1,964
Investment in PD Glycol........................................... 58
Goodwill.......................................................... 43
Deferred charges and other assets................................. 49
------
Total assets.................................................... $2,395
======
Other current liabilities......................................... $ 79
Long-term debt.................................................... 205
Other liabilities and deferred credits............................ 14
Partners' capital................................................. 2,097
------
Total liabilities and partners' capital......................... $2,395
======
</TABLE>
The unaudited pro forma combined historical results of the Partnership as if
the Occidental Contributed Business had been contributed on January 1, 1998 is
as follows:
<TABLE>
<CAPTION>
For the year
ended
December 31,
Millions of dollars 1998
------------------- ------------
<S> <C>
Sales and other operating revenues........................... $4,869
Unusual charges.............................................. 35
Operating income............................................. 320
Net income................................................... 154
</TABLE>
The unaudited pro forma data presented above is not necessarily indicative
of the results of operations of the Partnership that would have occurred had
such transaction actually been consummated as of January 1, 1998, nor are they
necessarily indicative of future results.
F-10
<PAGE>
EQUISTAR CHEMICALS, LP
NOTES TO FINANCIAL STATEMENTS--(Continued)
4. Supplemental Cash Flow Information
<TABLE>
<CAPTION>
Millions of dollars 1998 1997
------------------- ---- ----
<S> <C> <C>
Cash paid for interest.......................................... $154 $--
==== ===
Noncash investing and financing activities:
Noncash adjustments to contributed capital.................... $ 3 $--
Inventory transfer from PD Glycol............................. 15 --
==== ===
</TABLE>
Historical cost of assets contributed and liabilities assumed by the
Partnership in December 1997 (inception):
<TABLE>
<S> <C>
Total current assets.............................................. $ 948
Property, plant and equipment, net................................ 2,121
Goodwill, net..................................................... 1,142
Deferred charges and other assets................................. 158
------
Total assets.................................................... $4,369
======
Current maturities of long-term debt.............................. $ 36
Other current liabilities......................................... 17
Long-term debt.................................................... 1,462
Other liabilities and deferred credits............................ 43
Partners' capital................................................. 3,156
Note receivable from Lyondell LP.................................. (345)
------
Total liabilities and partners' capital......................... $4,369
======
</TABLE>
5. Financial Instruments
The fair value of all financial instruments included in current assets and
current liabilities, including cash and cash equivalents, accounts receivable,
accounts payable, and accrued liabilities approximated their carrying value due
to their short maturity. Based on the borrowing rates currently available to
the Partnership for debt with terms and average maturities similar to the
Partnership's debt portfolio, the fair value of the Partnership's long-term
debt, including amounts due within one year, was approximately $2.3 billion and
$1.5 billion at December 31, 1998 and 1997, respectively.
The Partnership had issued letters of credit totaling $2.6 million and $4
million at December 31, 1998 and 1997, respectively.
6. Related Party Transactions
Loans to Millennium and Occidental--In connection with Occidental's entry
into Equistar in May 1998, Equistar executed promissory notes to Millennium and
Occidental in the principal amounts of $75.0 million and $419.7 million,
respectively. Each of the notes provides for the annual accrual of interest
(based on a year of 360 days and actual days elapsed) at a rate equal to LIBOR
plus .6 percent. These notes were paid in full in June 1998. Interest expense
incurred on these notes during 1998 was $3 million.
Note Receivable from Lyondell LP--Upon formation of the Partnership,
Lyondell LP contributed capital to the Partnership in the form of a $345
million promissory note (the "Lyondell Note"). The Lyondell Note bears interest
at LIBOR plus a market spread. The note was repaid in full by Lyondell in July
1998. Interest income accrued on the Lyondell note totaled $12.8 million and
$1.75 million during 1998 and during the period from December 1, 1997
(inception) to December 31, 1997, respectively.
F-11
<PAGE>
EQUISTAR CHEMICALS, LP
NOTES TO FINANCIAL STATEMENTS--(Continued)
Shared Services Agreement with Lyondell--Lyondell provides certain
corporate, general and administrative services to the Partnership, including
legal, tax, treasury, risk management and other services pursuant to a shared
services agreement. During the year ended December 31, 1998, Lyondell charged
the Partnership $3 million for these services. During the period December 1,
1997 (inception) to December 31, 1997, charges from Lyondell were less than $1
million. As part of the shared services agreement, the Partnership provides
certain general and administrative services to Lyondell, such as health, safety
and environmental services, human resource services, information services and
legal services. During the year ended December 31, 1998 and during the period
December 1, 1997 (inception) to December 31, 1997, the Partnership charged
Lyondell less than $1 million for these services.
Shared Services and Shared-Site Agreements with Millennium--The Partnership
and Millennium have entered into a variety of operating, manufacturing and
technical service agreements related to the business of Equistar and the vinyl
acetate monomers, acetic acid, synthesis gas and methanol businesses retained
by Millennium Petrochemicals. These agreements include the provision by the
Partnership to Millennium Petrochemicals of materials management, certain
utilities, administrative office space, health, safety and environmental
services and computer services. During the year ended December 31, 1998, the
Partnership charged Millennium Petrochemicals $5 million for these services.
During the period from December 1, 1997 (inception) to December 31, 1997,
charges to Millennium Petrochemicals were less than $1 million. These
agreements also include the provision by Millennium Petrochemicals to the
Partnership of certain operational services, including waste water treatment
and barge dock access. During the year ended December 31, 1998 and during the
period December 1, 1997 (inception) to December 31, 1997, Millennium
Petrochemicals charged the Partnership less than $1 million for these services.
Operating Agreement with Occidental Chemical Corporation--On May 15, 1998,
Occidental Chemical and the Partnership entered into an Operating Agreement
(the "Operating Agreement") whereby Occidental Chemical agreed to operate and
maintain the Occidental Contributed Business and to cause third-parties to
continue to provide equipment, products and commodities to those businesses
upon substantially the same terms and conditions as provided prior to the
transfer. Under the terms of the Operating Agreement, the Partnership agreed to
reimburse Occidental Chemical for its cost in connection with the services
provided to the Partnership, and the Partnership agreed to pay Occidental
Chemical an administrative fee. The Operating Agreement terminated in
accordance with its terms on June 1, 1998. During the term of the Operating
Agreement, the Partnership paid Occidental Chemical an administrative fee of $1
million.
Transition Services Agreement with Occidental Chemical--On June 1, 1998,
Occidental Chemical and the Partnership entered into a Transition Services
Agreement (the "TSA"). Under the terms of the TSA, Occidental Chemical agreed
to provide the Partnership certain services in connection with the Occidental
Contributed Business, including services related to accounting, payroll, office
administration, marketing, transportation, purchasing and procurement,
management, human resources, customer service, technical services and others.
Between June 1, 1998 and December 31, 1998, the Partnership expensed $6 million
in connection with services provided pursuant to the TSA. The TSA expires by
its terms on June 1, 1999.
Occidental Chemical Ethylene Sales Agreement--The Partnership and Occidental
Chemical entered into a Sales Agreement, dated May 15, 1998 (the "Ethylene
Sales Agreement"). Under the terms of the Ethylene Sales Agreement, Occidental
Chemical has agreed to purchase an annual minimum amount of ethylene from the
Partnership equal to 100 percent of the ethylene feedstock requirements of
Occidental Chemical's United States plants (estimated to be 2 billion pounds
per year at the time of the signing of the agreement) less any quantities up to
250 million pounds tolled in accordance with the provisions of such agreement.
The Partnership's maximum supply obligation in any calendar year under the
Ethylene Sales Agreement is 2.55 billion pounds. Upon three years notice from
either party to the other, the Partnership's maximum supply
F-12
<PAGE>
EQUISTAR CHEMICALS, LP
NOTES TO FINANCIAL STATEMENTS--(Continued)
obligation in any calendar year under the Ethylene Sales Agreement may be
"phased down" as set forth in the agreement, provided that no phase down may
occur prior to January 1, 2009. In accordance with the phase down provisions of
the agreement, the annual minimum requirements set forth in the agreement must
be phased down over at least a five year period so that the annual required
minimum can not decline to zero prior to December 31, 2013 unless certain
specified force majeure events occur. The Ethylene Sales Agreement provides for
an ethylene sales price that is generally reflective of market prices and will
be determined pursuant to a formula using the Partnership's sales price to
third parties and several published market price indices. During the period
from May 15, 1998 to December 31, 1998, the Partnership charged Occidental
Chemical $171 million under the Ethylene Sales Agreement.
Product Sales to Millennium--The Partnership sells ethylene to Millennium at
market-related prices pursuant to an agreement entered into in connection with
the formation of Equistar. Under this agreement, Millennium is required to
purchase 100 percent of its ethylene requirements for its LaPorte, Texas
facility (estimated to be 300 million pounds per year), up to a maximum of 330
million pounds per year. Millennium has the option to increase the amount
purchased to up to 400 million pounds per year beginning January 1, 2001. The
initial term of the contract expires December 1, 2000 and thereafter, the
contract automatically renews annually. Either party may terminate on one
year's notice, except that if Millennium elects to increase its purchases under
the contract, a party must provide two year's notice of termination. The
pricing terms of this agreement are similar to the Ethylene Sales Agreement
with Occidental Chemical. The Partnership charged Millennium $41 million and $4
million for ethylene for 1998 and December 1997, respectively.
Product Sales to Lyondell--Lyondell acquired its intermediate chemicals and
derivatives business through the acquisition of ARCO Chemical Company effective
August 1, 1998. Sales to Lyondell, primarily for ethylene, propylene, MTBE,
benzene and alkylate, totaled $97 million for the period from August 1, 1998 to
December 31, 1998, and were based on price terms generally reflective of
market.
Transactions with LCR.--Lyondell's rights and obligations under the terms of
its product sales and feedstock purchase agreements with LYONDELL-CITGO
Refining LP ("LCR"), a joint venture investment of Lyondell, were assigned to
the Partnership. Accordingly, certain refinery products are sold to the
Partnership as feedstocks, and certain olefins by-products are sold to LCR for
processing into gasoline. Sales to LCR were $236 million and $27 million and
purchases from LCR were $131 million and $10 million for the year ended
December 31, 1998 and for the period from December 1, 1997 (inception) to
December 31, 1997, respectively. The Partnership also assumed certain tolling
arrangements as well as terminalling and storage obligations between Lyondell
and LCR and performs certain marketing services for LCR. Aggregate charges
under these various service agreements of $15 million were made to LCR by the
Partnership with respect to 1998. No charges were made during December 1997.
All of the agreements between LCR and the Partnership are on terms generally
representative of prevailing market prices. The Partnership also has a shared
services agreement with LCR to provide LCR with information services, including
mainframe processing and maintenance. Net charges to LCR by the Partnership for
the shared services agreement were less than $1 million during 1998. No charges
were made during December 1997.
Transactions with Lyondell Methanol--The Partnership provides operating and
other services for Lyondell Methanol Company, L.P. ("Lyondell Methanol") under
the terms of existing agreements that were assumed by Equistar from Lyondell,
including the lease to Lyondell Methanol by the Partnership of the real
property on which its methanol plant is located. Pursuant to the terms of those
agreements, Lyondell Methanol pays the Partnership a management fee and will
reimburse certain expenses of the Partnership at cost. Management fees charged
by the Partnership to Lyondell Methanol totaled $6 million for the year ending
December 31, 1998 and less than $1 million during the period from December 1,
1997 (inception) to December 31, 1997. The Partnership sells natural gas to
Lyondell Methanol at prices generally representative of its cost. Purchases by
F-13
<PAGE>
EQUISTAR CHEMICALS, LP
NOTES TO FINANCIAL STATEMENTS--(Continued)
Lyondell Methanol of natural gas feedstock from the Partnership totaled $44
million and $4 million for the year ended December 31, 1998 and during the
period from December 1, 1997 (inception) to December 31, 1997, respectively.
Lyondell Methanol sells all of its products to Equistar. For the year ending
December 31, 1998 and during the period from December 1, 1997 (inception) to
December 31, 1997, purchases from Lyondell Methanol were $103 million and $15
million, respectively.
Related Party Leases--As part of their shared services agreement with the
Partnership, Millennium subleases from the Partnership certain administrative
office space at a monthly rent of $42,000.
7. Accounts Receivable
In December 1998, the Partnership entered into a purchase agreement with an
independent issuer of receivables-backed commercial paper. Under the terms of
the agreement, the Partnership agreed to sell on an ongoing basis and without
recourse, designated accounts receivable. To maintain the balance of the
accounts receivable sold, the Partnership is obligated to sell new receivables
as existing receivables are collected. The agreement expires in December 1999.
At December 31, 1998, the Partnership's gross accounts receivable that had
been sold to the purchasers aggregated $130 million. This amount has been
reported as operating cash flows in the statement of cash flows. Costs related
to the sale are included in selling, general and administrative expenses in the
statement of income.
8. Inventories
Inventories at December 31, 1998 and 1997 consisted of the following:
<TABLE>
<CAPTION>
Millions of dollars 1998 1997
------------------- ---- ----
<S> <C> <C>
Raw materials.................................................. $149 $160
Work-in-process................................................ 11 5
Finished goods................................................. 301 282
Materials and supplies......................................... 88 66
---- ----
$549 $513
==== ====
</TABLE>
For the year ending December 31, 1998, cost of sales increased by less than
$1 million associated with the reduction of LIFO inventories. For the period
from December 1, 1997 (inception) to December 31, 1997, cost of sales increased
by approximately $1 million associated with the reduction in LIFO inventories.
The excess of the current cost of inventories over book value was approximately
$103 million at December 31, 1997.
9. Property, Plant and Equipment, Net
The components of property, plant and equipment, at cost, and the related
accumulated depreciation at December 31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
Millions of dollars 1998 1997
------------------- ------ ------
<S> <C> <C>
Manufacturing facilities and equipment..................... $5,344 $3,489
Manufacturing equipment acquired under capital leases...... 236 --
Construction projects in progress.......................... 189 127
Land....................................................... 78 74
------ ------
Total property, plant and equipment...................... 5,847 3,690
Less accumulated depreciation.............................. 1,772 1,572
------ ------
Property, plant and equipment, net....................... $4,075 $2,118
====== ======
</TABLE>
F-14
<PAGE>
EQUISTAR CHEMICALS, LP
NOTES TO FINANCIAL STATEMENTS--(Continued)
Depreciation expense for the year ending December 31, 1998 and for the
period from December 1, 1997 (inception) to December 31, 1997 was $200 million
and $15 million, respectively. At December 31, 1998, $10 million of the
accumulated depreciation reported in the accompanying balance sheet related to
the manufacturing equipment acquired under capital leases that was contributed
by Occidental in 1998.
In July 1998, the depreciable lives of certain assets were increased from a
range of 5 to 25 years to a range of 5 to 30 years. This change was accounted
for as a change in accounting estimate and resulted in a $33 million decrease
in depreciation expense for 1998.
10. Deferred Charges and Other Assets
Deferred charges and other assets at December 31, 1998 and 1997 were as
follows:
<TABLE>
<CAPTION>
Millions of dollars 1998 1997
------------------- ---- ----
<S> <C> <C>
Deferred turnaround costs, net.................................. $ 84 $ 66
Deferred software costs, net.................................... 70 44
Deferred pension asset.......................................... 30 23
Other........................................................... 73 18
---- ----
Total deferred charges and other assets....................... $257 $151
==== ====
</TABLE>
11. Other Accrued Liabilities
Other accrued liabilities at December 31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
Millions of dollars 1998 1997
------------------- ---- ----
<S> <C> <C>
Accrued property taxes......................................... $ 76 $ 4
Accrued freight................................................ 22 8
Accrued payroll costs.......................................... 44 19
Accrued interest............................................... 18 --
Accrued severance and other costs related to formation of the
Partnership................................................... 3 27
Other.......................................................... 37 7
---- ---
Total other accrued liabilities.............................. $200 $65
==== ===
</TABLE>
F-15
<PAGE>
EQUISTAR CHEMICALS, LP
NOTES TO FINANCIAL STATEMENTS--(Continued)
12. Long-Term Debt and Financing Arrangements
Long-term debt at December 31, 1998 and 1997 was comprised of the following:
<TABLE>
<CAPTION>
Millions of dollars 1998 1997
------------------- ------ ------
<S> <C> <C>
Bank credit facilities:
5-year term credit facility.............................. $1,150 $ 800
$500 million credit agreement............................ 152 --
Other debt obligations:
Medium-term notes (2000-2005)............................ 163 194
10.00% Notes due in 1999................................. 150 150
9.125% Notes due in 2002................................. 100 100
6.5% Notes due in 2006................................... 150 150
7.55% Debentures due in 2026............................. 150 150
Other.................................................... -- 4
------ ------
Total long-term debt................................... 2,015 1,548
Less current maturities.................................... 150 36
------ ------
Long-term debt, net.................................... 1,865 1,512
Capital lease obligations (5.89% due in 2000).............. 205 --
------ ------
Total long-term debt and lease obligations............. $2,070 $1,512
====== ======
</TABLE>
Aggregate maturities of long-term debt during the five years subsequent to
December 31, 1998 are as follows: 1999-$302 million; 2000-$247 million; 2001-
$90 million; 2002-$1.251 billion; 2003-$29 million. All of the above debt is
guaranteed by the partners.
The medium-term notes mature at various dates from 2000 to 2005 and have a
weighted average interest rate of 9.87 percent and 9.83 percent at December 31,
1998 and 1997, respectively.
The Partnership has a five-year, $1.25 billion credit facility (the
"Facility") with a group of banks expiring November 2002. Borrowings under the
Facility bear interest at either the Federal Funds rate plus 1/2 of 1 percent,
LIBOR plus 1/2 of 1 percent, a fixed rate offered by one of the sponsoring
banks or interest rates that are based on a competitive auction feature wherein
the interest rate can be established by competitive bids submitted by the
sponsoring banks, depending on the type of borrowing made under the Facility.
Borrowings under the Facility had a weighted average interest rate of 5.8
percent and 5.7 percent at December 31, 1998 and 1997, respectively.
On June 12, 1998, the Partnership entered into a $500 million credit
agreement consisting of a $250 million revolving credit facility and a $250
million one-year term facility. Borrowings under the $500 million credit
agreement bear interest at either the Federal Funds rate plus 1/2 of 1 percent,
LIBOR plus 0.625 percent, a fixed rate offered by one of the sponsoring banks
or interest rates that are based on a competitive auction feature wherein the
interest rate can be established by competitive bids submitted by the
sponsoring banks. At December 31, 1998, the weighted average interest rate for
borrowings under the $500 million credit agreement was 6.1 percent.
The Facility and the $500 million credit agreement (the "Bank Credit
Facilities") are available for working capital and general purposes as needed
and contain covenants relating to liens, sale and leaseback transactions, debt
incurrence, leverage and interest coverage ratios, sales of assets and mergers
and consolidations.
F-16
<PAGE>
EQUISTAR CHEMICALS, LP
NOTES TO FINANCIAL STATEMENTS--(Continued)
In February 1999, the Partnership issued $900 million of debt securities.
The debt securities include $300 million of 8.50 percent Notes, which will
mature on February 15, 2004, and $600 million of 8.75 percent Notes, which will
mature on February 15, 2009. The Partnership intends to use the net proceeds
from this offering (i) to repay the $205 million outstanding under a
capitalized lease obligation relating to the Partnership's Corpus Christi
facility, (ii) to repay the outstanding balance under the $500 million credit
agreement, after which the $500 million credit agreement will be terminated,
(iii) to repay the outstanding $150 million, 10.0 percent Notes due in June
1999, upon maturity and (iv) to the extent of the remaining net proceeds,
reduce outstanding borrowings under the Facility and for Partnership working
capital. Outstanding borrowings under the Partnership's $500 million credit
agreement that are payable in 1999 are included as long-term obligations of the
Partnership in the accompanying balance sheet at December 31, 1998 based on the
expectation that these borrowings will be refinanced as described above.
13. Unusual Charges
In December 1997, the Partnership recorded $42 million of unusual charges
related to the formation of the Partnership. These charges included severance
and other costs related to a workforce reduction (approximately 430 employees)
that resulted from the consolidation of the businesses contributed to the
Partnership ($30 million), various closing costs ($6 million), and various
other charges ($6 million). Approximately $15 million of these charges were
paid in 1997 and $27 million were included in other accrued liabilities at
December 31, 1997. During the year ended December 31, 1998, approximately $24
million of these charges were paid and $3 million were included in other
accrued liabilities at December 31, 1998.
During 1998, the Partnership recorded and paid $35 million of unusual
charges related to its initial formation and the addition of Occidental to the
Partnership. These charges included transition personnel costs ($14 million),
costs associated with the consolidation of certain operations and facilities
($11 million), operating and transition services provided by Occidental
Chemical ($7 million), various closing costs ($2 million), and other
miscellaneous charges ($1 million).
14. Leases
At December 31, 1998, future minimum lease payments for capital and
operating leases with noncancelable lease terms in excess of one year were as
follows:
<TABLE>
<CAPTION>
Millions of dollars Capital Operating
------------------- ------- ---------
<S> <C> <C>
1999.................................................. $ 13 $101
2000.................................................. 208 74
2001.................................................. -- 58
2002.................................................. -- 44
2003.................................................. -- 38
Thereafter............................................ -- 336
---- ----
Total minimum lease payments........................ 221 $651
====
Imputed interest...................................... (16)
----
Present value of minimum lease payments............... $205
====
</TABLE>
Operating lease net rental expense was $110 million for the year ending
December 31, 1998 and $11 million for the period from December 1, 1997
(inception) to December 31, 1997.
F-17
<PAGE>
EQUISTAR CHEMICALS, LP
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Partnership is party to various unconditional purchase obligation
contracts as a purchaser for product and services. At December 31, 1998, future
minimum payments under these contracts with noncancelable contract terms in
excess of one year were as follows:
<TABLE>
<CAPTION>
Millions of dollars Amount
------------------- ------
<S> <C>
1999............................................................. $ 29
2000............................................................. 28
2001............................................................. 24
2002............................................................. 23
2003............................................................. 23
Thereafter....................................................... 142
----
Total minimum contract payments................................ $269
====
</TABLE>
The Partnership's total purchases under these agreements were $33 million
for the year ending December 31, 1998 and $3 million during the period from
December 1, 1997 (inception) to December 31, 1997.
15. Retirement Plans
All full-time regular employees of the Partnership are covered by defined
benefit pension plans sponsored by the Partnership. The plans became effective
on January 1, 1998, except for union represented employees formerly employed by
Millennium, whose plans were contributed to the Partnership on December 1,
1997, and union represented employees formerly employed by Occidental, whose
plans were contributed to the Partnership on May 15, 1998. In connection with
the formation of the Partnership, there were no pension assets or obligations
contributed to the Partnership, except for the union represented plans
described above. Retirement benefits are based on years of service and the
employee's highest three consecutive years of compensation during the last ten
years of service. The funding policy for these plans is to make periodic
contributions as required by applicable law. The Partnership accrues pension
costs based on an actuarial valuation and funds the plans through contributions
to pension trust funds. The Partnership also has unfunded supplemental
nonqualified retirement plans which provide pension benefits for certain
employees in excess of the tax qualified plans' limits.
F-18
<PAGE>
EQUISTAR CHEMICALS, LP
NOTES TO FINANCIAL STATEMENTS--(Continued)
The following table provides a reconciliation of benefit obligations, plan
assets and funded status of the retirement plans at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
Millions of dollars 1998 1997
------------------- ---- ----
<S> <C> <C>
Change in benefit obligation:
Benefit obligation, January 1............................. $ 21 $ --
Benefit obligation contributed at inception of
Partnership.............................................. -- 21
Benefit obligation contributed by Occidental.............. 46 --
Service cost.............................................. 16 --
Interest cost............................................. 5 --
Actuarial loss (gain)..................................... 5 --
Benefits paid............................................. (5) --
---- ----
Benefit obligation, December 31........................... $ 88 $ 21
==== ====
Change in plan assets:
Fair value of plan assets, January 1...................... $ 40 $ --
Fair value of plan assets contributed at inception of
Partnership.............................................. -- 40
Fair value of plan assets contributed by Occidental....... 51 --
Actual return of plan assets.............................. 1 --
Partnership contributions................................. 1 --
Benefits paid............................................. (5) --
---- ----
Fair value of plan assets, December 31.................... $ 88 $ 40
==== ====
Funded status............................................... $ -- $ 19
Unrecognized actuarial loss (gain).......................... 13 4
---- ----
Net amount recognized....................................... $ 13 $ 23
==== ====
Amounts recognized in the Balance Sheets consist of:
Prepaid benefit cost...................................... $ 30 $ 23
Accrued benefit liability................................. (17) --
---- ----
Net amount recognized....................................... $ 13 $ 23
==== ====
Weighted-average assumptions as of December 31:
Discount rate............................................. 6.75% 7.25%
Expected return on plan assets............................ 9.50% 9.00%
Rate of compensation increase............................. 4.75% 4.75%
</TABLE>
As of December 31, 1998, Equistar had defined benefit pension plans where
the accumulated benefit obligation exceeded the fair value of plan assets. The
accumulated benefit obligation exceeded the fair value of plan assets by $19
million for these plans as of December 31, 1998. As of December 31, 1998 and
1997, Equistar had defined benefit pension plans where the fair value of plan
assets exceeded the accumulated benefit obligation. The fair value of plan
assets exceeded the accumulated benefit obligation by $19 million for these
plans as of December 31, 1998 and 1997.
The Partnership's net periodic pension cost for 1998 included the following
components:
<TABLE>
<CAPTION>
Millions of dollars 1998
------------------- ----
<S> <C>
Components of net periodic benefit cost:
Service cost...................................................... $16
Interest cost..................................................... 5
Expected return on plan assets.................................... (6)
---
Net periodic benefit cost......................................... $15
===
</TABLE>
F-19
<PAGE>
EQUISTAR CHEMICALS, LP
NOTES TO FINANCIAL STATEMENTS--(Continued)
As the non-union plans became effective on January 1, 1998, the Partnership
did not recognize any net periodic pension cost during the period from December
1, 1997 (inception) to December 31, 1997.
Effective January 1, 1998, the Partnership also maintains voluntary defined
contribution savings plans for eligible employees. Under provisions of the
plans, the Partnership contributes an amount equal to 160 percent of employee
contributions up to a maximum matching contribution of eight percent of the
employee's base salary. Contributions to the plans by the Partnership were $7
million and less than $1 million for the year ended December 31, 1998 and
during the period from December 1, 1997 (inception) to December 31, 1997,
respectively.
16. Postretirement Benefits Other Than Pensions
The Partnership sponsors unfunded postretirement benefit plans other than
pensions ("OPEB") for both salaried and non-salaried employees, which provide
medical and life insurance benefits. The postretirement health care plans are
contributory while the life insurance plans are non-contributory. Currently,
the Partnership pays approximately 80 percent of the cost of the health care
plans, but reserves the right to modify the cost-sharing provisions at any
time. In connection with the formation of the Partnership on December 1, 1997,
Lyondell and Millennium contributed $31 million of accrued postretirement
benefit liabilities for employees that transferred to the Partnership. Upon
joining the Partnership in May 1998, Occidental contributed $14 million of
accrued postretirement benefit liabilities for employees that transferred to
the Partnership
The following table provides a reconciliation of benefit obligations and
funded status of the OPEB plans at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
Millions of dollars 1998 1997
- ------------------- ---- ----
<S> <C> <C>
Change in benefit obligation:
Benefit obligation, January 1.................................... $ 50 $ --
Benefit obligation contributed at inception of Partnership....... -- 50
Benefit obligation contributed by Occidental..................... 14 --
Service cost..................................................... 3 --
Interest cost.................................................... 4 --
Actuarial loss (gain)............................................ (2) --
---- ----
Benefit obligation, December 31.................................. $ 69 $ 50
==== ====
Funded status...................................................... $(69) $(50)
Unrecognized actuarial loss (gain)................................. 16 19
---- ----
Net amount recognized.............................................. $(53) $(31)
==== ====
Amounts recognized in the Balance Sheets consist of:
Prepaid benefit cost............................................. $ -- $ --
Accrued benefit liability........................................ (53) (31)
---- ----
Net amount recognized............................................ $(53) $(31)
==== ====
Weighted-average assumptions as of December 31:
Discount rate.................................................... 6.75% 7.25%
Rate of compensation increase.................................... 4.75% 4.75%
</TABLE>
Because the OPEB plans are unfunded, there was no change in the plan assets
during the year ended December 31, 1998 and for the period from December 1,
1997 (inception) to December 31, 1997.
F-20
<PAGE>
EQUISTAR CHEMICALS, LP
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Partnership's postretirement benefit costs for 1998 included the
following components:
<TABLE>
<CAPTION>
Millions of dollars 1998
------------------- ----
<S> <C>
Components of net periodic benefit cost:
Service cost...................................................... $ 3
Interest cost..................................................... 4
Expected return of plan assets.................................... --
===
Net periodic benefit cost......................................... $ 7
===
</TABLE>
The accrued postretirement benefit liabilities at December 31, 1997 were
calculated and contributed as of December 31, 1997; therefore, there was no net
periodic postretirement benefit costs for the period from December 1, 1997
(inception) to December 31, 1997.
For measurement purposes, the assumed annual rate of increase in the per
capita cost of covered health care benefits as of December 31, 1998 was 7.0
percent for 1999-2001 and 5.0 percent thereafter. The health care cost trend
rate assumption does not have a significant effect on the amounts reported. To
illustrate, increasing the assumed health care cost trend rates by one
percentage point in each year would increase the accumulated postretirement
benefit liability as of December 31, 1998 by less than $1 million and would not
have a material effect on the aggregate service and interest cost components of
the net periodic postretirement benefit cost for the year then ended.
Decreasing the assumed health care cost trend rates by one percentage point in
each year would decrease the accumulated postretirement benefit liability as of
December 31, 1998 by $1 million and would not have a material effect on the
aggregate service and interest cost components of the net periodic
postretirement benefit cost for the year then ended.
17. Commitments and Contingencies
The Partnership has various purchase commitments for materials, supplies and
services incident to the ordinary conduct of business. In the aggregate, such
commitments are not at prices in excess of current market.
The Partnership is also subject to various lawsuits and proceedings. Subject
to the uncertainty inherent in all litigation, management believes the
resolution of these proceedings will not have a material adverse effect upon
the financial statements or liquidity of the Partnership.
Equistar has agreed to indemnify and defend Lyondell and Millennium,
individually, against certain uninsured claims and liabilities which Equistar
may incur relating to the operation of the Contributed Business prior to
December 1, 1997 up to $7 million each within the first seven years of the
Partnership, subject to certain terms of the Asset Contribution Agreements.
Equistar has also agreed to indemnify Occidental up to $7 million on a similar
basis relating to the operation of the Occidental Contributed Business prior to
May 15, 1998. During the year ended December 31, 1998, the Partnership incurred
$5 million in expenses for these uninsured claims and liabilities. No expenses
were incurred for these uninsured claims and liabilities during the period
December 1, 1997 (inception) to December 31, 1997.
The Partnership's policy is to be in compliance with all applicable
environmental laws. The Partnership is subject to extensive environmental laws
and regulations concerning emissions to the air, discharges to surface and
subsurface waters and the generation, handling, storage, transportation,
treatment and disposal of waste materials. Some of these laws and regulations
are subject to varying and conflicting interpretations. In addition, the
Partnership cannot accurately predict future developments, such as increasingly
strict requirements of environmental laws, inspection and enforcement policies
and compliance costs therefrom which might affect the handling, manufacture,
use, emission or disposal of products, other materials or hazardous and non-
hazardous waste.
F-21
<PAGE>
EQUISTAR CHEMICALS, LP
NOTES TO FINANCIAL STATEMENTS--(Continued)
In the opinion of management, any liability arising from the matters
discussed in this Note is not expected to have a material adverse effect on the
financial statements or liquidity of the Partnership. However, the adverse
resolution in any reporting period of one or more of these matters discussed in
this Note could have a material impact on the Partnership's results of
operations for that period without giving effect to contribution or
indemnification obligations of co-defendants or others, or to the effect of any
insurance coverage that may be available to offset the effects of any such
award.
18. Segment Information
Using the guidelines set forth in SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information, the Partnership has identified two
segments in which it operates. The reportable segments are petrochemicals and
polymers. The petrochemicals segment includes olefins, oxygenated chemicals,
aromatics and specialty chemicals. Olefins include ethylene, propylene and
butadiene, and the oxygenated chemicals include ethylene oxide, ethylene
glycol, ethanol and MTBE. The petrochemicals segment also includes the
production and sale of aromatics including benzene and toluene. The polymers
segment consists of polyolefins including high-density polyethylene, low-
density polyethylene, linear low-density polyethylene, polypropylene, and
performance polymers. The performance polymers include enhanced grades of
polyethylene, including wire and cable resins, concentrates and compounds, and
polymeric powders.
No customer accounted for 10 percent or more of sales.
The accounting policies of the segments are the same as those described in
"Summary of Significant Accounting Policies" (see Note 2).
F-22
<PAGE>
EQUISTAR CHEMICALS, LP
NOTES TO FINANCIAL STATEMENTS--(Continued)
Summarized financial information concerning the Partnership's reportable
segments is shown in the following table. Intersegment sales between the
petrochemicals and polymers segments were made at prices based on current
market values.
For the year ended December 31, 1998:
<TABLE>
<CAPTION>
Petrochemicals Polymers
Millions of dollars Segment Segment Unallocated Eliminations Consolidated
- ------------------- -------------- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales and other
operating revenues:
Customers............. $ 2,351 $2,012 $ -- $ -- $4,363
Intersegment.......... 1,112 46 -- (1,158) --
------- ------ ------ ------- ------
$ 3,463 $2,058 $ -- $(1,158) $4,363
======= ====== ====== ======= ======
Unusual charges......... $ -- $ -- $ 35 $ -- $ 35
======= ====== ====== ======= ======
Operating income........ $ 319 $ 177 $ (214) $ -- $ 282
======= ====== ====== ======= ======
Depreciation and
amortization expense... $ 152 $ 65 $ 51 $ -- $ 268
======= ====== ====== ======= ======
Capital expenditures.... $ 71 $ 116 $ 13 $ -- $ 200
======= ====== ====== ======= ======
Total assets............ $ 2,997 $2,035 $1,636 $ -- $6,668
======= ====== ====== ======= ======
</TABLE>
For the period from December 1, 1997 (inception) to December 31, 1997:
<TABLE>
<CAPTION>
Petrochemicals Polymers
Millions of dollars Segment Segment Unallocated Eliminations Consolidated
- ------------------- -------------- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales and operating
revenues:
Customers............. $ 179 $ 186 $ -- $ -- $ 365
Intersegment.......... 105 -- -- (105) --
------ ------ ------ ----- ------
$ 284 $ 186 $ -- $(105) $ 365
====== ====== ====== ===== ======
Unusual charges......... $ -- $ -- $ 42 $ -- $ 42
====== ====== ====== ===== ======
Operating income........ $ 47 $ 22 $ (54) $ -- $ 15
====== ====== ====== ===== ======
Depreciation and
amortization expense... $ 7 $ 7 $ 5 $ -- $ 19
====== ====== ====== ===== ======
Capital expenditures.... $ 7 $ 4 $ 1 $ -- $ 12
====== ====== ====== ===== ======
Total assets............ $1,668 $1,504 $1,428 $ -- $4,600
====== ====== ====== ===== ======
</TABLE>
19. Subsequent Events
In January 1999, the Partnership announced that it was going to shut down
and "mothball" its gas phase HDPE reactor at Port Arthur, Texas, on March 31,
1999, as part of its long-term strategy to maximize value. The shutdown will
reduce the Partnership's HDPE capacity by 300 million pounds per year and
reduce employment at the unit from 200 to approximately 125. Customers for
products from the mothballed unit will be supplied with comparable products
produced at the Partnership's Matagorda, Victoria, and LaPorte, Texas,
facilities.
F-23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
of Lyondell Petrochemical Company:
In our opinion, the accompanying balance sheets and the related statements
of income and invested capital and of cash flows present fairly, in all
material respects, the financial position of the contributed petrochemicals and
polymers businesses of Lyondell Petrochemical Company ("Lyondell Contributed
Business") at November 30, 1997 and December 31, 1996, and the results of
operations, and cash flows for the eleven month period ended November 30, 1997
and each of the two years in the period ended December 31, 1996 in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Lyondell Contributed Business'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 which 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, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Houston, Texas
July 7, 1998
F-24
<PAGE>
LYONDELL CONTRIBUTED BUSINESS
BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
November 30, December 31,
ASSETS 1997 1996
------ ------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................... $ 1 $ --
Accounts receivable:
Trade............................................ 350 259
Related parties.................................. 31 96
Inventories........................................ 233 196
Prepaid expenses and other current assets.......... 7 10
------ ------
Total current assets........................... 622 561
------ ------
Property, plant and equipment........................ 1,974 1,969
Less accumulated depreciation and amortization....... (1,148) (1,129)
------ ------
826 840
Deferred charges and other assets.................... 84 93
------ ------
Total assets......................................... $1,532 $1,494
====== ======
<CAPTION>
LIABILITIES AND INVESTED CAPITAL
--------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable:
Trade............................................ $ 153 $ 200
Related parties.................................. 7 30
Current maturities of long-term debt............... 32 --
Other accrued liabilities.......................... 78 62
------ ------
Total current liabilities...................... 270 292
Long-term debt....................................... 713 745
Other liabilities and deferred credits............... 13 34
Commitments and contingencies (Note 9)
Total invested capital............................... 536 423
------ ------
Total liabilities and invested capital............... $1,532 $1,494
====== ======
</TABLE>
See notes to financial statements.
F-25
<PAGE>
LYONDELL CONTRIBUTED BUSINESS
STATEMENTS OF INCOME AND INVESTED CAPITAL
(in millions)
<TABLE>
<CAPTION>
For the eleven For the year
months ended ended December 31,
November 30, -------------------
1997 1996 1995
-------------- --------- ---------
<S> <C> <C> <C>
Sales and other operating revenues:
Unrelated parties........................ $2,183 $ 2,002 $ 2,025
Related parties.......................... 532 513 484
------ --------- ---------
2,715 2,515 2,509
Operating costs and expenses:
Cost of sales:
Unrelated parties...................... 1,662 1,659 1,491
Related parties........................ 423 409 332
Depreciation and amortization............ 68 67 46
Selling, general and administrative
expenses................................ 166 157 125
------ --------- ---------
2,319 2,292 1,994
------ --------- ---------
Operating income......................... 396 223 515
Interest expense, net...................... 50 65 76
------ --------- ---------
Income before income taxes............... 346 158 439
Provision for income taxes................. 127 56 162
------ --------- ---------
Net income............................... 219 102 277
Invested capital at beginning of period.... 423 320 (87)
Net transactions with Lyondell............. (106) 1 130
------ --------- ---------
Invested capital at end of period.......... $ 536 $ 423 $ 320
====== ========= =========
</TABLE>
See notes to financial statements.
F-26
<PAGE>
LYONDELL CONTRIBUTED BUSINESS
STATEMENTS OF CASH FLOWS
(in millions)
<TABLE>
<CAPTION>
For the eleven For the year
months ended ended December 31,
November 30, --------------------
1997 1996 1995
-------------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................ $ 219 $ 102 $ 277
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization........... 68 67 46
Decrease (increase) in accounts
receivable............................. (26) (95) 26
Increase in inventories................. (37) (37) (40)
Increase (decrease) in accounts
payable................................ (70) 83 13
Net change in other working capital
accounts............................... 19 (1) 10
Other................................... (17) (40) (14)
----- --------- ---------
Net cash provided by operating
activities........................... 156 79 318
Cash flows from investing activities:
Additions to property, plant and
equipment................................ (49) (80) (476)
----- --------- ---------
Net cash used in investing
activities........................... (49) (80) (476)
Cash flows from financing activities:
Net transactions with parent.............. (106) 1 130
Borrowings of long-term debt.............. -- 300 38
Repayments of long-term debt.............. -- (300) (10)
----- --------- ---------
Net cash provided by (used in)
financing activities................. (106) 1 158
Net change in cash and cash equivalents... 1 -- --
Cash and cash equivalents, beginning of
period................................... -- -- --
----- --------- ---------
Cash and cash equivalents, end of period.. $ 1 $ -- $ --
===== ========= =========
</TABLE>
See notes to financial statements.
F-27
<PAGE>
LYONDELL CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS
(In millions)
Note 1. Basis of Presentation and Description of the Contributed Business
As of December 1, 1997, Lyondell Petrochemical Company ("Lyondell" or the
"Company") and Millennium Chemicals Inc. ("Millennium") formed a now joint
venture company named Equistar Chemicals, LP (the "Partnership") which is being
operated as a partnership. The Partnership, which is owned 57% by the Company
and 43% by Millennium, owns and operates the existing olefins and polymers
businesses contributed by the two companies. The assets of the Partnership
consist of 15 manufacturing facilities on the US Gulf Coast and in the US
Midwest, producing ethylene, propylene, polyethylene (high-density, low-density
and linear low-density), polypropylene, ethyl alcohol, butadiene, aromatics,
methyl butyl tertiary ether ("MTBE") and other products for sale to customers
throughout the US. The Partnership has $1,745 of debt including $745 face value
of debt assumed from Lyondell and $750 under a new credit facility, the
proceeds of which will be used to repay debt assumed from Millennium upon
completion of the transaction, and a note receivable from Lyondell of $345.
On March 20, 1998, Lyondell and Millennium announced an agreement to expand
the Partnership with the addition of the ethylene, propylene, and ethylene
oxide and derivative businesses of Occidental Chemical Corporation ("OxyChem"),
a subsidiary of Occidental Petroleum. Following the closing of the agreement on
May 15, 1998, Lyondell's percentage ownership in the Partnership decreased to
41 percent from 57 percent, with Millennium and OxyChem each owning a 29.5
percent share.
Lyondell contributed to the Partnership substantially all of the net assets
and operations comprising its petrochemicals and polymers segments. Lyondell
retained ownership of its 58.75% interest in LYONDELL-CITGO Refining Company
Ltd. ("LYONDELL-CITGO Refining") and its 75% interest in Lyondell Methanol
Company, L.P. ("Lyondell Methanol").
The accompanying financial statements include the results of operations,
assets and liabilities of the petrochemicals and polymers businesses currently
owned by Lyondell that will be contributed to the Partnership ("Contributed
Business"). These financial statements are presented on a going concern basis
and include only the historical net assets and results of operations that are
directly related to the Contributed Business. Consequently, the financial
position, results of operations and cash flows may not be indicative of what
would have been reported if the Contributed Business had been a separate,
stand-alone entity or had been operated as a part of the Partnership.
Lyondell provided certain corporate, general and administrative services to
the Contributed Business, including legal, tax, treasury, risk management and
other services. The Contributed Business provided certain general and
administrative services to Lyondell, including computer, office lease and
employee benefits services. Charges for the services are believed to be
reasonable and substantially offset each other for the periods presented. In
addition, Lyondell has controlled, on a centralized basis, all cash receipts
and disbursements received or made by the Contributed Business. The net results
of such transactions are included in the balance sheets as invested capital.
Note 2. Significant Accounting Policies
Revenue Recognition. Revenue from product sales is generally recognized upon
delivery of product to the customer.
Use of Estimates. 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
F-28
<PAGE>
LYONDELL CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS--(Continued)
(In millions)
and liabilities at the date of the financial statements and the reported amount
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Cash and Cash Equivalents. Cash equivalents consist of highly liquid debt
instruments such as certificates of deposit, commercial paper and money market
accounts purchased with an original maturity date of three months or less.
Accounts Receivable. The Contributed Business sells its products primarily
to companies in the petrochemicals and polymers industries. The Contributed
Business performs ongoing credit evaluations of its customers' financial
condition and in certain circumstances requires letters of credit from them.
The Contributed Business's allowance for doubtful accounts, which is reflected
in the balance sheet as a reduction of accounts receivable, totaled $3 at
November 30, 1997 and December 31, 1996.
Inventories. Inventories are stated at the lower of cost or market value.
Cost is determined on the last-in, first-out ("LIFO") basis, except for
materials and supplies, which are valued at average cost. Inventories valued on
a LIFO basis were approximately $44 and $46 less than the amount of such
inventories valued at current cost at November 30, 1997 and December 31, 1996,
respectively.
Inventories consist of the following:
<TABLE>
<CAPTION>
November 30 December 31
1997 1996
----------- -----------
<S> <C> <C>
Petrochemicals................................... $ 136 $ 98
Polymers......................................... 74 74
Materials and supplies........................... 23 24
----- ----
$ 233 $196
===== ====
</TABLE>
Property, Plant and Equipment. Property, plant and equipment are recorded at
cost. Depreciation of property, plant and equipment is computed using the
straight-line method over the estimated useful lives of the assets, generally 5
to 30 years for manufacturing facilities and equipment. Interest cost incurred
on debt during the construction of major projects that exceed one year is
capitalized. No interest was capitalized during the periods presented.
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
November 30 December 31
1997 1996
----------- -----------
<S> <C> <C>
Manufacturing facilities and equipment............ $ 1,868 $1,822
Construction projects in progress................. 79 120
Land.............................................. 27 27
------- ------
$ 1,974 $1,969
======= ======
</TABLE>
Turnaround Maintenance and Repair Expenses. The cost of repairs and
maintenance incurred in connection with turnarounds of major units at the
Contributed Business's manufacturing facilities exceeding $5 are deferred as
incurred and amortized on a straight-line basis until the next planned
turnaround, which is generally four to six years.
F-29
<PAGE>
LYONDELL CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS--(Continued)
(In millions)
Other Accrued Liabilities. Other accrued liabilities consist of the
following:
<TABLE>
<CAPTION>
November 30 December 31
1997 1996
----------- -----------
<S> <C> <C>
Payroll........................................... $24 $20
Interest.......................................... 19 15
Taxes other than income........................... 24 20
Other............................................. 11 7
--- ---
$78 $62
=== ===
</TABLE>
Accounts payable and certain accrued expenses were not contributed to the
Partnership at its formation.
Environmental Remediation Costs. Expenditures related to investigation and
remediation of contaminated sites, which include operating facilities and
waste disposal sites, are accrued when it is probable a liability has been
incurred and the amount of the liability can reasonably be estimated. Accrued
liabilities are exclusive of claims against third parties (except where
payment has been received or the amount of liability or contribution by such
other parties, including insurance companies, has been agreed) and are not
discounted. In general, costs related to environmental remediation are charged
to expense. Environmental costs are capitalized if the costs increase the
value of the property and/or mitigate or prevent contamination from future
operations.
Exchanges. Finished product exchange transactions, which are of a
homogeneous nature of commodities in the same line of business and do not
involve the payment or receipt of cash, are not accounted for as purchases and
sales. Any resulting volumetric exchange balances are accounted for as
inventory in accordance with the normal LIFO valuation policy. Exchanges
settled through payment and receipt of cash are accounted for as purchases and
sales.
Income Taxes. Earnings of the Contributed Business have been included in
the consolidated federal income tax return filed by Lyondell. Pursuant to an
informal tax allocation agreement, income taxes have been allocated to the
Contributed Business based on applicable statutory tax rates applied to the
taxable earnings generated by such business. The effective income tax rates
were 36.6%, 35.7%, and 36.8% for the eleven months ended November 30, 1997 and
the years ended December 31, 1996, and 1995, respectively. State income tax
was the primary difference between the effective income tax rates and the 35%
federal statutory rate. Liabilities for currently and/or deferred income taxes
have been and remain the responsibility of Lyondell, and accordingly, have
been included in the balance sheet as invested capital.
As part of the transactions to consummate the Partnership, Lyondell entered
into tax sharing and indemnification agreements with the Partnership in which
Lyondell generally agreed to indemnify the Partnership for income tax
liabilities attributable to periods when the operations of the Contributed
Business were included in the consolidated tax return of Lyondell.
Research and Development. The cost of research and development efforts is
expensed as incurred. Such costs aggregated $12, $13, and $5 for the eleven
months ended November 30, 1997 and the years ended December 31, 1996, and
1995, respectively.
Note 3. Acquisition of Alathon(R) High-Density Polyethylene Business
In May 1995, the Company acquired Occidental Chemical Corporation's
Alathon(R) high-density polyethylene ("HDPE") business ("ALATHON Business")
for $356 including certain direct costs, plus
F-30
<PAGE>
LYONDELL CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS--(Continued)
(In millions)
approximately $64 for inventory. Assets involved in the purchased included
resin production facilities at Victoria and Matagorda, Texas, associated
research and development activities and the rights to the Alathon(R) trademark.
These facilities have a combined annual production capacity of approximately
1.5 billion pounds of HDPE. The Company financed the acquisition from internal
cash and $230 of short-term borrowings from its existing financing
arrangements.
The following unaudited pro forma information combines the results of
operations of the Contributed Business and the ALATHON Business for the year
ended December 31, 1995 and assumes the acquisition of the ALATHON Business
occurred on January 1, 1995. This unaudited pro forma information may not be
indicative of results that would have actually resulted if this transaction had
occurred on January 1, 1995 or which may be obtained in the future.
<TABLE>
<CAPTION>
Millions of dollars 1995
------------------- ------
<S> <C>
Sales and other operating revenues................................ $2,703
Net income........................................................ 297
</TABLE>
Note 4. Financial Instruments
The fair value of all financial instruments included in current assets and
current liabilities, including cash and cash equivalents, accounts receivable,
accounts payable and notes payable, approximated their carrying value due to
their short maturity. Based on the borrowing rates currently available to the
Contributed Business for debt with terms and average maturities similar to the
Contributed Business's debt portfolio, the fair value of the Contributed
Business's long-term debt, including amounts due within one year, was $701 and
$661 at November 30, 1997 and December 31, 1996, respectively.
The Contributed Business is party to various unconditional purchase
obligation contracts as a purchaser for product and services. At November 30,
1997, future minimum payments under these contracts with noncancelable contract
terms in excess of one year were as follows.
<TABLE>
<CAPTION>
Amount
------
<S> <C>
1998............................................................... $ 14
1999............................................................... 14
2000............................................................... 13
2001............................................................... 11
2002............................................................... 10
Thereafter......................................................... 54
----
Total minimum contract payments.................................. $116
====
</TABLE>
The Contributed Business's total purchases under these agreements were $15,
$17 and $13 for the eleven months ended November 30, 1997 and the years ended
December 31, 1996 and 1995, respectively.
F-31
<PAGE>
LYONDELL CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS--(Continued)
(In millions)
Note 5. Related Party Transactions
Related party transactions with Atlantic Richfield Company ("ARCO") for the
nine months ended September 30, 1997 excluding sales to ARCO Chemical Company,
and LYONDELL-CITGO Refining for the eleven months ended November 30, 1997 are
as follows:
<TABLE>
<CAPTION>
For the twelve
For the eleven months ended
months ended December 31
November 30 ----------------
1997 1996 1995
-------------- ------- -------
<S> <C> <C> <C>
Sales:
Products..................................... $ 319 $ 198 $ 162
Other........................................ 7 12 16
Business interruption recovery............... -- 25 --
----- ------- -------
$ 326 $ 235 $ 178
===== ======= =======
Costs:
Product purchases............................ $ 409 $ 182 $ 283
Transportation fees.......................... 19 23 21
Other, net................................... (5) (9) (7)
Business interruption recovery............... -- (3) --
----- ------- -------
$ 423 $ 193 $ 297
===== ======= =======
</TABLE>
The Company purchased 383,312 shares of common stock held by ARCO after the
conversion of the Exchangeable Notes on September 15, 1997 at a price of $25.66
per share, eliminating ARCO's ownership interest in the Contributed Business.
Therefore, as of September 30, 1997 ARCO is no longer considered a related
party of the Contributed Business.
Sales to ARCO Chemical Company, an ARCO affiliate, consisting primarily of
product sales, were $206, $278, and $306 for the nine months ended September
30, 1997 and the years ended December 31, 1996 and 1995, respectively.
In July of 1996 a fire occurred at the ARCO PipeLine Company meter station
located within the Channelview, Texas petrochemicals facility ("Channelview
Facility"). The fire forced the shutdown of the entire Channelview Facility for
several days and more than two weeks for some units. The Contributed Business
recovered lost profits from ARCO PipeLine Company for this shutdown. The
recovery was included in 1996 reported results.
F-32
<PAGE>
LYONDELL CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS--(Continued)
(In millions)
6. Long-term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
November 30 December 31 December 31
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
10.00% Notes due in 1999.................... $150 $150 $150
9.125% Notes due in 2002.................... 100 100 100
6.5% Notes due in 2006...................... 150 150 --
7.55% Debentures due in 2026................ 150 150 --
9.95% Notes due in 1996..................... -- -- 150
Medium-term notes........................... 195 195 207
Other....................................... -- -- 138
---- ---- ----
745 745 745
Less current portion........................ 32 -- 150
---- ---- ----
$713 $745 $595
==== ==== ====
</TABLE>
Aggregate maturities of long-term debt during the five years subsequent to
November 30, 1997 are as follows: 1998-$32; 1999-$150, 2000-$42; 2001-$90;
2002-$101. After contribution to the Partnership, Lyondell will continue to be
liable on the above debt until its maturity.
The Notes due in 1999 and the medium-term notes contain provisions that
would allow the holders to require the Company to repurchase the debt upon the
occurrence of certain events together with specified declines in public ratings
on the Notes due in 1999. Certain events include acquisitions by persons other
than ARCO or the Company of more than 20% of the Company's common stock, any
merger or transfer of substantially all of the Company's assets, in connection
with which the Company's common stock is changed into or exchanged for cash,
securities or other property and payment of certain "special" dividends.
The medium-term notes mature at various dates from 1998 to 2005 and have a
weighted average interest rate at November 30, 1997, December 31, 1996 and 1995
of 9.8%, 9.8% and 9.9%, respectively.
Interest paid was $59, $61, and $75 for the eleven months ended November 30,
1997 and the years ended December 31, 1996, and 1995, respectively.
7. Pension and Other Postretirement Benefits
Defined Benefit Pension Plans--All full-time regular employees of the
Contributed Business are covered by defined benefit pension plans sponsored by
Lyondell. Retirement benefits are based on years of service and the employee's
highest three consecutive years of compensation during the last ten years of
service. The funding policy for these plans is to make periodic contributions
as required by applicable law. The Contributed Business accrues pension costs
based on an actuarial valuation and funds the plans through contributions to
the Company, reflected in invested capital, who then contributes to pension
trust funds separate from Lyondell funds. The Contributed Business also has
unfunded supplemental nonqualified retirement plans which provide pension
benefits for certain employees in excess of the tax qualified plans' limits.
The Contributed Business recorded expense related to participation in these
plans of $7, $7 and $4 for the eleven months ended November 30, 1997 and the
years ended December 31, 1996, and 1995, respectively.
Defined Contribution Plans--Effective July 1, 1995, Lyondell also maintains
voluntary defined contribution savings plans for eligible employees, including
those employed by the Contributed Business.
F-33
<PAGE>
LYONDELL CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS--(Continued)
(In millions)
Under provisions of the plans, Lyondell contributes an amount equal to 160% of
employee contributions up to a maximum matching contribution of eight percent
of the employee's base salary. Prior to July 1, 1995, Lyondell had similar
voluntary defined contribution plans. The Contributed Business recorded expense
related to participation in these voluntary defined contribution savings plans
totaled $6, $6, and $5 for the eleven months ended November 30, 1997 and the
years ended December 31, 1996, and 1995, respectively.
Other Postretirement Benefit Plans--Lyondell sponsors unfunded
postretirement benefit plans other than pensions ("OPEB") for both salaried and
non-salaried employees, including those employed by the Contributed Business,
which provide medical and life insurance benefits. The postretirement health
care plans are contributory while the life insurance plans are non-
contributory. Currently, Lyondell pays approximately 80% of the cost of the
health care plans, but reserves the right to modify the cost-sharing provisions
at any time. The Contributed Business recorded expense related to participation
in these plans of approximately $4, $4, and $2 for the eleven months ended
November 30, 1997 and the years ended December 31, 1996, and 1995,
respectively. The actuarially determined liability associated with the
currently active employees of the Contributed Business based on current plan
provisions at November 30, 1997 and December 31, 1996 was $25 and $22,
respectively.
Note 8. Leases
At November 30, 1997, future minimum rental payments for operating leases
with noncancelable lease terms in excess of one year were as follows:
<TABLE>
<S> <C>
1998................................................................ $ 85
1999................................................................ 69
2000................................................................ 54
2001................................................................ 39
2002................................................................ 29
Thereafter.......................................................... 351
----
Total minimum contract payments................................... $627
====
</TABLE>
Operating lease net rental expenses were $42, $44, and $39 for the eleven
months ended November 30, 1997 and the years ended December 31, 1996, and 1995,
respectively.
Note 9. Commitments and Contingencies
The Contributed Business has various purchase commitments for materials,
supplies and services incident to the ordinary conduct of business. In the
aggregate, such commitments are not at prices in excess of current market.
In connection with the transfer of assets and liabilities from ARCO to the
Company, the Company and ARCO entered into an agreement ("Cross-Indemnity
Agreement") whereby the Company agreed to defend and indemnify ARCO against
certain uninsured claims and liabilities which ARCO may incur relating to the
operation of the Company's integrated petrochemicals and petroleum processing
business prior to July 1, 1988, including certain liabilities which may arise
out of pending and future lawsuits. ARCO indemnified the Company under the
Cross-Indemnity Agreement with respect to other claims or liabilities and other
matters of litigation not related to the assets or business included in the
Company's consolidated financial statements. The Company has reached an
agreement-in-principle with ARCO to update the Cross-Indemnity Agreement
("Revised Cross-Indemnity Agreement"). The Cross-Indemnity Agreement and the
Revised Cross-Indemnity
F-34
<PAGE>
LYONDELL CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS--(Continued)
(In millions)
Agreement cover operations of the Company included in the Contributed Business.
Subject to the uncertainty inherent in all litigation, management believes the
resolution of the matters pursuant to the Revised Cross-Indemnity Agreement
will not have a material adverse effect upon the financial statements or
liquidity of the Contributed Business.
In addition to lawsuits for which the Company has indemnified ARCO, the
Company is also subject to various lawsuits and proceedings which may involve
the operations of the Contributed Business. Subject to the uncertainty inherent
in all litigation, management believes the resolution of these proceedings will
not have a material adverse effect upon the consolidated financial statements
or liquidity of the Contributed Business.
As part of the transactions to consummate the Partnership, Lyondell will
agree to indemnify the Partnership for any present or future liabilities
arising within a seven year period after the consummation of the partnership
which are attributable to the Contributed Business operations prior to the
Partnership's formation in excess of $7.
The Contributed Business's policy is to be in compliance with all applicable
environmental laws. The Contributed Business is subject to extensive
environmental laws and regulations concerning emissions to the air, discharges
to surface and subsurface waters and the generation, handling, storage,
transportation, treatment and disposal of waste materials. Some of these laws
and regulations are subject to varying and conflicting interpretations. In
addition, the Contributed Business cannot accurately predict future
developments, such as increasingly strict requirements of environmental laws,
inspection and enforcement policies and compliance costs therefrom which might
affect the handling, manufacture, use, emission or disposal of products, other
materials or hazardous and non-hazardous waste.
As of November 30, 1997 and December 31, 1996, the Contributed Business has
accrued $2 and $3, respectively, related to future regulatory agency assessment
and remediation costs, of which $1 is included in current liabilities at
November 30, 1997 while the remaining amounts are expected to be incurred over
the next two to seven years. In the opinion of management, there is currently
no material range of loss in excess of the amount recorded. However, it is
possible that new information about the sites for which the reserve has been
established, new technology or future developments such as involvement in other
regulatory agency or other comparable state law investigations, could require
the Contributed Business to reassess its potential exposure related to
environmental matters.
In the opinion of management, any liability arising from the matters
discussed in this Note will not have a material adverse effect on the
consolidated financial statements or liquidity of the Contributed Business.
However, the adverse resolution in any reporting period of one or more of these
matters discussed in this Note could have a material impact on the Contributed
Business's results of operations for that period without giving effect to
contribution or indemnification obligations of co-defendants or others, or to
the effect of any insurance coverage that may be available to offset the
effects of any such award.
F-35
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Millennium Chemicals Inc.:
In our opinion, the accompanying balance sheets and the related statements
of income and invested capital and of cash flows present fairly, in all
material respects, the financial position of the contributed business of
Millennium Chemicals Inc. ("Millennium Contributed Business") at November 30,
1997 and December 31, 1996, and the results of operations, and cash flows for
the eleven month period ended November 30, 1997 and each of the two years in
the period ended December 31, 1996 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Millennium Contributed Business'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 which 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, and evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Cincinnati, Ohio
July 9, 1998
F-36
<PAGE>
MILLENNIUM CONTRIBUTED BUSINESS
BALANCE SHEETS
<TABLE>
<CAPTION>
November 30, December 31,
1997 1996
------------ ------------
(In millions)
<S> <C> <C>
ASSETS
------
Current assets:
Accounts receivable--net............................ $ 49 $ 269
Inventories......................................... 275 294
Prepaid expenses and other current assets -- 25
------ ------
Total current assets.............................. 324 588
Property, plant and equipment, net.................... 1,305 1,335
Other non-current assets:
Deferred charges and other assets................... 33 27
Goodwill............................................ 1,142 1,171
------ ------
Total assets...................................... $2,804 $3,121
====== ======
LIABILITIES AND INVESTED CAPITAL
--------------------------------
Current liabilities:
Current maturities of long-term debt................ $ 4 $ 4
Accounts payable.................................... -- 53
Accrued expenses and other liabilities.............. 55 168
------ ------
Total current liabilities......................... 59 225
Non-current liabilities:
Long-term debt...................................... -- 5
Indebtedness to Millennium.......................... -- 1,000
Other liabilities................................... 21 56
------ ------
Total liabilities................................. 80 1,286
Commitments and contingencies (Note 7)
Invested capital...................................... 2,724 1,835
------ ------
Total liabilities and invested capital............ $2,804 $3,121
====== ======
</TABLE>
See notes to financial statements.
F-37
<PAGE>
MILLENNIUM CONTRIBUTED BUSINESS
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Eleven Months Year
Ended Ended
November 30, December 31,
------------- -------------
1997 1996 1995
------------- ------ ------
(In Millions)
<S> <C> <C> <C>
Sales.............................................. $1,786 $1,860 $1,932
Cost of Sales...................................... 1,341 1,503 1,324
Selling, development and administrative expenses... 136 109 113
------ ------ ------
Operating income................................. 309 248 495
Interest expense, net.............................. 66 80 80
------ ------ ------
Income before income taxes......................... 243 168 415
Provision for income taxes......................... 96 76 172
------ ------ ------
Net income......................................... $ 147 $ 92 $ 243
====== ====== ======
</TABLE>
See notes to financial statements.
F-38
<PAGE>
MILLENNIUM CONTRIBUTED BUSINESS
STATEMENTS OF CHANGES IN INVESTED CAPITAL
<TABLE>
<CAPTION>
(In millions)
-------------
<S> <C>
Balance at December 31, 1995...................................... $1,692
Net income........................................................ 92
Net transactions with Millennium.................................. 51
------
Balance at December 31, 1996...................................... 1,835
Net income........................................................ 147
Net transactions with Millennium.................................. 742
------
Balance at November 30, 1997...................................... $2,724
======
</TABLE>
See notes to financial statements.
F-39
<PAGE>
MILLENNIUM CONTRIBUTED BUSINESS
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Eleven Months Year Ended
Ended November 30, December 31,
------------------ --------------
1997 1996 1995
------------------ ------ ------
(In millions)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................ $ 147 $ 92 $ 243
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization........... 125 127 132
(Increase) decrease in accounts
receivable............................. 220 (53) 32
Decrease (increase) in inventories...... 19 (15) (42)
Decrease (increase) in prepaid expenses
and other current assets............... 25 (6) (8)
Increase in other assets................ (31) (70) (39)
Increase (decrease) in trade accounts
payable................................ (53) (7) 7
(Decrease) increase in accrued expenses
and other liabilities.................. (113) 49 (73)
(Decrease) increase in other
liabilities............................ (35) (37) 10
----- ------ ------
Net cash provided by operating
activities........................... 304 80 262
Cash flows from investing activities:
Capital expenditures...................... (41) (127) (75)
----- ------ ------
Net cash used in investing
activities........................... (41) (127) (75)
----- ------ ------
Cash flows from financing activities:
Net transactions with Millennium.......... (258) 51 (184)
Repayment of long term debt............... (5) (4) (3)
----- ------ ------
Net cash (used in) provided by financing
activities............................... (263) 47 (187)
----- ------ ------
Net change in cash and cash equivalents... $ -- $ -- $ --
===== ====== ======
</TABLE>
See notes to financial statements.
F-40
<PAGE>
MILLENNIUM CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS
(amounts in millions)
NOTE 1--DESCRIPTION OF THE CONTRIBUTED BUSINESS AND OPERATIONS
Pursuant to a partnership agreement (the "Partnership Agreement"),
Millennium Chemicals Inc. ("Millennium") and Lyondell Petrochemical Company
("Lyondell") formed Equistar Chemicals, LP ("Equistar" or the "Partnership"), a
Delaware limited partnership, which commenced operations on December 1, 1997.
Equistar is 57% owned by Lyondell and 43% owned by Millennium. The Lyondell
interest is owned through two wholly owned subsidiaries, Lyondell Petrochemical
G.P. Inc. ("Lyondell GP") and Lyondell Petrochemical L.P. Inc. ("Lyondell LP").
Millennium also owns its interest in the Partnership through two wholly owned
subsidiaries, Millennium Petrochemicals GP LLC ("Millennium GP") and Millennium
Petrochemicals LP LLC ("Millennium LP").
The Partnership owns and operates the petrochemical and polymer businesses
contributed by Millennium and Lyondell (the "Contributed Business"). The assets
of the Partnership consist of 15 manufacturing facilities on the U.S. Gulf
Coast and in the U.S. Midwest. The petrochemical segment produces products
including ethylene, propylene, ethyl alcohol, butadiene, aromatics and methyl
tertiary butyl ether ("MTBE"). The products are used primarily in the
production of other chemicals and products, including polymers, for sales to
customers throughout the U.S. The petrochemicals segment also includes sales of
methanol produced by Lyondell Methanol LP ("Lyondell Methanol"), which is owned
75% by Lyondell and is operated by the Partnership. The polymers segment
produces products that include polyethylene (high-density, low-density and
linear low-density), and polypropylene, which are used in the production of a
wide variety of consumer and industrial products.
In May 1998, Equistar announced that Occidental Petroleum Corporation joined
the Partnership with a contribution of assets and liabilities (the "Occidental
Contributed Business"). The ownership percentages of Equistar after the
inclusion of the Occidental Contributed Business are Lyondell (41%), Millennium
(29.5%) and Occidental (29.5%).
Millennium contributed to the Partnership substantially all of the net
assets and operations comprising its petrochemicals and polymers segments.
Millennium retained $250 of the accounts receivable of the Contributed
Business.
The accompanying financial statements include the results of operations,
assets and liabilities of the petrochemicals and polymers businesses owned by
Millennium that were contributed to the Partnership ("Contributed Business").
The financial statements are presented on a going concern basis and include
only the historical net assets and results of operations that are directly
related to the Contributed Business. Consequently, the financial position,
results of operations and the cash flows may not be indicative of what may have
been reported had the Contributed Business been a separate, stand-alone entity
or operated as a part of the Partnership.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition. Revenue from product sales is generally recognized upon
shipment of product to the customer.
F-41
<PAGE>
MILLENNIUM CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS--(Continued)
(amounts in millions)
Use of Estimates. 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, liabilities,
revenues and expenses during the reporting periods. Actual results could differ
from those estimates.
Trade Receivables. Trade receivables consist of the following:
<TABLE>
<CAPTION>
November 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Trade receivables.................................. $49 $270
Allowance for doubtful accounts.................... -- (1)
--- ----
$49 $269
=== ====
</TABLE>
Inventories. Inventories are stated at the lower of cost or market value.
Cost is determined for the various categories of inventory using first-in,
first-out ("FIFO"); last-in, first-out ("LIFO") basis or average cost method as
deemed appropriate. Inventories valued on a LIFO basis were approximately $2
and $13 less than the amount of such inventories valued at current cost at
November 30, 1997 and December 31, 1996, respectively.
<TABLE>
<CAPTION>
November 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Finished products.................................. $169 $154
In-process products................................ 2 2
Raw materials...................................... 62 105
Other inventories.................................. 42 33
---- ----
$275 $294
==== ====
</TABLE>
Property, Plant and Equipment. Property, plant and equipment is stated on
the basis of cost. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets, generally 20 to 40 years for
buildings and 10 to 25 years for machinery and equipment.
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
November 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Land and buildings................................. $ 129 $ 125
Machinery and equipment............................ 1,569 1,516
Leasehold improvements............................. 4 4
------ ------
1,702 1,645
Allowance for depreciation and amortization........ 397 310
------ ------
$1,305 $1,335
====== ======
</TABLE>
Turnaround Maintenance. Costs relating to future major maintenance projects
are estimated and expensed ratably from the date a turnaround is completed
until the next planned turnaround, generally 4 to 6 years.
Goodwill. The net assets of the Contributed Business include goodwill of
$1,142 at November 30, 1997, which is being amortized using the straight line
method over forty years. Such goodwill arose from Millennium's 1993 acquisition
of Quantum Chemical Corporation of which the Contributed Business was a
F-42
<PAGE>
MILLENNIUM CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS--(Continued)
(amounts in millions)
part. The value of the purchase consideration was allocated to the acquired
assets and liabilities based on their fair values, resulting in $1,272 of
goodwill being allocated to the Contributed Business. Management periodically
evaluates goodwill for impairment based on the anticipated future cash flows
attributable to the operation. Such expected cash flows, on an undiscounted
basis, are compared to the carrying value of the tangible and intangible
assets, and if impairment is indicated, the carrying value of goodwill is
adjusted. Management believes that no impairment exists at November 30, 1997.
Accumulated amortization aggregated $130 and $101 at November 30, 1997 and
December 31, 1996, respectively. Amortization of goodwill amounted to $29 for
the eleven months ended November 30, 1997 and $31 each for the years ended
December 31, 1996 and 1995, respectively.
Accrued Expenses and Other Liabilities. Accrued expenses and other
liabilities consist of the following:
<TABLE>
<CAPTION>
November 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Major maintenance............................... $44 $ 56
Feedstock accruals.............................. -- 65
All other....................................... 11 47
--- ----
$55 $168
=== ====
</TABLE>
Accounts payable, feedstock accruals and certain other accrued expenses are
not being contributed to the Partnership at its formation.
Environmental Remediation Cost. Environmental remediation costs are
expensed or capitalized in accordance with generally accepted accounting
principles. In October 1996, the American Institute of Certified Public
Accountants issued Statement of Position ("SOP 96-1"), "Environmental
Remediation Liabilities," which establishes new accounting and reporting
standards for the recognition and disclosure of environmental remediation
liabilities. The adoption of SOP 96-1 in 1997 did not have a material impact
on the results of operations.
Research and Development. The cost of research and development efforts is
expensed as incurred. Such costs aggregated $28 for the eleven month period
ended November 30, 1997 and $33 and $32 for the years ended December 31, 1996
and 1995, respectively.
Exchanges. Finished product exchange transactions, which do not require
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 normal LIFO valuation policy. Exchanges settled through
payment and receipt of cash are accounted for as purchases and sales.
Federal Income Taxes. Earnings of the Contributed Business have been
included in a consolidated income tax return filed by its ultimate U.S.
parent, Millennium America Holdings Inc. ("MAHI"), a subsidiary of Millennium.
Pursuant to an informal tax allocation agreement, income taxes have been
allocated to the Contributed Business based on applicable statutory tax rates
applied to the taxable earnings generated by such business. Effective income
tax rates for the periods as of and at November 30, 1997 and December 31, 1996
and 1995 were 39.5%, 45.2% and 41.4%, respectively. Differences between the
effective income tax rates and the statutory federal income tax rates arise
primarily from goodwill amortization and state income taxes. Liabilities for
current and/or deferred income taxes have been and remain the responsibility
of MAHI, and accordingly, have been included in the balance sheet as invested
capital.
F-43
<PAGE>
MILLENNIUM CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS--(Continued)
(amounts in millions)
As part of the transactions to consummate the Partnership, Millennium
entered into tax sharing and indemnification agreements with the Partnership in
which Millennium generally agreed to indemnify the partnership for income tax
liabilities attributable to periods when the operations of the Contributed
Business were included in the consolidated tax return of Millennium. The
Partnership is not subject to federal income taxes as income is reportable
directly by the individual partners; therefore, going forward there will be no
provision for income taxes in the partnership's financial statements.
Fair Value of Financial Instruments. The fair values of all short-term
financial instruments are estimated to approximate their carrying value because
of their short maturity.
Earnings Per Share. Historical earnings per share are not presented because
there is no separate identifiable pool of capital for the periods prior to
incorporation upon which a per share calculation could be based.
Reclassifications. Certain previously reported amounts have been restated to
conform to classifications currently adopted.
NOTE 3--LONG-TERM DEBT AND INDEBTEDNESS TO MILLENNIUM
The debt included in the balance sheets reflects the obligations directly
related to the Contributed Business including allocated debt from Millennium.
<TABLE>
<CAPTION>
November 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Note payable to Millennium bearing interest at
8% due 2006.................................... -- $ 750
Other indebtedness to Millennium................ -- 250
Industrial revenue bonds bearing interest at
5.5% due 1998.................................. $ 4 9
Less current maturities......................... (4) (4)
------ ------
$ -- $1,005
====== ======
</TABLE>
Interest paid for the eleven months ended November 30, 1997 and the years
ended December 31, 1996 and 1995 was $66, $80 and $80, respectively.
NOTE 4--PENSION AND OTHER POSTRETIREMENT BENEFITS
All full-time employees of the Contributed Business are covered by defined
benefit pension plans sponsored by Millennium. Retirement benefits are based on
years of service and average compensation as defined under the respective
plans' provisions. The funding policy is to contribute amounts to the plans
sufficient to meet the minimum funding requirements set forth in the Employee
Retirement Income Security Act of 1974. The Contributed Business accrues
pension costs based on actuarial valuations and funds the plan through
contributions to Millennium who then contributes the funds to a master trust
sponsored by Millennium. Such contributions are reflected in invested capital.
Pension income related to participation in these plans was $2, $5 and $4 for
the eleven months ended November 30, 1997 and the years ended December 31, 1996
and 1995, respectively. One such plan covers benefits for union-represented
employees of the Contributed Business. Such plan will be assumed by the
Partnership upon its consummation.
Millennium also provides unfunded health care and life insurance benefits to
certain groups of retirees. Expenses related to the employees of the
Contributed Business were $3, $2 and $2 for the eleven months ended November
30, 1997 and the years ended December 31, 1996 and 1995, respectively.
F-44
<PAGE>
MILLENNIUM CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS--(Continued)
(amounts in millions)
NOTE 5--RELATED PARTY TRANSACTIONS
Millennium provided certain corporate, general and administrative services
to the Contributed Business, including legal, financial, tax, risk management
and employee benefits services. Charges for these services are included in
selling and administration expenses and are believed to be reasonable. In
addition, a subsidiary of Millennium has controlled, on a centralized basis,
all cash receipts and disbursements received or made by the Contributed
Business. The net results of such transactions are included in the balance
sheets as invested capital. The Contributed Business also sells ethylene to an
affiliated business unit of Millennium for the manufacture of vinyl acetate
monomer. Vinyl acetate monomer is sold by Millennium to the Partnership. These
sales are reflected at market price and have been included in the accompanying
income statement. All significant intercompany accounts and transactions within
the Contributed Business have been eliminated. Millennium provides the
Partnership with certain operational services, including waste water treatment
and barge dock access. The Partnership provides certain general and
administrative services to Millennium, including materials management, certain
utilities, office space, health, safety and environmental services and computer
services. The Partnership has also controlled certain cash receipts and
disbursements received or made on behalf of Millennium.
NOTE 6--LEASES
Rental expense for operating leases was $38, $45 and $43 for the eleven
months ended November 30, 1997 and the years ended December 31, 1996 and 1995,
respectively.
Minimum Rentals
Future minimum rental commitments under noncancellable operating leases with
terms in excess of one year as of November 30, 1997 are as follows:
<TABLE>
<S> <C>
1998.................................... $43
1999.................................... 42
2000.................................... 26
2001.................................... 17
2002.................................... 13
Thereafter.............................. 18
----
$159
====
</TABLE>
NOTE 7--COMMITMENTS AND CONTINGENCIES
The Contributed Business is subject, among other things, to several
proceedings under the Federal Comprehensive Environmental Response Compensation
and Liability Act and other federal and state statutes. These proceedings are
in various stages ranging from initial investigation to active settlement
negotiations to implementation of clean-up remediation of sites. Additionally,
Millennium and/or its subsidiaries are defendants or plaintiffs in lawsuits
that have arisen in the normal course of business including those relating to
commercial transactions and product liability with respect to the Contributed
Business.
As part of the transactions to consummate the Partnership, Millennium agreed
to indemnify the partnership for any present or future liabilities arising
within a seven-year period after the consummation of the Partnership which are
attributable to the Contributed Business's operations prior to the
Partnership's formation in excess of $7.
The Contributed Business has various contractual obligations to purchase raw
materials used in its production of polyethylene. Commitments to purchase
ethylene used in the production of polyethylene are based on market prices and
expire from 1997 to 2001.
F-45
<PAGE>
OCCIDENTAL CONTRIBUTED BUSINESS
BALANCE SHEET
March 31, 1998
(amounts in thousands)
(Unaudited)
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash............................................................... $ 13
Trade receivables.................................................. 13,492
Other receivables.................................................. 9,264
Inventories........................................................ 159,420
Prepaid expenses................................................... 8,315
----------
Total current assets.............................................. 190,504
EQUITY INVESTMENT................................................... 86,155
PROPERTY, PLANT AND EQUIPMENT, net.................................. 1,807,605
OTHER ASSETS........................................................ 28,685
----------
TOTAL ASSETS...................................................... $2,112,949
==========
CURRENT LIABILITIES:
Accounts payable................................................... $ 74,547
Accrued liabilities................................................ 33,879
----------
Total current liabilities......................................... 108,426
CAPITAL LEASE LIABILITIES........................................... 205,000
NOTES PAYABLE TO AFFILIATES......................................... 1,222,674
DEFERRED CREDITS AND OTHER LIABILITIES.............................. 72,733
INVESTED CAPITAL.................................................... 504,116
----------
TOTAL LIABILITIES AND INVESTED CAPITAL............................ $2,112,949
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-46
<PAGE>
OCCIDENTAL CONTRIBUTED BUSINESS
STATEMENT OF OPERATIONS AND INVESTED CAPITAL
For the three months ended March 31, 1998
(amounts in thousands)
(Unaudited)
<TABLE>
<S> <C>
NET SALES AND OPERATING REVENUES...................................... $355,442
OPERATING COSTS AND EXPENSES:
Cost of sales....................................................... 320,067
Selling, general and administrative and other operating expenses.... 4,206
--------
OPERATING INCOME...................................................... 31,169
Loss from equity investment......................................... (1,490)
Interest expense, affiliates and other.............................. (25,991)
Other income, net................................................... 888
--------
INCOME BEFORE TAXES................................................... 4,576
Provision for income taxes.......................................... 2,255
--------
NET INCOME............................................................ 2,321
PENSION LIABILITY ADJUSTMENT.......................................... --
INCREASE IN INVESTED CAPITAL.......................................... 11,586
INVESTED CAPITAL, beginning of period................................. 490,209
--------
INVESTED CAPITAL, end of period....................................... $504,116
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-47
<PAGE>
OCCIDENTAL CONTRIBUTED BUSINESS
STATEMENT OF CASH FLOWS
For the three months ended March 31, 1998
(amounts in thousands)
(Unaudited)
<TABLE>
<S> <C>
CASH FLOW OPERATING ACTIVITIES:
Net income......................................................... $ 2,321
Adjustment to reconcile net income to net cash used by operating
activities:
Depreciation and amortization of assets.......................... 30,966
Loss from equity investment...................................... 1,490
Other noncash charges to income.................................. 202
Changes in operating assets and liabilities:
Decrease in receivables.......................................... 4,996
Increase in inventories.......................................... (16,364)
Decrease in prepaid expenses..................................... 1,979
Decrease in accounts payable and accrued liabilities............. (33,800)
Other operating, net............................................... 1,126
--------
Net cash used by operating activities................................ (7,084)
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures............................................... (6,121)
Other investing, net............................................... 730
--------
Net cash used by investing activities................................ (5,391)
CASH FLOW FROM FINANCING ACTIVITIES:
Increase in invested capital....................................... 11,586
--------
Net cash provided by financing activities............................ 11,586
--------
Change in cash....................................................... (889)
Cash--beginning of period............................................ 902
--------
Cash--end of period.................................................. $ 13
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-48
<PAGE>
OCCIDENTAL CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
(Unaudited)
(1) BASIS OF PRESENTATION AND DESCRIPTION OF THE CONTRIBUTED BUSINESS--
On May 15, 1998, Occidental Petroleum Corporation (Occidental) signed an
agreement with Lyondell Petrochemical Company and Millenium Chemicals Inc. to
effect the proposed contribution of its ethylene, propylene, ethylene oxide and
ethylene glycol derivatives businesses (collectively, the Occidental
Contributed Business) to a joint venture limited partnership called Equistar
Chemicals, LP (Equistar) in return for a 29.5% interest in Equistar, the
receipt of approximately $420 million in cash and the assumption by Equistar of
approximately $205 million of Occidental capital lease liabilities.
Under terms of the agreement, on May 15, 1998, Occidental contributed to
Equistar substantially all of the net assets and operations of the Occidental
Contributed Business. The accompanying financial statements include the results
of operations, assets and liabilities of the Occidental Contributed Business
represented by Oxy Petrochemicals Inc., PDG Chemical Inc. and a plant owned by
Occidental Chemical Corporation, which are all indirect subsidiaries of
Occidental Chemical Holding Corporation (OCHC). OCHC is an indirect subsidiary
of Occidental. These financial statements include only the historical results
of operations and net assets that are directly related to the Occidental
Contributed Business. Consequently, the financial position, results of
operations, and cash flows may not be indicative of what would have been
reported if the Occidental Contributed Business had been a separate, stand-
alone entity or had been operated as a part of Equistar during the period
presented. Additionally, certain assets and liabilities of the Occidental
Contributed Business were retained by Occidental. The retained assets will be
leased to Equistar under terms of the agreement.
Certain information and disclosures normally included in the notes to
financial statements have been condensed or omitted pursuant to Securities and
Exchange Commission (SEC) rules and regulations, but resultant disclosures are
in accordance with generally accepted accounting principles as they apply to
interim reporting. These interim financial statements should be read in
conjunction with the Occidental Contributed Business audited financial
statements as of December 31, 1997 (1997 Financial Statements).
The accompanying financial statements as of March 31, 1998 are unaudited.
All references made to amounts for the period then ended have been prepared in
accordance with the rules and regulations of the SEC. They include all
adjustments which are considered necessary for a fair statement of the results
of operations and financial position of the Occidental Contributed Business for
the interim period presented. Such adjustments consisted only of normal
recurring items.
Occidental provided certain corporate, general and administrative services
to the Occidental Contributed Business, including legal, financial, marketing
and executive services. Charges for these services were allocated based on the
estimated costs of specific functions performed by Occidental and affiliates
for the Occidental Contributed Business. Management believes the charges, which
amounted to $2.6 million for the three months ended March 31, 1998, are
reasonable. Such amounts are included in selling, general and administrative
expenses.
The Occidental Contributed Business sells ethylene to affiliated businesses
of Occidental. These sales, reflected at market prices and included in the
accompanying Statement of Operations, were $49 million for the three months
ended March 31, 1998.
Occidental utilizes a centralized cash management system for its operations,
including the Occidental Contributed Business. Cash distributed to or advanced
from Occidental has been reflected in invested capital in the accompanying
balance sheets. In addition, settlement of transactions with other Occidental
affiliates are recorded through invested capital.
F-49
<PAGE>
OCCIDENTAL CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS--(Continued)
March 31, 1998
(Unaudited)
(2) SIGNIFICANT ACCOUNTING POLICIES--
Risks and uncertainties--
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts, generally not by material amounts. Management
believes that these estimates and assumptions provide a reasonable basis for
the fair presentation of the Occidental Contributed Business' financial
position and results of operations.
Since the Occidental Contributed Business' major products are commodities,
significant changes in the prices of chemical products could have a significant
impact on the Occidental Contributed Business' results of operations for any
particular period.
Environmental liabilities and costs--
Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Reserves for estimated costs that relate to
existing conditions caused by past operations and that do not contribute to
current or future revenue generation are recorded when environmental remedial
efforts are probable and the costs can be reasonably estimated. In determining
the reserves, Occidental uses the most current information available, including
similar past experiences, available technology, regulations in effect, the
timing of remediation and cost-sharing arrangements. The environmental reserves
are based on management's estimate of the most likely cost to be incurred and
are reviewed periodically and adjusted as additional or new information becomes
available. The environmental reserves are included in other noncurrent
liabilities and amounted to $7.8 million at March 31, 1998.
Income taxes--
The Occidental Contributed Business has been included in the consolidated
U.S. federal income tax return and in certain unitary state income tax returns
of Occidental. A portion of the income tax provision for these returns is
allocated to the Occidental Contributed Business using the same method as a tax
sharing arrangement between OCHC and Occidental. The Occidental Contributed
Business also records state income tax provisions for operations required to be
reported in separate tax returns. The difference between the provision for
income taxes at the U.S. federal statutory rate and the effective tax rate is
primarily due to state income taxes. Liabilities for current and/or deferred
income taxes have been and remain the responsibility of Occidental and,
accordingly, have been included in the Balance Sheet as invested capital.
Fair value of financial instruments--
The fair value of on-balance sheet financial instruments approximates
carrying value. However, the fair value of notes payable to affiliates cannot
be practicably determined due to the related party nature of the balances.
Change in accounting principle--
Effective January 1, 1998, the Occidental Contributed Business adopted the
provisions of Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income." This statement establishes standards for
reporting and display of comprehensive income and its components in a full set
of
F-50
<PAGE>
OCCIDENTAL CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS--(Continued)
March 31, 1998
(Unaudited)
general purpose financial statements. The implementation of SFAS No. 130 did
not have an impact on the Occidental Contributed Business' results of
operations. The Occidental Contributed Business' comprehensive income was $2.3
million for the three months ended March 31, 1998.
(3) RECEIVABLES--
As of March 31, 1998, the Occidental Contributed Business transferred, with
limited recourse, to an Occidental affiliate net domestic trade receivables
under a revolving sale program in connection with the ultimate sale for cash of
an undivided ownership interest in such receivables by the affiliate. The net
trade receivables transferred amounted to $113.7 million as of March 31, 1998.
The Occidental Contributed Business transferred the receivables to the
affiliate in a noncash transaction that was reflected as a reduction in
invested capital. Occidental retained collection responsibility with respect to
the receivables sold. An interest in newly created receivables is transferred
monthly, net of collections made from customers. Fees related to the sales of
receivables under this program, which are allocated from Occidental, were $1.6
million for the three months ended March 31, 1998, and are included in other
income, net.
Under the terms of the Equistar agreement, Occidental repurchased the net
domestic trade receivables of $114.8 million of the Occidental Contributed
Business as of May 15, 1998 and contributed $100.3 million to Equistar.
Other receivables include $3.2 million as of March 31, 1998, from the equity
investee.
(4) INVENTORIES--
Inventories are stated at the lower of cost or market value determined using
the first-in, first-out (FIFO) or weighted-average-cost methods. Inventories
consist of the following as of March 31, 1998 (in thousands):
<TABLE>
<S> <C>
Raw materials................................................... $ 60,494
Materials and supplies.......................................... 17,250
Work in process................................................. 9,956
Finished goods.................................................. 71,720
--------
$159,420
========
</TABLE>
(5) EQUITY INVESTMENT--
The Occidental Contributed Business has a fifty percent interest in PD
Glycol, a partnership which manufactures ethylene oxide and ethylene glycol
derivatives at its plant in Beaumont, Texas. The investment, which is accounted
for on the equity method, exceeded the historical underlying equity in net
assets by approximately $43 million at March 31, 1998. The excess is being
amortized into income over the estimated total productive life of the plant.
F-51
<PAGE>
OCCIDENTAL CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS--(Continued)
March 31, 1998
(Unaudited)
(6) PROPERTY, PLANT AND EQUIPMENT--
Property additions and major renewals and improvements are capitalized at
cost. Property acquired under a capital lease has been capitalized at the
present value of future minimum lease payments. Depreciation is primarily
provided using the units-of-production method based on estimated total
productive life.
Interest costs incurred in connection with major capital expenditures are
capitalized and amortized over the lives of the related assets. Capitalized
interest is calculated based on the average borrowing rate of Occidental. The
amount of interest capitalized was $39,000 for the three months ended March 31,
1998.
Property, plant and equipment consists of the following as of March 31, 1998
(in thousands):
<TABLE>
<S> <C>
Land and land improvements................................... $ 81,950
Buildings.................................................... 38,061
Machinery and equipment...................................... 2,421,068
Property acquired under capital lease........................ 350,000
Construction in progress..................................... 50,263
-----------
2,941,342
Accumulated depreciation and amortization.................... (1,133,737)
-----------
Property, plant and equipment, net........................... $ 1,807,605
===========
</TABLE>
Included above is $103.4 million of net property, plant and equipment that
was retained by Occidental and will be leased to Equistar under the terms of
the agreement dated May 15, 1998.
(7) OTHER ASSETS--
Other assets consist of the following as of March 31, 1998 (in thousands):
<TABLE>
<S> <C>
Catalyst......................................................... $ 7,600
Deferred start-up costs.......................................... 6,287
Prepaid pension costs............................................ 6,493
Other............................................................ 8,305
-------
$28,685
=======
</TABLE>
Catalyst is amortized over estimated lives ranging from 18 months to 3
years. Deferred start-up costs are amortized over a period of 20 years. Other
amortizable assets are written off to income over the estimated periods to be
benefited.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities"
(SOP 98-5), which requires that costs of start-up activities, including
organizational costs, be expensed as incurred. The initial application of the
statement will result in a charge to income for any costs of start-up
activities that have not yet been fully amortized. Occidental will implement
SOP 98-5 effective January 1, 1999.
F-52
<PAGE>
OCCIDENTAL CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS--(Continued)
March 31, 1998
(Unaudited)
(8) ACCRUED LIABILITIES--
Accrued liabilities consist of the following as of March 31, 1998 (in
thousands):
<TABLE>
<S> <C>
Turnaround maintenance........................................... $15,362
Property taxes and insurance..................................... 9,481
Other............................................................ 9,036
-------
$33,879
=======
</TABLE>
Maintenance turnarounds are generally performed every 2 to 5 years.
Occidental utilizes an accrual methodology under which it estimates the
projected cost of a turnaround and accrues the cost equally over the years
between turnarounds. Total accruals relating to these future major maintenance
projects were $42.3 million as of March 31, 1998, and were included in accrued
liabilities as noted above and deferred credits and other liabilities in the
accompanying Balance Sheet.
(9) NOTES PAYABLE TO AFFILIATES--
The financial statements of the Occidental Contributed Business include
several notes payable to Occidental and an affiliate. Accrued interest on these
notes is settled annually through and is included in invested capital at rates
ranging between 6 and 11 percent. Interest expense on notes payable to
affiliates was $22.8 million for the three months ended March 31, 1998.
Principal amounts of the notes payable to an affiliate totaling $63.9
million are due on December 31, 1998. As the amounts will be settled either
through invested capital or another note payable to the affiliate, no notes
payable to affiliates have been classified as current in the accompanying
Balance Sheet.
(10) RETIREMENT PLANS AND POSTRETIREMENT BENEFITS--
Reference is made to Note 10 of the 1997 Financial Statements regarding
retirement plans and postretirement benefits.
(11) LEASE COMMITMENTS--
At March 31, 1998, future net minimum lease payments for capital and
operating leases are as follows (in thousands):
<TABLE>
<CAPTION>
Capital Operating
-------- ---------
<S> <C> <C>
1998.................................................. $ 9,884 $12,086
1999.................................................. 13,179 5,986
2000.................................................. 208,286 5,339
2001.................................................. -- 4,886
2002.................................................. -- 3,765
Thereafter............................................ -- 22,535
-------- -------
Total minimum lease payments.......................... 231,349 $54,597
-------- =======
Imputed interest...................................... (26,349)
--------
Present value of net minimum lease payments........... $205,000
========
</TABLE>
Rental expense for operating leases, excluding leases with terms of one year
or less, was approximately $4 million for the three months ended March 31,
1998.
F-53
<PAGE>
OCCIDENTAL CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS--(Continued)
March 31, 1998
(Unaudited)
(12) COMMITMENTS AND CONTINGENCIES--
OCHC has been named as defendant or as potentially responsible party with
regard to the Occidental Contributed Business in a number of lawsuits, claims
and proceedings, including governmental proceedings under the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA) and
corresponding state acts. These governmental proceedings seek funding,
remediation and, in some cases, compensation for alleged property damage,
punitive damages and civil penalties, aggregating substantial amounts. OCHC is
usually one of many companies in these proceedings, and has to date been
successful in sharing response costs with other financially sound companies.
OCHC has accrued reserves with regard to the Occidental Contributed Business at
the most likely cost to be incurred in those proceedings where it is probable
that OCHC will incur remediation costs which can be reasonably estimated.
It is impossible at this time to determine the ultimate liabilities that
OCHC may incur with regard to the Occidental Contributed Business resulting
from the foregoing lawsuits, claims and proceedings. Certain of these matters
may involve substantial amounts, and if these were to be ultimately resolved
unfavorably to the full amount of their maximum potential exposure, an event
not currently anticipated, it is possible that such an event could have a
material adverse effect upon the financial position or results of operations of
the Occidental Contributed Business. However, in management's opinion, after
taking into account reserves and indemnities, it is unlikely that any of the
foregoing matters will have a material adverse effect upon the financial
position or results of operations of the Occidental Contributed Business.
Under the terms of the agreement with Equistar, Occidental has agreed to
indemnify Equistar for any present or future contingent liabilities arising
within a seven year period after May 15, 1998 which are attributable to the
Occidental Contributed Business's operations prior to May 15, 1998 in excess of
$7 million.
The Occidental Contributed Business has certain other commitments to
purchase electrical power, raw materials and other potential obligations, all
in the ordinary course of business.
(13) SUBSEQUENT EVENT--
On January 11, 1999, CITGO Petroleum Corporation (CITGO) initiated a legal
action against Occidental Chemical Corporation (OCC) in the United States
District Court for the Northern District of Oklahoma seeking compensatory and
exemplary damages in an unspecified amount. It alleges that OCC breached the
provisions of a Plant Site Right of First Refusal Agreement pertaining to the
Lake Charles plant (Right of First Refusal) dated August 31, 1983, between
CITGO and Cities Service Oil and Gas Corporation, predecessor in interest in
OCC. It is impossible at this time to determine the ultimate legal liabilities,
if any, that may arise from this lawsuit. The CITGO compliant was not filed
against Equistar and seeks only money damages from OCC. However, in
management's opinion, the lawsuit is not likely to have a material adverse
effect upon the financial position of the Occidental Contributed Business.
F-54
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors,
Occidental Chemical Holding Corporation:
We have audited the accompanying balance sheets of the Occidental Contributed
Business as of December 31, 1997 and 1996, and the related statements of
operations and invested capital, and cash flows for each of the three years in
the period ended December 31, 1997. The Occidental Contributed Business is the
ethylene, propylene, ethylene oxide and ethylene glycol derivatives businesses
of Occidental Chemical Holding Corporation included in its indirect
subsidiaries Oxy Petrochemicals Inc., PDG Chemical Inc. and a plant owned by
Occidental Chemical Corporation. These financial statements are the
responsibility of Occidental Chemical Holding Corporation'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, the financial statements referred to above present fairly, in
all material respects, the financial position of the Occidental Contributed
Business as of December 31, 1997 and 1996, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Dallas, Texas,
July 10, 1998 (except with
respect to the matter
discussed in Note 13, as to
which the date is January
26, 1999)
F-55
<PAGE>
OCCIDENTAL CONTRIBUTED BUSINESS
BALANCE SHEETS
December 31, 1997 and 1996
(amounts in thousands)
<TABLE>
<CAPTION>
December 31
1997 1996
---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash................................................... $ 902 $ 13
Trade receivables...................................... 17,235 13,841
Other receivables...................................... 10,517 2,263
Inventories............................................ 143,056 175,667
Prepaid expenses....................................... 10,294 12,100
---------- ----------
Total current assets................................. 182,004 203,884
EQUITY INVESTMENT........................................ 88,375 94,044
PROPERTY, PLANT AND EQUIPMENT, net....................... 1,830,446 1,913,834
OTHER ASSETS............................................. 30,636 26,539
---------- ----------
TOTAL ASSETS......................................... $2,131,461 $2,238,301
========== ==========
CURRENT LIABILITIES:
Current portion of capital lease liabilities........... -- $ 6,905
Accounts payable....................................... $ 89,309 125,129
Accrued liabilities.................................... 53,981 62,796
---------- ----------
Total current liabilities............................ 143,290 194,830
CAPITAL LEASE LIABILITIES................................ 205,000 205,000
NOTES PAYABLE TO AFFILIATES.............................. 1,222,674 1,209,269
DEFERRED CREDITS AND OTHER LIABILITIES................... 70,288 41,883
INVESTED CAPITAL......................................... 490,209 587,319
---------- ----------
TOTAL LIABILITIES AND INVESTED CAPITAL .............. $2,131,461 $2,238,301
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-56
<PAGE>
OCCIDENTAL CONTRIBUTED BUSINESS
STATEMENTS OF OPERATIONS AND INVESTED CAPITAL
For the years ended December 31, 1997, 1996 and 1995
(amounts in thousands)
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
NET SALES AND OPERATING REVENUES........... $1,802,854 $1,671,158 $1,899,191
OPERATING COSTS AND EXPENSES:
Cost of sales............................ 1,530,521 1,506,399 1,437,155
Selling, general and administrative and
other operating expenses................ 21,666 22,212 20,397
---------- ---------- ----------
OPERATING INCOME........................... 250,667 142,547 441,639
Loss from equity investment.............. (6,052) (5,859) (5,566)
Interest expense, affiliates and other... (105,960) (119,811) (136,298)
Other expense, net....................... (6,881) (2,190) (3,549)
---------- ---------- ----------
INCOME BEFORE TAXES........................ 131,774 14,687 296,226
Provisions for income taxes.............. 50,482 8,254 111,624
---------- ---------- ----------
NET INCOME................................. 81,292 6,433 184,602
PENSION LIABILITY ADJUSTMENT............... 4,191 963 1,334
DECREASE IN INVESTED CAPITAL............... (182,593) (127,916) (142,929)
INVESTED CAPITAL, beginning of year........ 587,319 707,839 664,832
---------- ---------- ----------
INVESTED CAPITAL, end of year.............. $ 490,209 $ 587,319 $ 707,839
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-57
<PAGE>
OCCIDENTAL CONTRIBUTED BUSINESS
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1997, 1996 and 1995
(amounts in thousands)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income..................................... $ 81,292 $ 6,433 $184,602
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of assets...... 121,209 111,519 117,912
Loss from equity investment.................. 6,052 5,859 5,566
Other noncash charges to income.............. 14,380 8,159 2,197
Changes in operating assets and liabilities:
Decrease (increase) in receivables........... (11,648) 3,282 271
Decrease (increase) in inventories........... 32,611 (17,504) 10,673
Decrease (increase) in prepaid expenses...... 1,806 (1,421) 493
Increase (decrease) in accounts payable and
accrued liabilities......................... (23,710) 6,541 (11,223)
Other operating, net........................... (8,210) (12,621) (9,007)
-------- -------- --------
Net cash provided by operating activities........ 213,782 110,247 301,484
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures........................... (40,608) (40,933) (43,372)
Other investing, net........................... (383) (643) (6,549)
-------- -------- --------
Net cash used by investing activities............ (40,991) (41,576) (49,921)
CASH FLOW FROM FINANCING ACTIVITIES:
Principal payments on capital lease
liabilities................................... (6,905) (27,619) (27,619)
Increase (decrease) in notes payable to
affiliates.................................... 13,405 85,820 (82,739)
Decrease in invested capital................... (178,402) (126,953) (141,595)
-------- -------- --------
Net cash used by financing activities............ (171,902) (68,752) (251,953)
-------- -------- --------
Change in cash................................... 889 (81) (390)
Cash--beginning of year.......................... 13 94 484
-------- -------- --------
Cash--end of year................................ $ 902 $ 13 $ 94
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-58
<PAGE>
OCCIDENTAL CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
(1) BASIS OF PRESENTATION AND DESCRIPTION OF THE CONTRIBUTED BUSINESS--
On May 15, 1998, Occidental Petroleum Corporation (Occidental) signed an
agreement with Lyondell Petrochemical Company and Millennium Chemicals Inc. to
effect the proposed contribution of its ethylene, propylene, ethylene oxide and
ethylene glycol derivatives businesses (collectively, the Occidental
Contributed Business) to a joint venture limited partnership called Equistar
Chemicals, LP (Equistar) in return for a 29.5% interest in Equistar, receipt of
approximately $420 million in cash and the assumption by Equistar of
approximately $205 million of Occidental capital lease liabilities.
Under terms of the agreement, on May 15, 1998, Occidental contributed to
Equistar substantially all of the net assets and operations of the Occidental
Contributed Business. The accompanying financial statements include the results
of operations, assets and liabilities of the Occidental Contributed Business
represented by Oxy Petrochemicals Inc., PDG Chemical Inc. and a plant owned by
Occidental Chemical Corporation, which are all indirect subsidiaries of
Occidental Chemical Holding Corporation (OCHC). OCHC is an indirect subsidiary
of Occidental. These financial statements include only the historical results
of operations and net assets that are directly related to the Occidental
Contributed Business. Consequently, the financial position, results of
operations, and cash flows may not be indicative of what would have been
reported if the Occidental Contributed Business had been a separate, stand-
alone entity or had been operated as a part of Equistar during the periods
presented. Additionally, certain assets and liabilities of the Occidental
Contributed Business were retained by Occidental. The retained assets will be
leased to Equistar under terms of the agreement.
Occidental provided certain corporate, general and administrative services
to the Occidental Contributed Business, including legal, financial, marketing
and executive services. Charges for these services were allocated based on the
estimated costs of specific functions performed by Occidental and affiliates
for the Occidental Contributed Business. Management believes the charges, which
amounted to $10.4 million in each of the years 1997, 1996 and 1995, are
reasonable. Such amounts are included in selling, general and administrative
expenses.
The Occidental Contributed Business sells ethylene to affiliated businesses
of Occidental. These sales, reflected at market prices and included in the
accompanying Statements of Operations, were $242 million, $227 million and $474
million for the years ended December 31, 1997, 1996 and 1995, respectively.
Occidental utilizes a centralized cash management system for its operations,
including the Occidental Contributed Business. Cash distributed to or advanced
from Occidental has been reflected in invested capital in the accompanying
balance sheets. In addition, settlement of transactions with other Occidental
affiliates are recorded through invested capital.
(2) SIGNIFICANT ACCOUNTING POLICIES--
Risks and uncertainties--
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date
of the financial
F-59
<PAGE>
OCCIDENTAL CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997, 1996 and 1995
statements. Accordingly, upon settlement, actual results may differ from
estimated amounts, generally not by material amounts. Management believes that
these estimates and assumptions provide a reasonable basis for the fair
presentation of the Occidental Contributed Business' financial position and
results of operations.
Since the Occidental Contributed Business' major products are commodities,
significant changes in the prices of chemical products could have a significant
impact on the Occidental Contributed Business' results of operations for any
particular period.
Environmental liabilities and costs--
Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Reserves for estimated costs that relate to
existing conditions caused by past operations and that do not contribute to
current or future revenue generation are recorded when environmental remedial
efforts are probable and the costs can be reasonably estimated. In determining
the reserves, Occidental uses the most current information available, including
similar past experiences, available technology, regulations in effect, the
timing of remediation and cost-sharing arrangements. The environmental reserves
are based on management's estimate of the most likely cost to be incurred and
are reviewed periodically and adjusted as additional or new information becomes
available. The environmental reserves are included in other noncurrent
liabilities and amounted to $7.9 million and $8.2 million at December 31, 1997
and 1996, respectively.
Income taxes--
The Occidental Contributed Business has been included in the consolidated
U.S. federal income tax return and in certain unitary state income tax returns
of Occidental. A portion of the income tax provision for these returns is
allocated to the Occidental Contributed Business using the same method as a tax
sharing arrangement between OCHC and Occidental. The Occidental Contributed
Business also records state income tax provisions for operations required to be
reported in separate tax returns. The difference between the provision for
income taxes at the U.S. federal statutory rate and the effective tax rate is
primarily due to state income taxes. Liabilities for current and/or deferred
income taxes have been and remain the responsibility of Occidental and,
accordingly, have been included in the Balance Sheets as invested capital.
Fair value of financial instruments--
The fair value of on-balance sheet financial instruments approximates
carrying value. However, the fair value of notes payable to affiliates cannot
be practicably determined due to the related party nature of the balances.
Change in accounting principle--
Effective January 1, 1998, the Occidental Contributed Business adopted the
provisions of Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income." This statement establishes standards for
reporting and display of comprehensive income and its components in a full set
of general purpose financial statements. The implementation of SFAS No. 130 did
not have an impact on the Occidental Contributed Business' results of
operations. The Occidental Contributed Business' comprehensive income was $85.4
million for 1997, $5.9 million for 1996 and $185.7 million for 1995.
F-60
<PAGE>
OCCIDENTAL CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997, 1996 and 1995
(3) RECEIVABLES--
As of December 31, 1997, 1996, and 1995, the Occidental Contributed Business
transferred, with limited recourse, to an Occidental affiliate net domestic
trade receivables under a revolving sale program in connection with the
ultimate sale for cash of an undivided ownership interest in such receivables
by the affiliate. The net trade receivables transferred amounted to $136.4
million and $164.3 million as of December 31, 1997 and 1996, respectively. The
Occidental Contributed Business transferred the receivables to the affiliate to
a noncash transaction that was reflected as a reduction in invested capital.
Occidental retained collection responsibility with respect to the receivables
sold. An interest in newly created receivables is transferred monthly, net of
collections made from customers. Fees related to the sales of receivables under
this program, which are allocated from Occidental, were $8.4 million, $6.8
million and $8.3 million for the years ended December 31, 1997, 1996 and 1995,
respectively, and are included in other expense, net.
Under the terms of the Equistar agreement, Occidental repurchased net
domestic trade receivables of $114.8 million of the Occidental Contributed
Business as of May 15, 1998 and contributed $100.3 million to Equistar.
Other receivables include $3.9 million and $1.7 million as of December 31,
1997 and 1996, respectively, from the equity investee.
(4) INVENTORIES--
Inventories are stated at the lower of cost or market value determined using
the first-in, first-out (FIFO) or weighted-average-cost methods. Inventories
consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Raw materials........................................ $ 55,954 $ 91,824
Materials and supplies............................... 17,666 16,667
Work in process...................................... 9,729 7,635
Finished goods....................................... 59,707 59,541
-------- --------
$143,056 $175,667
======== ========
</TABLE>
(5) EQUITY INVESTMENT--
The Occidental Contributed Business has a fifty percent interest in PD
Glycol, a partnership which manufactures ethylene oxide and ethylene glycol
derivatives at its plant in Beaumont, Texas. The investment, which is accounted
for on the equity method, exceeded the historical underlying equity in net
assets by approximately $43 million at December 31, 1997 and $44 million at
December 31, 1996. The excess is being amortized into income over the estimated
total productive life of the plant.
(6) PROPERTY, PLANT AND EQUIPMENT--
Property additions and major renewals and improvements are capitalized at
cost. Property acquired under a capital lease has been capitalized at the
present value of future minimum lease payments. Depreciation is primarily
provided using the units-of-production method based on estimated total
productive life.
F-61
<PAGE>
OCCIDENTAL CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997, 1996 and 1995
Interest costs incurred in connection with major capital expenditures are
capitalized and amortized over the lives of the related assets. Capitalized
interest is calculated based on the average borrowing rate of Occidental. The
amount of interest capitalized was $637,000 and $639,000 for the years ended
December 31, 1997 and 1996, respectively.
Property, plant and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Land and land improvements........................... $ 81,752 $ 82,164
Buildings............................................ 37,906 37,870
Machinery and equipment.............................. 2,420,446 2,400,202
Property acquired under capital lease................ 350,000 350,000
Construction in progress............................. 46,273 39,561
----------- ----------
2,936,377 2,909,797
Accumulated depreciation and amortization............ (1,105,931) (995,963)
----------- ----------
Property, plant and equipment, net................... $ 1,830,446 $1,913,834
=========== ==========
</TABLE>
Included above is $103.9 million and $106.4 million as of December 31, 1997
and 1996, respectively, of net property, plant and equipment that was retained
by Occidental and will be leased to Equistar under the terms of the agreement
dated May 15, 1998.
(7) OTHER ASSETS--
Other assets consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Catalyst.............................................. $10,502 $10,923
Deferred start-up costs............................... 6,479 7,249
Prepaid pension costs................................. 6,558 --
Other................................................. 7,097 8,367
------- -------
$30,636 $26,539
======= =======
</TABLE>
Catalyst is amortized over estimated lives ranging from 18 months to 3
years. Deferred start-up costs are amortized over a period of 20 years. Other
amortizable assets are written off to income over the estimated periods to be
benefited.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities"
(SOP 98-5), which requires that costs of start-up activities, including
organizational costs, be expensed as incurred. The initial application of the
statement will result in a charge to income for any costs of start-up
activities that have not yet been fully amortized. Occidental will implement
SOP 98-5 effective January 1, 1999.
F-62
<PAGE>
OCCIDENTAL CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997, 1996 and 1995
(8) ACCRUED LIABILITIES--
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Turnaround maintenance................................ $15,356 $17,557
Property taxes and insurance.......................... 25,396 24,206
Capital and purchase reserves......................... 4,319 5,517
Other................................................. 8,910 15,516
------- -------
$53,981 $62,796
======= =======
</TABLE>
Maintenance turnarounds are generally performed every 2 to 5 years.
Occidental utilizes an accrual methodology under which it estimates the project
cost of a turnaround and accrues the cost equally over the years between
turnarounds. Total accruals relating to these future major maintenance projects
were $41.2 million and $22.1 million as of December 31, 1997 and 1996,
respectively, and were included in accrued liabilities as noted above and
deferred credits and other liabilities in the accompanying Balance Sheets.
(9) NOTES PAYABLE TO AFFILIATES--
The financial statements of the Occidental Contributed Business include
several notes payable to Occidental and an affiliate. Accrued interest on these
notes is settled annually through and is included in invested capital at rates
ranging between 6 and 11 percent. Interest expense on notes payable to
affiliates was $93.4 million, $105.8 million and $137.1 million for the years
ended December 31, 1997, 1996 and 1995.
Principal amounts of the notes payable to an affiliate totaling $63.9
million are due on December 31, 1998. As the amounts will be settled either
through invested capital or another note payable to the affiliate, no notes
payable to affiliates have been classified as current in the accompanying
Balance Sheets.
(10) RETIREMENT PLANS AND POSTRETIREMENT BENEFITS--
The Occidental Contributed Business participates in various defined
contribution retirement plans sponsored by Occidental for its salaried,
domestic union and nonunion hourly employees that provide for periodic
contributions by the Occidental Contributed Business based on plan-specific
criteria, such as base pay, age level, and/or employee contributions. The
Occidental Contributed Business contributed and expensed approximately $6
million under the provisions of these plans in each of the years 1997, 1996 and
1995.
Occidental provides medical and dental benefits and life insurance coverage
for certain active, retired and disabled employees and their eligible
dependents. Beginning in 1993, certain salaried participants pay for all
medical cost increases in excess of increases in the Consumer Price Index
(CPI). The benefits generally are funded by Occidental as the benefits are paid
during the year. The cost of providing these benefits is based on claims filed
and insurance premiums paid for the period.
The Occidental Contributed Business' retirement and postretirement defined
benefit plans are accrued based on various assumptions and discount rates, as
described below. The actuarial assumptions used could change in the near term
as a result of changes in expected future trends and other factors which,
depending on the nature of the changes, could cause increases or decreases in
the liabilities accrued.
Retirement plans--
Pension costs for the Occidental Contributed Business' defined benefit
pension plans, determined by independent actuarial valuations, are funded by
payments to trust funds, which are administered by independent
F-63
<PAGE>
OCCIDENTAL CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997, 1996 and 1995
trustees. The components of net pension cost for employees of the Occidental
Contributed Business for the years ended December 31 were as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Service cost--benefits earned during the period..... $ 135 $ 140 $ 121
Interest cost on projected benefit obligation....... 3,154 3,037 2,647
Actual return on plan assets........................ (8,243) (5,116) (5,066)
Net amortization and deferral....................... 5,889 3,251 3,746
------- ------- -------
Net pension cost.................................. $ 935 $ 1,312 $ 1,448
======= ======= =======
</TABLE>
In 1997 and 1996, the Occidental Contributed Business recorded an adjustment
to invested capital of $4.2 million and $1.0 million, respectively, to reflect
the net-of-tax difference between the additional liability required under
pension accounting provisions and the corresponding intangible asset.
The following table sets forth the defined benefit plans funded status and
amounts recognized in the Occidental Contributed Business Balance Sheets at
December 31 (in thousands):
<TABLE>
<CAPTION>
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
---------------- ---------------
1997 1996 1997 1996
------- ------- ------ -------
<S> <C> <C> <C> <C>
Present value of the estimated pension
benefits to be paid in the future:
Vested benefits........................... $33,309 $ -- $5,109 $36,583
Nonvested benefits........................ 5,459 -- 334 6,096
------- ------- ------ -------
Total projected benefit obligations......... 38,768 -- 5,443 42,679
Plan assets at fair value................... 41,769 -- 5,067 37,635
------- ------- ------ -------
Projected benefit obligation in excess of
(less than) plan assets.................... $(3,001) $ -- $ 376 $ 5,044
======= ======= ====== =======
Projected benefit obligation in excess of
(less than) plan assets.................... $(3,001) $ -- $ 376 $ 5,044
Unrecognized prior service cost............. -- -- (489) (767)
Unrecognized net loss....................... (2,324) -- (519) (7,098)
Additional minimum liability(a)............. -- -- 1,008 7,865
------- ------- ------ -------
Pension liability (asset)................. $(5,325) $ -- $ 376 $ 5,044
======= ======= ====== =======
</TABLE>
- --------
(a) A related amount up to the limit allowable under SFAS No. 87 "Employers'
Accounting for Pensions" has been included in other assets. Amounts
exceeding such limits have been charged to invested capital.
The discount rate used in determining the actuarial present value of the
projected benefit obligations was 7.5 percent in 1997 and 1996. The rate of
increase in future compensation levels used in determining the actuarial
present value of the projected benefit obligations was between 4.5 and 5.5
percent in 1997 and 1996. The expected long-term rate of return on assets was 8
percent in 1997 and 1996.
Postretirement benefits--
To reflect the Occidental Contributed Business' participation in the
Occidental plan, the net periodic postretirement benefit costs and the
postretirement benefit obligations are based on an allocation of the Occidental
actuarial study using participant counts and demographic information for the
Occidental Contributed Business for each of the years presented in the tables
below.
The postretirement benefit obligation as of December 31, 1997 was determined
by application of the terms of medical and dental benefits and life insurance
coverage, including the effect of established maximums on
F-64
<PAGE>
OCCIDENTAL CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997, 1996 and 1995
covered costs, together with relevant actuarial assumptions and health care
cost trend rates projected at a CPI increase of 3 percent in 1997 (except for
union employees). For union employees, the health care cost trend rates were
projected at annual rates ranging ratably from 8.5 percent in 1997 to 5 percent
through the year 2004 and level thereafter. The effect of a one percent annual
increase in these assumed cost trend rates would increase the accumulated
postretirement benefit obligation by approximately $800,000 and the annual
service and interest costs by approximately $100,000 in 1997. The weighted
average discount rate used in determining the accumulated postretirement
benefit obligation as of December 31, 1997 was 7.5 percent. The plans are
unfunded.
The following table sets forth the postretirement plans' combined status,
reconciled with the amounts included in the accompanying Balance Sheets in
deferred credits and other liabilities at December 31 (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees...................................................... $ 5,751 $ 6,377
Fully eligible active plan participants....................... 4,970 5,012
Other active plan participants................................ 7,658 7,516
------- -------
Total accumulated postretirement benefit obligation............. 18,379 18,905
Unrecognized net gain (loss).................................. 1,725 (202)
------- -------
Allocated accrued postretirement benefit cost............... $20,104 $18,703
======= =======
</TABLE>
Allocated net periodic postretirement benefit cost for the employees of the
Occidental Contributed Business for the years ended December 31, 1997, 1996 and
1995 included the following components (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Service cost-benefits attributed to service during the
period................................................... $ 741 $ 697 $ 678
Interest cost on accumulated postretirement benefit
obligation............................................... 1,391 1,422 1,396
Net amortization and deferral............................. -- -- 39
------ ------ ------
Allocated net periodic postretirement benefit cost...... $2,132 $2,119 $2,113
====== ====== ======
</TABLE>
Under terms of the Equistar agreement, Occidental will retain liabilities
related to retirees as of May 15, 1998.
(11) LEASE COMMITMENTS--
At December 31, 1997, future net minimum lease payments for capital and
operating leases are as follows (in thousands):
<TABLE>
<CAPTION>
Capital Operating
-------- ---------
<S> <C> <C>
1998........................................................ $ 13,179 $16,115
1999........................................................ 13,179 5,986
2000........................................................ 208,286 5,339
2001........................................................ -- 4,886
2002........................................................ -- 3,765
Thereafter.................................................. -- 22,535
-------- -------
Total minimum lease payments................................ 234,644 $58,626
=======
Imputed interest............................................ (29,644)
--------
Present value of net minimum lease payments................. $205,000
========
</TABLE>
F-65
<PAGE>
OCCIDENTAL CONTRIBUTED BUSINESS
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997, 1996 and 1995
Rental expense for operating leases, excluding leases with terms of one year
or less, was approximately $17 million, $17 million and $18 million for the
years ended December 31, 1997, 1996 and 1995, respectively.
(12) COMMITMENTS AND CONTINGENCIES--
OCHC has been named as defendant or as potentially responsible party with
regard to the Occidental Contributed Business in a number of lawsuits, claims
and proceedings, including governmental proceedings under the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA) and
corresponding state acts. These governmental proceedings seek funding,
remediation and, in some cases, compensation for alleged property damage,
punitive damages and civil penalties, aggregating substantial amounts. OCHC is
usually one of many companies in these proceedings, and has to date been
successful in sharing response costs with other financially sound companies.
OCHC has accrued reserves with regard to the Occidental Contributed Business at
the most likely cost to be incurred in those proceedings where it is probable
that OCHC will incur remediation costs which can be reasonably estimated.
It is impossible at this time to determine the ultimate liabilities that
OCHC may incur with regard to the Occidental Contributed Business resulting
from the foregoing lawsuits, claims and proceedings. Certain of these matters
may involve substantial amounts, and if these were to be ultimately resolved
unfavorably to the full amount of their maximum potential exposure, an event
not currently anticipated, it is possible that such an event could have a
material adverse effect upon the financial position or results of operations of
the Occidental Contributed Business. However, in management's opinion, after
taking into account reserves and indemnities, it is unlikely that any of the
foregoing matters will have a material adverse effect upon the financial
position or results of operations of the Occidental Contributed Business.
Under the terms of the agreement with Equistar, Occidental has agreed to
indemnify Equistar for any present or future contingent liabilities arising
within a seven year period after May 15, 1998 which are attributable to the
Occidental Contributed Business's operations prior to May 15, 1998 in excess of
$7 million.
The Occidental Contributed Business has certain other commitments to
purchase electrical power, raw materials and other potential obligations, all
in the ordinary course of business.
(13) SUBSEQUENT EVENT--
On January 11, 1999, CITGO Petroleum Corporation (CITGO) initiated a legal
action against Occidental Chemical Corporation (OCC) in the United States
District Court for the Northern District of Oklahoma seeking compensatory and
exemplary damages in an unspecified amount. It alleges that OCC breached the
provisions of a Plant Site Right of First Refusal Agreement pertaining to the
Lake Charles plant dated August 31, 1983, between CITGO and Cities Service Oil
and Gas Corporation, predecessor in interest to OCC. It is impossible at this
time to determine any ultimate legal liabilities that may arise from this
lawsuit. The CITGO complaint was not filed against Equistar and seeks only
money damages from OCC. In management's opinion, the lawsuit is not likely to
have a material adverse effect upon the financial position of the Occidental
Contributed Business.
F-66
<PAGE>
- -------------------------------------------------------------------------------
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you
with different information.
We are not offering to exchange notes in any jurisdiction where the offer
is not permitted.
We do not claim the accuracy of the information in this prospectus as of
any date other than the date stated on the cover.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
<TABLE>
<S> <C>
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 7
Cautionary Statements..................................................... 11
Forward Looking Statements................................................ 11
Use of Proceeds........................................................... 11
Capitalization............................................................ 12
The Partners of Equistar.................................................. 13
Selected Historical and Pro Forma Financial and Operating Data of
Equistar................................................................. 15
Selected Historical Financial and Operating Data of the Lyondell
Contributed Business..................................................... 17
Selected Historical Financial and Operating Data of the Millennium
Contributed Business..................................................... 19
Equistar Unaudited Pro Forma Income Statement Data for the Year Ended
December 31, 1998........................................................ 21
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 22
Disclosure of Market Risk................................................. 33
Description of Equistar's Business........................................ 34
Management................................................................ 48
Compensation.............................................................. 51
Ownership................................................................. 57
Description of the Partnership Agreement.................................. 58
Description of the Parent Agreement....................................... 66
Related Transactions...................................................... 70
The Exchange Offers....................................................... 74
Description of the New Notes.............................................. 84
Federal Income Tax Considerations......................................... 92
The Exchange and Registration Rights Agreement............................ 92
Book-Entry; Delivery and Form............................................. 94
Plan of Distribution...................................................... 96
Legal Matters............................................................. 97
Independent Accountants................................................... 98
Available Information..................................................... 98
Index to Financial Statements............................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PROSPECTUS
Equistar Chemicals, LP
Equistar Funding Corporation
$900,000,000
Offers to Exchange
ALL OUTSTANDING
8 1/2% Notes due 2004
8 3/4% Notes due 2009
for
REGISTERED
8 1/2% Notes due 2004
8 3/4% Notes due 2009
- -------------------------------------------------------------------------------
<PAGE>
PART II
Information Not Required in Prospectus
ITEM 20. Indemnification of Directors and Officers
The partnership governance committee has provided for the indemnification of
Equistar's executive officers. Executives are entitled to indemnification with
respect to all matters to which Section 145 of the General Corporation Law of
the State of Delaware may relate, as if Section 145 were applicable to a
partnership. The right to indemnification and payment of expenses incurred in
defending a proceeding in advance of its final disposition is not exclusive of
any other right which the executives may have or hereafter acquire under any
statute, any agreement or otherwise, both as to action in that executive's
official capacity and as to action in any other capacity by holding office. The
indemnification right continues after the executive ceases to serve as an
Equistar officer or to serve another entity at the request of Equistar.
Section 145 of the General Corporation Law of the State of Delaware provides
as follows:
(a) A corporation shall have power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by the
person in connection with such action, suit or proceeding if the person
acted in good faith and in a manner the person reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe
the person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
the person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the person's conduct was
unlawful.
(b) A corporation shall have power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in
a manner the person reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.
II-1
<PAGE>
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the present or former director, officer, employee or agent is proper in
the circumstances because the person has met the applicable standard of
conduct set forth in subsections (a) and (b) of this section. Such
determination shall be made, with respect to a person who is a director or
officer at the time of such determination, (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) by a committee of such directors
designated by majority vote of such directors, even though less than a
quorum, or (3) if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion, or (4) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative, or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the corporation as authorized in this
section. Such expenses (including attorneys' fees) incurred by former
directors and officers and other employees and agents may be so paid upon
such terms and conditions, if any, as the corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in such person's official capacity and as to action in another capacity
while holding such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not
the corporation would have the power to indemnify such person against such
liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to an employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
II-2
<PAGE>
(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees).
Equistar may elect to enter into indemnification agreements with each of its
executive officers and with other persons as the partnership governance
committee may designate.
In addition, Equistar may elect to maintain liability insurance to protect
itself and any executive officer of Equistar or another partnership,
corporation, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not Equistar would have the power to indemnify
that person against any expense, liability or loss under the laws of the State
of Delaware.
ITEM 21. Exhibits
<TABLE>
<CAPTION>
Exhibit No. Exhibit
<C> <S>
3.1 Certificate of Limited Partnership of Equistar Chemicals, LP dated
as of October 17, 1997
3.2 Certificates of Amendment to the Certificate of Limited
Partnership of Equistar Chemicals, LP dated as of May 15, 1998
3.3 Amended and Restated Limited Partnership Agreement of Equistar
Chemicals, LP dated as of May 15, 1998, as amended
3.3(a) First Amendment to Amended and Restated Limited Partnership
Agreement of Equistar Chemicals, LP dated as of June 30, 1998
3.4 Certificate of Incorporation of Equistar Funding Corporation dated
as of January 22, 1999
3.5 By-Laws of Equistar Funding Corporation dated as of January 22,
1999
4.1 Exchange and Registration Rights Agreement among Equistar
Chemicals, LP, Equistar Funding Corporation, Chase Securities
Inc., for themselves and the other Initial Purchasers (except
NationsBanc Montgomery Securities LLC) and NationsBanc Montgomery
Securities LLC, for themselves and the other Initial Purchasers
(except Chase Securities Inc.) dated as of February 9, 1999
4.2 Indenture among Equistar Chemicals, LP, Equistar Funding
Corporation and The Bank of New York, as Trustee, dated as of
January 15, 1999
4.2(a) First Supplemental Indenture dated as of February 16, 1999 among
Equistar Chemicals, LP, Equistar Funding Corporation and The Bank
of New York, Trustee
4.2(b) Form of Note (attached as Exhibit A to the First Supplemental
Indenture dated as of February 16, 1999 among Equistar Chemicals,
LP, Equistar Funding Corporation and The Bank of New York,
Trustee)
*4.2(c) Form of Second Supplemental Indenture among Equistar Chemicals,
LP, Equistar Funding Corporation and The Bank of New York, as
Trustee
*4.2(d) Form of Note (attached as Exhibit A to the Form of Second
Supplemental Indenture among Equistar Chemicals, LP, Equistar
Funding Corporation and The Bank of New York, as Trustee, filed
herewith as Exhibit 4.2(c))
4.3 $1.25 billion Revolving Credit Agreement among Equistar Chemicals,
LP, as Borrower, Millennium America Inc., as Guarantor, and the
Lenders party thereto dated November 25, 1997
4.3(a) Amended and Restated Credit Agreement dated as of November 25,
1997, as amended and restated February 5, 1999, among Equistar
Chemicals, LP, as Borrower, Millennium America Inc., as Guarantor
and the Lenders party thereto
4.4 Indenture between Lyondell Petrochemical Company and Texas
Commerce Bank National Association, as Trustee, dated as of May
31, 1989
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
4.4(a) First Supplemental Indenture dated as of May 31, 1989 between
Lyondell Petrochemical Company and Texas Commerce Bank National
Association, Trustee, to the Indenture dated as of May 31, 1989
4.4(b) Second Supplemental Indenture dated as of December 1, 1997 among
Lyondell Petrochemical Company, Equistar Chemicals, LP and Texas
Commerce Bank National Association, Trustee, to the Indenture dated
as of May 31, 1989
4.5 Indenture between Lyondell Petrochemical Company and Continental
Bank, National Association, as Trustee, dated as of March 10, 1992
4.5(a) First Supplemental Indenture dated as of March 10, 1992 between
Lyondell Petrochemical Company and Continental Bank, National
Association, as Trustee, to the Indenture dated as of March 10, 1992
4.5(b) Second Supplemental Indenture dated as of December 1, 1997 among
Lyondell Petrochemical Company, Equistar Chemicals, LP and First
Trust National Association, Trustee, to the Indenture dated as of
March 10, 1992
4.6 Indenture between Lyondell Petrochemical Company and Texas Commerce
Bank National Association, as Trustee, dated as of January 29, 1996
4.6(a) First Supplemental Indenture dated as of February 15, 1996 between
Lyondell Petrochemical Company and Texas Commerce Bank National
Association, Trustee, to the Indenture dated as of January 29, 1996
4.6(b) Second Supplemental Indenture dated as of December 1, 1997 among
Lyondell Petrochemical Company, Equistar Chemicals, LP and Texas
Commerce Bank National Association, Trustee, to the Indenture dated
as of January 29, 1996
Equistar is a party to several debt instruments under which the total amount of
securities authorized does not exceed 10% of the total assets of Equistar and
its subsidiaries on a consolidated basis. Pursuant to paragraph 4(iii)(A) of
Item 601(b) of Registration S-K, Equistar agrees to furnish a copy of such
instruments to the Commission upon request.
*5 Exhibit 5 Opinion of Baker & Botts, L.L.P. with respect to the
legality of the new notes
EXECUTIVE COMPENSATION:
10.1 Form of Severance Agreement between Lyondell Petrochemical Company
and Former Lyondell Executives
10.2 Form of Severance Agreement between Millennium Petrochemicals Inc.
and Former Millennium Executives
*10.3 Equistar Chemicals, LP Bonus Plan
*10.4 Equistar Chemicals, LP Supplemental Executive Retirement Plan
*10.5 Equistar Chemicals, LP Long-Term Incentive Plan
10.6 Summary Description of Equistar Chemicals, LP Executive
Supplementary Savings Plan
10.7 Summary Description of Equistar Chemicals, LP Executive Medical Plan
10.8 Summary Description of Equistar Chemicals, LP Salary Deferral Plan
10.9 Summary Description of Equistar Chemicals, LP Executive Disability
Plan
10.10 Summary Description of Equistar Chemicals, LP Executive Life
Insurance Plan
</TABLE>
II-4
<PAGE>
OTHER MATERIAL CONTRACTS:
<TABLE>
<C> <S>
10.11 Asset Contribution Agreement among Lyondell Chemical Company,
Lyondell Petrochemical LP and Equistar Chemicals, LP dated as of
December 1, 1997
10.11(a) First Amendment dated as of May 15, 1998 to the Asset Contribution
Agreement among Lyondell Chemicals Company, Lyondell Petrochemicals
LP and Equistar Chemicals, LP dated as of December 1, 1997
10.12 Asset Contribution Agreement among Millennium Petrochemicals Inc.,
Millennium LP and Equistar Chemicals, LP dated as of December 1,
1997
10.12(a) First Amendment dated as of May 15, 1998 to the Asset Contribution
Agreement among Millennium Petrochemicals Inc., Millennium LP and
Equistar Chemicals, LP dated as of December 1, 1997
10.13 Master Transaction Agreement among Equistar Chemicals, LP,
Occidental Petroleum Corporation, Lyondell Chemical Company and
Millennium Chemicals Inc. dated as of May 15, 1998
10.14 Agreement and Plan of Merger and Asset Contribution among
Occidental Petrochem Partner 1, Inc., Occidental Petrochem Partner
2, Inc., Oxy Petrochemicals Inc., PDG Chemical Inc. and Equistar
Chemicals, LP dated as of May 15, 1998
10.15 Amended and Restated Parent Agreement among Occidental Chemical
Corporation, Oxy CH Corporation, Occidental Petroleum Corporation,
Lyondell Petrochemical Company, Millennium Chemicals Inc. and
Equistar Chemicals, LP dated as of May 15, 1998
10.15(a) First Amendment dated as of June 30, 1998 to the Amended and
Restated Parent Agreement among Occidental Chemical Corporation,
Oxy CH Corporation, Occidental Petroleum Corporation, Lyondell
Petrochemical Company, Millennium Chemicals Inc. and Equistar
Chemicals, LP dated as of May 15, 1998
10.15(b) Assignment and Assumption Agreement with respect to the Amended and
Restated Parent Agreement executed as of June 19, 1998
10.16 Ethylene Sales Agreement between Equistar Chemicals, LP and
Occidental Chemical Corporation dated as of May 15, 1998
11 Statement Concerning Computation of Ratios
21 Subsidiaries of Equistar Chemicals, LP
23.1 Consent of Arthur Andersen LLP
23.2 Consents of PricewaterhouseCoopers LLP
*23.3 Consent of Baker & Botts, L.L.P. (included in Exhibit 5 Opinion)
24.1 Power of Attorney for Equistar Chemicals, LP
24.2 Power of Attorney for Equistar Funding Corporation
24.3 Power of Attorney for Lyondell Petrochemical GP Inc.
24.4 Power of Attorney for Millennium Petrochemicals Inc.
24.5 Power of Attorney for Occidental Petrochem Partner GP, Inc.
25.1 T-1 Statement of Eligibility of Trustee for the 8 1/2% notes
25.2 T-1 Statement of Eligibility of Trustee for the 8 3/4% notes
27 Financial Data Schedule
*99.1 Form of Instruction to Registered Holder and/or Book Entry Transfer
Participant from Beneficial Owner for Tender of Notes
*99.2 Form of Letter to The Depository Trust Company Participants for
Tender of Notes
*99.3 Form of Notice of Guaranteed Delivery
*99.4 Form of Transmittal Letter for Tender of Notes
</TABLE>
- --------
* To be filed by amendment.
II-5
<PAGE>
ITEM 22. Undertakings
1. The undersigned registrant hereby undertakes
. to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to
--include any prospectus required by section 10(a)(3) of the
Securities Act of 1933
--include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to information in the registration statement
--reflect in the prospectus any facts or events arising after the
effective date of the registration statement or its most recent post-
effective amendment which, individually or in the aggregate,
represent a fundamental change in the information shown in the
registration statement
Any increase or decrease in volume of securities offered if the total
dollar value of securities offered would not exceed that which was
registered and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus
filed with the SEC under Rule 424(b) of the Securities Act if, in the
aggregate, the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price stated in the
"Calculation of Registration Fee" table in the effective registration
statement
. that, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of securities at that time shall be deemed
to be the initial bona fide offering
. to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering
2. The undersigned registrant hereby undertakes to provide to the
underwriter at the closing, specified in the underwriting agreement,
certificates in such denominations and registered in such names as
required by the underwriters to permit prompt delivery to each
purchaser.
3. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
4. The undersigned registrant hereby undertakes
. to respond to requests for information that is incorporated by
reference into the prospectus under items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of a request, and to send
the incorporated documents by first-class mail or other equally
prompt means. This undertaking includes information contained in
documents filed after the effective date of the registration
statement through the date of responding to the request
5. The undersigned registrant hereby undertakes to supply by means of a
posteffective amendment all information concerning a transaction, and
the company being acquired therein, that was not the subject of and
included in the registration statement when it became effective.
II-6
<PAGE>
SIGNATURES
Under the requirements of the Securities Act of 1933, the registrants have
duly caused this Registration Statement or amendment thereto to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Houston, State of Texas, on April 16, 1999.
EQUISTAR CHEMICALS, LP, by its General
Partner
LYONDELL PETROCHEMICAL G.P. INC.
By: /s/ Dan F. Smith
--------------------------------------
Name: Dan F. Smith
------------------------------------
Title: President and Chief Executive
Officer
------------------------------------
Under the requirements of the Securities Act of 1933, this Registration
Statement or amendment thereto has been signed by the following persons, in the
capacities indicated on April 16, 1999.
Name Title
/s/ Dan F. Smith President and Chief Executive
- ------------------------------------- Officer and Director
Name: Dan F. Smith
* Executive Vice President and
- ------------------------------------- Director
Name: Jeffrey R. Pendergraft
* Executive Vice President and
- ------------------------------------- Director
Name: T. Kevin DeNicola
/s/ Dan F. Smith
*By:_________________________________
(Dan F. Smith, as Attorney-in-fact)
II-7
<PAGE>
SIGNATURES
Under the requirements of the Securities Act of 1933, the registrants have
duly caused this Registration Statement or amendment thereto to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Houston, State of Texas, on April 16, 1999.
EQUISTAR CHEMICALS, LP, by its General
Partner
MILLENNIUM PETROCHEMICALS GP LLC
By:Millennium Petrochemicals Inc.
By: /s/ C. William Carmean
---------------------------------
Name: C. William Carmean
---------------------------------
Title: Vice President
---------------------------------
Under the requirements of the Securities Act of 1933, this Registration
Statement or amendment thereto has been signed by the following persons, in the
capacities indicated on April 16, 1999.
Name Title
* Director
- -------------------------------------
William M. Landuyt
* Director
- -------------------------------------
George H. Hempstead, III
* Director, President and Chief
- ------------------------------------- Executive Officer
Peter P. Hanik
* Vice President, Principal Accounting
_____________________________________ Officer and Principal Financial
Charles A. Daly Officer
/s/ C. William Carmean
*By: ________________________________
(C. William Carmean, as Attorney-in-
fact)
II-8
<PAGE>
SIGNATURES
Under the requirements of the Securities Act of 1933, the registrants have
duly caused this Registration Statement or amendment thereto to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Houston, State of Texas, on April 16, 1999.
EQUISTAR CHEMICALS, LP, by its General
Partner
OCCIDENTAL PETROCHEM PARTNER GP, INC.
By: /s/ Linda S. Peterson
--------------------------------------
Name: Linda S. Peterson
------------------------------------
Title: Vice President and Assistant
Secretary
------------------------------------
Under the requirements of the Securities Act of 1933, this Registration
Statement or amendment thereto has been signed by the following persons, in the
capacities indicated on April 16, 1999.
Name Title
* Executive Vice President, Chief
- ------------------------------------- Financial Officer and Director
Richard A. Lorraine (Principal Accounting Officer)
* President and Director
- -------------------------------------
J. Roger Hirl
* Secretary, Senior Vice President and
- ------------------------------------- Director
Keith McDole
*By: /s/ Scott A. King
-----------------------------------
(Scott A. King, as Attorney-in-fact)
II-9
<PAGE>
SIGNATURES
Under the requirements of the Securities Act of 1933, this Registration
Statement or amendment thereto has been signed by the following persons in the
capacities indicated on April 16, 1999.
Name Title
/s/ Dan F. Smith Chief Executive Officer, Equistar
- ------------------------------------- Chemicals, LP
Dan F. Smith
(Chief Executive Officer)
/s/ Kelvin R. Collard Vice President and Controller,
- ------------------------------------- Equistar Chemicals, LP
Kelvin R. Collard
(Principal Financial and Accounting Officer)
II-10
<PAGE>
SIGNATURES
Under the requirements of the Securities Act of 1933, the registrants have
duly caused this Registration Statement or amendment thereto to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Houston, State of Texas, on April 16, 1999.
EQUISTAR FUNDING CORPORATION
By: /s/ Kelvin R. Collard
--------------------------------------
Name: Kelvin R. Collard
------------------------------------
Title: Vice President and Controller
------------------------------------
Under the requirements of the Securities Act of 1933, this Registration
Statement or amendment thereto has been signed by the following persons, in the
capacities indicated on April 16, 1999.
Name Title
/s/ Dan F. Smith Chief Executive Officer and Director
- -------------------------------------
Dan F. Smith
(Chief Executive Officer)
/s/ Eugene R. Allspach President and Chief Operating
- ------------------------------------- Officer and Director
Eugene R. Allspach
/s/ Kelvin R. Collard Vice President and Controller and
- ------------------------------------- Director
Kelvin R. Collard
(Principal Financial and Accounting Officer)
II-11
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF LIMITED PARTNERSHIP
OF
EQUISTAR CHEMICALS, LP
This Certificate of Limited Partnership of Equistar Chemicals, LP (the
"Partnership") is being executed and filed by the undersigned, the two general
partners of the Partnership (the "General Partners"), to form a limited
partnership under the Delaware Revised Uniform Limited Partnership Act.
1. The name of the limited partnership is Equistar Chemicals, LP.
2. The address of the registered office of the Partnership in the State
of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, New
Castle County, Delaware 19801, and the name and address of the registered agent
for service of process on the Partnership in the State of Delaware is The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801.
3. The name and business address of each of the General Partners is:
Lyondell Petrochemical G.P. Inc.
1221 McKinney
Suite 1600
Houston, Texas 77010
Millennium Petrochemicals GP LLC
Meadowood Shopping Center
2664 Capitol Trail
Newark, Delaware 19711
-1-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has hereunto set its hand
this 17th day of October, 1997.
Lyondell Petrochemical G.P. Inc.
By: /s/ Jeffrey R. Pendergraft
---------------------------------------
Name: Jeffrey R. Pendergraft
-----------------------------------
Title: Executive Vice President
----------------------------------
Millennium Petrochemicals GP LLC
By: /s/ George H. Hempstead
---------------------------------------
Name: George H. Hempstead
-----------------------------------
Title: Senior Vice President
----------------------------------
-2-
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT TO THE
CERTIFICATE OF LIMITED PARTNERSHIP OF
EQUISTAR CHEMICALS, LP
Pursuant to the provisions of Section 17-202 of the Delaware Revised
Uniform Limited Partnership Act, this Certificate of Amendment to the
Certificate of Limited Partnership of Equistar Chemicals, LP (the
"Partnership"), is being duly executed and filed by Lyondell Petrochemical G.P.
Inc., a Delaware corporation and a general partner of the Partnership and by PDG
Chemical Inc., a Delaware corporation and a newly admitted general partner of
the Partnership.
1. Name. The name of the limited partnership is Equistar Chemicals, LP.
----
2. Amendment. The Certificate of Limited Partnership of the Partnership
---------
is hereby amended to provide that PDG Chemical Inc. has been admitted as a
general partner of the Partnership. The business address of PDG Chemical
Inc. is:
c/o Occidental Chemical Corporation
5005 LBJ Freeway
Dallas, Texas 75244
Attn: Senior Vice President and General Counsel
Dated: May 15, 1998
Lyondell Petrochemical G.P. Inc.
By: /s/ Dan F. Smith
--------------------------------
Name: Dan F. Smith
Title: President and Chief Executive Officer
PDG Chemical Inc.
By: /s/ R.J. Schuh
--------------------------------
Name: R.J. Schuh
Title: President
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
CERTIFICATE OF LIMITED PARTNERSHIP OF
EQUISTAR CHEMICALS, LP
Pursuant to the provisions of Section 17-202 of the Delaware Revised
Uniform Limited Partnership Act, this Certificate of Amendment to the
Certificate of Limited Partnership of Equistar Chemicals, LP (the
"Partnership"), is being duly executed and filed by Lyondell Petrochemical G.P.
Inc., a Delaware corporation and a general partner of the Partnership and by PDG
Chemical Inc., a Delaware corporation and a newly admitted general partner of
the Partnership.
1. Name. The name of the limited partnership is Equistar Chemicals, LP.
----
2. Amendment. The Certificate of Limited Partnership of the Partnership
---------
is hereby amended to replace the general partner, PDG Chemical Inc., with
Occidental Petrochem Partner GP, Inc. The address of Occidental Petrochem
Partner GP, Inc. is:
c/o Occidental Chemical Corporation
5005 LBJ Freeway
Dallas, Texas 75244
Attn: Senior Vice President and General Counsel
Dated: September 14, 1998
Lyondell Petrochemical G.P. Inc.
By: /s/ Kerry Galvin
--------------------------------
Name: Kerry Galvin
Title: Vice President and Secretary
Occidental Petrochem Partner GP, Inc.
By: /s/ Linda S. Peterson
--------------------------------
Name: Linda S. Peterson
Title: Assistant Secretary
<PAGE>
EXHIBIT 3.3
CONFORMED COPY
AMENDED AND RESTATED
LIMITED PARTNERSHIP
AGREEMENT
OF
EQUISTAR CHEMICALS, LP
________________________________________________________________________________
ORGANIZED UNDER THE DELAWARE
REVISED UNIFORM LIMITED PARTNERSHIP ACT
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 1 ORGANIZATION MATTERS................................................... 2
1.1 Formation of Partnership; Amended and Restated Agreement............... 2
1.2 Name................................................................... 2
1.3 Business Offices....................................................... 2
1.4 Purpose and Business................................................... 2
1.5 Filings................................................................ 3
1.6 Power of Attorney...................................................... 3
1.7 Term................................................................... 3
SECTION 2 CAPITAL CONTRIBUTIONS.................................................. 4
2.1 Acquisition of Units; Holdings of Initial Partners..................... 4
2.2 Transaction Costs...................................................... 4
2.3 Property Contributions................................................. 4
2.4 Other Contributions.................................................... 5
2.5 Capital Accounts....................................................... 5
2.6 No Return of or on Capital............................................. 6
2.7 Partner Loans.......................................................... 6
2.8 Administration and Investment of Funds................................. 6
SECTION 3 DISTRIBUTIONS.......................................................... 6
3.1 Operating Distributions................................................ 6
3.2 Liquidating Distributions.............................................. 7
3.3 Withholding............................................................ 7
3.4 Offset................................................................. 8
SECTION 4 BOOK AND TAX ALLOCATIONS............................................... 8
4.1 General Book Allocations............................................... 8
4.2 Change in Partner's Units.............................................. 9
4.3 Deficit Capital Account and Nonrecourse Debt Rules..................... 9
4.4 Federal Tax Allocations................................................ 11
4.5 Other Tax Allocations.................................................. 12
SECTION 5 ACCOUNTING, FINANCIAL REPORTING AND TAX MATTERS........................ 12
5.1 Fiscal Year............................................................ 12
5.2 Method of Accounting for Financial Reporting Purposes.................. 12
5.3 Books and Records; Right of Partners to Audit.......................... 12
5.4 Reports and Financial Statements....................................... 12
5.5 Method of Accounting for Book and Tax Purposes......................... 13
5.6 Taxation............................................................... 13
5.7 Delegation............................................................. 15
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 6 MANAGEMENT............................................................. 15
6.1 Partnership Governance Committee....................................... 15
6.2 Limitations on Authority of General Partners........................... 16
6.3 Lack of Authority of Persons Other Than General Partners and Officers.. 16
6.4 Composition of Partnership Governance Committee........................ 17
6.5 Partnership Governance Committee Meetings.............................. 18
6.6 Partnership Governance Committee Quorum and General Voting
Requirement............................................................ 19
6.7 Partnership Governance Committee Unanimous Voting Requirements......... 19
6.8 Control of Interested Partner Issues................................... 22
6.9 Auxiliary Committees................................................... 23
6.10 Certain Limitations on Partner Representatives......................... 23
SECTION 7 OFFICERS AND EMPLOYEES................................................. 24
7.1 Partnership Officers................................................... 24
7.2 Selection and Term of Executive Officers............................... 24
7.3 Removal of Executive Officers.......................................... 25
7.4 Duties................................................................. 25
7.5 CEO.................................................................... 26
7.6 Other Officers......................................................... 26
7.7 Secretary.............................................................. 27
7.8 Salaries............................................................... 27
7.9 Delegation............................................................. 27
7.10 Employee Hirings....................................................... 27
7.11 General Authority...................................................... 27
SECTION 8 STRATEGIC PLANS, ANNUAL BUDGETS AND LOANS.............................. 28
8.1 Strategic Plan......................................................... 28
8.2 Annual Budget.......................................................... 28
8.3 Funding of Partnership Expenses........................................ 29
8.4 Implementation of Budgets and Discretionary Expenditures by CEO........ 29
8.5 Strategic Plan Deadlock................................................ 30
8.6 Loans.................................................................. 30
SECTION 9 RIGHTS OF PARTNERS..................................................... 32
9.1 Delegation and Contracts with Related Parties.......................... 32
9.2 General Authority...................................................... 32
9.3 Limitation on Fiduciary Duty; Non-Competition.......................... 33
9.4 Limited Partners....................................................... 35
9.5 Partner Covenants...................................................... 35
9.6 Special Purpose Entities............................................... 35
SECTION 10 TRANSFERS AND PLEDGES.................................................. 36
10.1 Restrictions on Transfer and Prohibition on Pledge..................... 36
10.2 Right of First Option.................................................. 36
10.3 Inclusion of General or Limited Partner Units.......................... 38
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
10.4 Rights of Transferee................................................... 38
10.5 Effective Date of Transfer............................................. 38
10.6 Transfer to Wholly Owned Affiliate..................................... 39
10.7 Invalid Transfer....................................................... 39
SECTION 11 DEFAULT................................................................ 39
11.1 Default................................................................ 39
11.2 Remedies for Default................................................... 40
11.3 Purchase of Defaulting Partners' Units................................. 41
11.4 Liquidation............................................................ 41
11.5 Certain Consequences of Default........................................ 42
SECTION 12 DISSOLUTION, LIQUIDATION AND TERMINATION............................... 42
12.1 Dissolution and Termination............................................ 42
12.2 Procedures Upon Dissolution............................................ 42
12.3 Termination of the Partnership......................................... 44
12.4 Asset and Liability Statement.......................................... 44
SECTION 13 MISCELLANEOUS.......................................................... 44
13.1 Confidentiality and Use of Information................................. 44
13.2 Indemnification........................................................ 45
13.3 Third Party Claim Reimbursement........................................ 48
13.4 Dispute Resolution..................................................... 49
13.5 EXTENT OF LIMITATION OF LIABILITY, INDEMNIFICATION,
ETC.................................................................... 49
13.6 Further Assurances..................................................... 49
13.7 Successors and Assigns................................................. 49
13.8 Benefits of Agreement Restricted to the Parties........................ 49
13.9 Notices................................................................ 49
13.10 [Reserved]............................................................. 50
13.11 Severability........................................................... 50
13.12 Construction........................................................... 50
13.13 Counterparts........................................................... 50
13.14 Waiver of Right to Partition........................................... 51
13.15 Governing Law.......................................................... 51
13.16 Jurisdiction; Consent to Service of Process; Waiver.................... 51
13.17 Expenses............................................................... 51
13.18 Waiver of Jury Trial................................................... 51
13.19 Payment Terms and Interest Calculations................................ 51
13.20 Usury Savings Clause................................................... 52
13.21 Other Waivers.......................................................... 52
13.22 Special Joinder by Millennium America.................................. 52
13.23 Amendment.............................................................. 52
SECTION 14 LAKE CHARLES FACILITY.................................................. 53
14.1 Lease Not in Force and Effect.......................................... 53
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
14.2 LC Partnership Provisions.............................................. 53
14.3 No Rebuilding Termination.............................................. 54
14.4 Other Redemption....................................................... 54
</TABLE>
APPENDICES
APPENDIX A - Defined Terms
APPENDIX B - Partnership Financial Statements and Reports
APPENDIX C - Executive Officers
APPENDIX D - Dispute Resolution Procedures
APPENDIX E - Division of Partnership Business
SCHEDULES
Schedule 2.3(d) - Capital Accounts
-iv-
<PAGE>
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
EQUISTAR CHEMICALS, LP
This Amended and Restated Limited Partnership Agreement of Equistar
Chemicals, LP dated May 15, 1998 is entered into by and among Lyondell
Petrochemical G.P. Inc., a Delaware corporation ("Lyondell GP"), Lyondell
Petrochemical L.P. Inc., a Delaware corporation ("Lyondell LP"), Millennium
Petrochemicals GP LLC, a Delaware limited liability company ("Millennium GP"),
Millennium Petrochemicals LP LLC, a Delaware limited liability company
("Millennium LP"), PDG Chemical Inc., a Delaware corporation ("Occidental GP"),
Occidental Petrochem Partner 1, Inc., a Delaware corporation ("Occidental
LP1"), and Occidental Petrochem Partner 2, Inc., a Delaware corporation
("Occidental LP2," and together with Occidental LP1, "Occidental LP").
The definitions of capitalized terms used in this Agreement, including the
appendices hereto, are set forth in Appendix A hereto.
----------
WHEREAS, Lyondell GP, Lyondell LP, Millennium GP and Millennium LP
(together, the "Initial Partners") entered into the Limited Partnership
Agreement of Equistar Chemicals, LP dated October 10, 1997 (the "Initial
Agreement"), pursuant to the Initial Master Transaction Agreement between
Lyondell Petrochemical Company, a Delaware corporation ("Lyondell"), the
ultimate parent entity of each of Lyondell GP and Lyondell LP, and Millennium
Chemicals Inc., a Delaware corporation ("Millennium"), the ultimate parent
entity of each of Millennium GP and Millennium LP;
WHEREAS, the Initial Partners contributed their Initial Assets to the
Partnership on the Initial Closing Date and the Initial Related Agreements
relating to the Partnership and their Contributed Businesses were entered into,
all as provided in the Initial Master Transaction Agreement;
WHEREAS, the Partnership, Occidental Petroleum Corporation , a Delaware
corporation ("Occidental"), the ultimate parent entity of each of Occidental GP,
Occidental LP1 and Occidental LP2 (together, the "Occidental Partners"),
Lyondell and Millennium have entered into the Master Transaction Agreement dated
May 15, 1998 (the "Second Master Transaction Agreement"), which provides, among
other things, for the admission of Occidental GP as a general partner of the
Partnership and of each of Occidental LP1 and Occidental LP2 as a limited
partner of the Partnership, subject to and upon the terms and conditions set
forth therein; and
WHEREAS, simultaneous with the execution and delivery of this Agreement,
(i) the Occidental Partners are contributing to the Partnership their Initial
Assets and Contributed Business in accordance with the Occidental Contribution
Agreement (which involves, in the case of Occidental LP2, the merger of Oxy
Petrochemicals and the Partnership, with the Partnership as the surviving
entity); (ii) Lyondell, Millennium, Occidental and certain Occidental Affiliates
are entering
<PAGE>
into the Amended and Restated Parent Agreement and (iii) the Additional Related
Agreements are being entered into;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
of the parties hereto, it is hereby agreed as follows:
SECTION 1
ORGANIZATION MATTERS
--------------------
1.1 Formation of Partnership; Amended and Restated Agreement. The
--------------------------------------------------------
Certificate of Limited Partnership was filed with the Secretary of State of the
State of Delaware on October 17, 1997. The Initial Agreement was entered into
October 10, 1997. The Partners desire to enter into this Agreement which amends
and restates the Initial Agreement and constitutes the limited partnership
agreement of the Partnership as of the date hereof. 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 by each of the parties hereto, (i) Occidental GP is hereby
admitted to the Partnership as a general partner of the Partnership, (ii)
Occidental LP1 is hereby admitted to the Partnership as a limited partner of the
Partnership and (iii) Occidental LP2 is hereby admitted to the Partnership as a
limited partner of the Partnership. 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.
1.2 Name. The name of the Partnership is "Equistar Chemicals, LP" The
----
Partnership's 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.
1.3 Business Offices. The principal place of business of the Partnership
----------------
shall be 1221 McKinney Street, Houston, Texas 77010, or such other place as the
General Partners may from time to time determine. The registered agent of the
Partnership in the State of Delaware is The Corporation Trust Company, 1209
Orange Street, Wilmington, Delaware 19801.
1.4 Purpose and Business. The business of the Partnership shall be to,
--------------------
directly or indirectly, (i) engage in the Specified Petrochemicals Businesses,
in the United States and internationally, including research and development,
purchasing, processing and disposing of feedstocks, and manufacturing,
marketing and distributing products, (ii) acquire and dispose of properties and
assets used or useful in connection with the foregoing and (iii) do all things
necessary, appropriate, convenient or incidental in connection with the
ownership, operation or financing of such business and activities, or otherwise
in connection with the foregoing, as are permitted under the Act, including the
acquisition and operation of the Contributed Businesses.
-2-
<PAGE>
1.5 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 and of Occidental GP in accordance
with this Agreement.
1.6 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 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 Units, the dissolution, liquidation and termination of
the Partnership, and the distribution of assets of the Partnership in connection
therewith, pursuant to the terms of this Agreement.
Each Limited Partner hereby agrees to execute and deliver to its Affiliated
General Partner within five 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.
1.7 Term. The term for which the Partnership is to exist as a limited
----
partnership is from the date the Partnership's Certificate of Limited
Partnership was filed with the office of the Secretary
-3-
<PAGE>
of State of the State of Delaware through the dissolution of the Partnership in
accordance with the provisions of Section 12.
----------
SECTION 2
CAPITAL CONTRIBUTIONS
---------------------
2.1 Acquisition of Units; Holdings of Initial Partners. In exchange for
--------------------------------------------------
the contributions provided for in Section 2.3, Occidental LP1, Occidental LP2
and Occidental GP shall receive the Units set forth by their names below, and
effective on the date hereof, the Units shall be owned as follows:
PARTNER UNITS
Lyondell GP 820
Millennium GP 590
Occidental GP 295
Lyondell LP 40,180
Millennium LP 28,910
Occidental LP1 6,623
Occidental LP2 22,582
TOTAL 100,000
The Units shall entitle the holder to the distributions set forth in Section 3
---------
and to the allocation of Profits, Losses and other items as set forth in Section
-------
4. Units shall not be represented by certificates.
- -
2.2 Transaction Costs. If the Partnership is entitled to deductions with
-----------------
respect to costs described in either Section 6.10 of the Initial Master
------------
Transaction Agreement or Section 6.10 of the Second Master Transaction
------------
Agreement to which a Partner is not entitled to reimbursement, the incurrence of
such costs shall not increase the Capital Account of such a Partner, and such
Partner shall be entitled to any deductions attributable to such costs.
2.3 Property Contributions.
----------------------
(a) Pursuant to their Contribution Agreement, on the date hereof,
Occidental LP1, Occidental LP2 and Occidental GP have contributed or caused to
be contributed to the Partnership, the Initial Assets contemplated thereby
subject to the Assumed Liabilities contemplated thereby (which involves, in the
case of Occidental LP2, the merger of Oxy Petrochemicals and the Partnership,
with the Partnership as the surviving entity).
-4-
<PAGE>
(b) The Partners intend that the contribution of assets subject to
liabilities heretofore made by the Partners to the Partnership and to be made
pursuant to Section 2.3(a) has qualified and will qualify as a tax-free
--------------
contribution under Section 721 of the Code in which no Partner has recognized or
will recognize gain or loss. The Partners agree that the Partnership will so
file its tax return, and each Partner agrees to file its tax return on the same
basis and to maintain such position consistently at all times thereafter.
(c) Immediately after the contributions by Occidental GP, Occidental LP1,
and Occidental LP2, the Capital Accounts of the Initial Partners shall be
adjusted so that each Partner's Capital Account would be the same per Unit as
that of every other Partner on the date hereof if on such date the principal and
accrued interest on the Lyondell Note were paid and the special capital
distributions accrued interest provided in Sections 3.1(e), (f), and (g) were
made.
(d) Schedule 2.3(d) sets forth the Capital Accounts of the Partners as if
the contributions and distributions referred to in Section 2.3(c) were made.
2.4 Other Contributions. From time to time and subject to the limitations
-------------------
of Section 6.7, if applicable, the Partnership Governance Committee (or the CEO
-----------
acting pursuant to Section 8.3), on behalf of the Partnership, may issue a
-----------
written notice ("Funding Notice") to the Limited Partners calling for an
additional capital contribution to the Partnership. Any Funding Notice will set
forth:
(a) the use of funds therefor;
(b) the aggregate amount of the capital contribution required, which amount
shall be apportioned among the Limited Partners Pro Rata; and
(c) the date by which the capital contribution must be received by the
Partnership, which date will not be earlier than seven Business Days from the
date the Funding Notice is issued.
Each Limited Partner shall timely wire transfer its Pro Rata share of the amount
set forth in the Funding Notice to the Partnership's bank account. Except as
expressly set forth in this Agreement, no Partner shall be permitted or required
to make any additional capital contribution to the Partnership.
2.5 Capital Accounts. Each Partner's Capital Account shall be determined
----------------
and maintained in accordance with Regulation (S)1.704-1(b)(2)(iv) as reasonably
interpreted by the Tax Matters Partner. The Tax Matters Partner shall have the
discretion, after consultation with the other General Partners, to make those
determinations, valuations, adjustments and allocations with respect to each
Partner's Capital Account as it deems appropriate so that the allocations made
pursuant to this Agreement will have substantial economic effect as such term is
used in Regulation (S)1.704-1(b). If any Partner transfers all or a portion of
its Units in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent such Capital
Account relates to the transferred Units.
-5-
<PAGE>
2.6 No Return of or on Capital. Except as provided in Sections 3 and 4,
-------------------------- ----------------
no Partner shall receive any interest or other return on its capital
contributions or on the balance in its Capital Account and no return of its
capital contributions.
2.7 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, 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 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.
2.8 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 an Affiliate of one of
the Partners) the responsibility for administering and investing Partnership
funds pursuant to such guidelines.
SECTION 3
DISTRIBUTIONS
-------------
3.1 Operating Distributions. Subject to Section 17-607 of the Act and
-----------------------
other applicable law, Available Net Operating Cash shall be distributed as soon
as practicable following the end of each month to the Partners as follows:
(a) General. On a cumulative basis from the date of the admission of
-------
Occidental GP, Occidental LP1 and Occidental LP2, (i) distributions are to be
made to the Partners Pro Rata to the extent of cumulative Profits, and (ii) the
remaining distributions are to be made to the Limited Partners Pro Rata. For
simplicity, however, in the absence of extraordinary transactions, the
Partnership may make monthly distributions to the Partners Pro Rata, subject to
subsequent adjustments as provided below in this Section 3.1.
-----------
(b) Return of Excess Distributions. Within 90 days after the end of each
------------------------------
year, each General Partner shall return to the Partnership any amount it
receives for such year that is in excess of its share of the sum of the
cumulative undistributed Profits as of the end of the preceding year and the
Profits for such year.
(c) Effect of Operating Losses. For any year in which a General Partner's
--------------------------
share of a Loss is sustained that exceeds its previously undistributed Profits,
no distributions shall be made to such General Partner in any subsequent year
until such excess Loss is recouped, and for subsequent
-6-
<PAGE>
years only Profits in excess of such recoupment shall be treated as Profit for
purposes of this Section 3.1.
-----------
(d) Makeup Distributions. If for any reason the Partnership does not make
--------------------
a monthly distribution to all Partners Pro Rata, each General Partner shall be
entitled at the end of the year to receive the amount necessary to make its
aggregate distributions for the year equal the amount it was entitled to receive
and keep pursuant to the preceding criteria.
(e) Lyondell Note Proceeds. All principal and interest received on the
----------------------
Lyondell Note shall be distributed among the Initial Partners in the ratio of
the Units owned by them prior to the admission of the Occidental Partners.
(f) 1998 Credit Facility Proceeds. At such time as the Partnership enters
-----------------------------
into the 1998 Credit Facility, the Partnership shall make a special distribution
to Millennium LP of $75 million, plus interest on such amounts from May 15,
1998, until such distribution at a per annum rate (based on a year of 360 days
and the number of days elapsed) equal to the LIBOR Rate plus 60 basis points
(.60%). The interest payments shall be treated as payment for the use of
capital to which section 707(c) of the Code applies.
(g) Bank Credit Agreement Proceeds. At such time as the Partnership enters
------------------------------
into the 1998 Credit Facility, the Partnership shall draw down the Bank Credit
Agreement Repayment Amount under the 1998 Credit Facility and shall apply the
Bank Credit Agreement Repayment Amount to the repayment of the principal amount
then outstanding under the Bank Credit Agreement. Two Business Days after such
repayment, the Partnership shall draw down $419,700,000 under the Bank Credit
Agreement and make a special distribution to Occidental LP2 of the $419,700,000
proceeds of such drawdown plus interest on such $419,700,000 from May 15, 1998
until the date of such distribution at a per annum rate (based on a year of 360
days and the number of days elapsed) equal to the LIBOR Rate plus 60 basis
points (.60%), provided that Occidental Chemical Corporation has executed the
Amended and Restated Indemnity Agreement. The interest payment shall be treated
as payment for the use of capital to which section 707(c) of the Code applies.
3.2 Liquidating Distributions. Distributions to the Partners of cash or
-------------------------
property arising from a liquidation of the Partnership shall be made in
accordance with the Capital Account balances of the Partners as provided in
Section 12.2(d).
- ---------------
3.3 Withholding. The Partnership is authorized to withhold from
-----------
distributions to a Partner and to pay over to a foreign, federal, state or local
government, any amounts required to be withheld pursuant to the Code or any
provisions of any other foreign, federal, state or local law. Any amounts so
withheld shall be treated as distributed to such Partner pursuant to this
Section 3 for all purposes of this Agreement, and shall be offset against any
- ---------
amounts otherwise distributable to such Partner.
-7-
<PAGE>
3.4 Offset. Any amount otherwise distributable to a Partner pursuant to
------
this Section 3 shall, unless otherwise agreed by two Representatives of each of
---------
the Nonconflicted General Partners pursuant to Section 6.8, be applied by the
-----------
Partnership to satisfy any of the following obligations that are owed by such
Partner or its Affiliate to the Partnership and that are not paid when due:
(a) Lyondell Note and Other Notes. In the case of Lyondell LP, the failure
-----------------------------
to pay any interest or principal when due on the Lyondell Note or, in the case
of any Partner, the failure to pay any interest or principal when due on any
indebtedness for borrowed money of such Partner or any Affiliate of such Partner
to the Partnership.
(b) Contribution Agreement. In the case of any Partner, the failure of such
----------------------
Partner or any Affiliate of such Partner to make any payment pursuant to Section
6 of its Contribution Agreement that has been Finally Determined to be due.
(c) Contribution. In the case of any Partner, the failure to make any
------------
capital contribution required pursuant to this Agreement (other than pursuant to
its Contribution Agreement).
SECTION 4
BOOK AND TAX ALLOCATIONS
------------------------
4.1 General Book Allocations. This section controls partnership
------------------------
allocations for book purposes. As used herein, "book" means the allocations
used to determine debits and credits to the Capital Accounts of the Partners and
to determine the amounts distributable to the Partners pursuant to Section 3 and
---------
Section 12.2(d). It does not refer to the method in which books are maintained
- ---------------
for financial reporting purposes pursuant to Section 5.2. Except as otherwise
-----------
provided in Sections 4.2 and 4.3, Profits or Losses for book purposes shall be
--------------------
allocated each year among the Partners Pro Rata, subject to the following:
(a) If the tax basis in Partnership assets is increased as a result of the
distribution of $75 million to Millennium LP as provided in Section 3.1(f), book
deductions equal to the tax deductions resulting from such increase shall be
allocated to Millennium LP until such time as gain or income is allocable under
(c) below.
(b) If the tax basis in Partnership assets is increased as a result of the
distribution of 43% of the proceeds of the Lyondell Note to Millennium LP, book
deductions equal to the tax deductions resulting from such increase shall be
allocated among the Initial Partners in the ratio of the Units owned by each
prior to the admission of the Occidental Partners until gain or income is
allocable under (c) below.
(c) If during any 12 month period the Partnership sells, distributes to
Partners, or otherwise disposes of more than 50% in value of the assets it owned
at the beginning of such period, gain or income recognized in the taxable period
of such sale, distribution or other disposition or thereafter recognized from
the sale, distribution, or other disposition of property or from the
-8-
<PAGE>
operation of other property shall be allocated to the Partners in the ratio in
which the aggregate amount of deductions described in (a) and (b) above were
allocated to the Partners until the aggregate amount of such gain and income so
allocated equals the aggregate amount of such deductions.
(d) Interest accruing on the Lyondell Note shall continue to be allocated
among the Initial Partners in the ratio of the Units owned by them prior to the
admission of the Occidental Partners.
(e) The initial agreed value of the Lease will be amortized ratably over
the term of the Lease, and the resulting deductions shall be allocated to
Occidental LP1. Any gain recognized on the disposition of the Lease shall be
allocated to Occidental LP1. If, prior to such disposition, the Partnership
has made capital improvements to such assets that have been borne by the
Partners Pro Rata, then upon the disposition of the Lease with such
improvements, gain shall be deemed to be attributable to such improvements to
the extent of the excess of its depreciated value for GAAP purposes at the time
of the disposition over its Book Value at such time, and such gain shall be
allocated to the Partners Pro Rata.
(f) Deductions attributable to the Book Value of the assets of the
Partnership as they exist immediately after the contributions described in
Section 2.3(a) other than the Lease will be allocated among the Partners other
than Occidental LP1 in the ratio of the Units owned by each, and any gain
recognized on the disposition of such contributed assets will be allocated to
the Partners other than Occidental LP1 in the ratio of the Units owned by each.
If, prior to disposition of such asset sale, the Partnership has made capital
improvements to such assets that have been borne by the Partners Pro Rata, then
upon the disposition of a contributed asset with such improvements, gain shall
be deemed to be attributable to such improvements to the extent of the excess of
its depreciated value for GAAP purposes at the time of disposition over its Book
Value at such time, and such gain shall be allocated to the Partners Pro Rata.
4.2 Change in Partner's Units. If during a year Units are transferred or
-------------------------
new Units issued, allocations among the Partners shall be made in accordance
with their interests in the Partnership from time to time during such year in
accordance with Section 706 of the Code, using the closing-of-the-books method,
except that depreciation and other amortization with respect to each Partnership
asset shall be deemed to accrue ratably on a daily basis over the entire period
during such year that the asset is owned and in service by the Partnership.
4.3 Deficit Capital Account and Nonrecourse Debt Rules. The special rules
--------------------------------------------------
in this Section 4.3 apply in the following order to take into account the
-----------
possibility of the Partners' having deficit Capital Account balances for which
they are not economically responsible and the effect of the Partnership's
incurring nonrecourse debt, directly or indirectly.
(a) Partnership Minimum Gain Chargeback. If there is a net decrease in
-----------------------------------
"partnership minimum gain" during any year, determined in accordance with the
tiered partnership rules of Regulation (S)1.704-2(k), each Partner shall be
allocated items of income and gain for such year equal to such Partner's share
of the net decrease in partnership minimum gain within the meaning of
-9-
<PAGE>
Regulation (S)1.704-2(g)(2), except to the extent not required by Regulation
(S)1.704-2(f). To the extent that this subsection (a) is inconsistent with
-------------
Regulation (S)1.704-2(f) or (S)1.704-2(k) or incomplete with respect to such
regulations, the minimum gain chargeback provided for herein shall be applied
and interpreted in accordance with such regulations.
(b) Partner Minimum Gain Chargeback. If there is a net decrease in
-------------------------------
"partner nonrecourse debt minimum gain" during any year, within the meaning of
Regulation (S) 1.704-2(i)(2), each Partner who has a share of such gain,
determined in accordance with Regulation (S) 1.704-2(i)(5), shall be allocated
items of income and gain for such year (and, if necessary, subsequent years)
equal to such Partner's share of the net decrease in partner nonrecourse debt
minimum gain. To the extent that this subsection (b) is inconsistent with
--------------
Regulation (S) 1.704-2(i) or 1.704-2(k) or incomplete with respect to such
regulations, the partner nonrecourse debt minimum gain chargeback provided for
herein shall be applied and interpreted in accordance with such regulations.
(c) Deficit Account Chargeback and Qualified Income. If any Partner has an
-----------------------------------------------
Adjusted Capital Account Deficit at the end of any year, including an Adjusted
Capital Account Deficit for such Partner caused or increased by an adjustment,
allocation or distribution described in Regulation (S)1.704-1(b)(2)(ii)(d)(4),
(5) or (6), such Partner shall be allocated items of income and gain (consisting
of a pro rata portion of each item of Partnership income, including gross income
and gain) in an amount and manner sufficient to eliminate such Adjusted Capital
Account Deficit as quickly as possible. This subsection (c) is intended to
--------------
constitute a "qualified income offset" pursuant to Regulation (S)1.704-
1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
(d) Partner Nonrecourse Deductions. Any partner nonrecourse deductions for
------------------------------
any year or other period shall be allocated to the Partner who bears the
economic risk of loss with respect to the partner nonrecourse debt to which such
partner nonrecourse deductions are attributable in accordance with Regulation
(S)1.704-2(i) or (S)1.704-2(k).
(e) Curative Allocations. The Allocations provided by this Section 4.3 may
-------------------- -----------
not be consistent with the manner in which the Partners intend to divide
Profits, Losses and similar items. Accordingly, Profits, Losses and other items
will be reallocated among the Partners (in the same year and to the extent
necessary, in subsequent years) in a manner consistent with Regulation (S)1.704-
1(b) and 1.704-2 so as to prevent such allocations from distorting the manner in
which Profits, Losses and other items are intended to be allocated among the
Partners pursuant to Sections 4.1 and 4.2.
--------------------
(f) Nonrecourse Debt Sharing. For purposes of this Agreement, nonrecourse
------------------------
deductions, within the meaning of Regulation (S)1.704-2(b), shall be deemed to
be allocated among the Partners Pro Rata. Solely for purposes of determining a
Partner's proportionate share of the "excess nonrecourse liabilities" of the
Partnership within the meaning of Regulation (S)1.752-3(a)(3), Partnership
Profits are allocated to the Partners Pro Rata.
-10-
<PAGE>
4.4 Federal Tax Allocations.
-----------------------
(a) General Rule. Except as otherwise provided in the following paragraphs
------------
of this Section 4.4, allocations for federal income tax purposes of items of
-----------
income, gain, loss and deduction, and credits and basis therefor, shall be made
in the same manner as book allocations are made.
(b) Elimination of Book/Tax Disparities. Taxable income and tax deductions
-----------------------------------
shall be shared among the Partners so as to take into account the variation
between the Book Value and the adjusted tax basis of each property at the time
it is contributed to the Partnership and at each time it is revalued.
(i) To account for such variation, effective as of the formation of
the Partnership:
(A) the depreciation and other deductions attributable to the
basis that the contributing Partner had in each property at the time
of contribution shall be allocated to such Partner, and
(B) upon disposition of a contributed property, the excess of its
Book Value at such time over its tax basis at such time shall be
allocated to the Partner who contributed the property.
(ii) If the Book Value of a Partnership property is revalued as of a
date subsequent to the date of its acquisition by the Partnership, the
portion of its Book Value at the time of its disposition that is
attributable to the increase resulting from such revaluation:
(A) shall be disregarded in applying Section 4.4(b)(i)(B) to the
partner who contributed such property, and
(B) shall be treated for purposes of this Section 4.4(b) as a
separate property that was contributed on the revaluation date by the
persons who were partners immediately prior to the revaluation date.
(iii) The Partners agree that the foregoing allocations constitute a
reasonable method for purposes of Reg. 1.704-3(a)(1) and will be so
reported and defended by the Partnership and all Partners unless and until
the Partners otherwise agree or a court otherwise requires.
(c) Allocation of Items Among Partners. Each item of income, gain, loss,
----------------------------------
deduction and credit and all other items governed by Section 702(a) of the Code
shall be allocated among the Partners in proportion to the allocation of
Profits, Losses and other items to such Partners hereunder, provided that any
-------------
gain treated as ordinary income because it is attributable to the recapture of
any depreciation or amortization shall be allocated among the Partners in
accordance with Prop. Treas.
-11-
<PAGE>
Reg. (S)(S) 1.1245-1(e)(2) and 1.1250-1(f), or, upon promulgation of final
regulations with respect to the matters covered therein, such final regulations.
(d) Section 754 Election Allocations. Income and deductions of the
--------------------------------
Partnership that are attributable to the Section 754 election shall be allocated
to the Partners entitled thereto.
4.5 Other Tax Allocations. Items of income, gain, loss, deduction, credit
---------------------
and tax preference for state, local and foreign income tax purposes shall be
allocated among the Partners in a manner consistent with the allocation of such
items for federal income tax purposes in accordance with the foregoing
provisions of this Section.
SECTION 5
ACCOUNTING, FINANCIAL REPORTING AND TAX MATTERS
-----------------------------------------------
5.1 Fiscal Year. The fiscal year of the Partnership shall be the calendar
-----------
year.
5.2 Method of Accounting for Financial Reporting Purposes. For financial
-----------------------------------------------------
reporting purposes, the Partnership shall adopt a standard set of accounting
policies and shall maintain separate books of account, all in accordance with
GAAP. The Partnership's financial reports shall comply with requirements of the
SEC to the extent applicable to the Partnership and any Partner or any
controlling Person of such Partner, to the extent such information is necessary,
in conjunction with the financial reporting obligations of such Person under
applicable SEC requirements.
5.3 Books and Records; Right of Partners to Audit.
---------------------------------------------
(a) Proper and complete records and books of account of the Partnership's
business, including all such transactions and other matters as are usually
entered into records and books of account maintained by businesses of like
character or as are required by law, shall be kept by the Partnership at the
Partnership's principal place of business. None of the Partnership's funds
shall be commingled with the funds of any Partner.
(b) Each Partner and its internal and independent auditors, at the expense
of such Partner, shall have full and complete access to the internal and
independent auditors of the Partnership and shall have the right to inspect such
books and records and the physical properties of the Partnership during normal
business hours and, at its own expense, to cause an independent audit thereof.
The Partnership shall make all books and records of the Partnership available to
such Partner and its internal and independent auditors in connection with such
audit and shall cooperate with such Partner and auditors and to provide any
assistance reasonably necessary in connection with such audit.
5.4 Reports and Financial Statements. The Partnership shall prepare and
--------------------------------
deliver to the Partners the Partnership financial statements and reports
described on Appendix B as soon as reasonably practicable and in any event on or
prior to the due date indicated on Appendix B.
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<PAGE>
5.5 Method of Accounting for Book and Tax Purposes. For purposes of
----------------------------------------------
making allocations and distributions hereunder (including distributions in
liquidation of the Partnership in accordance with Capital Account balances as
required by Section 12.3), Capital Accounts and Profits, Losses and other items
------------
described in Section 4.1 shall be determined in accordance with federal income
-----------
tax accounting principles utilizing the accrual method of accounting, with the
adjustments required by Regulation (S)1.704-1(b) to properly maintain Capital
Accounts.
5.6 Taxation.
--------
(a) Status of the Partnership. The Partners acknowledge that the
-------------------------
Partnership is a partnership for federal, foreign and state income tax purposes,
and hereby agree not to elect to be excluded from the application of Subchapter
K of Chapter 1 of Subtitle A of the Code or any similar state statute.
(b) Tax Elections and Reporting.
---------------------------
(i) Generally. The Partnership has made or shall make the following
---------
elections under the Code and the Regulations and any similar state
statutes:
(A) Adopt the calendar year as the annual accounting period;
(B) Adopt the accrual method of accounting;
(C) Elect to deduct organization costs ratably over a 60-month
period as provided in Section 709 of the Code;
(D) Adopt the LIFO method of accounting for inventory; and
(E) Make any other elections available under the Code that the
Partnership Governance Committee determine are appropriate, with the
determination of whether an election is appropriate to be made
pursuant to the principle that each Partner shall be treated equally
(i.e., no Partner will receive preferential tax treatment to the
disadvantage of another Partner).
(ii) Section 754 Election. The Partnership shall, upon the written
--------------------
request of any Partner benefitted thereby, cause the Partnership to file an
election under Section 754 of the Code and the Regulations thereunder to
adjust the basis of the Partnership assets under Section 734(b) or 743(b)
of the Code, and a corresponding election under the applicable sections of
state and local law.
(c) Tax Returns. The Tax Matters Partner, on behalf of the Partnership,
-----------
shall prepare and file the necessary tax and information returns. Each Partner
shall timely provide such information, if any, as may be needed by the
Partnership for purposes of preparing such tax and information returns. At
least 75 days before the due date (as extended) for the Partnership's federal
income tax
-13-
<PAGE>
return, the Tax Matters Partner shall deliver a draft of such return to each
Partner. Each Partner shall have 15 Business Days after receipt of the draft in
which to furnish any objections or comments on the draft to the Tax Matters
Partner. The Tax Matters Partner shall make its best efforts to finalize the
Partnership's federal income tax return at least 30 days before the due date for
filing (as extended) of such return A Partner may not report its share of any
Partnership tax item in a manner inconsistent with the Partnership's reporting
of such item unless the Partner has timely furnished its objection to the Tax
Matters Partner as provided in the immediately preceding sentence. If a Partner
reports its share of any Partnership tax item in a manner inconsistent with the
Partnership's reporting of such item, such Partner shall promptly notify the
Partnership in writing at least 20 Business Days prior to the filing of any
statement with the IRS in which such inconsistent position is reported. The
Partnership shall promptly deliver to each Partner a copy of the federal income
tax return for the Partnership as filed with the appropriate taxing authorities
and a copy of any material state and local income tax return as filed.
(d) Tax Audits.
----------
(i) Federal Tax Matters. The Partnership is authorized to make such
-------------------
filings with the IRS as may be required to designate Lyondell GP as the Tax
Matters Partner. The Tax Matters Partner, as an authorized representative
of the Partnership, shall direct the defense of any claims made by the IRS
to the extent that such claims relate to the adjustment of Partnership
items at the Partnership level. The Tax Matters Partner shall promptly
deliver to each Partner a copy of all notices, communications, reports or
writings of any kind (including, without limitation, any notice of
beginning of administrative proceedings or any report explaining the
reasons for a proposed adjustment) received from the IRS relating to or
potentially resulting in an adjustment of Partnership items, as well as any
other information requested by a Partner that is commercially reasonable to
request. The Tax Matters Partner shall be diligent and act in good faith
in deciding whether to contest at the administrative and judicial level any
proposed adjustment of a Partnership item and whether to appeal any adverse
judicial decision. The Tax Matters Partner shall keep each Partner advised
of all material developments with respect to any proposed adjustment that
comes to its attention. All costs incurred by the Tax Matters Partner in
performing under this subsection (d) shall be paid by the Partnership. The
--------------
Tax Matters Partner shall have sole authority to represent the Partnership
in connection with all tax audits, including the power to extend the
statute of limitations, to enter in any settlement, and to litigate any
proposed partnership adjustment, subject to the following: (A) No
settlement will be entered into with respect to an item that would
materially affect any Partner adversely unless each Partner is first
notified of the terms of the settlement; and no Partner will be bound by
any settlement unless it consents thereto; (B) If a Partner does not
consent to a settlement, the settlement will nevertheless be binding on all
partners who do consent; and the non-consenting Partner may, at its sole
cost, pursue such administrative or judicial remedies as it deems
appropriate; (C) If the Tax Matters Partner brings an action in any court,
each Partner, at its sole cost, shall have the right to intervene in the
preceding to the extent permitted by the court; and (D) If a settlement or
litigation causes Partners to be treated differently for tax purposes with
respect to certain tax issues of the Partnership, the income and deductions
of the Partnership
-14-
<PAGE>
thereafter arising will be allocated among the Partners to reflect the
varying manner in which the issues were resolved.
(ii) State and Local Tax Matters. The Partnership shall promptly
---------------------------
deliver to each Partner a copy of all notices, communications, reports or
writings of any kind with respect to income or similar taxes received from
any state or local taxing authority relating to the Partnership which
might, in the judgment of the Tax Matters Partner, materially and adversely
affect any Partner, and shall keep each Partner advised of all material
developments with respect to any proposed adjustment of Partnership items
which come to its attention.
(iii) Continuation of Rights. Each Partner shall continue to have the
----------------------
rights described in this subsection (d) with respect to tax matters
--------------
relating to any period during which it was a Partner, whether or not it is
a Partner at the time of the tax audit or contest.
(e) Tax Rulings. No Person other than the Tax Matters Partner 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 unless such Person shall have
received written authorization from the Tax Matters Partner and any such other
Partner to make such request.
(f) Tax Information. At the request of any Partner, the Tax Matters
---------------
Partner shall timely furnish all reasonably obtainable information required to
prepare annual earnings and profits computations (as defined in Section 312 of
the Code) with respect to that Partner's share of Partnership income.
5.7 Delegation. The Partners agree that all of the tasks to be performed
----------
under this Section (other than serving as Tax Matters Partner) may be delegated
to employees and consultants of the Partnership.
SECTION 6
MANAGEMENT
----------
6.1 Partnership Governance Committee.
--------------------------------
(a) 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. The Partnership Governance Committee (on
behalf of the Partners) shall have (i) the full authority of the General
Partners to exercise all of the powers of the Partnership and (ii) full control
over the business, property and affairs of the Partnership. Except to the
extent set forth in this Agreement, the Partnership Governance Committee shall
have full, exclusive and complete discretion to manage and control the business,
property and affairs of the Partnership, to make all decisions affecting the
business, property and affairs of the Partnership and to take all such actions
as it deems necessary,
-15-
<PAGE>
appropriate, convenient or incidental to accomplish the purpose of the
Partnership as set forth in Section 1.4 (as such purpose may be expanded in
-----------
accordance with Section 6.7(i)).
(b) 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 action taken 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 6.5(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. Each
Partnership Governance Committee Action shall be binding on the Partnership.
(c) The Partnership Governance Committee shall adopt policies and
procedures, not inconsistent with this Agreement (including Section 6.7) or the
-----------
Act, governing financial controls and legal compliance, including delegations of
authority (and limitations thereon) to the officers of the Partnership as
permitted hereby. 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. 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.
6.2 Limitations on Authority of General Partners. Except as expressly set
--------------------------------------------
forth in this Agreement, each General Partner agrees to exercise its authority
to manage and control the Partnership only through Partnership Governance
Committee Action. Each General Partner agrees not to exercise, or purport or
attempt to exercise any authority (i) to act for or incur, create or assume any
obligation, liability or responsibility on behalf of the Partnership or any
other Partner, (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.
6.3 Lack of Authority of Persons Other Than General Partners and Officers.
---------------------------------------------------------------------
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.
-16-
<PAGE>
6.4 Composition of Partnership Governance Committee.
-----------------------------------------------
(a) The Partnership Governance Committee shall consist of nine
Representatives and each General Partner shall designate three Representatives
(each a "Representative"). All the Representatives of all three General
Partners shall together constitute the Partnership Governance Committee.
(b) 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 take action on
behalf of such General Partner which the absent Representative could have
exercised at such meeting. 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.
(c) On or before the date hereof, each General Partner shall have delivered
to the other General Partners a written notice (i) designating the three persons
to serve as such General Partner's initial Representatives and (ii) designating
the person or persons, if any, who are to serve as initial Alternates and their
order of succession.
(d) Each General Partner may, in its sole discretion and by written notice
delivered to the other General Partners and the Partnership at any time or from
time to time, remove or replace one or more of its Representatives or change one
or more of its Alternates. If a Representative or Alternate dies, resigns or
becomes disabled or incapacitated, the General Partner that designated such
Representative or Alternate, as the case may be, shall promptly designate a
replacement. Each Representative and each Alternate shall serve until replaced
by the General Partner that designated such Representative or Alternate, as the
case may be.
(e) Copies of all written notices designating Representatives 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.
(f) 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 or to any General Partner other than the General
Partner that designated such Representative; 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. Nothing in
this
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<PAGE>
Section 6.4(f) shall limit the duty owed to the Partnership by any person acting
- -------------
in his capacity as an officer of the Partnership (including any such officer who
is also a Representative).
(g) Representatives shall not receive from the Partnership any
compensation for their service or any reimbursement of expenses for attendance
at meetings of the Partnership Governance Committee.
6.5 Partnership Governance Committee Meetings.
-----------------------------------------
(a) Regular meetings of the Partnership Governance Committee shall be held
at such times and at such places as shall from time to time be determined in
advance and committed to a written schedule by the Partnership Governance
Committee. The first regular meeting of the Partnership Governance Committee
during January of each fiscal year shall be deemed to be the "Annual Meeting."
The Secretary shall deliver by commercial courier service or other hand delivery
or transmit by facsimile transmission (with proof of confirmation from the
transmitting machine), an agenda for each regular meeting to the Representatives
at least five Business Days prior to such meeting. Each agenda for a regular
meeting shall specify, to a reasonable degree, the business to be transacted at
such meeting. Subject to Section 6.6, 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.
(b) Special meetings of the Partnership Governance Committee may be called
by any Representative by delivering by commercial courier service or other hand
delivery or transmitting by facsimile transmission (with proof of confirmation
from the transmitting machine), written notice of a special meeting to each of
the other Representatives at least two 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. Notice of any special
meeting may be waived before or after the meeting by a written waiver of notice
signed by the Representative entitled to notice. A Representative's attendance
at a special meeting shall constitute a waiver of notice 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.
Special meetings of the Partnership Governance Committee shall be held at the
Partnership's offices (or at such other place or in such other manner as the
Representatives shall agree) at such time as may be stated in the notice of such
meeting.
(c) One Representative of each General Partner shall serve as a co-chair of
each meeting (regular and special) of the Partnership Governance Committee. Any
co-chair may instruct the Secretary to include one or more items on a meeting
agenda and none of the co-chairs nor the Secretary may delete or exclude an
agenda item proposed by any other co-chair.
(d) 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.
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<PAGE>
(e) Representatives, at their discretion, 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 may hear each other, and participation
in such a meeting shall constitute presence in person at such meeting.
(f) 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
Representatives 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
promptly to each of the Representatives and 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.
6.6 Partnership Governance Committee Quorum and General Voting Requirement
----------------------------------------------------------------------
(a) The presence of at least two Representatives (including any duly
present Alternates) of Lyondell GP shall constitute a quorum of the Partnership
Governance Committee for the transaction of business and the taking of
appropriate Partnership Governance Committee Actions at any meeting; provided,
--------
however, that the presence at such meeting of at least two Representatives
- -------
(including any duly present Alternates) from each General Partner shall be
necessary for the taking of any action described in Section 6.7; and provided,
----------- --------
further, that no Partnership Governance Committee Actions can be taken at any
- -------
meeting with respect to any matter that was not reflected, with a reasonable
level of specificity, on an agenda for such meeting that was delivered in
accordance with Section 6.5 unless at least one Representative of each General
-----------
Partner is present. No Partnership Governance Committee Action may be taken at
any meeting at which a quorum is not present.
(b) Except as otherwise provided in Section 6.7 or elsewhere in this
-----------
Agreement, the approval of two or more Representatives acting for Lyondell GP
will be sufficient for the Partnership Governance Committee to take any
Partnership Governance Committee Action and in such case the Partnership shall
be authorized to take such action without the consent of any other Person.
6.7 Partnership Governance Committee Unanimous Voting Requirements.
--------------------------------------------------------------
Unless and until two or more Representatives of Lyondell GP, two or more
Representatives of Millennium GP and two or more Representatives of Occidental
GP have given their approval (in which event a Partnership Governance Committee
Action is hereby authorized without the need for the consent of any other
Person), no Partnership Governance Committee Action will be deemed for any
purpose to have been taken at any Partnership Governance Committee meeting that
would cause or permit the Partnership or any subsidiary thereof (or any Person
acting in the name or on behalf of any of them) directly or indirectly to take
(or commit to take), and neither the Partnership nor any subsidiary thereof nor
any person acting in the name or on behalf of any of them directly or indirectly
may take or commit to take, any of the actions described below in this
subsection (whether in a single transaction or series of related transactions):
-19-
<PAGE>
(i) to cause the Partnership, directly or indirectly, to engage,
participate or invest in any business outside the scope of its business as
described in Section 1.4;
-----------
(ii) to approve any Strategic Plan, as well as any amendments or
updates thereto (including the annual updates provided for in Section 8.1);
-----------
(iii) to authorize any disposition of assets having a fair market
value exceeding $30 million in any one transaction or a series of related
transactions not contemplated in an approved Strategic Plan;
(iv) to authorize any acquisition of assets or any capital
expenditure exceeding $30 million that is not contemplated in an approved
Strategic Plan;
(v) to require capital contributions to the Partnership (other than
contributions contemplated by the Contribution Agreements or an approved
Strategic Plan or to achieve or maintain compliance with any HSE Law)
within any fiscal year if the total of such contributions required from the
Partners within that year would exceed $100 million or the total of such
contributions required from the Partners within that year and the
immediately preceding four years would exceed $300 million;
(vi) to authorize the incurrence of debt for borrowed money unless
(x) such debt is contemplated by clause (vii) (b) below, (y) after giving
effect to the incurrence of such debt (and any related transactions) and
the maximum amount of borrowings permitted under clause (vii) below, the
Partnership would be expected to have an "investment grade" debt rating by
Moody's Investor Services Inc. and Standard & Poor's Corporation or (z)
such debt is incurred to refinance the public, bank or other debt assumed
or incurred by the Partnership as contemplated by the Initial Master
Transaction Agreement or the Second Master Transaction Agreement or to
refinance indebtedness under the 1998 Credit Facility or to refinance any
such debt, and in the case of each of (x), (y) and (z), the agreement
relating to such debt does not provide that the Transfer by a Partner of
its Units (or a change of control with respect to any Partner or any of its
Affiliates) would constitute a default thereunder, otherwise accelerate the
maturity thereof or give the lender or holder any "put rights" or similar
rights with respect thereto; provided, however, that notwithstanding the
-------- -------
foregoing, the provisions of Sections 6.7(xxi) and 6.7(xxii), if
----------------- ---------
applicable, must be satisfied with respect to any refinancing;
(vii) (a) to enter into the 1998 Credit Facility or (b) to make
borrowings under one or more of the Partnership's bank credit facility or
facilities, its uncommitted lines of credit or any credit facility or debt
instrument of the Partnership of any kind that refinances all or any
portion of the Partnership's credit facility or facilities, at any time, if
as a result of any such borrowing the aggregate principal amount of all
such borrowings outstanding at such time would exceed the sum of $1.25
billion and the amount which becomes available for borrowing under the 1998
Credit Facility.
-20-
<PAGE>
(viii) to enter into interest rate protection or other hedging
agreements (other than hydrocarbon hedging agreements in the ordinary
course);
(ix) to enter into any capitalized lease or similar off-balance
sheet financing arrangements involving payments (individually or in the
aggregate) by it in excess of $30 million in any fiscal year;
(x) to cause the Partnership or any subsidiary of the Partnership
to issue, sell, redeem or acquire any Units or other equity securities (or
any rights to acquire, or any securities convertible into or exchangeable
for, Units or other equity securities);
(xi) to make Partnership cash distributions in excess of Available
Net Operating Cash or to make non-cash distributions (except as
contemplated by Section 12);
----------
(xii) to appoint or discharge Executive Officers (other than the
CEO), based on the recommendation of the CEO;
(xiii) to approve material compensation and benefit plans and
policies, material employee policies and material collective bargaining
agreements for the Partnership's employees;
(xiv) to initiate or settle any litigation or governmental
proceedings if the effect thereof would be material to the financial
condition of the Partnership;
(xv) to change the independent accountants for the Partnership;
(xvi) to change the Partnership's method of accounting as adopted
pursuant to Section 5.2 or to change the Partnership's method of accounting
-----------
as provided in Section 5.5 or to make the elections referred to in Section
----------- -------
5.6(b)(i)(E);
------------
(xvii) to create or change the authority of any Auxiliary Committee;
(xviii) to merge, consolidate or convert the Partnership or any
subsidiary thereof with or into any other entity (other than a Wholly Owned
Subsidiary of the Partnership);
(xix) to file a petition in bankruptcy or seeking any
reorganization, liquidation or similar relief on behalf of the Partnership
or any subsidiary; or to consent to the filing of a petition in bankruptcy
against the Partnership or any subsidiary; or to consent to the appointment
of a receiver, custodian, liquidator or trustee for the Partnership or any
subsidiary or for all or any substantial portion of their property;
(xx) to exercise any power or right described in Section 6.8(a)(i)
or (ii) with respect to a Conflict Circumstance involving (a) LYONDELL-
CITGO Refining Company Ltd., its successors or assigns, (b) Lyondell
Methanol Company, L.P., its successors or
-21-
<PAGE>
assigns or (c) any other Affiliate of Lyondell GP, Millennium GP or
Occidental GP if such Affiliate's actions with respect to such Conflict
Circumstance are not controlled by Lyondell, Millennium or Occidental
respectively, other than a Conflict Circumstance involving the exercise of
any rights and remedies with respect to a default under any agreement that
is the subject of such Conflict Circumstance;
(xxi) (a) prior to the seventh anniversary of the Initial Closing
Date, to repay any Millennium America Guaranteed Debt, other than through
refinancing or (b) to refinance any Millennium America Guaranteed Debt
prior to the seventh anniversary of the Initial Closing Date if any of the
principal of the debt refinancing such Millennium America Guaranteed Debt
would be due and payable after the seventh anniversary of the Initial
Closing Date; provided, however, that if the Millennium America Guaranteed
-----------------
Debt continues to be guaranteed by Millennium America or its successors
after the seventh anniversary of the Initial Closing Date, then the term of
such debt shall not exceed 365 days; and
(xxii) (a) prior to 30 days after the seventh anniversary of the date
of this Agreement, to repay any Oxy Guaranteed Debt, other than through
refinancing or (b) to refinance any Oxy Guaranteed Debt prior to 30 days
after the seventh anniversary of the date of this Agreement if any of the
principal of the debt refinancing such Oxy Guaranteed Debt would be due and
payable after 30 days after the seventh anniversary of the date of this
Agreement; provided, however, that if the Oxy Guaranteed Debt continues to
-----------------
be guaranteed by Occidental Chemical Corporation or its successors after 30
days after the seventh anniversary of the date of this Agreement, then the
term of such debt shall not exceed 365 days.
6.8 Control of Interested Partner Issues.
------------------------------------
(a) Notwithstanding anything to the contrary contained in this Agreement,
with respect to any Conflict Circumstance (other than a Conflict Circumstance
described in Section 6.7(xx), which shall be governed by Section 6.7), the
--------------- -----------
Nonconflicted General Partners acting jointly (through their respective
Representatives) shall, subject to Section 6.8(b), have the sole and exclusive
--------------
power and right for and on behalf, and at the sole expense, of the Partnership
(i) to control 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 a 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
(other than a Conflict Circumstance described in Section 6.7(xx), which shall be
---------------
governed by Section 6.7) shall require the approval of two Representatives of
-----------
each of the Nonconflicted General Partners. 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.
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(b) Each Nonconflicted General Partner, in exercising its control, power
and rights pursuant to this Section, shall act in good faith and in a manner it
believes to be in the best interests of the Partnership; provided that it shall
never be deemed to be in the best interests of the Partnership not to pay,
perform and observe all of the obligations to be paid, performed or observed by
or on the part of the Partnership under the terms of any of the Other Agreements
(as defined in the Amended and Restated Parent Agreement). Each Nonconflicted
General Partner shall act through its Representatives, and the approval of two
Representatives acting for each of the Nonconflicted General Partners will be
sufficient for the Nonconflicted General Partners (and therefore the Partnership
Governance Committee on behalf of the Partnership) to take any action in respect
of the relevant Conflict Circumstance. The Conflicted General Partner (or its
Affiliates) shall have the right to deal with the Partnership and with each
Nonconflicted General Partner on an arm's-length basis and in a manner it
believes to be in its own best interests, but in any event must deal with them
in good faith.
6.9 Auxiliary Committees.
--------------------
(a) From time to time, the Partnership Governance Committee may, by
Partnership Governance Committee Action, designate one or more committees
("Auxiliary Committees") or disband any Auxiliary Committee. Each Auxiliary
Committee shall (i) operate under the specific authority delegated to it by the
Partnership Governance Committee (consistent with Section 6.7) for the purpose
-----------
of assisting the Partnership Governance Committee in managing (on behalf of the
General Partners) the business, property and affairs of the Partnership and (ii)
report to the Partnership Governance Committee.
(b) Each General Partner shall have the right to appoint an equal number of
members on each Auxiliary Committee. Auxiliary Committee members may (but need
not) be members of the Partnership Governance Committee. No Auxiliary Committee
member shall be compensated or reimbursed by the Partnership for service as a
member of such Auxiliary Committee.
(c) Each Partnership Governance Committee Action designating an Auxiliary
Committee shall be in writing and shall set forth (i) the name of such
Auxiliary Committee, (ii) the number of members and (iii) in such detail as the
Partnership Governance Committee deems appropriate, the purposes, powers and
authorities (consistent with Section 6.7) of such Auxiliary Committee; provided,
----------- --------
however, that in no event shall any Auxiliary Committee have any powers or
- -------
authority in reference to amending this Agreement, adopting an agreement of
merger, consolidation or conversion of the Partnership, authorizing the sale,
lease or exchange of all or substantially all of the property and assets of the
Partnership, authorizing a dissolution of the Partnership or declaring a
distribution. Each Auxiliary Committee shall keep regular minutes of its
meetings and promptly deliver the same to the Partnership Governance Committee.
6.10 Certain Limitations on Partner Representatives. No Representative or
----------------------------------------------
Alternate of a Partner who, as an officer, director or employee of such Partner
or any of its Affiliates, participates in material operational decisions by such
Partner or Affiliate regarding a business or operation of such Partner or
Affiliate that competes with a business or operation of the Partnership or of
the other
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<PAGE>
Partner or its Affiliates, or that competes with a Business Opportunity offered
pursuant to Section 9.3(c) or (d), shall receive or have access to any
---------------------
competitively sensitive information regarding the competing business of the
Partnership or of the other Partner or its Affiliates or such Business
Opportunity, nor shall such Representative or Affiliate participate in any
decision of the Partnership Governance Committee relating to such business or
operation of the Partnership or the other Partner or its Affiliates or such
Business Opportunity.
SECTION 7
OFFICERS AND EMPLOYEES
----------------------
7.1 Partnership Officers.
--------------------
(a) The Partnership Governance Committee may select natural persons who are
(or upon becoming an officer will be) agents or employees of the Partnership to
be designated as officers of the Partnership, with such titles as the
Partnership Governance Committee shall determine.
(b) The executive officers of the Partnership shall consist of a Chief
Executive Officer ("CEO"), and others as determined from time to time by
Partnership Governance Committee (collectively, the "Executive Officers").
(c) The Partnership Governance Committee also shall appoint a Secretary and
may appoint such other officers and assistant officers and agents as may be
deemed necessary or desirable and such persons shall perform such duties in the
management of the Partnership as may be provided in this Agreement or as may be
determined by Partnership Governance Committee Action.
(d) The Partnership Governance Committee may leave unfilled any offices
except those of CEO and Secretary. Two or more offices may be held by the same
person except that the same person may not hold the offices of CEO and
Secretary.
7.2 Selection and Term of Executive Officers.
----------------------------------------
(a) The Executive Officers as of the date of this Agreement are listed on
Appendix C.
(b) The CEO shall hold office for a five-year term, subject to the CEO's
earlier death, resignation or removal. Upon the expiration of such term or
earlier vacancy, Lyondell GP shall designate the CEO, provided that such person
shall be reasonably acceptable to both of Millennium GP and Occidental GP. The
CEO shall not be required to be an employee of the Partnership.
(c) Each Executive Officer (other than the CEO) shall hold office until his
or her death, resignation or removal. Upon the death, resignation or removal of
an Executive Officer, or the creation of a new Executive Officer position, the
CEO may nominate a person to fill the vacancy, which shall be subject to
Partnership Governance Committee approval. Executive Officers shall not
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be required to be employees of the Partnership. Any Executive Officer also may
serve as an officer or employee of any Partner or Affiliate of a Partner.
7.3 Removal of Executive Officers.
-----------------------------
(a) The CEO may be removed, at any time, by Partnership Governance
Committee Action taken pursuant to Section 6.6, with or without cause, whenever
-----------
in the judgment of the Partnership Governance Committee the best interests of
the Partnership would be served thereby.
(b) Any Executive Officer (other than the CEO), or any other officer or
agent may be removed, at any time, by Partnership Governance Committee Action
taken pursuant to Section 6.7(xii), with or without cause, upon the
----------------
recommendation of the CEO, whenever in the judgment of the Partnership
Governance Committee the best interests of the Partnership would be served
thereby.
(c) Notwithstanding anything to the contrary in Sections 6.7(xii), 7.3(a)
-------------------------
and 7.3(b), any General Partner may, by action of two or more of its
- ----------
Representatives, remove from office any Executive Officer who takes or causes
the Partnership to take any action described in Section 6.7 that has not been
-----------
approved by two or more Representatives of Lyondell GP, two or more
Representatives of Millennium GP and two or more Representatives of Occidental
GP as contemplated by Section 6.7. Any such removal shall be effected by
-----------
delivery by such Representatives of written notice of such removal (i) to such
Executive Officer and (ii) to the Representatives of the other General Partners;
provided that such removal shall not be effective if such action is rescinded or
- -------------
cured (to the reasonable satisfaction of the General Partner who has delivered
such notice) promptly after such notice is delivered.
7.4 Duties.
------
(a) 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; provided,
--------
that, no officer shall be liable to the Partnership or to any Partner for his or
- ----
her good faith reliance on the provisions of this Agreement. Notwithstanding
the foregoing, it is understood that any officer or employee of the Partnership
who is also a Representative of a General Partner shall, in his capacity as a
Representative, owe no duty (fiduciary or otherwise) to any Person other than
such General Partner.
(b) 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 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 publicly held Delaware
corporation, as well as other such powers and duties as from time to time may be
conferred by the Partnership Governance
-25-
<PAGE>
Committee and by this Agreement. The CEO and the other officers and employees of
the Partnership shall develop and implement management and other policies and
procedures consistent with this Agreement and the general policies and
procedures established by the Partnership Governance Committee.
(c) 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 impracticable or
impossible to carry on the Partnership's business;
(ii) to confess a judgment against the Partnership;
(iii) to possess Partnership property other than in the ordinary
conduct of the Partnership's business; or
(iv) to take, or cause to be taken, any of the actions described in
Section 6.7.
-----------
7.5 CEO. Subject to the terms of this Agreement, the CEO shall have
---
general authority and discretion comparable to that of a chief executive officer
of a publicly held Delaware corporation of similar size to direct and control
the business and affairs of the Partnership, including without limitation its
day-to-day operations in a manner consistent with the Annual Budget and the most
recently approved Strategic Plan. The CEO shall take steps to implement all
orders and resolutions of the Partnership Governance Committee or, as
applicable, any Auxiliary Committee. 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 (not
otherwise requiring Partnership Governance Committee Action), 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 as well as such other duties as from time to time may be assigned to him or
her by the Partnership Governance Committee or as are prescribed by this
Agreement.
7.6 Other Officers. The President (if any) and the Vice Presidents shall
--------------
perform such duties as may, from time to time, be assigned to them by the
Partnership Governance Committee or by the CEO. In addition, at the request of
the CEO, or in the absence or disability of the CEO, the President (if any) or
any Vice President, in any 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.
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<PAGE>
7.7 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 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 and of the seal,
if any. 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 or the CEO from time to time may assign to or confer upon the
Secretary.
7.8 Salaries. Salaries or other compensation of the other Executive
--------
Officers of the Partnership shall be established by the CEO consistent with
plans approved by the Partnership Governance Committee. Except as approved by
the Partnership Governance Committee, all fees and compensation of the officers
and employees of the Partnership other than the CEO 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 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.
7.9 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.
7.10 Employee Hirings. Without the prior approval of the two other General
----------------
Partners, which approval shall not be unreasonably withheld, a General Partner
(or its Affiliates) shall not be entitled to hire employees of the Partnership
who at the time of such employment are eligible to participate in the incentive
compensation programs available to senior managers or executives or to hire
specific individuals who had been employed by the Partnership within the
previous year and who prior to the termination of their employment were eligible
to participate in the incentive compensation programs available to senior
managers or executives. Without the prior approval of the relevant General
Partner, which approval shall not be unreasonably withheld, the Partnership
shall not be entitled to hire employees of such General Partner (or its
Affiliates) who at the time of such employment are eligible to participate in
the incentive compensation programs available to senior managers or executives
or to hire specific individuals who had been employed by such General Partner
(or its Affiliates) within the previous year and who prior to the termination of
their employment were eligible to participate in the incentive compensation
programs available to senior managers or executives.
7.11 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. In no event shall any Person dealing with any officer
with respect to any business or property of the Partnership be obligated to
ascertain that the terms of this Agreement have been complied with, or
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<PAGE>
be obligated to inquire into the necessity or expedience of any act or action of
the officer; and every contract, agreement, deed, mortgage, security agreement,
promissory note or other instrument or document executed by the officer with
respect to any business or property of the Partnership shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that (i) at the time of the execution and/or delivery thereof, this Agreement
was in full force and effect, (ii) the instrument or document was duly executed
in accordance with the terms and provisions of this Agreement and is binding
upon the Partnership, and (iii) the officer was duly authorized and empowered to
execute and deliver any and every such instrument or document for and on behalf
of the Partnership.
SECTION 8
STRATEGIC PLANS, ANNUAL BUDGETS AND LOANS
-----------------------------------------
8.1 Strategic Plan.
--------------
(a) The Partnership shall be managed in accordance with a five-year
strategic business plan (the "Strategic Plan") which shall be updated annually
under the direction of the CEO and presented for approval by the Partnership
Governance Committee pursuant to Section 6.7 no later than 90 days prior to the
-----------
start of the first fiscal year covered by the updated plan.
(b) The Strategic Plan shall establish the strategic direction of the
Partnership, including plans relating to capital maintenance and enhancement,
geographic expansion, acquisitions and dispositions, new product lines,
technology, long-term supply and customer arrangements, internal and external
financing, environmental and legal compliance, and plans, programs and policies
relating to compensation and industrial relations. The Strategic Plan shall
include projected income statements, balance sheets and cash flow statements,
including the expected timing and amounts of capital contributions and cash
distributions. The format and level of detail of each Strategic Plan shall be
consistent with that of the initial Strategic Plan agreed to by the Initial
Partners on or prior to the Initial Closing Date or the Strategic Plan most
recently approved pursuant to Section 6.7.
-----------
8.2 Annual Budget.
-------------
(a) The Executive Officers of the Partnership shall prepare an Annual
Budget (each, an "Annual Budget") for each fiscal year, including an Operating
Budget and Capital Expenditure Budget; provided that each Annual Budget shall be
--------
consistent with the information for such fiscal year included in the Strategic
Plan most recently approved pursuant to Section 6.7; and provided, further, that
----------- -------- -------
unless provided otherwise in the most recently approved Strategic Plan, the
Annual Budget (including any Annual Budget prepared under Section 8.2(b)) shall
--------------
utilize a format and provide a level of detail consistent with the Partnership's
initial Annual Budget. The Annual Budget for each year shall be submitted to
the Partnership Governance Committee for approval at least 60 days prior to the
start of the fiscal year covered by such budget. Each Annual Budget shall
incorporate (i) a projected income statement, balance sheet and a cash flow
statement, (ii) the amount of any corresponding cash deficiency or surplus and
(iii) the estimated amount, if any, and expected
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<PAGE>
timing for all required capital contributions. Each proposed Annual Budget shall
be prepared on a basis consistent with the Partnership's financial statements.
(b) If for any fiscal year the Partnership Governance Committee has failed
to approve an updated Strategic Plan, then, subject to Section 8.5, for such
-----------
year and each subsequent year prior to approval of an updated Strategic Plan,
the Executive Officers of the Partnership shall prepare (and promptly furnish to
the Partnership Governance Committee) the Annual Budget consistent with the
projections and other information for that year included in the Strategic Plan
most recently approved pursuant to Section 6.7; provided, however, that the CEO,
----------- -------- -------
acting in good faith, shall be entitled to modify any such Annual Budget in
order to satisfy current contractual and compliance obligations and to account
for other changes in circumstances resulting from the passage of time or the
occurrence of events beyond the control of the Partnership; provided, further,
-------- -------
that the CEO shall not be authorized to cause the Partnership to proceed with
capital expenditures to accomplish capital enhancement projects except to the
extent that such expenditures would enable the Partnership to continue or
complete any such capital project reflected in the last Strategic Plan that was
approved by the Partnership Governance Committee pursuant to Section 6.7.
-----------
(c) Each "Operating Budget" shall constitute an estimate for each
applicable period of all operating income, which shall include expenses required
to maintain, repair and restore to good and usable condition the Partnership's
assets.
(d) Each "Capital Expenditure Budget" shall constitute an estimate for the
applicable period of the capital expenditures required to (i) accomplish capital
enhancement projects included in the most recently approved Strategic Plan, (ii)
maintain and preserve the Partnership's assets in good operating condition and
repair and (iii) achieve or maintain compliance with any HSE Law.
8.3 Funding of Partnership Expenses. All Partnership expenses (both
-------------------------------
operating and capital expenses), regardless of whether included in any Strategic
Plan or Annual Budget, shall be funded from operating cash flows or authorized
borrowings under available lines of credit, unless otherwise agreed by the
Partnership Governance Committee. Subject to the limitations of Sections 2.4
------------
and 6.7(v), if applicable, to the extent that the CEO determines at any time
- ----------
that funds are needed to fund Partnership operations, the CEO may issue a
Funding Notice to the Limited Partners calling for an additional capital
contribution. The Limited Partners will take all steps necessary to cause
compliance with such Funding Notice.
8.4 Implementation of Budgets and Discretionary Expenditures by CEO.
---------------------------------------------------------------
(a) After a Strategic Plan and an Annual Budget have been approved by the
Partnership Governance Committee (or an Annual Budget has been developed in
accordance with Section 8.2(b)), the CEO will be authorized, without further
--------------
action by the Partnership Governance Committee, to cause the Partnership to make
expenditures consistent with such Strategic Plan and Annual Budget; provided,
--------
however, that all internal control policies and procedures, including those
- -------
regarding the required authority for certain expenditures, shall have been
followed.
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<PAGE>
(b) 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 Strategic Plan or Annual Budget. Promptly after
learning of an emergency, the CEO or such designee shall notify the
Representatives of the nature of the emergency and the response that has been
made, or is committed or proposed to be made, with respect to the emergency.
8.5 Strategic Plan Deadlock. If the Partnership Governance Committee has
-----------------------
not agreed upon and approved an updated Strategic Plan, as contemplated by
Sections 6.7 and 8.1, by such date as is 12 months after the beginning of the
- --------------------
first fiscal year that would have been covered by such plan, then the General
Partners shall submit their disagreements to non-binding mediation by a Neutral.
If the General Partners are unable to agree upon a mutually acceptable Neutral
within 30 days after a nomination of a Neutral is made by one General Partner to
the other General Partners, then such Neutral shall upon the application of any
General Partner be appointed within 70 days of such nomination by the Center for
Public Resources, or if such appointment is not so made promptly then promptly
thereafter by the American Arbitration Association in Philadelphia,
Pennsylvania, or if such appointment is not so made promptly then promptly
thereafter by the senior United States District Court judge sitting in
Wilmington, Delaware. The fees of the Neutral shall be paid equally by the
General Partners. Within 20 days of selection of the Neutral, two persons
having decision-making authority on behalf of each General Partner shall meet
with the Neutral and agree upon procedures and a schedule for attempting to
resolve the differences between the General Partners. They shall continue to
meet thereafter on a regular basis until (i) agreement is reached by the General
Partners (acting through their Representatives) on an updated Strategic Plan or
(ii) at least 24 months have elapsed since the beginning of the first fiscal
year that was to be covered by the first updated plan for which agreement was
not reached and one General Partner shall determine and notify the other General
Partners and the Neutral in writing (a "Deadlock Notice") that no agreement
resolving the dispute is likely to be reached.
8.6 Loans.
-----
(a) 1998 Credit Facility. Each General Partner agrees that it will use its
--------------------
reasonable best efforts to cause the Partnership to enter into a credit facility
or facilities (whether one or more, the "1998 Credit Facility") on or prior to
December 15, 1998, which 1998 Credit Facility would allow the Partnership to
borrow at least $500 million aggregate principal amount (inclusive of the Bank
Credit Agreement Repayment Amount but exclusive of any other portion of the 1998
Credit Facility which may be dedicated to the satisfaction of working capital
needs or used for refinancing any indebtedness of the Partnership existing at
such time) thereunder, notwithstanding the amount ($1.25 billion) that may be
borrowed by the Partnership under its bank credit facility in existence as of
the date of this Agreement. Each General Partner further agrees to cause the
Partnership to draw down the Bank Credit Agreement Repayment Amount under the
1998 Credit Facility and to apply the Bank Credit Agreement Repayment Amount to
the repayment of any principal amount outstanding under the Bank Credit
Agreement on or prior to December 15, 1998, and two Business Days after such
repayment to cause the Partnership to draw down $419,700,000 under the Bank
Credit Agreement for distribution to Occidental LP2 as provided in Section
3.1(g).
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<PAGE>
(b) 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. Any
Partner may, at its sole discretion, guarantee or provide other credit or
financial support for all or any portion of any debt, including any refinancing
of the Bank Credit Agreement or any uncommitted lines of credit of the
Partnership, for such period of time and on such other terms as the Partner
shall determine.
(c) Millennium Guarantee. Millennium America, an Affiliate of Millennium
--------------------
GP and Millennium LP, issued a full and unconditional guarantee (the "Millennium
America Guarantee") in respect of $750 million of principal owed by the
Partnership pursuant to the Bank Credit Agreement, together with interest
thereon, as set forth in the Bank Credit Agreement. Millennium America (or its
successors or assigns) shall maintain the Millennium America Guarantee in full
force and effect in respect of $750 million of principal, together with
interest thereon, under the Bank Credit Agreement or any refinancings thereof
(including, without limitation, any further refinancings of such refinancings)
indefinitely; provided, however, that Millennium America may terminate the
-------- -------
Millennium America Guarantee at any time on or after the seventh anniversary of
the Initial Closing Date if, and only if: (i) the Partnership's ratio of Total
Indebtedness to Total Capitalization is, as of the end of the most recently
completed fiscal quarter of the Partnership lower than such ratio as of December
31, 1998, (ii) the Partnership's ratio of EBITDA to Net Interest for the most
recent 12 month period is at least 105% of such ratio for the 12 month period
ending December 31, 1998, (iii) the Partnership is not then in default in the
payment of principal of, or interest on, any indebtedness for borrowed money in
excess of $15 million and (iv) the Partnership is not then in default in respect
of any covenants relating to any indebtedness for borrowed money if the effect
of any such default shall be to accelerate, or to permit the holder or obligee
of such indebtedness (or any trustee on behalf of such holder or obligee) to
accelerate (with or without the giving of notice or lapse of time or both), such
indebtedness in an aggregate amount in excess of $50 million; provided, further,
-------- -------
that if Millennium GP and Millennium LP sell all of their respective interests
in the Partnership, or if Millennium Petrochemicals Inc. sells all of its equity
interests in both Millennium GP and Millennium LP, in each case to an
unaffiliated third party (or parties) at any time in accordance with the terms
of this Agreement, Millennium America may terminate the Millennium America
Guarantee if, at the time of such sale or at the time of such termination, (A)
the Partnership has an "investment grade" credit rating issued by Moody's
Investor Service Inc. or Standard & Poor's Corporation (or, if the Partnership
has no rated indebtedness outstanding at such time, Millennium America
demonstrates to the reasonable satisfaction of the Partnership that the
Partnership could obtain such an "investment grade" credit rating), or (B) the
fair market value of the Partnership's assets is at least 140% of the gross
amount of its liabilities. For purposes of this paragraph (c), "EBITDA" means,
with respect to any period, operating income before interest, taxes,
depreciation and amortization, as determined in accordance with GAAP; "Net
Interest" means, with respect to any period, (i) the amount which, in conformity
with GAAP, would be set forth opposite the caption "interest expense" (or any
like caption) on a consolidated income statement of the Partnership and all
other Persons with which the Partnership's financial statements are to be
consolidated in accordance with GAAP for the relevant period ended on such date
less (ii) the amount which, in conformity with GAAP,
- ----
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<PAGE>
would be set forth opposite the caption "interest income" (or any like caption)
on such consolidated income statement; "Total Indebtedness" means at the time of
determination all indebtedness of the Partnership and its subsidiaries on a
consolidated basis, as determined in accordance with GAAP; "Total
Capitalization" means, at the time of determination, the sum of Total
Indebtedness plus the partner's equity reflected on a balance sheet of the
Partnership prepared in accordance with GAAP.
SECTION 9
RIGHTS OF PARTNERS
------------------
9.1 Delegation and Contracts with Related Parties.
---------------------------------------------
(a) 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.
(b) Upon receipt of any required approval by the Partnership Governance
Committee (including, as applicable, any approval required by Section 6.8), 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, without any other duties or
rights being implied by reason of a Partner being a Partner or by reason of any
provision of this Agreement or the existence of the Partnership.
9.2 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. In no event shall any Person dealing with any
General Partner or such General Partner's representatives with respect to any
business or property of the Partnership 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 the General Partner or the
General Partner's representatives; and every contract, agreement, deed,
mortgage, security agreement, promissory note or other instrument or document
executed by the General Partner or the General Partner's representatives with
respect to any business or property of the Partnership shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that (i) at the time of the execution and/or delivery thereof, this Agreement
was in full force and effect, (ii) the instrument or document was duly executed
in accordance with the terms and provisions of this Agreement and is binding
upon the Partnership, and (iii) the General Partner or the General Partner's
representative was duly authorized and empowered to execute and deliver any and
every such instrument or document for and on behalf of the Partnership. Nothing
in this Section 9.2 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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<PAGE>
9.3 Limitation on Fiduciary Duty; Non-Competition; Right of First
-------------------------------------------------------------
Opportunity.
-----------
(a) 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 its Contributed
Businesses, 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 9.3 and is agreeing to such provision 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) or of any Limited Partner (including any liability of its Affiliates
or its and their respective officers, agents, directors 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; provided, however, that each
-------- -------
General Partner shall at all times owe to the other General Partners a fiduciary
duty in observing the requirement described in Section 6.7 that two or more
-----------
Representatives of Lyondell GP, two or more Representatives of Millennium GP and
two or more Representatives of Occidental GP shall be required to give their
approval before the Partnership may undertake any of the actions listed in
Section 6.7. 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 Partners a duty to act in good faith with respect
to all matters involving the Partnership.
(b) Except as set forth in Section 9.3(c), each Partner's Affiliates shall
--------------
be free to engage in or possess an interest in any other business of any type,
including any business in direct competition with the Partnership, and to avail
itself of any business opportunity available to it without having to offer the
Partnership or any Partner the opportunity to participate in such business.
Except as set forth in Section 9.3(c), it is expressly agreed that the legal
--------------
doctrine of "corporate or business opportunities" sometimes applied to a Person
deemed to be subject to fiduciary or other similar duties so as to prevent such
Persons from engaging in or enjoying the benefits of certain additional business
opportunities shall not be applied in the case of any investment, acquisition,
business, activity or operation of any Partner's Affiliates.
(c) (i) If a Partner's Affiliate desires to initiate or pursue an
opportunity to undertake, engage in, acquire or invest in a Related
Business by investing in or acquiring a Person whose business is a Related
Business, acquiring assets of a Related Business, or otherwise engaging in
or undertaking a Related Business (a "Business Opportunity"), such Partner
or its Affiliate (such Partner, together with its Affiliates, being called
the "Proposing Partner") shall offer the Partnership the Business
Opportunity on the terms set forth in Section 9.3(c)(ii).
------------------
(ii) When a Proposing Partner offers a Business Opportunity to the
Partnership, the Partnership shall elect to do one of the following within
a reasonably prompt period:
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<PAGE>
(A) acquire or undertake the Business Opportunity for the benefit of
the Partnership as a whole, at the cost, expense and benefit of
the Partnership; provided, however, that, if the Partnership
-------- -------
ceases to actively pursue such opportunity for any reason, then
the Proposing Partner will be entitled to proceed under clause
(B) below; or
(B) permit the Proposing Partner to acquire or undertake the Business
Opportunity for its own benefit and account without any duty to
the Partnership or the other Partners with respect thereto;
provided, however, that if the Business Opportunity is in direct
-------- --------
competition with the then existing business of the Partnership (a
"Competing Opportunity"), then the Proposing Partner and the
Partnership shall, if either so elects, seek to negotiate and
implement an arrangement whereby the Partnership would either (i)
acquire or undertake the Competing Opportunity at the sole cost,
expense and benefit of the Proposing Partner under a mutually
acceptable arrangement whereby the Competing Opportunity is
treated as a separate business within the Partnership with the
costs, expenses and benefits related thereto being borne and
enjoyed solely by the Proposing Partner, or (ii) enter into a
management agreement with the Proposing Partner to manage the
Competing Opportunity on behalf of the Proposing Partner on terms
and conditions mutually acceptable to the Proposing Partner and
the Partnership. If the Partnership and the Proposing Partner do
not reach agreement as to such arrangement, the Proposing Partner
may acquire or undertake the Competing Opportunity for its own
benefit and account without any duty to the Partnership or the
other Partners with respect thereto.
(d) Notwithstanding the provisions of Section 9.3(c)(ii), (i) if the
------------------
Business Opportunity constitutes less than 25% (based on annual revenues for the
most recently completed fiscal year) of an acquisition of or investment in
assets, activities, operations or businesses that is not otherwise a Related
Business, then a Proposing Partner may acquire or invest in such Business
Opportunity without first offering it to the Partnership; provided, that, after
-------- ----
completion of the acquisition or investment thereof, such Proposing Partner must
offer the Business Opportunity to the Partnership pursuant to the terms of
Section 9.3(c)(ii); and if the Partnership elects option (A) of Section
- ------------------ -------
9.3(c)(ii) with respect thereto, the Business Opportunity shall be acquired by
- ----------
the Partnership at its fair market value as of the date of such acquisition and
(ii) if the Business Opportunity is (A) part of an integrated project, a
substantial element of which is the development, exploration, production and/or
sale of oil or gas reserves and (B) located in a country other than the United
States, Canada or Mexico then such Partner or its Affiliate may acquire or
invest in such Business Opportunity without first offering it to the
Partnership; provided, that subject to any requisite consents and approvals from
--------
third parties or governmental authorities, the Partner or its Affiliate will use
commercially reasonable efforts to include the Partnership to the maximum extent
practicable in such integrated project with respect to the Business Opportunity
portion of the project.
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<PAGE>
(e) Notwithstanding the provisions of Section 9.3(c), any direct or
--------------
indirect expansion by LYONDELL-CITGO Refining Company Ltd. of its aromatics
business shall not be deemed to constitute a Business Opportunity for purposes
of Section 9.3(c).
--------------
(f) If (i) the Partnership is presented with an opportunity to acquire or
undertake a Business Opportunity (other than pursuant to Section 9.3(c)) that it
determines not to acquire or undertake and (ii) the Representatives of one or
two General Partners, but not the other General Partner(s), desire that the
Partnership acquire or undertake such Business Opportunity, then the Partnership
shall permit such General Partner(s) and its or their respective Affiliates to
acquire or undertake such Business Opportunity (or in the event two of the
General Partners desire to so undertake, then, as between those two General
Partners and their respective Affiliates, the Business Opportunity may be
pursued or acquired either jointly or independently and Section 9.3(c)(ii)(B)
---------------------
shall be deemed to be applicable thereto to the same extent as if such General
Partner(s) and its or their respective Affiliates were a Proposing Partner with
respect to such Business Opportunity.
9.4 Limited Partners.
----------------
(a) No Limited Partner shall take part in the management or control of the
Partnership's business, transact any business in the Partnership's name or have
the power to sign documents for or otherwise to bind the Partnership.
(b) Each Limited Partner shall have the rights with respect to the
Partnership's books and records as set forth in Section 5.3.
-----------
9.5 Partner Covenants. Each Partner covenants and agrees with the
-----------------
Partnership and with the other Partners as follows:
(i) It shall not exercise, or purport or attempt to exercise, its
authority to withdraw, retire, resign, or assert that it has been expelled
from the Partnership;
(ii) It shall not do any act that would make it impossible or
impracticable to carry on the Partnership's business; and
(iii) It shall not act or purport or attempt to act in a manner
inconsistent with any act of a General Partner acting pursuant to the
Partnership Governance Committee or in a manner contrary to the agreements
of the Partners set forth in this Agreement;
provided, that, nothing in this Section 9.5 shall be deemed to waive its rights
- -------- ---- -----------
under Sections 10, 11 or 12.
---------------------
9.6 Special Purpose Entities. Each Partner covenants and agrees that (i)
------------------------
its business shall be restricted solely to the holding of its Units and the
doing of things necessary or incidental in connection therewith (including,
without limitation, the exercise of its rights and powers under this Agreement),
and (ii) it shall not own any assets, incur any liabilities or engage,
participate or invest
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<PAGE>
in any business outside the scope of such business; provided, however, that this
--------- -------
Section 9.6 shall not be binding upon (a) Millennium Petrochemicals Inc., a
Virginia corporation, or its successors by operation of law to the extent that
any Units shall be Transferred to it in accordance with Section 10.6 or (b) at
------------
its option, any Wholly Owned Affiliate of any Partner to whom Units shall be
Transferred pursuant to Section 10.6 if, at the date of such Transfer, such
------------
Wholly Owned Affiliate shall have a consolidated net worth, as determined in
accordance with GAAP, of at least $50 million. Notwithstanding the foregoing
provisions of this Section 9.6, this Section 9.6 shall not prohibit any Partner
from incurring debt payable to its Parent or an Affiliate so long such debt is
permitted under Section 2.4 of the Parent Agreement.
SECTION 10
TRANSFERS AND PLEDGES
---------------------
10.1 Restrictions on Transfer and Prohibition on Pledge. Except pursuant
--------------------------------------------------
to Section 11 or the procedures described below in this Section, a Partner shall
----------
not, in any transaction or series of transactions, directly or indirectly
Transfer all or any part of its Units. A Partner shall not, in any transaction
or series of transactions, directly or indirectly Pledge all or any part of its
Units or its interest in the Partnership. Neither the term "Transfer" nor the
term "Pledge," however, shall include an assignment by a Partner of such
Partner's right to receive distributions from the Partnership so long as such
assignment does not purport to assign any right of such Partner to participate
in or manage the affairs of the Partnership, to receive any information or
accounting of the affairs of the Partnership, or to inspect the books or records
of the Partnership or any other right of a Partner pursuant to this Agreement or
the Act. Any attempt by a Partner to Transfer or Pledge all or a portion of its
Units in violation of this Agreement shall be void ab initio and shall not be
-- ------
effective to Transfer or Pledge such Units or any portion thereof. Subject to
any applicable restrictions imposed by the Amended and Restated Parent
Agreement, nothing in this Agreement shall prevent the Transfer or Pledge by the
owner thereof of any capital stock, equity ownership interests or other security
of a Partner or any Affiliate of a Partner.
10.2 Right of First Option.
---------------------
(a) Except as set forth in Section 10.6, without the consent of all of
the General Partners, no Partner may Transfer less than all of its Units and no
Partner may Transfer its Units for consideration other than cash. Any Limited
Partner (or Limited Partners, if there are Affiliated Limited Partners) and its
(or their) Affiliated General Partner desiring to Transfer all of their Units
(together, the "Selling Partners") shall give written notice (the "Initial
Notice") to the Partnership and the other Partners (the "Offeree Partners")
stating that the Selling Partners desire to Transfer their Units and stating the
cash purchase price and all other terms on which they are willing to sell (the
"Offer Terms"). Delivery of an Initial Notice shall constitute the irrevocable
offer of the Selling Partners to sell their Units to the Offeree Partners
hereunder.
(b) The Offeree Partners shall have the option, exercisable by delivering
written notice (the "Acceptance Notice") of such exercise to the Selling
Partners within 45 days of the date of the
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<PAGE>
Initial Notice, to elect to purchase all of the Units of the Selling Partners on
the Offer Terms described in the Initial Notice. If all of the Offeree Partners
deliver an Acceptance Notice, then all of the Units shall be transferred to the
Offeree Partners on a pro rata basis (based on the ratio of the number of Units
owned by each Offeree Partner delivering an Acceptance Notice to the number of
Units owned by all Offeree Partners delivering an Acceptance Notice or on any
other basis that shall be mutually agreed upon between the Offeree Partners
delivering an Acceptance Notice). If less than all of the Offeree Partners
deliver an Acceptance Notice, the Selling Partners shall give written notice
thereof (the "Additional Notice") to the Offeree Partners electing to purchase,
and such Offeree Partners shall have the option, exercisable by delivery of an
Acceptance Notice of such exercise to the Selling Partners within 15 days of
such Additional Notice, to purchase all of the Units, including the Units it had
not previously elected to purchase; provided, however, that any election by an
-------- -------
Offeree Partner not to purchase all such Units shall be deemed a rescission of
such Offeree Partner's original Acceptance Notice and an election not to
purchase any of the Units of the Selling Partners. The Acceptance Notice shall
set a date for closing the purchase, such date to be not less than 30 nor more
than 90 days after delivery of the Acceptance Notice; provided that such time
--------
period shall be subject to extension as reasonably necessary (up to a maximum of
an additional 120 days after such 90 day period) in order to comply with any
applicable filing and waiting period requirements under the Hart-Scott-Rodino
Antitrust Improvements Act. The closing shall be held at the Partnership's
offices. The purchase price for the Selling Partners' Units shall be paid in
cash delivered at the closing. The purchase shall be consummated by appropriate
and customary documentation (including the giving of representations and
warranties substantially similar to those set forth in Sections 2.1 through 2.3
of the Second Master Transaction Agreement).
(c) If none of the Offeree Partners elect to purchase the Selling Partners'
Units within 45 days after the receipt of the Initial Notice, the Selling
Partners shall have a further 180 days during which they may, subject to
Sections 10.2(d) and (e), consummate the sale of their Units to a third party
- ------------------------
purchaser at a purchase price and on such other terms that are no more favorable
to such purchaser than the Offer Terms. If the sale is not completed within
such further 180-day period, the Initial Notice shall be deemed to have expired
and a new notice and offer shall be required before the Selling Partners may
make any Transfer of their Units.
(d) Before the Selling Partners may consummate a Transfer of their Units to
a third party in accordance with this Agreement, the Selling Partners shall
demonstrate to the Offeree Partners that the Person willing to serve as the
proposed purchaser's guarantor under the agreement contemplated by Section
-------
10.2(e)(vi) has outstanding indebtedness that is rated investment grade by
- -----------
Moody's Investors Service, Inc. and Standard & Poor's Corporation, or if such
Person has no rated indebtedness outstanding, such Person shall provide an
opinion from a nationally recognized investment banking firm that such Person
could be reasonably expected to obtain such ratings.
-37-
<PAGE>
(e) Notwithstanding the foregoing provisions of this Section 10.2, a
------------
Partner may Transfer its Units (other than pursuant to Section 10.6) only if all
------------
of the following occur:
(i) The Transfer is accomplished in a non-public offering in
compliance with, and exempt from, the registration and qualification
requirements of all federal and state securities laws and regulations.
(ii) The Transfer does not cause a default under any material
contract to which the Partnership is a party or by which the Partnership or
any of its properties is bound.
(iii) The transferee executes an appropriate agreement to be bound by
this Agreement.
(iv) The transferor and/or transferee bears all reasonable costs
incurred by the Partnership in connection with the Transfer.
(v) The business and activities of the transferee comply with
Section 9.6.
-----------
(vi) The guarantor of the transferee satisfies the criteria set
forth in Section 10.2(d) and delivers an agreement to the ultimate parent
--------------
entity of the Offeree Partners and to the Partnership, substantially in the
form of the Amended and Restated Parent Agreement.
(vii) The proposed transferor is not in default in the timely
performance of any of its material obligations to the Partnership.
(viii) The provisions of Section 10.3 are satisfied.
------------
10.3 Inclusion of General or Limited Partner Units. No Limited Partner may
---------------------------------------------
Transfer its Units to any Person (other than in accordance with Section 10.6)
------------
unless the Units of its General Partner Affiliate and its Limited Partner
Affiliate or Affiliates (if any) are simultaneously transferred to such Person
or a Wholly Owned Affiliate of such Person. No General Partner may transfer its
Units to any Person (other than a Wholly Owned Affiliate of such Partner) unless
the Units of its Affiliated Limited Partner (or Limited Partners, if more than
one) are simultaneously transferred to such Person or a Wholly Owned Subsidiary
of such Person.
10.4 Rights of Transferee. Upon consummation of a Transfer in accordance
--------------------
with Section 10.2, the transferee or transferees shall immediately, and without
------------
any further action of any Person, become (i) a Substitute Limited Partner if and
to the extent Limited Partner Units are transferred and (ii) a Substitute
General Partner, if and to the extent General Partner Units are transferred.
10.5 Effective Date of Transfer. Each Transfer shall become effective as
--------------------------
of the first day of the calendar month following the calendar month during which
the Partnership Governance Committee approves such Transfer and receives a copy
of the instrument of assignment and all such
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<PAGE>
certificates and documents of the character described in Section 10.2, which the
------------
Partnership Governance Committee may reasonably request.
10.6 Transfer to Wholly Owned Affiliate. Without the need for the consent
----------------------------------
of any Person (subject to the provisions contained in this Section 10.6):
------------
(a) any Partner may Transfer its Units to any Wholly Owned Affiliate of
such Partner (other than the Partner that is its Affiliate), provided the
transferee executes an instrument reasonably satisfactory to all of the General
Partners accepting the terms and provisions of this Agreement (except as may be
provided in Section 9.6). Upon consummation of a Transfer in accordance with
-----------
this Section 10.6(a), the transferee shall immediately, and without any further
------------
action of any Person, become (i) a Substitute Limited Partner if and to the
extent Limited Partner Units are transferred and (ii) a Substitute General
Partner, if and to the extent General Partner Units are transferred; and
(b) any Limited Partner may, at its option and at any time, (i) Transfer
up to 99% of its Limited Partner Units to its Affiliated General Partner,
whereupon such Limited Partner Units shall, without any further action, become
General Partner Units or (ii) Transfer all of the Limited Partner Units held by
such Limited Partner to its Affiliated Limited Partner. Promptly following any
Transfer of Limited Partner Units in accordance with this Section 10.6(b), each
---------------
Partner shall take such actions and execute such instruments or documents
(including, without limitation, amendments to this Agreement or supplemental
agreements hereto) as may be reasonably necessary to ensure that each Affiliated
Partner Group shall, taken as a whole and following such Transfer, maintain all
of its rights under this Agreement as in effect immediately prior to such
Transfer (including, without limitation, the portion of Available Net Operating
Cash distributable to such Affiliated Partner Group).
10.7 Invalid Transfer. No Transfer of Units which is in violation of this
----------------
Section 10 shall be valid or effective, and the Partnership shall not recognize
- ----------
the same for the purposes of making any allocation or distribution.
SECTION 11
DEFAULT
-------
11. Default.
-------
(a) Each of the following events shall constitute a "Default" and create
the rights provided for in this Section 11 in favor of the Partnership and the
----------
Non-Defaulting Partners against the Defaulting Partners:
(i) the failure by a Partner to make any contribution to the
Partnership as required pursuant to this Agreement (other than pursuant to
the Contribution Agreement), which failure continues for at least five
Business Days from the date that the Partner is notified such contribution
is overdue;
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<PAGE>
(ii) in the case of each of Lyondell GP and Lyondell LP, the failure
to pay principal, when due, on the Lyondell Note, which failure continues
for at least five Business Days from the date such payment is due; or
(iii) the withdrawal, retirement, resignation or dissolution of a
Partner (other than in connection with a Transfer of all of a Partner's
Units in accordance with this Agreement); or the Bankruptcy of a Partner or
its Guarantor.
(b) The day upon which the Default commences or occurs (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.
11. Remedies for Default. Provided that there shall be no duplication of
--------------------
remedies, without prejudice to any right 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, each Non-Defaulting
Affiliated Partner Group in its sole discretion may elect to pursue the
following remedies:
(a) At any time prior to the expiration of 60 days from the Default Date,
each Non-Defaulting Affiliated Partner Group may elect to purchase its pro rata
share (based on the ratio of the number of Units owned by such Partners to the
number of Units owned by all Non-Defaulting Partners electing to purchase) of
the Units of the Defaulting Partners as described in Section 11.3; provided,
------------ --------
however, that within 10 days after the determination of the Fair Market Value,
- -------
either Non-Defaulting Affiliated Partner Group may withdraw its election. If a
Non-Defaulting Affiliated Partner Group withdraws its election to purchase after
the determination of Fair Market Value, and the other Non-Defaulting Affiliated
Partner Group has elected and not so withdrawn, the withdrawing Affiliated
Partner Group shall provide notice within 5 days of its withdrawal to such other
Affiliated Partner Group. At any time prior to the expiration of 10 days from
receipt of such notice, the Affiliated Partner Group receiving such notice may
elect to purchase the Units as to which the election to purchase has been
withdrawn. If on the later to occur of (i) a Non-Defaulting Affiliated Partner
Group's withdrawal of its election to purchase or (ii) the expiration of 10 days
from receipt of the notice provided for in the foregoing sentence, no election
to purchase is in effect with respect to all of the Units of the Defaulting
Partners, then each Non-Defaulting Partner Affiliated Partner Group shall have
an additional 30 days from such time to elect an alternative remedy under
Section 11.2(b) below; and
- ---------------
(b) At any time prior to the expiration of 60 days from the Default Date
(or if any Non-Defaulting Affiliated Partner Group initially elected to pursue
its remedy under Section 11.2(a) above and no elections to purchase all Units of
---------------
the Defaulting Partners are made and not withdrawn, at any time within the 30
days following the last applicable waiting period under Section 11.2(a)), any
----------------
Non-Defaulting Affiliated Partner Group may elect to effect a liquidation of the
Partnership under Section 11.4 and thereby cause the Partnership to dissolve
------------
under Section 12.1(iv).
----------------
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<PAGE>
11.3 Purchase of Defaulting Partners' Units.
--------------------------------------
(a) Upon any election pursuant to Section 11.2(a), the purchase price
---------------
that such Non-Defaulting Partners shall pay, in the aggregate, to the Defaulting
Partners for their Units shall be an amount equal to (i) the amount that the
Defaulting Partners would receive in a liquidation (assuming that any sale under
Section 12.2 were for an amount equal to the Fair Market Value, without giving
- ------------
effect to any Damages) reduced by (ii) the unrecovered Damages attributable to
the Default by the Defaulting Partners.
(b) If the Non-Defaulting Partners have a right to purchase the Units of
the Defaulting Partners, any Non-Defaulting Partner may first seek a
determination of Fair Market Value by delivering notice in writing to the
Defaulting Partners. Each such Non-Defaulting Affiliated Partner Group shall
have 10 days from the final determination of Fair Market Value (or if purchasing
pursuant to the withdrawal of election to purchase, 10 days from receipt of
notice as provided in Section 11.2(b)) to elect to purchase its share of the
---------------
Defaulting Partner Units by delivering notice of such election in writing, and
the purchase shall be consummated prior to the expiration of 60 days from the
date such notice is delivered; provided that, such time period shall be subject
-------------
to extension as reasonably necessary (up to a maximum of an additional 120 days
after such 60 day period) in order to comply with any applicable filing and
waiting period requirements under the Hart-Scott-Rodino Antitrust Improvements
Act.
(c) The purchase price so determined shall be payable in cash at a
closing held at the Partnership's offices. The purchase shall be consummated by
appropriate and customary documentation (including the giving of representations
and warranties substantially similar to those set forth in Sections 2.1 through
--------------------
2.4 of the Second Master Transaction Agreement) as soon as practicable and in
- ---
any event within the applicable time period specified in subsection (b).
--------------
(d) The Non-Defaulting Partners may assign, in whole or in part, their
right to purchase the Units of the Defaulting Partners to one or more third
parties without the consent of any Partner hereunder.
(e) If Units are transferred in accordance with this Section 11.3,
------------
whether to the Non-Defaulting Partners or a third party (under subsection (d)
--------------
above), upon the consummation of such Transfer, each such transferee shall
immediately, and without any further action on the part of any Person, become
(i) a Substitute Limited Partner if and to the extent that Limited Partner Units
were transferred to such Person and (ii) a Substitute General Partner if and to
the extent that General Partner Units were transferred to such Person.
11.4 Liquidation. Upon any election pursuant to Section 11.2(b), any Non-
----------- ---------------
Defaulting Partner shall have the right to elect to dissolve and liquidate the
Partnership pursuant to the procedures in Section 12.1(iv) (such procedures
----------------
constituting a "Liquidation"); provided, however, that any amount payable to the
-------- -------
Defaulting Partners in such Liquidation pursuant to Section 12.2 shall be
------------
reduced by, without duplication, any unrecovered Damages incurred by the Non-
Defaulting Partners and the Non-Defaulting Partners' Percentage Interest of any
unrecovered Damages incurred
-41-
<PAGE>
by the Partnership in connection with the Default. The Non-Defaulting Partner
shall deliver notice of such election to dissolve and liquidate in writing to
the Partnership and the other Partners.
11.5 Certain Consequences of Default. Notwithstanding any other provision
-------------------------------
of this Agreement, commencing on the Default Date and (i) prior to the Non-
Defaulting Partners' collection of Damages through the exercise of its legal
remedies or otherwise, or (ii) while the Non-Defaulting Partners are pursuing
their remedies under Section 11.2(a) or (b), the Representatives of the
----------------------
Defaulting General Partner shall not have any voting or decisional rights with
respect to matters requiring Partnership Governance Committee Action, and such
matters shall be determined solely by the Representatives of the Non-Defaulting
General Partners; provided, however, that the foregoing loss of voting and
-------- -------
decisional rights shall not occur as a result of a Default caused solely by the
Bankruptcy of a Partner or a Guarantor described in Section 11.1(a)(iii); and
--------------------
provided further, that in the case of a Default under Section 11.1(a)(i) or
- ---------------- ------------------
(ii), the foregoing loss of voting and decisional rights shall not apply to
- ----
those voting and decisional rights contained in Sections 6.7(i), (x), (xvi) or
------------------------------
(xviii) of this Agreement, which rights shall continue in full force and effect
- -------
at all times.
SECTION 12
DISSOLUTION, LIQUIDATION AND TERMINATION
----------------------------------------
12.1 Dissolution and Termination. As long as there is at least one other
---------------------------
General Partner (who is hereby authorized in such event to conduct the business
of the Partnership without dissolution), the withdrawal, retirement,
resignation, dissolution or Bankruptcy of a General Partner shall not dissolve
the Partnership, but rather shall be a Default covered by Section 11. The
----------
Partnership shall be dissolved upon the happening of any one of the following
events:
(i) the written determination of all General Partners to dissolve
the Partnership ;
(ii) the entry of a judicial decree of dissolution;
(iii) any other act or event which results in the dissolution of a
limited partnership under the Act (except as provided in the first sentence
of this Section 12.1);
------------
(iv) the election of a Non-Defaulting Affiliated Partner Group to
effect a dissolution of the Partnership under Section 11.4; or
------------
(v) after the delivery of a Deadlock Notice by a General Partner
pursuant to Section 8.5, the written determination by any General Partner
-----------
to dissolve the Partnership.
12.2 Procedures Upon Dissolution.
---------------------------
(a) General. If the Partnership dissolves, it shall commence winding up
-------
pursuant to the appropriate provisions of the Act and the procedures set forth
in this Section 12. Notwithstanding
----------
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<PAGE>
the dissolution of the Partnership, prior to the termination of the Partnership,
the business of the Partnership and the affairs of the Partners, as such, shall
continue to be governed by this Agreement.
(b) Control of Winding Up. The winding up of the Partnership shall be
---------------------
conducted under the direction of the Partnership Governance Committee; provided,
--------
however, that if the dissolution is caused by entry of a decree of judicial
- -------
dissolution, the winding up shall be carried out in accordance with such decree.
(c) Manner of Winding Up. Unless the provisions of Section 12.2(e) apply,
-------------------- ---------------
the Partnership shall attempt to sell all property and apply the proceeds
therefrom in accordance with this Section 12.2(c) and Section 12.2(d) below.
--------------- ---------------
Upon dissolution of the Partnership, the Partnership Governance Committee shall
determine the time, manner and terms of any sale or sales of Partnership
property pursuant to such winding up, consistent with its duties and having due
regard to the activity and condition of the relevant market and general
financial and economic conditions. Except as otherwise agreed by the Partners,
no distributions will be made in kind to any Partner without the consent of each
Partner.
(d) Application of Assets. In the case of a dissolution and winding-up of
---------------------
the Partnership, the Partnership's assets shall be applied as follows:
(i) First, to satisfaction of the liabilities of the Partnership
owing to creditors (including Partners and Affiliates of Partners who are
creditors), whether by payment or reasonable provision for payment. Any
reserves created to make any such provision for payment may be paid over by
the Partnership to an independent escrow holder or trustee, to be held in
escrow or trust for the purpose of paying any such contingent, conditional
or unmatured liabilities or obligations, and, at the expiration of such
period as the Partnership Governance Committee may deem advisable, such
reserves shall be distributed to the Partners or their assigns in the
manner set forth in subsection (d)(ii) below.
------------------
(ii) Second, after all allocations of Profits or Losses and other
items pursuant to Section 4, to the Partners in accordance with the
---------
balances in their Capital Accounts. Any Partner that then has a deficit in
its Capital Account shall contribute cash in the amount necessary to
eliminate such deficit. Such contributions shall be made within 90 days
after the date in which all undistributed assets of the Partnership have
been converted to cash.
(iii) Notwithstanding the foregoing, if any Partner shall be indebted
to the Partnership, then until payment in full of the principal of and
accrued but unpaid interest on such indebtedness, regardless of the stated
maturity or maturities thereof, the Partnership shall retain such Partner's
distributive share of Partnership property and apply such sums to the
liquidation of such indebtedness and the cost of operation of such
Partnership property during the period of such liquidation.
(e) Division of Assets upon Deadlock. If dissolution occurs pursuant to
--------------------------------
Section 12.1(v), then the provisions of this Section 12.2(e) shall, if elected
- --------------- ---------------
by any Partner, apply in lieu of
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the provisions of Section 12.2(c), but subject to the provisions of Section
--------------- -------
12.2(d)(ii). In such event, the Partnership properties shall be divided and
- -----------
distributed in kind to the Partners in accordance with the provisions of
Appendix E.
12.3 Termination of the Partnership. Upon the completion of the
------------------------------
liquidation of the Partnership and the distribution of all Partnership assets,
the Partnership's affairs shall terminate and the Partnership shall cause to be
executed and filed a Certificate of Cancellation of the Partnership's
Certificate of Limited Partnership pursuant to the Act, as well as any and all
other documents required to effectuate the termination of the Partnership.
12.4 Asset and Liability Statement. Within a reasonable time following the
-----------------------------
completion of the winding-up and liquidation of the Partnership's business, the
Partnership Governance Committee shall supply to each of the Partners a
statement (which may be unaudited) which shall set forth the assets and the
liabilities of the Partnership as of the date of complete liquidation, and each
Partner's pro rata portion of distributions pursuant to Section 12.2.
------------
SECTION 13
MISCELLANEOUS
-------------
13.1 Confidentiality and Use of Information.
--------------------------------------
(a) Except as provided in subsection (c) or (d) hereof, each Partner
--------------
shall, and shall cause each of its Affiliates and its and their respective
partners, shareholders, directors, officers, employees and agents (collectively,
"Related Persons") to, keep secret, retain in strictest confidence, and not
distribute, disseminate or disclose any and all Confidential Information except
to (i) the Partnership and its officers and employees, (ii) any lender to the
Partnership or (iii) any Partner or any of their respective Affiliates or other
Related Persons on a "need to know" basis in connection with the transactions
leading up to and contemplated by this Agreement and the operation of the
Partnership, and such Partner disclosing Confidential Information pursuant to
this Section 13.1(a) shall use, and shall cause its Affiliates and other Related
--------------
Persons to use, such Confidential Information only for the benefit of the
Partnership in conducting the Partnership's business or for any other specific
purposes for which it was disclosed to such party; provided that the disclosure
-------------
of financial statements of, or other information relating to the Partnership
shall not be deemed to be the disclosure of Confidential Information (y) to the
extent that any Partner (or its ultimate parent entity) deems it necessary,
appropriate or customary pursuant to law, regulation or stock exchange rule (in
the reasonable good faith judgment of such parent entity) to disclose such
information in or in connection with filings with the SEC, press releases
disseminated to the financial community, presentations to lenders, presentations
to ratings agencies or information disclosed to similar audiences or (z) to the
extent that in order to sustain a position taken for tax purposes, any Partner
deems it necessary and appropriate to disclose such financial statements or
other information. All Confidential Information disclosed in connection with the
Partnership or pursuant to this Agreement shall remain the property of the
Person whose property it was prior to such disclosure unless such property has
been transferred to the Partnership pursuant to a Contribution Agreement.
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<PAGE>
(b) No Confidential Information regarding the plans or operations of
any Partner or any Affiliate thereof received or acquired by or disclosed to any
unaffiliated Partner or Affiliate thereof in the course of the conduct of
Partnership business, or otherwise as a result of the existence of the
Partnership, may be used by such unaffiliated Partner or Affiliate thereof for
any purpose other than for the benefit of the Partnership in conducting the
Partnership Business. The Partnership and each Partner shall have the
affirmative obligation to take all necessary steps to prevent the disclosure to
any Partner or Affiliate thereof of information regarding the plans or
operations of such Partner and its Affiliates in markets and areas unrelated to
the business of the Partnership in which any other Partner and their respective
Affiliates compete.
(c) In the event that any Partner is legally required (by
interrogatories, discovery requests for information or documents, subpoena,
civil investigative demand or similar process) to disclose any Confidential
Information, it is agreed that such Partner prior to disclosure will provide the
Partnership Governance Committee (and, if such Confidential Information concerns
another Partner, such Partner) with prompt notice of such request(s) so that the
Partnership Governance Committee (or such other Partner) may seek an appropriate
protective order or other appropriate remedy and/or waive the Partner's
compliance with the provisions of this Section. In the event that such
protective order or other remedy is not obtained, or that the Partnership
Governance Committee (and, if such Confidential Information concerns another
Partner, such Partner) grants a waiver hereunder, the Partner required to
furnish Confidential Information may furnish that portion (and only that
portion) of the Confidential Information which, in the opinion of such Partner's
counsel, such Partner is legally compelled to disclose, and such Partner will
exercise its commercially reasonable best efforts to obtain reliable assurance
that confidential treatment will be accorded any Confidential Information so
furnished.
(d) Any Partner may disclose Confidential Information to a third party
who requires such Confidential Information for the purpose of evaluating a
possible purchase of such Partner's Units in accordance with Section 10;
----------
provided, however, that such third party shall be informed by such Partner of
- -------- -------
the confidential nature of the information and the existence of this Section
-------
13.1 and prior to any disclosure shall execute a written confidentiality
- ----
agreement with such Partner substantially identical in scope to this Section and
providing that such confidentiality agreement is also made for the benefit of
the Partnership and each of the other Partners.
(e) The Partners and their Affiliates shall consult with each other on
an ongoing basis with respect to disclosures regarding the Partnership and its
business and affairs permitted under Section 13.1(a)(y).
------------------
13.2 Indemnification.
---------------
(a) Indemnification by Partnership. The Partnership agrees, to the
fullest extent permitted by applicable law, to indemnify, defend and hold
harmless each Partner, its Affiliates and their respective officers, directors
and employees from, against and in respect of any Liability which such
Indemnified Person may sustain, incur or assume as a result of, or relative to,
a Third Party Claim arising out of or in connection with the business, property
or affairs of the Partnership, except
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<PAGE>
to the extent that it is Finally Determined that such Third Party Claim arose
out of or was 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 breach of this Agreement or any
Related Agreement. The Partnership shall periodically reimburse or advance to
any Person entitled to indemnity under this subsection (a) its legal and other
--------------
expenses incurred in connection with defending any claim with respect to such
Liability if such Person shall agree to reimburse promptly the Partnership for
such amounts if it is finally determined that such Person was not entitled to
indemnity hereunder. Nothing in this Section 13.2(a) is intended to, nor shall
--------------
it, affect or take precedence over the indemnity provisions contained in any
Related Agreement.
(b) Partner's Right of Contribution. Each Partner hereby agrees, to the
-------------------------------
fullest extent permitted by law, to indemnify, defend and hold harmless the
other Partners, their Affiliates and their respective officers, directors and
employees from and against the indemnifying Partner's Percentage Interest
(calculated at the time any such Liability was incurred) of any Liability that
such Indemnified Person may sustain, incur or assume as a result of or relating
to any Third Party Claim arising out of or in connection with the business,
property or affairs of the Partnership; provided, however, that such indemnified
-------- -------
Partner, its Affiliates and their respective officers, directors and employees
shall not be entitled to indemnity under this subsection (b) to the extent that
--------------
it is Finally Determined that such Third Party Claim arose out of or was 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 breach of this Agreement or any Related Agreement;
provided, further, that such indemnified Partner, its Affiliates and their
- -------- -------
respective officers, directors and employees shall not be entitled to indemnity
under this subsection (b) unless (x) the indemnified Partner shall first make a
--------------
written demand for indemnification from the Partnership in accordance with
subsection (a) above and subsection (c) below and the Partnership shall fail to
- -------------- --------------
satisfy such demand in a manner reasonably satisfactory to the indemnified
Partner within 60 days of such notice or (y) the Partnership is insolvent or
otherwise unable to satisfy its obligations. The indemnifying Partner shall
periodically reimburse any Person entitled to indemnity under this subsection
----------
(b) for its legal and other expenses incurred in connection with defending any
- ---
claim with respect to such Liability if such Person shall agree to reimburse
promptly the indemnifying Partner for such amounts if it is Finally Determined
that such Person was not entitled to indemnity hereunder.
(c) Procedures. Promptly after receipt by a Person entitled to
----------
indemnification under subsection (a) or (b) (an "Indemnified Party") of notice
---------------------
of any pending or threatened claim against it (a "Claim"), such Indemnified
Party shall give prompt written notice (including copies of all papers served
with respect to such claim) to the party to whom the Indemnified Party is
entitled to look for indemnification (the "Indemnifying Party") of the
commencement thereof, which notice shall describe in reasonable detail the
nature of the Third Party Claim, an estimate of the amount of damages
attributable to the Third Party Claim to the extent feasible and the basis of
the Indemnified Party's request for indemnification under this Agreement;
provided that the failure to so notify the Indemnifying Party shall not relieve
- --------
the Indemnifying Party 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 Claim that is subject to indemnification under
subsection (a) shall be brought against an Indemnified Party and it shall give
- --------------
notice to the Indemnifying Party of the commencement
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<PAGE>
thereof, the Indemnifying Party may, and at the request of the Indemnified Party
shall, participate in and control the defense of the Third Party Claim with
counsel of its choice reasonably satisfactory to the Indemnified Party. The
Indemnified Party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the Indemnified Party unless (i) the
employment thereof has been specifically authorized in writing by the
Indemnifying Party, (ii) the Indemnifying Party failed to assume the defense and
employ counsel or failed to diligently prosecute or settle the Third Party Claim
or (iii) there shall exist or develop a conflict that would ethically prohibit
counsel to the Indemnifying Party from representing the Indemnified Party. If
requested by the Indemnifying Party, the Indemnified Party agrees to cooperate
with the Indemnifying Party and its counsel in contesting any Third Party Claim
that the Indemnifying Party elects to contest, including, without limitation, by
making any counterclaim against the Person asserting the Third Party Claim or
any cross-complaint against any Person, in each case only if and to the extent
that any such counterclaim or cross-complaint arises from the same actions or
facts giving rise to the Third Party Claim. The Indemnifying Party shall be the
sole judge of the acceptability of any compromise or settlement of any claim,
litigation or proceeding in respect of which indemnity may be sought hereunder,
provided that the Indemnifying Party will give the Indemnified Party reasonable
- --------
prior written notice of any such proposed settlement or compromise and will not
consent to the entry of any judgment or enter into any settlement with respect
to any Third Party Claim without the prior written consent of the Indemnified
Party, which shall not be unreasonably withheld. The Indemnifying Party (if the
Indemnified Party is entitled to indemnification hereunder) shall reimburse the
Indemnified Party for its reasonable out of pocket costs incurred with respect
to such cooperation.
If the Indemnifying Party fails to assume the defense of a Third Party
Claim within a reasonable period after receipt of written notice pursuant to the
first sentence of this subparagraph (c), or if the Indemnifying Party assumes
the defense of the Indemnified Party pursuant to this subparagraph (c) but fails
diligently to prosecute or settle the Third Party Claim, then the Indemnified
Party shall have the right to defend, at the sole cost and expense of the
Indemnifying Party (if the Indemnified Party is entitled to indemnification
hereunder), the Third Party Claim by all appropriate proceedings, which
proceedings shall be promptly and vigorously prosecuted by the Indemnified Party
to a final conclusion or settled. The Indemnified Party shall have full control
of such defense and proceedings; provided that the Indemnified Party shall not
--------
settle such Third Party Claim without the written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld. The Indemnifying Party
may participate in, but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this Section, and the Indemnifying Party shall
bear its own costs and expenses with respect to such participation.
Notwithstanding the other provisions of this Section 13.2, if the
------------
Indemnifying Party disputes its potential liability to the Indemnified Party
under this Section 13.2 and if such dispute is resolved in favor of the
------------
Indemnifying Party, the Indemnifying Party shall not be required to bear the
costs and expenses of the Indemnified Party's defense pursuant to this Section
-------
13.2 or of the Indemnifying Party's participation therein at the Indemnified
- ----
Party's request, and the Indemnified Party shall reimburse the Indemnifying
Party in full for all costs and expenses of the litigation concerning such
dispute. If a dispute over potential liability is resolved in favor of the
Indemnified
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<PAGE>
Party the Indemnifying Party shall reimburse the Indemnified Party in full for
all costs of the litigation concerning such dispute.
After it has been determined, by acknowledgment, agreement, or ruling
of court of Legal Requirements, that an Indemnifying Party is liable to the
Indemnified Party under this Section 13.2(c), the Indemnifying Party shall pay
---------------
or cause to be paid to the Indemnified Party the amount of the Liability within
ten business days of receipt by the Indemnifying Party of a notice reasonably
itemizing the amount of the Liability but only to the extent actually paid or
suffered by the Indemnified Party.
(d) Survival. The indemnities contained in this Section shall survive the
--------
termination and liquidation of the Partnership.
(e) Subrogation. In the event of any payment by or on behalf of an
-----------
Indemnifying Party to an Indemnified Party in connection with any Liability, the
Indemnifying Party (or any guarantor who made such payment) shall be subrogated
to and shall stand in the place of the Indemnified Party as to any events or
circumstances in respect of which the Indemnified Party may have any right or
claim against any third party (not including the Partnership) relating to such
event or indemnification. The Indemnified Party shall cooperate with the
Indemnifying Party (or such guarantor) in any reasonable manner in prosecuting
any subrogated claim.
(f) Nothing in this Agreement shall be deemed to limit the Partnership's
power to indemnify its officers, employees, agents or any other person, to the
fullest extent permitted by law.
13. Third Party Claim Reimbursement.
-------------------------------
(a) In the case of a Liability relating to a Third Party Claim and caused
by the Fault of a General Partner, its Affiliates or any of their respective
officers, directors or employees (acting in their capacities as such) against
whom reimbursement is being sought, such General Partner hereby agrees to
reimburse the Partnership for such Liability to the extent that:
(i) the Liability relates to a Third Party Claim that has been
finally resolved and that the Partnership has actually paid (an "Expense");
(ii) the Expense is not covered by insurance carried by the
Partnership (excluding any amounts relating to insured claims to the extent that
they fall within deductibles or self-insured retentions or are above applicable
coverage limits); and
(iii) the Expense is not offset by third party indemnification or
otherwise; provided, however, that such General Partner shall reimburse the
-------- --------
Partnership for the Expense only to the extent and in proportion to its Fault.
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<PAGE>
(b) Any claim by the Partnership for reimbursement under this Section
may be initiated upon written notice from a Nonconflicted General Partner to the
General Partner to whom the Partnership is entitled to look for indemnification,
and the General Partners shall have a period of 60 days during which to reach
unanimous agreement as to the terms on which any reimbursement shall be made.
If the General Partners are unable to agree or there are any disputes over Fault
and reimbursement under this Section, such matters shall be resolved pursuant to
the Dispute Procedures.
13.4 Dispute Resolution. Except as otherwise provided for herein, all
------------------
controversies or disputes arising under this Agreement shall be resolved
pursuant to the provisions set forth on Appendix D (the "Dispute Procedures").
----------
13.5 EXTENT OF LIMITATION OF LIABILITY, INDEMNIFICATION, ETC. TO THE
-------------------------------------------------------
FULLEST EXTENT PERMITTED BY LAW AND WITHOUT LIMITING OR ENLARGING THE SCOPE OF
THE LIMITATION OF LIABILITY, INDEMNIFICATION, RELEASE AND ASSUMPTION OBLIGATIONS
SET FORTH HEREIN, A PARTY SHALL BE ENTITLED TO INDEMNIFICATION OR RELEASE
HEREUNDER IN ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE LOSS
GIVING RISE TO ANY SUCH INDEMNIFICATION OR RELEASE IS THE RESULT OF THE SOLE,
GROSS, ACTIVE, PASSIVE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY
OR OTHER FAULT OR VIOLATION OF ANY LAW OF OR BY ANY SUCH PARTY. THE PARTIES
AGREE THAT THIS STATEMENT CONSTITUTES A CONSPICUOUS LEGEND.
13.6 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.
13.7 Successors and Assigns. Except as may be expressly provided herein,
----------------------
this Agreement shall be binding upon and inure to the benefit of the successors
of the Partners, but no Partner may assign or delegate any of its rights or
obligations under this Agreement. Except as expressly provided herein, any
purported assignment or delegation shall be void and ineffective.
13.8 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, including any officer or employee of the Partnership or any Partner,
shall have any right, claim or cause of action under or by virtue of this
Agreement.
13.9 Notices. All notices, requests 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 with proof of
confirmation from the transmitting machine or (ii) delivered by commercial
courier or other hand delivery, as follows:
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<PAGE>
Lyondell Petrochemical Company Millennium Chemicals Inc.
1221 McKinney Street 99 Wood Avenue South
Houston, Texas 77010 Iselin, New Jersey 08830
Attention: Kerry A. Galvin Attention: George H. Hempstead, III
Telecopy Number: (713) 309-4718 Telecopy Number: (908) 603-6857
Occidental Petroleum Corporation Equistar Chemicals, LP
10889 Wilshire Blvd. P.O. Box 2583
Los Angeles, CA 90004 1221 McKinney Street
Attention: President Houston, Texas 77252-2583
Telecopy Number: (310) 443-6333 Attention: Gerald A. O'Brien
Telecopy Number: (713) 309-4718
With a copy to:
Occidental Petroleum Corporation
10889 Wilshire Boulevard
Los Angeles, California 90024
Attention: General Counsel
Telecopy Number: (310) 443-6333
13.10 [Reserved]
13.11 Severability. In the event that any provisions of this Agreement
------------
shall be Finally Determined to be unenforceable, 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.
13.12 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 provisions of this Agreement and not as an aid in construction;
(ii) no consideration shall be given to the fact or presumption 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 gender; and (vii) each appendix, exhibit,
attachment and schedule to this Agreement is a part of this Agreement.
13.13 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.
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<PAGE>
13.14 Waiver of Right to Partition. Except as provided in Section 12.2(e),
---------------------------- ---------------
each Person who now or hereafter is a party hereto or who has any right herein
or hereunder irrevocably waives during the term of the Partnership any right to
maintain any action for partition with respect to Partnership property.
13.15 Governing Law. The laws of the State of Delaware shall govern the
-------------
construction, interpretation and effect of this Agreement without giving effect
to any conflicts of law principles.
13.16 Jurisdiction; Consent to Service of Process; Waiver. ANY JUDICIAL
---------------------------------------------------
PROCEEDING BROUGHT AGAINST ANY PARTY TO THIS AGREEMENT 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 DELAWARE, AND,
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES TO THIS
AGREEMENT 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 PARTIES TO THIS AGREEMENT SHALL
APPOINT THE CORPORATION TRUST COMPANY, 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 DELAWARE. 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 DELAWARE FOR ANY PURPOSE EXCEPT AS PROVIDED ABOVE AND SHALL NOT BE
DEEMED TO CONFER RIGHTS ON ANY PERSON OTHER THAN THE PARTIES HERETO.
13.17 Expenses. Except as otherwise provided herein or in the Second
--------
Master Transaction Agreement, each party hereto shall be responsible for its own
expenses incurred in connection with this Agreement.
13.18 Waiver of Jury Trial. EACH PARTY HEREBY KNOWINGLY AND INTENTIONALLY,
--------------------
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
13.19 Payment Terms and Interest Calculations.
---------------------------------------
(a) 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.
(b) 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
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thereon, is paid in full. Interest shall, subject to the provisions of Section
-------
13.20, accrue at a per annum rate equal to the lesser of (i) the Agreed Rate
- -----
plus 2%, compounded quarterly, to the extent permitted by law or (ii) the
Highest Lawful Rate.
(c) 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.
13.20 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, in each case to the extent they are applicable to this
Agreement. Accordingly, if any payment made pursuant to this Agreement results
in any Person having paid any interest in excess of the Maximum Amount, 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 13.20 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 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.
13.21 Other Waivers. EACH PARTY HEREBY WAIVES ANY OBJECTION IT MAY HAVE
-------------
BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON-
---------
CONVENIENS.
13.22 Special Joinder by Millennium America. Millennium America is a party
-------------------------------------
to this Agreement for the sole purpose of evidencing its agreement to be bound
by the provisions set forth in Section 8.6(c) and is not a partner of the
Partnership and shall not have any rights under this Agreement or any other
obligations under this Agreement.
13.23 Amendment. All waivers, modifications, amendments or alterations of
---------
this Agreement shall require the written approval of each of the General
Partners and each of the Limited Partners.
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SECTION 14
LAKE CHARLES FACILITY
---------------------
14.1 Lease Not in Force and Effect. At any such time as the Lease is
-----------------------------
terminated, expires or is otherwise not in force and effect (other than a No
Rebuilding Termination), the following shall occur:
(a) The number of Units held by Occidental LP1 shall be reduced from 6,623
Units to 2,541 Units.
(b) The Partnership and Occidental LP1 shall form a general partnership
(the "LC Partnership") by entering into a partnership agreement having the
provisions described in Section 14.2 (the "GPA").
(c) The Partnership shall distribute to Occidental LP1 the balance in its
Capital Account.
(d) Occidental LP1 shall cause the Lake Charles Facility to be contributed
to the LC Partnership and shall contribute to the LC Partnership the amount
received pursuant to Section 14.1(c), plus an amount equal to any proceeds of a
partial condemnation of the Lake Charles Facility received by OCC under the
terms of the Lease, and the Partnership shall contribute to the LC Partnership
the amount received pursuant to Section 26(b) of the Lease in connection with
such termination of the Lease.
(e) Immediately after and as a result of the foregoing transactions, the
capital account of each of Occidental LP1 and the Partnership in the LC
Partnership shall be pro rata in accordance with the partners' equity ownership
interests, and Occidental LP1's Capital Account shall be the same per Unit as
the Capital Accounts of the other Partners (determined without regard to the
special allocations in Sections 4.1(a) through (c)).
(f) Sections 4.1(e) and (f) shall terminate.
14.2 LC Partnership Provisions. The GPA shall include provisions to the
-------------------------
following effect, as well as other customary provisions:
(a) The LC Partnership shall be formed under the laws of Delaware. The two
partners shall be the Partnership and Occidental LP1. The Partnership shall
have an equity ownership interest of 49.9%, and Occidental LP1 shall have an
equity ownership interest of 50.1%
(b) The term of the GPA shall be the same as the term of this Agreement.
(c) All issues relating to the LC Partnership must be decided by mutual
agreement of both partners, except that the LC Partnership shall enter into an
operating agreement with the Partnership (in its individual capacity), as
operator, that shall delegate to the operator the right and obligation to make
all day-to-day decisions of the LC Partnership, which day-to-day decisions shall
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<PAGE>
for this purpose be deemed to be all decisions of the LC Partnership other than
issues comparable to those issues set forth in Section 6.7 hereof (which issues
must be decided by the partners of the LC Partnership). Such operating
agreement shall provide for the LC Partnership to pay and reimburse the operator
for all costs whatsoever incurred or paid by the operator in performing its
obligations under the operating agreement. The term of such operating agreement
shall be the same as the term of the LC Partnership.
(d) All contributions and distributions will be made, and all book income
and deductions will be allocated, in accordance with the partners' equity
ownership interests. Tax items will be allocated between the partners in a
manner similar to that set forth in this Agreement.
(e) No partner in the LC Partnership may transfer (except a transfer to a
Wholly Owned Affiliate) or encumber its equity ownership without the consent of
the other partner.
14.3 No Rebuilding Termination. Upon a No Rebuilding Termination,
-------------------------
Occidental LP1 shall have the option to contribute to the Partnership within 30
days following the No Rebuilding Termination an amount (the "Payment Amount")
equal to the excess, if any, of (a) the Proceeds plus the book value (determined
in accordance with GAAP) as recorded on the books of OCC for that portion and
aspect of the Lake Charles Facility that consititutes land, over (b) the payment
made pursuant to Section 26(b) of the Lease in connection with such No
Rebuilding Termination. If within such 30-day period Occidental LP1 contributes
the Payment Amount to the Partnership, (i) Occidental LP1's 6,623 Units shall
remain outstanding, (ii) its Capital Account shall be credited with the Payment
Amount, (iii) the assets of the Partnership shall be revalued so that the
Capital Account of each Partner is the same per Unit (determined without regard
to the special allocations in Sections 4.1(a) through (c)), and (iv) Sections
4.1(e) and (f) shall terminate. If Occidental LP1 does not contribute the
Payment Amount to the Partnership within such 30-day period, (A) Occidental
LP1's 6,623 Units shall be redeemed and canceled and of no further force and
effect and (B) an amount equal to the balance in Occidental LP1's Capital
Account shall be distributed by the Partnership to Occidental LP1, or if there
is a deficit in Occidental LP1's Capital Account, Occidental LP1 shall
contribute to the Partnership an amount of cash necessary to eliminate such
deficit. Upon completion of the steps in clauses (A) and (B), Occidental LP1's
entire interest in the Partnership shall terminate.
14.4 Other Redemption. If Occidental LP1 breaches any of its obligations
----------------
under Section 14.1, (a) Occidental LP1's 6,623 Units shall be redeemed and
canceled and of no further force and effect and (b) an amount equal to the
balance in Occidental LP1's Capital Account shall be distributed by the
Partnership to Occidental LP1, or if there is a deficit in Occidental LP1's
Capital Account, Occidental LP1 shall contribute to the Partnership an amount of
cash necessary to eliminate such deficit. Upon completion of the steps in
clauses (a) and (b), Occidental LP1's entire interest in the Partnership shall
terminate.
-54-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed on behalf of each of
the parties hereto, by their respective officers thereunto duly authorized,
effective as of the date first written above.
GENERAL PARTNERS
LYONDELL PETROCHEMICAL G.P. INC.
By: /s/ Dan F. Smith
------------------------------------------
Dan F. Smith
Name:----------------------------------------
President and Chief Executive Officer
Title:---------------------------------------
MILLENNIUM PETROCHEMICALS GP LLC
By: Millennium Petrochemicals Inc., its Manager
By: /s/ George H. Hempstead III
------------------------------------
George H. Hempstead III
Name:----------------------------------
Senior Vice President
Title:---------------------------------
PDG CHEMICAL INC.
By: /s/ R.J. Schuh
------------------------------------------
R.J. Schuh
Name:----------------------------------------
President
Title:---------------------------------------
[Signature Page 1 of 3 for Amended and Restated Limited Partnership Agreement]
-55-
<PAGE>
LIMITED PARTNERS
LYONDELL PETROCHEMICAL L.P. INC.
By: /s/ Dan F. Smith
------------------------------------------
Name: Dan F. Smith
----------------------------------------
Title: President and Chief Executive Officer
---------------------------------------
MILLENNIUM PETROCHEMICALS LP LLC
By: Millennium Petrochemicals Inc., its Manager
By: /s/ George H. Hempstead, III
-----------------------------------
George H. Hempstead, III
Name:---------------------------------
Senior Vice President
Title:--------------------------------
OCCIDENTAL PETROCHEM PARTNER 1, INC.
By: /s/ John W. Morgan
-------------------------------------------
John W. Morgan
Name:-----------------------------------------
Vice President
Title:----------------------------------------
OCCIDENTAL PETROCHEM PARTNER 2, INC.
By: /s/ John W. Morgan
-------------------------------------------
John W. Morgan
Name:-----------------------------------------
Vice President
Title:----------------------------------------
[Signature Page 2 of 3 for Amended and Restated Limited Partnership Agreement]
-56-
<PAGE>
SPECIAL JOINDER PURSUANT TO
SECTION 13.22
MILLENNIUM AMERICA INC.
By: /s/ George H. Hempstead, III
--------------------------------------------
George H. Hempstead, III
Name:------------------------------------------
Senior Vice President
Title:-----------------------------------------
[Signature Page 3 of 3 for Amended and Restated Limited Partnership Agreement]
-57-
<PAGE>
APPENDIX A
TO LIMITED PARTNERSHIP AGREEMENT
--------------------------------
DEFINED TERMS
-------------
1998 Credit Facility. See Section 8.6(a).
-------------------- --------------
AAA. See Appendix D.
--- ----------
Acceptance Notice. See Section 10.2(b).
----------------- ---------------
Act. The Delaware Revised Uniform Limited Partnership Act, as amended and
---
in effect from time to time.
Additional Related Agreements. The agreements defined as "Related
-----------------------------
Agreements" in the Second Master Transaction Agreement (other than this
Agreement), as such agreements may be amended from time to time after the date
hereof.
Adjusted Capital Account Deficit. With respect to any Partner, the deficit
--------------------------------
balance, if any, in such Partner's Capital Account as of the end of the relevant
fiscal year, after giving effect to the following adjustments:
(i) Such Capital Account shall be deemed to be increased by any
amounts which such Partner is obligated to restore to the Partnership
(pursuant to this Agreement or otherwise) or is deemed to be obligated to
restore pursuant to the second to last sentence of Regulation (S)1.704-
2(g)(1) and (S)1.704-2(i)(5) (relating to allocations attributable to
nonrecourse debt).
(ii) Such Capital Account shall be deemed to be decreased by the items
described in Regulation (S)1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Deficit is intended to comply with
the provisions of Regulation (S)1.704-1(b)(2)(ii)(d) and shall be interpreted
and applied consistently therewith.
Additional Notice. See Section 10.2(b).
----------------- ---------------
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 such term shall not include (i) the Partnership or
any entities controlled by it, (ii) in the case of Millennium GP and Millennium
LP shall not include Suburban Propane Partners, L.P. and any entities controlled
by it and (iii) in the case of Occidental GP, Occidental LP1 and Occidental LP2,
shall not include Canadian Occidental Petroleum Ltd. and any entities controlled
by it. For purposes of this definition the term "control" shall have the
meaning set forth in 17 CFR 230.405, as in effect on the date hereof.
Appendix A-1
<PAGE>
Affiliated General Partner. In the case of Lyondell LP, the "Affiliated
--------------------------
General Partner" shall mean Lyondell GP. In the case of Millennium LP, the
"Affiliated General Partner" shall mean Millennium GP. In the case of each of
Occidental LP1 and Occidental LP2, the "Affiliated General Partner" shall mean
Occidental GP.
Affiliated Limited Partner. In the case of Lyondell GP, the "Affiliated
--------------------------
Limited Partner" shall mean Lyondell LP. In the case of Millennium GP, the
"Affiliated Limited Partner" shall mean Millennium LP. In the case of
Occidental GP, each of Occidental LP1 and Occidental LP2 shall be "Affiliated
Limited Partner".
Affiliated Partner Group. A General Partner and its Affiliated Limited
------------------------
Partner or Affiliated Limited Partners, if more than one.
Agreed Rate. The base commercial lending rate announced by Citibank, N.A.
-----------
(or its successor) at its principal office, in effect from time to time, such
interest rate to change automatically, effective as of the date of each change
in such base rate.
Agreement. This Amended and Restated Limited Partnership Agreement of
---------
Equistar Chemicals, LP, as amended from time to time.
Alternate. See Section 6.4(b).
--------- --------------
Amended and Restated Indemnity Agreement. The Amended and Restated
----------------------------------------
Indemnity Agreement dated as of the date of this Agreement among Lyondell GP,
Lyondell LP, Millennium GP, Millennium LP, Millennium America, Occidental GP,
Occidental LP1, Occidental LP2 and OCC.
Amended and Restated Parent Agreement. The Amended and Restated Parent
-------------------------------------
Agreement dated as of the date of this Agreement between the Partnership,
Lyondell, Millennium, Occidental, Occidental Chemical Corporation and Oxy CH
Corporation.
Annual Budget. See Section 8.2.
------------- -----------
Applicable Usury Laws. 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.
Arbitrator. See Appendix D.
---------- ----------
Asset Fair Market Value. With respect to any asset, as of the date of
-----------------------
determination, the cash price at which a willing seller would sell, and a
willing buyer would buy, each being apprised of all relevant facts and neither
acting under compulsion, such as in an arm's-length negotiated transaction with
an unaffiliated third party without time constraints.
Appendix A-2
<PAGE>
Assumed Liabilities. In the case of Lyondell LP and Lyondell GP, Assumed
-------------------
Liabilities means the "Assumed Liabilities" as defined in the Contribution
Agreement of Lyondell. In the case of Millennium LP and Millennium GP, Assumed
Liabilities shall mean the "Assumed Liabilities" as defined in the Contribution
Agreement of Millennium Petrochemicals. In the case of Occidental LP1,
Occidental LP2 and Occidental GP, Assumed Liabilities means the "Assumed
Liabilities" as defined in the Contribution Agreement of Occidental.
Auxiliary Committee. See Section 6.9.
------------------- -----------
Available Net Operating Cash. At the time of determination, (a) all cash
----------------------------
and cash equivalents on hand in the Partnership as of the most recent month end,
plus the excess, if any, of the Partnership Target Debt over the Partnership's
actual indebtedness (as determined in accordance with GAAP) as of such month
end, less (b) the Projected Cash Requirements, if any, of the Partnership as of
such month end, as determined by the Executive Officers of the Partnership. For
purposes of this definition, "Projected Cash Requirements" means, for the 12-
month period following any such month end, the excess, if any, of the sum of (a)
forecast capital expenditures, plus (b) forecast cash payments for Taxes, debt
service including principal and interest requirements and other non-cash credits
to income, plus (c) forecast cash reserves for future operations or other
requirements, over the sum of (1) forecast net income of the Partnership, plus
(2) the sum of forecast depreciation, amortization, other non-cash charges to
income, interest expenses, and Tax expenses, in each case to the extent deducted
in determining net income, plus or minus (3) forecast decreases or increases,
respectively, in working capital, plus (4) the forecast cash proceeds of
dispositions of assets (net of expenses) plus (5) an amount equal to the
forecast net proceeds of debt financings, contributions and payments of the
Lyondell Note. For purposes of this definition, "Partnership Target Debt" means
for such month end, the level of indebtedness (as determined in accordance with
GAAP) projected for the Partnership in the most recently approved Strategic
Plan, except to the extent the Executive Officers of the Partnership determine
that changes in the financial condition, results of operations, assets, business
or prospects of the Partnership make a change advisable, in which case the
Partnership shall advise the General Partners promptly regarding the basis for
the change. Projected Cash Requirements shall be calculated consistent with the
most recently approved Strategic Plan, except to the extent the Executive
Officers of the Partnership determine that changes in the financial condition,
results of operations, assets, business or prospects of the Partnership make a
change advisable, in which case the Partnership shall advise the General
Partners promptly regarding the basis for the change.
Bank Credit Agreement. The Credit Agreement dated as of November 25, 1997
---------------------
among the Partnership, as Borrower, Millennium America, as Guarantor and the
lenders party thereto.
Bank Credit Agreement Repayment Amount. An amount equal to (i)
--------------------------------------
$419,700,000 less (ii) the Bank Credit Agreement Available Amount, but in no
event shall the Bank Credit Agreement Repayment Amount be less than zero. The
"Bank Credit Agreement Available Amount" shall equal (i) $1.25 billion less (ii)
the total principal amount outstanding under the Bank Credit Agreement at the
date of calculation.
Appendix A-3
<PAGE>
Bankruptcy. The occurrence of any of the following: (i) a Partner or its
----------
Guarantor shall file a voluntary petition in bankruptcy or shall be adjudicated
a bankrupt or insolvent, or shall file any petition or answer or consent seeking
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief for itself under any present or future applicable
federal, state or other statute or law relating to bankruptcy, insolvency, or
other relief for debtors, or shall seek or consent to or acquiesce in the
appointment of any trustee, receiver, conservator or liquidator of such Partner
or its Guarantor or of all or any substantial part of its properties or its
Units (the term "acquiesce," as used in this definition, includes the failure to
file a petition or motion to vacate or discharge any order, judgment or decree
within ten Business Days after entry of such order, judgment or decree); (ii) a
court of competent jurisdiction shall enter an order, judgment or decree
approving a petition filed against any Partner or its Guarantor seeking a
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under the present or any future federal bankruptcy act, or any
other present or future applicable federal, state or other statute or law
relating to bankruptcy, insolvency, or other relief for debtors, and such
Partner or its Guarantor shall acquiesce in the entry of such order, judgment or
decree or such other order, judgment or decree shall remain unvacated and
unstayed for an aggregate of 60 days (whether or not consecutive) from the date
of entry thereof, or any trustee, receiver, conservator or liquidator of such
Partner or its Guarantor or of all or any substantial part of its property or
its Units shall be appointed without the consent or acquiescence of such Partner
or its Guarantor and such appointment shall remain unvacated and unstayed for an
aggregate of 60 days (whether or not consecutive); (iii) a Partner or its
Guarantor shall admit in writing its inability to pay its debts as they mature;
(iv) a Partner or its Guarantor shall give notice to any governmental body of
insolvency or pending insolvency, or suspension or pending suspension of
operations; or (v) a Partner or its Guarantor shall make an assignment for the
benefit of creditors or take any other similar action for the protection or
benefit of creditors.
Book Value. With respect to any asset of the Partnership, the asset's
----------
adjusted basis as of the relevant date for federal income tax purposes, except
as follows:
(i) The initial aggregate Book Value of all of the assets of the
Partnership as of the Initial Closing Date shall be equal to the sum of (A)
the beginning aggregate Capital Accounts of the Partners immediately after
the Initial Closing Date, and (B) the aggregate amount of all liabilities
of the Partnership for federal income tax purposes immediately after the
Initial Closing Date.
(ii) The initial Book Value of any asset contributed by a Partner to
the Partnership after the Initial Closing Date shall be the gross fair
market value of such asset, which shall be equal to the amount credited to
such Partner's Capital Account for such contribution (increased by the
amount of any liabilities which the Partnership assumes or takes subject
to).
(iii) The Book Values of all Partnership assets (including intangible
assets such as goodwill) shall be adjusted (at the election of the
Partnership Governance Committee) to equal their respective gross fair
market values upon the occurrence of any of the events described in
Regulation (S)1.704-1(b)(2)(iv)(f)(5).
Appendix A-4
<PAGE>
(iv) The Book Value of any asset distributed by the Partnership to a
Partner shall be equal to the gross fair market value of such asset on the
date of the distribution.
(v) The Book Value of any Partnership asset with respect to which an
adjustment to tax basis has occurred by reason of the application of
Section 734(b) or 754(b) of the Code shall be adjusted to the extent such
adjustment to tax basis is taken into account pursuant to Regulation
(S)1.704-1(b)(2)(iv)(m).
(vi) If the Book Value of an asset is not equal to its adjusted tax
basis for federal income tax purposes, such Book Value shall be adjusted by
the Depreciation taken into account with respect to such asset for purposes
of computing Profits and Losses and other items allocated pursuant to
Section 4.1.
-----------
The foregoing definition of Book Value is intended to comply with the provisions
of Regulation (S)1.704-1(b)(2)(iv) and shall be interpreted and applied
consistently therewith. Any determinations of "gross fair market value" in this
definition of Book Value shall be made by the Partnership Governance Committee.
Business Day. Any day other than a Saturday, Sunday or other day on which
------------
banks are closed in New York City, New York; provided, however, that for
-------- -------
purposes of the definitions of "Interest Period" and "LIBOR Rate," "Business
Day" shall mean a day of the year on which banks are not required or authorized
to close in Houston, Texas and on which commercial banks are open for
international business (including dealings for dollar deposits) in the London
interbank market.
Business Opportunity. See Section 9.3(c).
-------------------- --------------
Capital Account. The separate capital account established and maintained
---------------
by the Partnership for each Partner, as contemplated by Section 2.
---------
Capital Expenditure Budget. See Section 8.2(d).
-------------------------- --------------
CEO. See Section 7.1(b).
--- --------------
Claim. See Section 13.2(c).
----- ---------------
Code. The Internal Revenue Code of 1986, as amended and in effect from
----
time to time and any successor thereto.
Competing Opportunity. See Section 9.3(c).
--------------------- --------------
Confidential Information. All confidential documents and information
------------------------
(including, without limitation, confidential commercial information and
information with respect to customers, trade secrets and proprietary
technologies or processes and the design and development of new products or
services) concerning the Partnership, the Partners or their Affiliates,
furnished to a Partner in connection with the transactions leading up to and
contemplated by this Agreement and the operation
Appendix A-5
<PAGE>
of the Partnership, except to the extent that such information (i) is or becomes
generally available to and known by the public or the petrochemical 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 the 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 otherwise generated by the Partnership with the
intention that it not be held as confidential.
Conflict Circumstance. Any transaction or dealing between the Partnership
---------------------
(or any Wholly Owned Subsidiary) and a General Partner (the "Conflicted General
Partner") or any of its Affiliates pursuant to any agreement (including this
Agreement or any other Related Agreements) or otherwise, including action to be
taken by the Partnership pursuant to Section 9.3(c) or (d) or 13.3(b); provided,
-------------- --- ------- --------
however, that a Conflict Circumstance shall cease to exist if and when the third
- -------
party with which the transaction or dealing exists shall cease to be an
Affiliate of a General Partner.
Conflicted General Partner. As defined in the definition of "Conflict
--------------------------
Circumstance."
Contributed Business. As defined in each of the Contribution Agreements.
--------------------
Contribution Agreement. In the case of Lyondell LP and Lyondell GP, the
----------------------
Contribution Agreement shall mean the Asset Contribution Agreement dated
December 1, 1997, between the Partnership, Lyondell and Lyondell LP. In the
case of Millennium LP and Millennium GP, the Contribution Agreement shall mean
the Asset Contribution Agreement dated December 1, 1997, between the
Partnership, Millennium Petrochemicals and Millennium LP. In the case of
Occidental LP1, Occidental LP2 and Occidental GP, the Contribution Agreement
shall mean the Agreement and Plan of Merger and Asset Contribution dated as of
the date of this Agreement between the Partnership, Oxy Petrochemicals,
Occidental LP1, Occidental LP2 and Occidental GP.
Damages. With respect to a Person in connection with a Default, 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 or other
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's business and assets
or winding up the Partnership's business, or other payments in respect of such
payments) suffered or incurred by such Person that arise out of or relate to
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
Appendix A-6
<PAGE>
Section 13.20, interest on amounts actually due until payment thereof is made at
- -------------
a rate per annum equal to the rate set forth in Section 13.19(b). "Damages"
---------------
shall not include any punitive, exemplary, special or other similar damages.
Deadlock Notice. See Section 8.5.
--------------- -----------
Default. See Section 11.1.
------- ------------
Default Date. See Section 11.1.
------------ ------------
Defaulting Partners. Lyondell GP and Lyondell LP, in the case of a Default
-------------------
by Lyondell GP, Lyondell LP or their Guarantor; Millennium GP and Millennium LP,
in the case of a Default by Millennium GP, Millennium LP or their Guarantor; and
Occidental GP, Occidental LP1 and Occidental LP2, in the case of a Default by
Occidental GP, Occidental LP1, Occidental LP2 or their Guarantor.
Depreciation. For each fiscal year or part thereof, an amount equal to the
------------
depreciation, amortization, or other cost recovery deduction allowable for
federal income tax purposes with respect to an asset for such year or other
period, except that if the Book Value of an asset differs from its adjusted
basis for federal income tax purposes at the beginning of such year,
Depreciation shall be (i) an amount which bears the same ratio to such Book
Value as the federal income tax depreciation, amortization or other cost
recovery deduction for such year bears to such adjusted tax basis, or, (ii) if
the federal income tax depreciation, amortization or other cost recovery
deduction for such year is equal to zero, an amount determined with reference to
such Book Value using a reasonable method selected by the Tax Matters Partner.
Dispute Notice. See Appendix D.
-------------- ----------
Disputing Partner. See Appendix D.
----------------- ----------
Executive Officers. See Section 7.1(b).
------------------ --------------
Expense. See Section 13.3(a).
------- ---------------
Fair Market Value. "Fair Market Value" with respect to the Partnership
-----------------
shall mean the Asset Fair Market Value of all of the Partnership's assets
decreased by the fair value of all its liabilities, as of the most recently
ended fiscal quarter. "Fair Market Value" with respect to a Related Business
shall mean the Asset Fair Market Value of all the assets of such Related
Business decreased by the fair value of all its liabilities, as of the most
recently ended fiscal quarter. In either case, the following shall apply to the
determination of Fair Market Value:
(i) The General Partners shall first attempt to agree on such value,
which if agreed to shall be the Fair Market Value.
Appendix A-7
<PAGE>
(ii) If the General Partners are unable to agree within 20 days of
the first written notice from one General Partner to the others proposing
an amount to be the Fair Market Value (the "Notice"), then if requested by
any General Partner, each General Partner shall (at its own cost) cause an
independent, qualified appraiser to deliver a written appraisal of its
determination of the Fair Market Value within 50 days of the Notice. If
both of the two lowest appraised values are greater than or equal to 90% of
the highest appraised value, then the middle of the three appraised values
shall be the Fair Market Value.
(iii) If either of the two lowest appraised values are lower than 90%
of the highest appraised value, then the General Partners shall jointly
appoint a Neutral within 20 days of the delivery of both such appraisals.
If the General Partners have been unable to agree upon such appointment
within such 20 days, then such Neutral shall upon the application of any
General Partner be appointed within 10 days of the filing of such
application by the Center for Public Resources, or if such appointment is
not so made promptly then promptly thereafter by the American Arbitration
Association in Philadelphia, Pennsylvania, or if such appointment is not so
made promptly then promptly thereafter by the senior United States District
Court judge sitting in Wilmington, Delaware. The fees and expenses of the
Neutral shall be paid equally by the Partners.
(iv) The Neutral shall, within 30 days of the appointment of the
Neutral, determine which of the three appraised values (without in any way
modifying or compromising between the three appraised values) is closest to
the fair market value of the enterprise's assets as determined by the
Neutral, and that appraised value shall be the Fair Market Value.
Fault. Any act or omission of a Partner, its Affiliates or any of their
-----
respective officers, directors or employees (acting in their capacities as such)
that constitutes or results from intentional misconduct, criminal intent or
gross negligence.
Finally Determined. Determined by any final, nonappealable judicial order
------------------
or pursuant to a binding alternative dispute resolution procedure.
Funding Notice. See Section 2.4.
-------------- -----------
GAAP. United States generally accepted accounting principles, as in effect
----
from time to time.
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 Units 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.
GPA. See Section 14.1(b).
--- ---------------
Appendix A-8
<PAGE>
Guarantor. Lyondell Petrochemical Company, with respect to Lyondell GP and
---------
Lyondell LP; Millennium Chemicals Inc., with respect to Millennium GP and
Millennium LP; Occidental Chemical Corporation and Oxy CH Corporation, with
respect to Occidental GP, Occidental LP1 and Occidental LP2; and any successor
or additional guarantor party to an agreement substantially in the form of the
Amended and Restated Parent Agreement and entered into in accordance with
Section 10.
- ----------
Highest Lawful Rate. 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.
HSE Law. "HSE Law," as defined in Section 1 of the Contribution Agreement.
-------
Indemnified Party. See Section 13.2(c).
----------------- ---------------
Indemnifying Party. See Section 13.2(c).
------------------ ---------------
Interest Period. The period commencing on the date of this Agreement and
---------------
ending one month thereafter and, thereafter, each subsequent period commencing
on the last day of the immediately preceding Interest Period and ending one
month thereafter; provided, however, that whenever the last day of any Interest
-------- -------
Period would otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next succeeding Business
Day.
Initial Agreement. See first WHEREAS clause.
-----------------
Initial Assets. "Assets," as defined in Section 1 of the applicable
--------------
Contribution Agreement.
Initial Closing Date. December 1, 1997, the date the closing under the
--------------------
Initial Master Transaction Agreement took place.
Initial Master Transaction Agreement. The Master Transaction Agreement,
------------------------------------
dated July 25, 1997, as amended, between Lyondell and Millennium, providing for
the execution of various agreements concerning the Partnership and the Initial
Assets.
Initial Notice. See Section 10.2(a).
-------------- ---------------
Initial Partners. See first WHEREAS clause.
----------------
Initial Related Agreements. The agreements defined as "Related Agreements"
--------------------------
in the Initial Master Transaction Agreement (other than the Partnership
Agreement), as such agreements may be amended from time to time after the
Initial Closing Date.
IRS. Internal Revenue Service.
---
Lake Charles Facility. The property that is the subject of and leased
---------------------
pursuant to the Lease.
Appendix A-9
<PAGE>
LC Partnership. See Section 14.1(b).
-------------- ---------------
Lease. The Lease Agreement, dated May 15, 1998, between OCC, as lessor,
-----
and Occidental LP1, as lessee.
Liability. Any loss, claim, damages, fine, penalty, assessment by public
---------
agencies, settlement, cost or expense (including costs of investigation, defense
and attorneys' fees) or other liability.
LIBOR Rate. For any Interest Period, the rate per annum (rounded upwards,
----------
if necessary, to the nearest 1/16th of 1%) published in the Wall Street Journal
as the London Interbank Offered Rate for a one month period as of two Business
Days prior to the first day of such Interest Period; provided if no such rate
appears the rate shall be as shown on page 3750 of the Dow Jones & Company
Telerate screen or any successor page as the composite offered rate for London
interbank deposits with a period equal to one month, as shown under the heading
"USD" as of 11:00 a.m. (London time) two Business Days prior to the first day of
such Interest Period; provided that if no such rate appears, the rate shall be
the rate per annum equal to the arithmetic mean (which shall be rounded upward
to the nearest 1/16 of 1% per annum) of which U.S. dollar deposits with an
Interest Period equal to one month are displayed on page "LIBO" of the Reuters
Monitor Money Rates Service or such other page as may replace the LIBO page on
that service for the purpose of displaying London interbank offered rates of
major banks at or about 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period.
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 Units 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.
Limited Partners Pro Rata. From or to the Limited Partners in the ratio of
-------------------------
the Units owned by each.
Liquidation. See Section 11.4.
----------- ------------
Losses. See definition of "Profits and Losses."
------ ------- ------
Lyondell. See first WHEREAS clause.
--------
Lyondell Assumed Debt. Debt issued by Lyondell having an aggregate
---------------------
principal amount of $745 million, as specified in the Contribution Agreement
with respect to Lyondell.
Lyondell GP. See introductory paragraph to this Agreement.
-----------
Appendix A-10
<PAGE>
Lyondell LP. See introductory paragraph to this Agreement.
-----------
Lyondell Note. The promissory note dated December 1, 1997, in the amount
-------------
of $345 million payable by Lyondell LP to the Partnership.
Maximum Amount. 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.
Millennium. See first WHEREAS clause.
----------
Millennium America. Millennium America Inc., a Delaware corporation.
------------------
Millennium America Guarantee. See Section 8.6(c).
---------------------------- --------------
Millennium America Guaranteed Debt. The portion, if any, of the debt
----------------------------------
outstanding under the Bank Credit Agreement and the portion, if any, of any debt
that refinances the debt outstanding under the Bank Credit Agreement or any
subsequent refinancing thereof (in any case, not to exceed a guarantee of $750
million principal amount), in each case to the extent such debt is guaranteed by
Millennium America, or an Affiliate thereof, as contemplated by Section 8.6(c).
--------------
Millennium GP. See introductory paragraph to this Agreement.
-------------
Millennium LP. See introductory paragraph to this Agreement.
-------------
Neutral. A neutral Person acceptable to all of the appointing Partners and
-------
not affiliated with any of the Partners, except where otherwise specifically
provided.
No Rebuilding Termination. A total termination of the Lease pursuant to
-------------------------
Section 12(b) or 13 thereof.
Nonconflicted General Partner. With respect to any Conflict Circumstance,
-----------------------------
any General Partner that is not the Conflicted General Partner with respect
thereto.
Non-Defaulting Partners. The Partners other than the Defaulting Partners.
-----------------------
OCC. Occidental Chemical Corporation, a New York corporation.
---
Occidental. See third WHEREAS clause.
----------
Occidental GP. See introductory paragraph to this Agreement.
-------------
Occidental LP1. See introductory paragraph to this Agreement.
--------------
Occidental LP2. See introductory paragraph to this Agreement.
--------------
Appendix A-11
<PAGE>
Occidental Partners. See third WHEREAS clause.
-------------------
Offeree Partners. See Section 10.2(a).
---------------- ---------------
Operating Budget. See Section 8.2(c).
---------------- --------------
Oxy Guaranteed Debt. The $419,700,000 drawdown under the Bank Credit
-------------------
Agreement pursuant to Section 8.6(a) and the portion, if any, of any debt that
refinances the $419,700,000 drawdown under the Bank Credit Agreement or any
subsequent refinancing thereof (in any case, not to exceed a guarantee of
$419,700,000 principal amount), in each case to the extent such debt is
guaranteed by Occidental Chemical Corporation, a New York corporation, or an
Affiliate thereof and the proceeds thereof have been distributed to Occidental
LP2 pursuant to Section 3.1(g) and, until such amount has been so drawn and
distributed, "Oxy Guaranteed Debt" shall mean the Oxy Note to the extent the
obligations thereunder are indemnified by OCC pursuant to the Amended and
Restated Indemnity Agreement.
Oxy Note. The Promissory Note dated May 15, 1998 in the principal amount
--------
of $419,700,000 payable by the Partnership to Occidental LP2.
Oxy Petrochemicals. Oxy Petrochemicals Inc., a Delaware corporation.
------------------
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.
Partners Pro Rata. From or to all Partners in the ratio of the Units
-----------------
owned by each.
Partnership. Equistar Chemicals, LP, a Delaware limited partnership, the
-----------
limited partnership formed and continued under the Act and this Agreement.
Partnership Governance Committee. See Section 6.1.
-------------------------------- -----------
Partnership Governance Committee Action. See Section 6.1.
--------------------------------------- -----------
Payment Amount. See Section 14.3.
-------------- ------------
Proceeds. The Insurance Proceeds, the Self-Insurance Proceeds and the
--------
Condemnation Proceeds (each as defined in the Lease), to the extent actually
received by the lessor under the Lease pursuant to the Lease.
Profits and Losses. For each applicable period, the Partnership's taxable
------- ------
income or loss for such period determined in accordance with Section 703(a) of
the Code (for this purpose, all items of income, gain, loss or deduction
required to be stated separately pursuant to Section 703(a)(1) of the Code shall
be included in taxable income or loss) with the following adjustments:
Appendix A-12
<PAGE>
(i) Any income of the Partnership that is exempt from federal
income tax and not otherwise taken in account in computing Profits or
Losses pursuant to this definition shall be added to such taxable income or
loss.
(ii) Any expenditures of the Partnership described in Section
705(a)(2)(B) of the Code or treated as such pursuant to Regulation
(S)1.704-1(b)(2)(iv)(i) and not otherwise taken in account in computing
Profits or Losses pursuant to this definition shall be subtracted from such
taxable income or loss.
(iii) Depreciation for such period shall be taken into account in
lieu of the depreciation, amortization and other cost recovery deductions
taken into account in computing such taxable income or loss.
(iv) Gain or loss resulting from any disposition of Partnership
property with respect to which gain or loss is recognized for federal
income tax purposes shall be computed with reference to the Book Value of
the property disposed of, rather than the adjusted tax basis of such
property.
(v) If any property is distributed in kind to any Partner, the
difference between its fair market value and its Book Value at the time of
distribution shall be treated as Profit or Loss, as the case may be,
recognized by the Partnership.
(vi) The amount of any adjustment to the Book Value of any
Partnership asset pursuant to clause (iii) of the definition of Book Value
herein shall be taken into account as Profit or Loss from the disposition
of such asset.
Percentage Interest. The percentage determined by dividing the number of
-------------------
Units owned by a Partner by the total number of outstanding Units.
Person. Any natural person or any corporation, limited liability company,
------
partnership, joint venture, association, trust or other entity.
Pledge. To mortgage, pledge, encumber or create or suffer to exist any
------
pledge, lien or encumbrance upon or security interest in. Such defined term is
used in this Agreement as both a noun and a verb.
Pro Rata. In the ratio of the Units owned by a Partner to the total number
--------
of applicable Units.
Proposing Partner. See Section 9.3(c).
----------------- --------------
Reconstituted Basis. As to each Partnership property, the Partnership's
-------------------
basis in such property immediately after it is contributed to the Partnership
reduced by any depreciation and other deductions allocated to a Partner pursuant
to Section 4.4(b)(i)(a).
Appendix A-13
<PAGE>
Regulations. The income tax regulations promulgated by Department of the
-----------
Treasury and in effect from time to time.
Related Agreements. The Initial Related Agreements and the Occidental
------------------
Related Agreements.
Related Business. Any business related to (i) the manufacturing, marketing
----------------
and distribution of Specified Petrochemicals; (ii) the purchasing, processing
and disposing of feedstocks in connection with the manufacturing, marketing and
distributing of Specified Petrochemicals; and (iii) any research and development
in connection with the foregoing.
Related Persons. See Section 13.1.
--------------- ------------
Representative. See Section 6.4(a).
-------------- --------------
SEC. Securities and Exchange Commission.
---
Second Master Transaction Agreement. See third WHEREAS clause.
-----------------------------------
Selling Partners. See Section 10.2(a).
---------------- ---------------
Specified Petrochemicals.
------------------------
(i) Olefins and olefins coproducts consisting of: ethylene, propylene,
butadiene, and mixed butylenes; aromatics and gasoline blending components
(benzene, toluene, MTBE, alkylate, pyrolysis gasolines); mixed C5 hydrocarbons;
resin formers (dicyclopentadiene, isoprene, piperylenes, resin oil); pyrolysis
liquid fuel products (pyrolysis gas oil, pyrolysis fuel oil);
(ii) Polyolefins consisting of: low-density, linear low-density, and high-
density polyethylene; polypropylene; ethylene/propylene copolymers; rotomolding
and polymeric powders; wire and cable resins; adhesive tie layers; hot melt
adhesive resins; colors and concentrates; fuel additives;
(iii) Ethyl alcohol and ethyl ether; and
(iv) Ethylene oxide, ethylene glycol and derivatives thereof.
provided, however that the definition of Specified Petrochemicals shall in no
- -------- -------
event include polyvinyl chloride or resins derived from phenol compounds or
dicyclopentadiene.
Specified Petrochemicals Businesses. The businesses related to Specified
-----------------------------------
Petrochemicals.
Strategic Plan. See Section 8.1.
-------------- -----------
Appendix A-14
<PAGE>
Substitute General Partner. A Person who is admitted as a General Partner
--------------------------
to the Partnership in place of and with all 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 all the rights of a Limited Partner.
Taxes. All taxes, charges, fees, levies or other assessments imposed by
-----
any taxing authority, including, but not limited to, income, gross receipts,
excise, property, sales, use, transfer, payroll, license, ad valorem, value
added, withholding, social security, national insurance (or other similar
contributions or payments), franchise, severance and stamp taxes (including any
interest, fines, penalties or additions attributable to, or imposed on or with
respect to, any such taxes, charges, fees, levies or other assessments) and "Tax
Return" means any return, report, information return or other document
(including any related or supporting information) with respect to Taxes.
Tax Matters Partner. Lyondell GP.
-------------------
Third Party Claim. Any allegation, claim, civil, criminal or other action,
-----------------
proceeding, charge or prosecution brought by any Person other than the
Partnership, any Partner or any Affiliate of a Partner.
Transfer. To sell, assign or otherwise in any manner dispose of, whether
--------
by act, deed, merger, consolidation, conversion or otherwise. Such defined term
is used in this Agreement as both a noun and a verb.
Unit. A unit representing a partnership interest in the Partnership.
----
Wholly Owned Affiliate. As to any Person, an Affiliate of such Person all
----------------------
of the equity interests of which are owned, directly or indirectly, by a
Partner, by another Wholly Owned Affiliate of such Person or by the ultimate
parent entity thereof.
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.
Appendix A-15
<PAGE>
APPENDIX B
TO LIMITED PARTNERSHIP AGREEMENT
--------------------------------
PARTNERSHIP FINANCIAL STATEMENTS AND REPORTS
--------------------------------------------
<TABLE>
<CAPTION>
Item & Frequency Due Dates
- ---------------- ---------
<S> <C>
Monthly:
- -------
Income Statement - current period and year-to-date 10th work day following month-end
Balance Sheet - current period 10th work day following month-end
Cash Flow Statement - current period and year-to-date 10th work day following month-end
Schedule of Income Allocation - preliminary 5th work day following month-end
Schedule of Income Allocation - final 10th work day following month-end
Calculation of Distribution of Available Net Operating
Cash - final 15th work day following month-end
Results of Operations Analysis 10th work day following month-end
Quarterly:
- ---------
Analysis for Investor Relations and Form 10-Q
disclosures: 15th work day following quarter-end
- Results of Operations 15th work day following quarter-end
- Cash Flow 15th work day following quarter-end
- Sales Variances 15th work day following quarter-end
- Capital Expenditures 15th work day following quarter-end
- Intercompany Transactions 15th work day following quarter-end
- Volumes 15th work day following quarter-end
- Prices 15th work day following quarter-end
- Unusual Items
Income Statement - current quarter and year-to-date 10th work day following quarter-end
Balance Sheet - current period 10th work day following quarter-end
Cash Flow Statement - current quarter and year-to-date 10th work day following quarter-end
Estimate of Each Partner's Regular Taxable Income 10th work day following quarter-end
and Alternative Minimum Taxable Income
</TABLE>
Appendix B-1
<PAGE>
APPENDIX C
TO LIMITED PARTNERSHIP AGREEMENT
--------------------------------
EXECUTIVE OFFICERS
------------------
<TABLE>
<S> <C>
Dan F. Smith Chief Executive Officer
Eugene R. Allspach President and Chief Operating Officer
Joseph M. Putz Senior Vice President, Finance and Administration
Debra L. Starnes Senior Vice President, Polymers
John R. Beard Vice President, Manufacturing
Clifton B. Currin, Jr. Vice President, Supply and Optimization
J. R. Fontenot Vice President, Engineering
Brian A. Gittings Vice President, Oxygenated Chemicals
Alan Houlton Vice President, Customer Supply Chain
Gerald A. O'Brien Vice President and Secretary
Myra J. Perkinson Vice President, Human Resources
W. Norman Phillips, Jr. Vice President, Petrochemicals
Kerry F. Williams Vice President, Research and Development
Jeffrey L. Hemmer Director, Business Process Improvement
</TABLE>
Appendix C-1
<PAGE>
APPENDIX D
TO LIMITED PARTNERSHIP AGREEMENT
--------------------------------
DISPUTE RESOLUTION PROCEDURES
-----------------------------
(1) Binding and Exclusive Means. Except as otherwise provided in the
---------------------------
Partnership Agreement, the dispute resolution provisions set forth in this
Appendix shall be the binding and exclusive means to resolve all disputes
arising under the Agreement (each a "Dispute").
(2) Standards and Criteria. In resolving any Dispute, the standards and
----------------------
criteria for resolving such Dispute shall, unless the Partners involved in the
Dispute in their discretion jointly stipulate otherwise, be as set forth in
Appendix 1 to this Appendix.
- ----------
(3) ADR and Binding Arbitration Procedures. If a Dispute arises, the
--------------------------------------
following procedures shall be implemented (with references to "Partners" meaning
the Partners involved in the Dispute):
(a) Any Partner may at any time invoke the dispute resolution procedures set
forth in this Appendix as to any Dispute by providing written notice of such
action to the Secretary of the Partnership, who within five Business Days after
such notice shall schedule a meeting to be held in Houston, Texas between the
Partners. The Partners' meeting shall occur within 10 Business Days after
notice of the meeting is delivered to the Partners. The meeting shall be
attended by representatives of each Partner having decision-making authority
regarding the Dispute as well as the dispute resolution process and who shall
attempt in a commercially reasonable manner to negotiate a resolution of the
Dispute.
(b) The representatives of the Partners shall cooperate in a commercially
reasonable manner and shall explore whether techniques such as mediation,
minitrials, mock trials or other techniques of alternative dispute resolution
might be useful. In the event that a technique of alternative dispute
resolution is so agreed upon, a specific timetable and completion date for its
implementation shall also be agreed upon. The representatives will continue to
meet and discuss settlement until the date (the "Interim Decision Date") that is
the earliest to occur of the following events: (i) an agreement shall be
reached by the Partners resolving the Dispute; (ii) one of the Partners shall
determine and notify the other Partners in writing that no agreement resolving
the Dispute is likely to be reached; (iii) if a technique of alternative dispute
resolution is agreed upon, the completion date therefor shall occur without the
Partners having resolved the Dispute; or (iv) if another technique of
alternative dispute resolution is not agreed upon, two full meeting days (or
such other time period as may be agreed upon) shall expire without the Partners
having resolved the Dispute.
(c) If, as of the Interim Decision Date, the Partners have not succeeded in
negotiating a resolution of the Dispute pursuant to subsection (b), the Partners
shall proceed under subsections (d), (e) and (f).
Appendix D-1
<PAGE>
(d) After satisfying the requirements above, such Dispute shall be submitted
to mandatory and binding arbitration at the election of any Partner involved in
the Dispute (the "Disputing Partner"). The arbitration shall be subject to the
Federal Arbitration Act as supplemented by the conditions set forth in this
Appendix. The arbitration shall be conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in effect on the date
the notice of arbitration is served, other than as specifically modified herein.
In the absence of an agreement to the contrary, the arbitration shall be held in
Houston, Texas. The Arbitrator (as defined below) will allow reasonable
discovery in the forms permitted by the Federal Rules of Civil Procedure, to the
extent consistent with the purpose of the arbitration. During the pendency of
the Dispute, each Partner shall make available to the Arbitrator and the other
Partners all books, records and other information within its control requested
by the other Partners or the Arbitrator subject to the confidentiality
provisions contained herein, and provided that no such access shall waive or
preclude any objection to such production based on any privilege recognized by
law. Recognizing the express desire of the Partners for an expeditious means of
dispute resolution, the Arbitrator may limit the scope of discovery between the
Partners as may be reasonable under the circumstances. In deciding the
substance of the Partners' claims, the laws of the State of Delaware shall
govern the construction, interpretation and effect of this Agreement (including
this Appendix) without giving effect to any conflict of law principles. The
arbitration hearing shall be commenced promptly and conducted expeditiously,
with each Partner involved in the Dispute being allocated an equal amount of
time for the presentation of its case. Unless otherwise agreed to by the
Partners, the arbitration hearing shall be conducted on consecutive days. Time
is of the essence in the arbitration proceeding, and the Arbitrator shall have
the right and authority to issue monetary sanctions against any of the Partners
if, upon a showing of good cause, that Partner is unreasonably delaying the
proceeding. To the fullest extent permitted by law, the arbitration proceedings
and award shall be maintained in confidence by the Arbitrator and the Partners.
(e) The Disputing Partner shall notify the American Arbitration Association
("AAA") and the other Partners in writing describing in reasonable detail the
nature of the Dispute (the "Dispute Notice"). The arbitrator (the "Arbitrator")
shall be selected within 15 days of the date of the Dispute Notice by all of the
Partners from the members of a panel of arbitrators of the AAA or, if the AAA
fails or refuses to provide a list of potential arbitrators, of the Center for
Public Resources and shall be experienced in commercial arbitration. In the
event that the Partners are unable to agree on the selection of the Arbitrator,
the AAA shall select the Arbitrator, using the criteria set forth in this
Appendix, within 30 days of the date of the Dispute Notice. In the event that
the Arbitrator is unable to serve, his or her replacement will be selected in
the same manner as the Arbitrator to be replaced. The Arbitrator shall be
neutral. The Arbitrator shall have the authority to assess the costs and
expenses of the arbitration proceeding (including the arbitrators', and
attorneys' fees and expenses) against any or all Partners.
(f) The Arbitrator shall decide all Disputes and all substantive and
procedural issues related thereto, and shall enforce this Agreement in
accordance with its terms. Without limiting the generality of the previous
sentence, the Arbitrator shall have the authority to issue injunctive relief;
however, the Arbitrator shall not have any power or authority to (i) award
consequential, incidental, indirect or punitive damages or (ii) amend this
Agreement. The Arbitrator shall render the arbitration award, in writing,
within 20 days following the completion of the arbitration hearing, and
Appendix D-2
<PAGE>
shall set forth the reasons for the award. In the event that the Arbitrator
awards monetary damages in favor of either party, the Arbitrator must certify in
the award that no indirect, consequential, incidental, indirect or punitive
damages are included in such award. If the Arbitrator's decision results in a
monetary award, the interest to be granted on such award, if any, and the rate
of such interest shall be determined by the Arbitrator in his or her discretion.
The arbitration award shall be final and binding on the Partners, and judgment
thereon may be entered in any court of competent jurisdiction, and may not be
appealed except to the extent permitted by the Federal Arbitration Act.
(4) Continuation of Business. Notwithstanding the existence of any Dispute
------------------------
or the pendency of any procedures pursuant to this Appendix, the Partners agree
and undertake that all payments not in dispute shall continue to be made and all
obligations not in dispute shall continue to be performed.
Appendix D-3
<PAGE>
APPENDIX 1 TO APPENDIX D
------------------------
(a) First priority shall be given to maximizing the consistency of the
resolution of the Dispute with the satisfaction of all express obligations of
the Partners and their Affiliates as set forth in the Partnership Agreement.
(b) Second priority shall be given to resolution of the Dispute in a manner
which best achieves the objectives of the business activities and arrangements
under the Partnership Agreement and the Related Agreements and permits the
Partners to realize the benefits intended to be afforded thereby.
(c) Third priority shall be given to such other matters, if any, as the
Partners or the Arbitrator shall determine to be appropriate under the
circumstances.
Appendix D-4
<PAGE>
APPENDIX E
TO LIMITED PARTNERSHIP AGREEMENT
--------------------------------
DIVISION OF PARTNERSHIP BUSINESS
--------------------------------
If the Partnership is dissolved and Section 12.2(e) applies to the winding
---------------
up of the affairs of the Partnership, the Partnership properties shall, to the
extent legally and contractually feasible and, after satisfaction of the
liabilities of the Partnership (whether by payment or reasonable provision for
payment), be distributed in kind to the Partners in accordance with a division
(the "Division") of the properties. The Division shall be implemented by
dividing the properties, to the extent feasible, in accordance with the
following priorities and principles:
A. First priority shall be given to maximizing the consistency of the Division
with a division of the Partnership properties that allocates to each Partner
(subject to such Partner's Percentage Interest of the Partnership's
liabilities) Partnership properties in proportion to the value of such
Partner's Percentage Interest in the Partnership's business taking into
account the aggregate Asset Fair Market Value of the Partnership's
properties and the value and benefits afforded to such Partner under the
Partnership Agreement and the other Related Agreements.
B. Second priority shall be given to the allocation of the Partnership's
various assets and business units between the Partners so as to maximize the
aggregate going concern value of the respective assets and business units
allocated to each Partner, taking into account, without limitation, the
potential synergies and efficiencies that are reasonably achievable in
connection with the operation of such allocated assets and business units as
an independent business entity.
C. Third priority shall be given to maximizing the consistency of the Division
with the nature and quality of the Assets and Contributed Business
originally transferred to the Partnership by the respective Partners or
their Affiliates.
Absent an agreement by the Partners or direction by the Neutral as to both
(i) how the Partners should allocate Partnership debt and (ii) the process for
relieving each Partner of liability for that portion of Partnership debt
allocated to the other Partner, the Partners (A) shall be jointly and severally
liable to the holders of all Partnership debt and (B) as between the Partners,
each Partner shall be obligated to pay to holders of the debt its Percentage
Interest of all payments of principal and interest on Partnership Debt.
Notwithstanding the foregoing, the Neutral shall be entitled to direct, and any
Partner may propose, an alternative allocation of Partnership debt in any
circumstance where such alternative allocation is reasonably likely to result in
a Division that is more consistent with the priorities outlined above.
For purposes of this Appendix E, Lyondell GP and Lyondell LP shall be
treated as if they were a single Partner, Millennium GP and Millennium LP shall
be treated as if they were a single Partner and Occidental GP, Occidental LP1
and Occidental LP2 shall be treated as if they were a single Partner.
Appendix E-1
<PAGE>
The Partners shall attempt to agree on a plan for a mutually acceptable
Division. If they are unable to so agree after 60 days following the occurrence
of the dissolution, a Neutral shall be appointed in accordance with Appendix D
and each Partner shall submit to the Neutral a written proposal for a Division.
The Neutral shall decide which of the three proposals (without in any way
modifying or compromising between the three proposals) more closely follows the
priorities and principles set forth above, and the proposal so chosen shall
thereupon be binding upon all Partners and shall be promptly implemented under
the direction of the Neutral. The Neutral shall be entitled to employ (at the
expense of the Partnership) such financial and accounting advisors and legal
counsel as he or she shall select, provided that no such advisor or counsel
shall have any affiliation with any Partner.
Appendix E-2
<PAGE>
SCHEDULE 2.3(D)
Effective Date Capital Account Balances
---------------------------------------
Column I reflects Capital Accounts after the contributions of the Occidental
Partners on the Effective Date and the Effective Date adjustments to the Capital
Accounts of the Initial Partners, but before the other contributions and
distributions described in Section 2.3(c). Column II indicates the amount of
the contributions and distributions described in 2.3(c) other than accrued
interest. Column III reflects the Capital Accounts if such contributions and
distributions were made (and accrued interest was paid and distributed) on the
Effective Date. Column IV reflects the number of Units owned by each Partner.
<TABLE>
<CAPTION>
PARTNER I II III IV
- ---------------- --------------- --------------- --------------- ------
<S> <C> <C> <C> <C>
Lyondell GP $ 42,451,400 $ 42,451,400 820
Lyondell GP 1,931,768,600 $ 148,350,000 2,080,118,600 40,180
------
41,000
Millennium GP 30,544,300 30,544,300 590
Millennium GP 1,720,020,000 (223,350,000) 1,496,670,000 28,910
------
29,500
Occidental GP 15,272,150 15,272,150 295
Occidental LP1 342,872,650 342,872,650 6,623
Occidental LP2 1,588,770,000 (419,700,000) 1,169,070,000 22,582
-------------- ------------- -------------- ------
29,500
$5,671,699,100 $(494,700,000) $5,176,999,100
============== ============= ==============
</TABLE>
*The difference between Lyondell LP's contribution of $345 million to satisfy
the Lyondell Note and the distribution to it of $196,650,000 (57%) of the
proceeds from such note.
<PAGE>
EXHIBIT 3.3(a)
FIRST AMENDMENT TO
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
EQUISTAR CHEMICALS, LP
<PAGE>
FIRST AMENDMENT TO AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
EQUISTAR CHEMICALS, LP
This First Amendment to the Amended and Restated Limited Partnership
Agreement of Equistar Chemicals, LP, dated as of June 30, 1998 (the "First
Amendment"), is entered into by and among Lyondell Petrochemical G.P. Inc., a
Delaware corporation ("Lyondell GP"), Lyondell Petrochemical L.P. Inc., a
Delaware corporation ("Lyondell LP"), Millennium Petrochemicals GP LLC, a
Delaware limited liability company ("Millennium GP"), Millennium Petrochemicals
LP LLC, a Delaware limited liability company ("Millennium LP"), PDG Chemical
Inc., a Delaware corporation ("Occidental GP"), Occidental Petrochem Partner 1,
Inc., a Delaware corporation ("Occidental LP1"), Occidental Petrochem Partner 2,
Inc., a Delaware corporation ("Occidental LP2"), and Occidental Petrochem
Partner GP, Inc., a Delaware corporation ("New Oxy GP").
WHEREAS, reference is here made for all purposes to the Amended and
Restated Limited Partnership Agreement of Equistar Chemicals, LP, dated May 15,
1998 (the "Partnership Agreement"); and
WHEREAS, all capitalized terms that are defined in the Partnership
Agreement, but are not defined in this First Amendment, shall have the same
meanings as defined in the Partnership Agreement; and
WHEREAS, Occidental GP wishes to convert 294 of its General Partner
Units in the Partnership to Limited Partner Units, and to transfer such Units to
Occidental LP2, and each of the other Partners are willing to consent to such
conversion and transfer; and
WHEREAS, Occidental GP wishes to transfer its remaining General Partner
Unit to New Oxy GP, and to withdraw from the Partnership and New Oxy GP wishes
to be admitted to the Partnership as a General Partner, and each of the other
Partners are willing to consent to such transfer, withdrawal, and admission;
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
1. Transfers and Withdrawal. (a) Occidental GP hereby converts 294 of
its 295 General Partner Units in the Partnership into 294 Limited Partner Units
in the Partnership.
(b) Occidental GP does hereby transfer its 294 Limited Partner
Units to Occidental LP2.
(c) Occidental GP does hereby transfer its remaining 1 General
Partner Unit to New Oxy GP. Concurrently New Oxy GP is hereby admitted into the
Partnership as a
<PAGE>
General Partner of the Partnership. Concurrently, Occidental GP hereby
withdraws from the Partnership.
(d) New Oxy GP assumes all of the obligations of Occidental GP under
or in respect of the Partnership.
2. Amendments. (a) Any reference in the Partnership Agreement to Occidental
GP shall hereafter be deemed for all purposes to mean New Oxy GP.
(b) As a result of the conversions, the withdrawal and the transfers
described herein, Section 2.1 of the Partnership Agreement is restated in its
entirety as follows:
"2.1 Holdings of Partners. Effective as of the close of business on
June 30, 1998, the Units shall be owned as follows:
Partner Units
------- -----
Lyondell GP 820
Millennium GP 590
Occidental GP 1
Lyondell LP 40,180
Millennium LP 28,910
Occidental LP1 6,623
Occidental LP2 22,876
TOTAL 100,000
===== =======
The Units shall entitle the holder to the distributions set forth in
Section 3 and to the allocation of Profits, Losses and other items as set forth
in Section 4. Units shall not be represented by certificates."
3. References to and Effect on Partnership Agreement. (a) The provisions of
the Partnership Agreement (as amended by this First Amendment) shall remain in
full force and effect in accordance with their terms following the effectiveness
of this First Amendment. Each Partner, by executing this First Amendment, (i)
consents to the admission of New Oxy GP into the Partnership and as a General
Partner, (ii) consents to the withdrawal of PDG Chemical, Inc. as a General
Partner and (iii) ratifies all actions done in comtemplation of items (i) and
(ii) herein.
(b) On and after the date first written above, each reference in the
Partnership Agreement to "this Agreement", "hereunder", "hereof", "herein" or
words of like import, and
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<PAGE>
any reference to the Partnership Agreement in any certificate or document
delivered in connection therewith, shall mean and be a reference to the
Partnership Agreement as amended hereby.
(c) 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 purpose of reflecting the withdrawals and admissions herein, including,
but not limited to, an amendment of the Certificate of Limited Partnership
of the Partnership pursuant to Section 17-204 of the Act.
4. Representations and Warranties. Each of Occidental GP and New Oxy Gp
represent and warrant to the other Partners as follows:
(a) Due Organization; Good Standing and Power. New Oxy GP is a
corporation duly organized, validly existing and in good standing under the
laws of its state of organization. New Oxy GP has all requisite power and
authority to enter into this First Amendment and to perform its
obligations hereunder. New Oxy GP is duly authorized, qualified or licensed
to do business as a foreign corporation and is in good standing in the
State of Texas and in each of the other jurisdictions in which its right,
title or interest in or to any of its assets or properties requires such
authorization, qualification or licensing, except where the failure to so
qualify or to be in good standing would not reasonably be expected to have
a material adverse effect.
(b) Authorization and Validity of Agreements. The execution, delivery
and performance of this First Amendment by New Oxy GP and the consummation
by it of the transactions contemplated hereby have been duly authorized by
the Board of Directors of New Oxy GP. Except to the extent heretofore
obtained, no other corporate action or action by stockholders is necessary
for the authorization, execution, delivery and performance by New Oxy GP of
this First Amendment and the consummation by New Oxy GP of the transactions
contemplated hereby. This First Amendment has been duly executed and
delivered by New Oxy GP and constitutes a legal, valid and binding
obligation of New Oxy GP, enforceable in accordance with its terms, except
as the same may be limited by bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights
generally and by general equity principles.
(c) No Consents Required; No Conflict with Instruments to which New Oxy
GP is a Party. The execution, delivery and performance of this First
Amendment by New Oxy GP, the performance by New Oxy GP of its obligations
under the Partnership Agreement (as amended by this First Amendment) and
the consummation of New Oxy GP of the transactions contemplated hereby or
thereby (i) will not require any consent except for such consents the
failure of which to be obtained or made, would not in the aggregate
reasonably be expected to have a material adverse effect; and (ii) will not
violate (with or without the
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<PAGE>
giving of notice or the lapse of time or both) or conflict with, or result
in the breach of termination of any provision of, or constitute a default
under, or result in the acceleration of the performance of the obligations
of New Oxy GP, any agreement or instrument to which New Oxy GP is a party,
except for such obligations, conflicts, breaches, terminations, defaults or
accelerations or which would not in the aggregate reasonably be expected to
have a material adverse effect.
5. Secretary's Certificate. New Oxy GP shall provide to each of the other
General Partners and the Partnership a copy of a secretary's certificate in the
form attached as Appendix I hereto.
6. Counterparts. This First Amendment may be executed by one or more of the
parties hereto in any number of separate counterparts, and all of such
counterparts taken together shall be deemed to constitute one and the same
instrument.
7. Governing Law. This First Amendment shall be governed by and construed
in accordance with the laws of the State of Delaware, without giving effect to
any conflicts of law principles.
[Remainder of this page left blank]
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<PAGE>
IN WITNESS WHEREOF, this First Amendment has been executed on behalf of
each of the parties hereto, by their respective officers thereunto duly
authorized, effective as of the date first written above.
GENERAL PARTNERS:
LYONDELL PETROCHEMICAL G.P. INC.
By: /s/ Kerry A. Galvin
---------------------------------
Name:
Title:
MILLENNIUM PETROCHEMICALS GP LLC
By: Millennium Petrochemicals Inc., its
Manager
By: /s/ George H. Hempstead, III
-----------------------------
Name: George H. Hempstead, III
Title: Vice President
OCCIDENTAL PETROCHEM PARTNER
GP, INC.
By: /s/ David C. Yen
-----------------------------------
Name: David C. Yen
Title: Vice President and Treasurer
WITHDRAWING GENERAL PARTNER:
PDG CHEMICAL INC.
By: /s/ J.R. Havert
-----------------------------------
Name: J.R. Havert
Title: Vice President and Assistant
Treasurer
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<PAGE>
LIMITED PARTNERS:
LYONDELL PERTOCHEMICAL L.P. INC.
By: /s/ Kerry a. Galvin
-----------------------------------
Name:
Title:
MILLENNIUM PETROCHEMICALS LP LLC
By: Millennium Petrochemicals Inc., its
Manager
By: /s/ George H. Hempstead, III
-----------------------------
Name: George H. Hempstead, III
Title: Vice President
OCCIDENTAL PETROCHEM PARTNER 1, INC.
By: /s/ David C. Yen
-----------------------------------
Name: David C. Yen
Title: Vice President and Treasurer
OCCIDENTAL PETROCHEM PARTNER 2, INC.
By: /s/ David C. Yen
-----------------------------------
Name: David C. Yen
Title: Vice President and Treasurer
-6-
<PAGE>
EXHIBIT 3.4
CERTIFICATE OF INCORPORATION
OF
EQUISTAR FUNDING CORPORATION
*****
1. The name of the corporation is Equistar Funding Corporation.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted is:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation shall have
authority to issue is: One Thousand (1,000) and the par value of each of such
shares is No Dollars and One Cents ($0.01) amounting in the aggregate to Ten
Dollars and Zero Cents ($10).
5. The name and mailing address of each incorporator is as follows:
NAME MAILING ADDRESS
---- ---------------
Gerald A. O'Brien 1221 McKinney, Suite 1600
Houston, Texas 77010
The name and mailing address of each person who is to serve as a director until
the first annual meeting of the stockholders or until a successor is elected and
qualified, is as follows:
NAME MAILING ADDRESS
---- ---------------
Dan F. Smith 1221 McKinney, Suite 1600
Houston, Texas 77010
Eugene R. Allspach 1221 McKinney, Suite 1600
Houston, Texas 77010
Kelvin R. Collard 1221 McKinney, Suite 1600
Houston, Texas 77010
<PAGE>
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose
of forming a corporation pursuant to the General Corporation Law of the State of
Delaware, do make this Certificate, hereby declaring and certifying that this is
my act and deed and the facts herein stated are true, and accordingly have
hereunto set my hand this 22nd day of January, 1999.
/s/ Gerald A. O'Brien
____________________________________________
Name: Gerald A. O'Brien
<PAGE>
EXHIBIT 3.5
EQUISTAR FUNDING CORPORATION
********
B Y - L A W S
********
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the City and State to be designated by the board of
directors, at such place as may be fixed from time to time by the board of
directors, or at such other place either within or without the State of Delaware
as shall be designated from time to time by the board of directors and stated in
the notice of the meeting. Meetings of stockholders for any other purpose may be
held at such time and place, within or without the State of Delaware, as shall
be stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
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<PAGE>
Section 2. The board of directors shall designate the time, place and
date (which shall not be more than 13 months after the date of the last annual
meeting) of annual meetings of stockholders, or at such other date and time as
shall be designated from time to time by the board of directors and stated in
the notice of the meeting, at which they shall elect by a plurality vote a board
of directors, and transact such other business as may properly be brought before
the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than 10 nor more than 60 days before the date of the
meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning a majority in
amount of the entire
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<PAGE>
capital stock of the corporation issued and outstanding and entitled to vote.
Such request shall state the purpose or purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than 10 nor more than 60 days before the date of
the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question
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<PAGE>
brought before such meeting, unless the question is one upon which by express
provision of the statutes or of the certificate of incorporation, a different
vote is required in which case such express provision shall govern and control
the decision of such question.
Section 10. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number. of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be not less than 3 nor more than 7. The first board shall consist of
3 directors. Thereafter, within the limits above specified, the number of
directors shall be determined by resolution of the board of directors or by the
stockholders at the annual meeting. The directors shall be elected at the annual
meeting of
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<PAGE>
the stockholders, except as provided in Section 2 of this Article, and each
director elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
Section 3. The business of the corporation shall be managed by or under
the direction of its board of directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the certificate of incorporation or by these by-laws directed or required to
be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
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<PAGE>
Section 5. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the president
on 2 days' notice to each director, either personally or by mail or by facsimile
communication; special meetings shall be called by the president or secretary in
like manner and on like notice on the written request of two directors unless
the board consists of only one director; in which case special meetings shall be
called by the president or secretary in like manner and on like notice on the
written request of the sole director.
Section 8. At all meetings of the board, 2 directors or 1/3 of members
then in office of directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the board of directors, except as
may be otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum shall not be present at any meeting of the board of
directors the directors present thereat
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<PAGE>
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these by-laws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The board of directors may designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. The board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in the place of
any such absent or disqualified member.
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<PAGE>
Any such committee, to the extent provided in the resolution of the
board of directors, shall have and may exercise all the powers and authority of
the board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to the following matters: (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
General Corporation Law of Delaware to be submitted to stockholders for approval
or (ii) adopting, amending or repealing any by-law of the corporation. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the board of directors.
Section 12. Each committee shall keep regular minutes of its meetings
and report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these by-laws, the board of directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the board of directors and may be paid
a fixed sum for attendance at each meeting of the board of directors or a stated
salary as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
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<PAGE>
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or by law, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by facsimile telecommunication.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board
of directors and shall be a president, a vice-president, a secretary and a
treasurer. The board of directors may also choose additional vice-presidents,
and one or more assistant secretaries and assistant treasurers. Any number
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<PAGE>
of offices may be held by the same person, unless the certificate of
incorporation or these by-laws otherwise provide.
Section 2. The board of directors at its first meeting after each
annual meeting of stockholders shall choose a president, one or more
vice-presidents, a secretary and a treasurer.
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and the board of
directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
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<PAGE>
THE VICE-PRESIDENTS
Section 8. In the absence of the president or in the event of his
inability or refusal to act, the vice-president (or in the event there be more
than one vice-president, the vice-presidents in the order designated by the
directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The board of directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his inability or refusal
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<PAGE>
to act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 14. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the treasurer and
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
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<PAGE>
ARTICLE VI
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by a
certificate or shall be uncertificated. Certificates shall be signed by, or in
the name of the corporation by, the chairman or vice-chairman of the board of
directors, or the president or a vice-president, and by the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
corporation.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Within a reasonable time after the issuance or transfer of
uncertificated stock, the corporation shall send to the registered owner thereof
a written notice containing the information required to be set forth or stated
on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the General
Corporation Law of Delaware or a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating,
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<PAGE>
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
Section 2. Any of or all the signatures on a certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates or uncertificated shares to be issued in place of any certificate
or certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates or uncertificated
shares, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and/or to give the corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person
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entitled thereto, cancel the old certificate and record the transaction upon its
books. Upon receipt of proper transfer instructions from the registered owner of
uncertificated shares such uncertificated shares shall be cancelled and issuance
of new equivalent uncertificated shares or certificated shares shall be made to
the person entitled thereto and the transaction shall be recorded upon the books
of the corporation.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting: provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on
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<PAGE>
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject
to the provisions of the certificate of incorporation, if any, may be declared
by the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
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CHECKS
Section 4. All checks or demands for money and note of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile there of to be
impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 7. The corporation shall indemnify its officers, directors,
employees and agents to the extent permitted by the General Corporation Law of
Delaware.
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered, amended or repealed or new
by-laws may be adopted by the stockholders or by the board of directors, when
such power is conferred upon the board of directors by the certificate of
incorporation at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment repeal or adoption of new
by-laws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal by-laws is conferred upon the board
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of directors by the certificate of incorporation it shall not divest or limit
the power of the stockholders to adopt, amend or repeal by-laws.
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EXHIBIT 4.1
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
Equistar Chemicals, LP
Equistar Funding Corporation
$300,000,000
8 1/2% Notes Due 2004
$600,000,000
8 3/4% Notes Due 2009
<PAGE>
February 9, 1999
CHASE SECURITIES INC.
270 Park Avenue, 8th floor
New York, New York 10017
and
NATIONSBANC MONTGOMERY SECURITIES LLC
233 South Wacker Drive, Suite 2800
Chicago, IL 60606
each, as representatives for themselves and
ABN AMRO Incorporated
BNY Capital Markets, Inc.
First Chicago Capital Markets Inc. and
J.P. Morgan Securities Inc.
Ladies and Gentlemen:
Equistar Chemicals, LP, a Delaware limited partnership (the
"Partnership"), and Equistar Funding Corporation, a Delaware corporation (the
"Corporation"), propose to issue and sell to Chase Securities Inc., NationsBanc
Montgomery Securities LLC, ABN AMRO Incorporated, BNY Capital Markets, First
Chicago Capital Markets Inc. and J.P. Morgan Securities Inc. (together, the
"Initial Purchasers") for whom Chase Securities Inc. and NationsBanc Montgomery
Securities LLC are acting as representatives, upon the terms and subject to the
conditions set forth in a purchase agreement dated February 9, 1999 (the
"Purchase Agreement"), $300,000,000 aggregate principal amount of their 8 1/2%
Notes Due 2004 and $600,000,000 aggregate principal amount of their 8 3/4% Notes
Due 2009 (together, the "Debt Securities"). Capitalized terms used but not
defined herein shall have the meanings given to such terms in the Purchase
Agreement.
As an inducement to the Initial Purchasers to enter into the Purchase
Agreement and in satisfaction of a condition to the obligations of the Initial
Purchasers thereunder, the Partnership and the Corporation agree with the
Initial Purchasers, for the benefit of the holders (including the Initial
Purchasers) of the Debt Securities, the Exchange Debt Securities (as defined
herein) and the Private Exchange Debt Securities (as defined herein) (each set
of holders or collectively, as the context so requires, the "Holders"), as
follows:
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1. Registered Exchange Offer. The Partnership and the Corporation
shall (i) prepare and, not later than 60 days following the date of original
issuance of the Debt Securities (the "Issue Date"), file with the Securities and
Exchange Commission (the "Commission") a registration statement (the "Exchange
Offer Registration Statement") on an appropriate form under the Securities Act
with respect to a proposed offer to the Holders of the Debt Securities of each
series (the "Registered Exchange Offer") to issue and deliver to such Holders,
in exchange for the Debt Securities of each series, a like aggregate principal
amount of debt securities of each series (the "Exchange Debt Securities") that
are identical in all material respects to the Debt Securities, except for the
transfer restrictions relating to the Debt Securities, (ii) use their reasonable
best efforts to cause the Exchange Offer Registration Statement to become
effective under the Securities Act no later than 150 days after the Issue Date
and the Registered Exchange Offer to be consummated no later than 180 days after
the Issue Date and (iii) keep the Exchange Offer Registration Statement
effective for not less than 30 days (or longer, if required by applicable law)
after the date on which notice of the Registered Exchange Offer is mailed to the
Holders (such period being called the "Exchange Offer Registration Period").
The Exchange Debt Securities will be issued under the Indenture or an indenture
(the "Exchange Debt Securities Indenture") among the Partnership, the
Corporation and the Trustee or such other bank or trust company, the Partnership
and the Corporation that is reasonably satisfactory to the Initial Purchasers,
as trustee (the "Exchange Debt Securities Trustee"), such indenture to be
identical in all material respects to the Indenture, except for the transfer
restrictions relating to the Debt Securities (as described above).
Upon the effectiveness of the Exchange Offer Registration Statement,
the Partnership and the Corporation shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder electing to exchange Debt Securities of each series for
Exchange Debt Securities of such series (assuming that such Holder (a) is not an
affiliate of the Partnership or the Corporation or is not an Exchanging Dealer
(as defined herein) not complying with the requirements of the next sentence,
(b) is not an Initial Purchaser holding Debt Securities that have, or that are
reasonably likely to have, the status of an unsold allotment in an initial
distribution, (c) acquires the Exchange Debt Securities in the ordinary course
of such Holder's business and (d) has no arrangements or understandings with any
person to participate in the distribution of the Exchange Debt Securities) and
to trade such Exchange Debt Securities from and after their receipt without any
limitations or restrictions under the Securities Act and without material
restrictions under the securities laws of the several states of the United
States. The Partnership, the Corporation, the Initial Purchasers and each
Exchanging Dealer acknowledge that, pursuant to current interpretations by the
Commission's staff of Section 5 of the Securities Act, each Holder that is a
broker-dealer electing to exchange Debt Securities, acquired for its own account
as a result of market-making activities or other trading activities, for
Exchange Debt Securities (an "Exchanging Dealer"), is required to deliver a
prospectus containing substantially the information set forth in Annex A hereto
on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and
the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan
of Distribution" section of such prospectus in connection with a sale of any
such Exchange Debt Securities received by such Exchanging Dealer pursuant to the
Registered Exchange Offer.
If, prior to the consummation of the Registered Exchange Offer, any
Holder holds any Debt Securities acquired by it that have, or that are
reasonably likely to be determined to have, the status of an unsold allotment in
an initial distribution, or any Holder is not entitled to participate in the
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<PAGE>
Registered Exchange Offer, the Partnership and the Corporation shall, upon the
request of any such Holder, simultaneously with the delivery of the Exchange
Debt Securities in the Registered Exchange Offer, issue and deliver to any such
Holder, in exchange for the Debt Securities held by such Holder (the "Private
Exchange"), a like aggregate principal amount of Debt Securities (the "Private
Exchange Debt Securities") that are identical in all material respects to the
Exchange Debt Securities, except for the transfer restrictions relating to such
Private Exchange Debt Securities. The Private Exchange Debt Securities will be
issued under the same indenture as the Exchange Debt Securities, and the
Partnership and the Corporation shall use their reasonable best efforts to cause
the Private Exchange Debt Securities to bear the same CUSIP number as the
Exchange Debt Securities.
In connection with the Registered Exchange Offer, the Partnership and the
Corporation shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter of
transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 days (or
longer, if required by applicable law) after the date on which notice of the
Registered Exchange Offer is mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange Offer
with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Debt Securities at any time prior
to the close of business, New York City time, on the last business day on which
the Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all laws that are applicable to
the Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange Offer and
any Private Exchange, as the case may be, the Partnership and the Corporation
shall:
(a) accept for exchange all Debt Securities, of any series, tendered and
not validly withdrawn pursuant to the Registered Exchange Offer and the Private
Exchange;
(b) deliver to the Trustee for cancellation all Debt Securities so accepted
for exchange; and
(c) cause the Trustee or the Exchange Debt Securities Trustee, as the case
may be, promptly to authenticate and deliver to each Holder, Exchange Debt
Securities or Private
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<PAGE>
Exchange Debt Securities, as the case may be, equal in principal amount to and
of the same series of the Debt Securities of such Holder so accepted for
exchange.
The Partnership and the Corporation shall use their reasonable best
efforts to keep the Exchange Offer Registration Statement effective and to amend
and supplement the prospectus contained therein in order to permit such
prospectus to be used by all persons subject to the prospectus delivery
requirements of the Securities Act for such period of time as such persons must
comply with such requirements in order to resell the Exchange Debt Securities;
provided that (i) in the case where such prospectus and any amendment or
supplement thereto must be delivered by an Exchanging Dealer, such period shall
be the lesser of 180 days and the date on which all Exchanging Dealers have sold
all Exchange Debt Securities held by them and (ii) the Partnership and the
Corporation shall make such prospectus and any amendment or supplement thereto
available to all dealers for use in connection with any resale of any Exchange
Debt Securities for a period of not less than 180 days after the consummation of
the Registered Exchange Offer.
The Indenture or the Exchange Debt Securities Indenture, as the case
may be, shall provide that the Debt Securities, the Exchange Debt Securities and
the Private Exchange Debt Securities of all series (except where the interests
of fewer than all series are affected) shall vote and consent together on all
matters as one class and that none of the Debt Securities, the Exchange Debt
Securities or the Private Exchange Debt Securities will have the right to vote
or consent as a separate class on any matter.
Interest on each Exchange Security and Private Exchange Security
issued pursuant to the Registered Exchange Offer and in the Private Exchange
will accrue from the last interest payment date on which interest was paid on
the Debt Securities surrendered in exchange therefor or, if no interest has been
paid on the Debt Securities, from the Issue Date.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Partnership and the Corporation that at the time of
the consummation of the Registered Exchange Offer (i) any Exchange Debt
Securities received by such Holder will be acquired in the ordinary course of
business, (ii) such Holder will have no arrangements or understanding with any
person to participate in the distribution of the Debt Securities or the Exchange
Debt Securities within the meaning of the Securities Act and (iii) such Holder
is not an affiliate of the Partnership or the Corporation or, if it is such an
affiliate, such Holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
Notwithstanding any other provisions hereof, the Partnership and the
Corporation will ensure that (i) any Exchange Offer Registration Statement and
any amendment thereto and any prospectus forming part thereof and any supplement
thereto complies in all material respects with the Securities Act and the rules
and regulations of the Commission thereunder, (ii) any Exchange Offer
Registration Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) any prospectus forming part of any Exchange
Offer Registration Statement, and any supplement to such prospectus, does not,
as of the consummation of the Registered Exchange Offer, include an untrue
statement of a material fact or omit
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<PAGE>
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
2. Shelf Registration. If (i) because of any change in law or
applicable interpretations thereof by the Commission's staff the Partnership and
the Corporation are not permitted to effect the Registered Exchange Offer as
contemplated by Section 1 hereof, (ii) any Debt Securities validly tendered
pursuant to the Registered Exchange Offer are not exchanged for Exchange Debt
Securities within 180 days after the Issue Date, (iii) any Initial Purchaser so
requests with respect to Debt Securities or Private Exchange Debt Securities not
eligible to be exchanged for Exchange Debt Securities in the Registered Exchange
Offer and held by it following the consummation of the Registered Exchange
Offer, (iv) any applicable law or interpretations do not permit any Holder to
participate in the Registered Exchange Offer, (v) any Holder that participates
in the Registered Exchange Offer does not receive freely transferable Exchange
Debt Securities in exchange for tendered Debt Securities, or (vi) the
Partnership and the Corporation so elect, then the following provisions shall
apply:
(a) The Partnership and the Corporation shall use their reasonable best
efforts to file as promptly as practicable (but in no event more than 30 days
after so required or requested pursuant to this Section 2) with the Commission,
and thereafter shall use their reasonable best efforts to cause to be declared
effective, a shelf registration statement on an appropriate form under the
Securities Act relating to the offer and sale of the Transfer Restricted Debt
Securities (as defined below) by the Holders thereof from time to time in
accordance with the methods of distribution set forth in such registration
statement (hereafter, a "Shelf Registration Statement" and, together with any
Exchange Offer Registration Statement, a "Registration Statement"); provided
that with respect to Exchange Debt Securities or Private Exchange Debt
Securities received by an Initial Purchaser in exchange for Debt Securities
constituting any portion of an unsold allotment, the Partnership and the
Corporation may, if permitted by current interpretations of the Commission's
staff, file a post-effective amendment to the Exchange Offer Registration
Statement containing the information required by Regulation S-K Items 507 and/or
508, as applicable, in satisfaction of its obligations under this Section 2(a)
with respect thereto, and any such Exchange Offer Registration Statement, as so
amended, shall be referred to herein as, and governed by the provisions herein
applicable to, a Shelf Registration Statement.
(b) The Partnership and the Corporation shall use their reasonable best
efforts to keep the Shelf Registration Statement continuously effective in order
to permit the prospectus forming part thereof to be used by Holders of Transfer
Restricted Debt Securities for a period ending on the earlier of (i) two years
from the Issue Date or such shorter period that will terminate when all the
Transfer Restricted Debt Securities covered by the Shelf Registration Statement
have been sold pursuant thereto and (ii) the date on which the Debt Securities
become eligible for resale without volume restrictions pursuant to Rule 144
under the Securities Act (in any such case, such period being called the "Shelf
Registration Period"). The Partnership and the Corporation shall be deemed not
to have used their reasonable best efforts to keep the Shelf Registration
Statement effective during the requisite period if they voluntarily take any
action that would result in Holders
5
<PAGE>
of Transfer Restricted Debt Securities covered thereby not being able to offer
and sell such Transfer Restricted Debt Securities during that period, unless
such action is required by applicable law.
(c) Notwithstanding any other provisions hereof, the Partnership and the
Corporation will ensure that (i) any Shelf Registration Statement and any
amendment thereto and any prospectus forming part thereof and any supplement
thereto complies in all material respects with the Securities Act and the rules
and regulations of the Commission thereunder, (ii) any Shelf Registration
Statement and any amendment thereto (in either case, other than with respect to
information included therein in reliance upon or in conformity with written
information furnished to the Partnership and the Corporation by or on behalf of
any Holder specifically for use therein (the "Holders' Information")) does not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (iii) any prospectus forming part of any Shelf Registration
Statement, and any supplement to such prospectus (in either case, other than
with respect to Holders' Information), does not include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(d) The Partnership and the Corporation will have the ability to suspend
the Shelf Registration Statement for no more than (a) 45 days during the first
12 month period after the date of original issuance of the Debt Securities and
(b) 90 days during any subsequent 12 month period (a "Suspension Period"), if
the Partnership and the Corporation determine, in their reasonable best
judgment, upon written advice of counsel, that the continued effectiveness and
use of the Shelf Registration Statement would require the disclosure of
confidential information or interfere with any financing, acquisition,
reorganization or other material transaction involving the Partnership. A
Suspension Period shall commence on and include the date that the Partnership
and the Corporation give notice that the Shelf Registration Statement is no
longer effective or the prospectus included therein is no longer usable for
offers and sales of Debt Securities, Private Exchange Debt Securities and
Exchange Debt Securities covered by such registration statement and continue
until holders of such Debt Securities, Private Exchange Debt Securities and
Exchange Debt Securities either receive the copies of the supplemented or
amended prospectus contemplated by Section 4(j) hereof or are advised in writing
by the Partnership and the Corporation that use of the prospectus may be
resumed.
3. Additional Interest. (a) The parties hereto agree that the Holders of
Transfer Restricted Debt Securities will suffer damages if the Partnership and
the Corporation fail to fulfill their obligations under Section 1 or Section 2,
as applicable, and that it would not be feasible to ascertain the extent of such
damages. Accordingly, if (i) the applicable Registration Statement is not filed
with the Commission on or prior to 60 days after the Issue Date, (ii) the
Exchange Offer Registration Statement or the Shelf Registration Statement, as
the case may be, is not declared effective within 150 days after the Issue Date
(or in the case of a Shelf Registration Statement required to be filed in
response to a change in law or the applicable interpretations of the
Commission's staff, if later, within 30 days after publication of the change in
law or interpretation), (iii) the Registered Exchange Offer is not consummated
on or prior to 180 days after the Issue Date, or (iv) the Shelf Registration
Statement is filed and declared effective within 180 days after the Issue Date
(or in the case of a Shelf Registration
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<PAGE>
Statement required to be filed in response to a change in law or the applicable
interpretations of the Commission's staff, if later, within 30 days after
publication of the change in law or interpretation) but shall thereafter cease
to be effective (at any time that the Partnership and the Corporation are
obligated to maintain the effectiveness thereof) (each such event referred to in
clauses (i) through (iv), a "Registration Default"), the Partnership and the
Corporation, jointly and severally, will be obligated to pay additional interest
("Additional Interest") on each Transfer Restricted Debt Security during the
period of one or more such Registration Defaults, at a rate of 0.25% per annum
over and above the interest rate set forth in such Transfer Restricted Debt
Security, increasing to 0.50% if the Registration Default is not cured within 90
days, until (i) the applicable Registration Statement is filed, (ii) the
Exchange Offer Registration Statement is declared effective and the Registered
Exchange Offer is consummated, (iii) the Shelf Registration Statement is
declared effective or (iv) the Shelf Registration Statement again becomes
effective, as the case may be. Following the cure of all Registration Defaults,
the accrual of Additional Interest will cease. As used herein, the term
"Transfer Restricted Debt Securities" means (i) each Debt Security until the
date on which such Debt Security has been exchanged for a freely transferable
Exchange Debt Security in the Registered Exchange Offer, (ii) each Debt Security
or Private Exchange Debt Security until the date on which it has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement or (iii) each Debt Security or Private
Exchange Debt Security until the date on which it is distributed to the public
pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule
144(k) under the Securities Act. Notwithstanding anything to the contrary in
this Section 3(a), the Partnership and the Corporation shall not be required to
pay Additional Interest to a Holder of Transfer Restricted Debt Securities if
such Holder failed to comply with its obligations to make the representations
set forth in the second to last paragraph of Section 1 or failed to provide the
information required to be provided by it, if any, pursuant to Section 4(n).
Additional interest will not accrue during a Suspension Period.
(b) The Partnership and the Corporation shall notify the Trustee and the
Paying Agent under the Indenture immediately upon the happening of each and
every Registration Default. The Partnership and the Corporation shall pay the
Additional Interest due on the Transfer Restricted Debt Securities by depositing
with the Paying Agent (which may not be the Partnership or the Corporation for
these purposes), in trust, for the benefit of the Holders thereof, prior to
10:00 a.m., New York City time, on the next interest payment date specified by
the Indenture and the Debt Securities, sums sufficient to pay the Additional
Interest then due. The Additional Interest due shall be payable on each
interest payment date specified by the Indenture and the Debt Securities to the
record holder entitled to receive the interest payment to be made on such date.
Each obligation to pay Additional Interest shall be deemed to accrue from and
including the date of the applicable Registration Default.
(c) The parties hereto agree that the Additional Interest provided for in
this Section 3 constitutes a reasonable estimate of and is intended to
constitute the sole damages that will be suffered by Holders of Transfer
Restricted Debt Securities by reason of the failure of (i) the Shelf
Registration Statement or the Exchange Offer Registration Statement to be filed,
(ii) the Shelf Registration Statement to remain effective or (iii) the Exchange
Offer Registration Statement to be
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<PAGE>
declared effective and the Registered Exchange Offer to be consummated, in each
case to the extent required by this Agreement.
4. Registration Procedures. In connection with any Registration
Statement, the following provisions shall apply:
(a) The Partnership and the Corporation shall (i) furnish to each Initial
Purchaser, prior to the filing thereof with the Commission, a copy of the
Registration Statement and each amendment thereof and each supplement, if any,
to the prospectus included therein and shall use their reasonable best efforts
to reflect in each such document, when so filed with the Commission, such
comments as any Initial Purchaser may reasonably propose; (ii) include the
information set forth in Annex A hereto on the cover, in Annex B hereto in the
"Exchange Offer Procedures" section and the "Purpose of the Exchange Offer"
section and in Annex C hereto in the "Plan of Distribution" section of the
prospectus forming a part of the Exchange Offer Registration Statement, and
include the information set forth in Annex D hereto in the Letter of Transmittal
delivered pursuant to the Registered Exchange Offer; and (iii) if requested by
any Initial Purchaser, include the information required by Items 507 or 508 of
Regulation S-K, as applicable, in the prospectus forming a part of the Exchange
Offer Registration Statement.
(b) The Partnership and the Corporation shall advise each Initial
Purchaser, each Exchanging Dealer and the Holders (if applicable) and, if
requested by any such person, confirm such advice in writing (which advice
pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to
suspend the use of the prospectus until the requisite changes have been made):
(i) when any Registration Statement and any amendment thereto
has been filed with the Commission and when such Registration Statement
or any post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to any Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Partnership and the Corporation of
any notification with respect to the suspension of the qualification of
the Debt Securities, the Exchange Debt Securities or the Private
Exchange Debt Securities for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the making of
any changes in any Registration Statement or the prospectus included
therein in order that the statements therein are not misleading and do
not omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
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(c) The Partnership and the Corporation will make every reasonable effort
to obtain the withdrawal at the earliest possible time of any order suspending
the effectiveness of any Registration Statement.
(d) The Partnership and the Corporation will furnish to each Holder of
Transfer Restricted Debt Securities included within the coverage of any Shelf
Registration Statement, without charge, at least one conformed copy of such
Shelf Registration Statement and any post-effective amendment thereto, including
financial statements and schedules and, if any such Holder so requests in
writing, all exhibits thereto (including those, if any, incorporated by
reference).
(e) The Partnership and the Corporation will, during the Shelf
Registration Period, promptly deliver to each Holder of Transfer Restricted Debt
Securities included within the coverage of any Shelf Registration Statement,
without charge, as many copies of the prospectus (including each preliminary
prospectus) included in such Shelf Registration Statement and any amendment or
supplement thereto as such Holder may reasonably request; and the Partnership
and the Corporation consent to the use of such prospectus or any amendment or
supplement thereto by each of the selling Holders of Transfer Restricted Debt
Securities in connection with the offer and sale of the Transfer Restricted Debt
Securities covered by such prospectus or any amendment or supplement thereto.
(f) The Partnership and the Corporation will furnish to each Initial
Purchaser and each Exchanging Dealer, and to any other Holder who so requests,
without charge, at least one conformed copy of the Exchange Offer Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules and, if any Initial Purchaser or Exchanging Dealer or
any such Holder so requests in writing, all exhibits thereto (including those,
if any, incorporated by reference).
(g) The Partnership and the Corporation will, during the Exchange Offer
Registration Period or the Shelf Registration Period, as applicable, promptly
deliver to each Initial Purchaser, each Exchanging Dealer and such other persons
that are required to deliver a prospectus following the Registered Exchange
Offer, without charge, as many copies of the final prospectus included in the
Exchange Offer Registration Statement or the Shelf Registration Statement and
any amendment or supplement thereto as such Initial Purchaser, Exchanging Dealer
or other persons may reasonably request; and the Partnership and the Corporation
consent to the use of such prospectus or any amendment or supplement thereto by
any such Initial Purchaser, Exchanging Dealer or other persons, as applicable,
as aforesaid.
(h) Prior to the effective date of any Registration Statement, the
Partnership and the Corporation will use their reasonable best efforts to
register or qualify, or cooperate with the Holders of Debt Securities, Exchange
Debt Securities or Private Exchange Debt Securities included therein and their
respective counsel in connection with the registration or qualification of, such
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Debt Securities, Exchange Debt Securities or Private Exchange Debt Securities
for offer and sale under the securities or blue sky laws of such jurisdictions
as any such Holder reasonably requests in writing and do any and all other acts
or things necessary or advisable to enable the offer and sale in such
jurisdictions of the Debt Securities, Exchange Debt Securities or Private
Exchange Debt Securities covered by such Registration Statement; provided that
the Partnership and the Corporation will not be required to qualify generally to
do business in any jurisdiction where they are not then so qualified or to take
any action which would subject them to general service of process or to taxation
in any such jurisdiction where they are not then so subject.
(i) The Partnership and the Corporation will cooperate with the Holders
of Debt Securities, Exchange Debt Securities or Private Exchange Debt Securities
to facilitate the timely preparation and delivery of certificates representing
Debt Securities, Exchange Debt Securities or Private Exchange Debt Securities to
be sold pursuant to any Registration Statement free of any restrictive legends
and in such denominations and registered in such names as the Holders thereof
may request in writing prior to sales of Debt Securities, Exchange Debt
Securities or Private Exchange Debt Securities pursuant to such Registration
Statement.
(j) If any event contemplated by Section 4(b)(ii) through (v) occurs
during the period for which the Partnership and the Corporation are required to
maintain an effective Registration Statement, the Partnership and the
Corporation will promptly prepare and file with the Commission a post-effective
amendment to the Registration Statement or a supplement to the related
prospectus or file any other required document so that, as thereafter delivered
to purchasers of the Debt Securities, Exchange Debt Securities or Private
Exchange Debt Securities from a Holder, the prospectus will not include an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(k) Not later than the effective date of the applicable Registration
Statement, the Partnership and the Corporation will provide a CUSIP number for
the Exchange Debt Securities and the Private Exchange Debt Securities and
provide the trustee with printed certificates for the Exchange Debt Securities
or the Private Exchange Debt Securities in a form eligible for deposit with The
Depository Trust Company and the Corporation.
(l) The Partnership and the Corporation will comply with all applicable
rules and regulations of the Commission and will make generally available to the
Partnership's and the Corporation's security holders as soon as practicable
after the effective date of the applicable Registration Statement an earning
statement satisfying the provisions of Section 11(a) of the Securities Act;
provided that in no event shall such earning statement be delivered later than
45 days after the end of a 12-month period (or 90 days, if such period is a
fiscal year) beginning with the first month of the Partnership's first fiscal
quarter commencing after the effective date of the applicable Registration
Statement, which statement shall cover such 12-month period.
(m) The Partnership and the Corporation will cause the Indenture or the
Exchange Debt Securities Indenture, as the case may be, to be qualified under
the Trust Indenture Act as required by applicable law in a timely manner.
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(n) The Partnership and the Corporation may require each Holder of
Transfer Restricted Debt Securities to be registered pursuant to any Shelf
Registration Statement to furnish to the Partnership and the Corporation such
information concerning the Holder and the distribution of such Transfer
Restricted Debt Securities as the Partnership and the Corporation may from time
to time reasonably require for inclusion in such Shelf Registration Statement,
and the Partnership and the Corporation may exclude from such registration the
Transfer Restricted Debt Securities of any Holder that fails to furnish such
information within a reasonable time after receiving such request.
(o) In the case of a Shelf Registration Statement, each Holder of
Transfer Restricted Debt Securities to be registered pursuant thereto agrees by
acquisition of such Transfer Restricted Debt Securities that, upon receipt of
any notice from the Partnership and the Corporation pursuant to Section 4(b)(ii)
through (v), such Holder will discontinue disposition of such Transfer
Restricted Debt Securities until such Holder's receipt of copies of the
supplemental or amended prospectus contemplated by Section 4(j) or until advised
in writing (the "Advice") by the Partnership or the Corporation that the use of
the applicable prospectus may be resumed. If the Partnership or the Corporation
shall give any notice under Section 4(b)(ii) through (v) during the period that
the Partnership and the Corporation are required to maintain an effective
Registration Statement (the "Effectiveness Period"), such Effectiveness Period
shall be extended by the number of days during such period from and including
the date of the giving of such notice to and including the date when each seller
of Transfer Restricted Debt Securities covered by such Registration Statement
shall have received (x) the copies of the supplemental or amended prospectus
contemplated by Section 4(j) (if an amended or supplemental prospectus is
required) or (y) the Advice (if no amended or supplemental prospectus is
required).
(p) In the case of a Shelf Registration Statement, the Partnership and
the Corporation shall enter into such customary agreements (including, if
requested, an underwriting agreement in customary form) and take all such other
action, if any, as Holders of a majority in aggregate principal amount of the
outstanding Debt Securities, Exchange Debt Securities and Private Exchange Debt
Securities being sold or the managing underwriters (if any) shall reasonably
request in order to facilitate any disposition of Debt Securities, Exchange Debt
Securities or Private Exchange Debt Securities pursuant to such Shelf
Registration Statement.
(q) In the case of a Shelf Registration Statement, the Partnership and
the Corporation shall (i) make reasonably available for inspection by a
representative of, and Special Counsel (as defined below) acting for, Holders of
a majority in aggregate principal amount of the outstanding Debt Securities,
Exchange Debt Securities and Private Exchange Debt Securities being sold and any
underwriter participating in any disposition of Debt Securities, Exchange Debt
Securities or Private Exchange Debt Securities pursuant to such Shelf
Registration Statement, all relevant financial and other records, pertinent
corporate documents and properties of the Partnership and the Corporation and
their subsidiaries and (ii) use their reasonable best efforts to have their
representatives, officers,
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directors, employees, accountants and counsel supply all relevant information
reasonably requested by such representative, Special Counsel or any such
underwriter (an "Inspector") in connection with such Shelf Registration
Statement; provided, however, that any information that is designated by the
Partnership and the Corporation as confidential shall be kept confidential by
the Holders or any such Inspector, unless such disclosure is made in connection
with a court proceeding or required law or is disclosed upon request or demand
of any regulatory authority having jurisdiction over such Holder or Inspector,
or such information becomes available to the public generally or through a third
party without an accompanying obligation of confidentiality.
(r) In the case of a Shelf Registration Statement, the Partnership and
the Corporation shall, if requested by Holders of a majority in aggregate
principal amount of the Debt Securities, Exchange Debt Securities and Private
Exchange Debt Securities being sold, their Special Counsel or the managing
underwriters (if any) in connection with such Shelf Registration Statement, use
their reasonable best efforts to cause (i) their counsel to deliver an opinion
relating to the Shelf Registration Statement and the Debt Securities, Exchange
Debt Securities or Private Exchange Debt Securities, as applicable, in customary
form consistent with opinions rendered in the initial offering of the Debt
Securities, (ii) their representatives and officers to execute and deliver all
customary documents and certificates requested by Holders of a majority in
aggregate principal amount of the Debt Securities, Exchange Debt Securities and
Private Exchange Debt Securities being sold, their Special Counsel or the
managing underwriters (if any) and (iii) their independent public accountants to
provide a comfort letter or letters in customary form, subject to receipt of
appropriate documentation as contemplated, and only if permitted, by Statement
of Auditing Standards No. 72.
5. Registration Expenses. The Partnership and the Corporation will bear all
expenses incurred in connection with the performance of their obligations under
Sections 1, 2, 3 and 4 and the Partnership and the Corporation will reimburse
the Initial Purchasers and the Holders for the reasonable fees and disbursements
of one firm of attorneys (in addition to any local counsel) chosen by the
Holders of a majority in aggregate principal amount of the Debt Securities,
Exchange Debt Securities and Private Exchange Debt Securities to be sold
pursuant to each Registration Statement (the "Special Counsel") acting for the
Initial Purchasers or Holders in connection therewith.
6. Indemnification. (a) In the event of a Shelf Registration Statement or
in connection with any prospectus delivery pursuant to an Exchange Offer
Registration Statement by an Initial Purchaser or Exchanging Dealer, as
applicable, the Partnership and the Corporation shall, jointly and severally,
indemnify and hold harmless each Holder (including, without limitation, any such
Initial Purchaser or Exchanging Dealer), its affiliates, their respective
officers, directors, employees, representatives and agents, and each person, if
any, who controls such Holder within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 6 and
Section 7 as a Holder) from and against any loss, claim, damage or liability,
joint or several, or any action in respect thereof (including, without
limitation, any loss, claim, damage, liability or action relating to purchases
and sales of Debt Securities, Exchange Debt Securities or Private Exchange Debt
Securities), to which that Holder may become subject, whether commenced or
threatened, under the Securities Act, the Exchange Act, any other federal or
state statutory law or regulation, at common law or otherwise, insofar as such
loss, claim, damage, liability or action arises out of, or is based upon, (i)
any untrue statement or alleged untrue statement of a material fact contained in
any such Registration Statement or
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<PAGE>
any prospectus forming part thereof or in any amendment or supplement thereto or
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading, and
shall reimburse each Holder promptly upon demand for any legal or other expenses
reasonably incurred by that Holder in connection with investigating or defending
or preparing to defend against or appearing as a third party witness in
connection with any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the Partnership and the
Corporation shall not be liable in any such case to the extent that any such
loss, claim, damage, liability or action arises out of, or is based upon, an
untrue statement or alleged untrue statement in or omission or alleged omission
from any of such documents in reliance upon and in conformity with any Holders'
Information; and provided, further, that with respect to any such untrue
statement in or omission from any related preliminary prospectus, the indemnity
agreement contained in this Section 6(a) shall not inure to the benefit of any
Holder from whom the person asserting any such loss, claim, damage, liability or
action received Debt Securities, Exchange Debt Securities or Private Exchange
Debt Securities to the extent that such loss, claim, damage, liability or action
of or with respect to such Holder results from the fact that both (A) a copy of
the final prospectus was not sent or given to such person at or prior to the
written confirmation of the sale of such Debt Securities, Exchange Debt
Securities or Private Exchange Debt Securities to such person and (B) the untrue
statement in or omission from the related preliminary prospectus was corrected
in the final prospectus unless, in either case, such failure to deliver the
final prospectus was a result of non-compliance by the Partnership or the
Corporation with Section 4(d), 4(e), 4(f) or 4(g).
(b) In the event of a Shelf Registration Statement, each Holder shall
indemnify and hold harmless the Partnership and the Corporation, their
affiliates, their respective officers, directors, employees, representatives and
agents, and each person, if any, who controls the Partnership and the
Corporation within the meaning of the Securities Act or the Exchange Act
(collectively referred to for purposes of this Section 6(b) and Section 7 as the
Partnership and the Corporation, respectively), from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof,
to which the Partnership and the Corporation may become subject, whether
commenced or threatened, under the Securities Act, the Exchange Act, any other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in any such Registration Statement or any prospectus forming part
thereof or in any amendment or supplement thereto or (ii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, but in each case only
to the extent that the untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with any
Holders' Information furnished to the Partnership and the Corporation by such
Holder, and shall reimburse the Partnership and the Corporation for any legal or
other expenses reasonably incurred by the Partnership and the Corporation in
connection with investigating or defending or preparing to defend against or
appearing as a third party witness in connection with any such loss, claim,
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<PAGE>
damage, liability or action as such expenses are incurred; provided, however,
that no such Holder shall be liable for any indemnity claims hereunder in excess
of the amount of net proceeds received by such Holder from the sale of Debt
Securities, Exchange Debt Securities or Private Exchange Debt Securities
pursuant to such Shelf Registration Statement.
(c) Promptly after receipt by an indemnified party under this Section 6
of notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party pursuant to Section 6(a) or 6(b), notify the indemnifying party in writing
of the claim or the commencement of that action; provided, however, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have under this Section 6 except to the extent that it has been
materially prejudiced (through the forfeiture of substantive rights or defenses)
by such failure; and provided, further, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may have to
an indemnified party otherwise than under this Section 6. If any such claim or
action shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than the reasonable costs of investigation; provided, however,
that an indemnified party shall have the right to employ its own counsel in any
such action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there may
be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party, (3)
a conflict or potential conflict exists (based upon advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel reasonably satisfactory to the indemnified
party to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 6(a) and 6(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without
14
<PAGE>
the prior written consent of the indemnified party (which consent shall not be
unreasonably withheld), effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
7. Contribution. If the indemnification provided for in Section 6 is
unavailable or insufficient to hold harmless an indemnified party under Section
6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Partnership and the Corporation, which shall be treated
as a single entity for this purpose, from the offering and sale of the Debt
Securities, on the one hand, and a Holder with respect to the sale by such
Holder of Debt Securities, Exchange Debt Securities or Private Exchange Debt
Securities, on the other, or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Partnership and the Corporation on the one hand and
such Holder on the other with respect to the statements or omissions that
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations. The relative benefits
received by the Partnership and the Corporation on the one hand and a Holder on
the other with respect to such offering and such sale shall be deemed to be in
the same proportion as the total net proceeds from the offering of the Debt
Securities (before deducting expenses) received by or on behalf of the
Partnership and the Corporation as set forth in the table on the cover of the
Offering Memorandum, on the one hand, bear to the total proceeds received by
such Holder with respect to its sale of Debt Securities, Private Exchange Debt
Securities or Exchange Debt Securities, on the other. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to the Partnership and the Corporation or information
supplied by the Partnership and the Corporation on the one hand or to any
Holders' Information supplied by such Holder on the other, the intent of the
parties and their relative knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The parties hereto agree
that it would not be just and equitable if contributions pursuant to this
Section 7 were to be determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable considerations referred
to herein. The amount paid or payable by an indemnified party as a result of the
loss, claim, damage or liability, or action in respect thereof, referred to
above in this Section 7 shall be deemed to include, for purposes of this Section
7, any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending or preparing to defend any such
action or claim. Notwithstanding the provisions of this Section 7, an
indemnifying party that is a Holder shall not be required to contribute any
amount in excess of the amount by which the total price at which the Debt
Securities, Exchange Debt Securities or Private Exchange Debt Securities sold by
such indemnifying party to any purchaser exceeds the amount of any damages which
such indemnifying party has otherwise paid or become liable to pay by reason of
any untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent
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misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
8. Rules 144 and 144A. The Partnership and the Corporation shall use their
reasonable best efforts to file the reports required to be filed by them under
the Securities Act and the Exchange Act in a timely manner and, if at any time
the Partnership and the Corporation are not required to file such reports, they
will, upon the written request of any Holder of Transfer Restricted Debt
Securities, make publicly available other information so long as necessary to
permit sales of such Holder's Debt Securities pursuant to Rules 144 and 144A.
The Partnership and the Corporation covenant that they will take such further
action as any Holder of Transfer Restricted Debt Securities may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Transfer Restricted Debt Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rules 144 and
144A (including, without limitation, the requirements of Rule 144A(d)(4)). Upon
the written request of any Holder of Transfer Restricted Debt Securities, the
Partnership and the Corporation shall deliver to such Holder a written statement
as to whether they have complied with such requirements. Notwithstanding the
foregoing, nothing in this Section 8 shall be deemed to require the Partnership
and the Corporation to register any of the Partnership's and the Corporation's
Debt Securities pursuant to the Exchange Act.
9. Underwritten Registrations. If any of the Transfer Restricted Debt
Securities covered by any Shelf Registration Statement are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders of
a majority in aggregate principal amount of such Transfer Restricted Debt
Securities included in such offering, subject to the consent of the Partnership
and the Corporation (which shall not be unreasonably withheld or delayed), and
such Holders shall be responsible for all underwriting commissions and discounts
in connection therewith.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted Debt
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
10. Miscellaneous. (a) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, unless the
Partnership and the Corporation have obtained the written consent of Holders of
a majority in aggregate principal amount of outstanding Debt Securities,
Exchange Debt Securities and Private Exchange Debt Securities of all series,
taken as a single class. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders whose Debt Securities, Exchange Debt
Securities or Private Exchange Debt Securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of a majority in aggregate
principal amount of the outstanding Debt Securities, Exchange Debt Securities
and Private Exchange Debt Securities whose rights are so affected.
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(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier or air courier guaranteeing next-day delivery:
(1) if to a Holder, at the most current address given by such
Holder to the Partnership and the Corporation in accordance with the
provisions of this Section 10(b), which address initially is, with
respect to each Holder, the address of such Holder maintained by the
Registrar under the Indenture, with a copy in like manner to Chase
Securities Inc. and NationsBanc Montgomery Securities LLC.
(2) if to an Initial Purchaser, initially at its address set
forth in the Purchase Agreement; and
(3) if to the Partnership or the Corporation, initially at the
address of the Partnership set forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; one business day
after being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) Successors And Assigns. This Agreement shall be binding upon the
Partnership and the Corporation and their respective successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopier) and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(e) Definition of Terms. For purposes of this Agreement, (a) the term
"business day" means any day on which the New York Stock Exchange, Inc. is open
for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405
under the Securities Act and (c) except where otherwise expressly provided, the
term "affiliate" has the meaning set forth in Rule 405 under the Securities Act.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
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(h) Remedies. In the event of a breach by the Partnership or the
Corporation or by any Holder of any of their obligations under this Agreement,
each Holder or the Partnership and the Corporation, as the case may be, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages (other than the recovery of damages for a breach by the
Partnership and the Corporation of its or their obligations under Sections 1 or
2 hereof for which Additional Interest has been paid pursuant to Section 3
hereof), will be entitled to specific performance of its or their rights under
this Agreement. The Partnership and the Corporation and each Holder agree that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it or them of any of the provisions of this Agreement and
hereby further agree that, in the event of any action for specific performance
in respect of such breach, it shall waive the defense that a remedy at law would
be adequate.
(i) No Inconsistent Agreements. Each of the Partnership and the
Corporation represents, warrants and agrees that (i) it has not entered into,
and shall not, on or after the date of this Agreement, enter into any agreement
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof, (ii) it has not previously
entered into any agreement which remains in effect granting any registration
rights with respect to any of its debt securities to any person and (iii)
without limiting the generality of the foregoing, without the written consent of
the Holders of a majority in aggregate principal amount of the then outstanding
Transfer Restricted Debt Securities, it shall not grant to any person the right
to request the Partnership or the Corporation to register any debt securities
under the Securities Act unless the rights so granted are not in conflict or
inconsistent with the provisions of this Agreement.
(j) No Piggyback on Registrations. Neither the Partnership, the
Corporation nor any of their security holders (other than the Holders of
Transfer Restricted Debt Securities in such capacity) shall have the right to
include any securities of the Partnership or the Corporation in any Shelf
Registration or Registered Exchange Offer other than Transfer Restricted Debt
Securities.
(k) Severability. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
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Please confirm that the foregoing correctly sets forth the agreement
among the Partnership, the Corporation and the Initial Purchasers.
Very truly yours,
EQUISTAR CHEMICALS, LP
By /s/ Gerald A. O'Brien
-----------------------------
Name: Gerald A. O'Brien
Title: Vice President and General Counsel
EQUISTAR FUNDING CORPORATION
By /s/ Gerald A. O'Brien
-----------------------------
Name: Gerald A. O'Brien
Title: Vice President and General Counsel
Accepted:
CHASE SECURITIES INC., for themselves and the
other Initial Purchasers (except NationsBanc Montgomery Securities LLC)
By /s/ Paul L. Hatton
--------------------------------
Authorized Signatory
NATIONSBANC MONTGOMERY SECURITIES LLC, for themselves and the
other Initial Purchasers (except Chase Securities Inc.)
By /s/ Andrew McCarthy
--------------------------------
Authorized Signatory
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ANNEX A
Each broker-dealer that receives Exchange Debt Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Debt
Securities. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of Exchange Debt Securities received in
exchange for Debt Securities where such Debt Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Partnership and the Corporation have agreed that, for a period
of 180 days after the Expiration Date (as defined herein), they will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution"
A-1
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ANNEX B
Each broker-dealer that receives Exchange Debt Securities for its own
account in exchange for Debt Securities, where such Debt Securities were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Debt Securities. See "Plan of
Distribution".
B-1
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Debt Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Debt
Securities. This Prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales of Exchange Debt
Securities received in exchange for Debt Securities where such Debt Securities
were acquired as a result of market-making activities or other trading
activities. The Partnership and the Corporation have agreed that, for a period
of 180 days after the Expiration Date, they will make this prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale. In addition, until _______________, 199__, all dealers
effecting transactions in the Exchange Debt Securities may be required to
deliver a prospectus.
The Partnership and the Corporation will not receive any proceeds from
any sale of Exchange Debt Securities by broker-dealers. Exchange Debt
Securities received by broker-dealers for their own account pursuant to the
Registered Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the Exchange Debt Securities or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer or the purchasers of any such Exchange Debt Securities. Any
broker-dealer that resells Exchange Debt Securities that were received by it for
its own account pursuant to the Registered Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Debt Securities may
be deemed to be an "underwriter" within the meaning of the Securities Act and
any profit on any such resale of Exchange Debt Securities and any commission or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that,
by acknowledging that it will deliver and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Partnership and
the Corporation will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Partnership and the
Corporation have agreed to pay all expenses incident to the Registered Exchange
Offer (including the expenses of one counsel for the holders of the Debt
Securities) other than commissions or concessions of any broker-dealers and will
indemnify the holders of the Debt Securities (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
C-1
<PAGE>
ANNEX D
o CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
--------------------------------------------------------------------
Address:
--------------------------------------------------------------------
--------------------------------------------------------------------
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Debt Securities. If the undersigned is a broker-dealer that will receive
Exchange Debt Securities for its own account in exchange for Debt Securities
that were acquired as a result of market-making activities or other trading
activities, it acknowledges that it will deliver a prospectus in connection with
any resale of such Exchange Debt Securities; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
D-1
<PAGE>
EXHIBIT 4.2
EQUISTAR CHEMICALS, LP
EQUISTAR FUNDING CORPORATION
as Issuers
and
THE BANK OF NEW YORK
as Trustee
Indenture
Dated as of January 15, 1999
<PAGE>
EQUISTAR CHEMICALS, LP
EQUISTAR FUNDING CORPORATION
Reconciliation and tie between Trust Indenture Act of 1939
and Indenture, dated as of January 15, 1999
Section of Section(s) of
Trust Indenture Act of 1939 Indenture
- ---------------- ------------------ -----------------
(S) 310 (a)(1)..............................7.10
(a)(2)..............................7.10
(a)(3)....................Not Applicable
(a)(4)....................Not Applicable
(a)(5)..............................7.10
(b)...........................7.08, 7.10
(S) 311 (a).................................7.11
(b).................................7.11
(c).......................Not Applicable
(S) 312 (a).................................2.07
(b)................................10.03
(c)................................10.03
(S) 313 (a).................................7.06
(b).................................7.06
(c).................................7.06
(d).................................7.06
(S) 314 (a)...........................4.03, 4.04
(b).......................Not Applicable
(c)(1).............................10.04
(c)(2).............................10.04
(c)(3)....................Not Applicable
(d).......................Not Applicable
(e)................................10.05
(S) 315 (a)..............................7.01(b)
(b).................................7.05
(c)..............................7.01(a)
(d)..............................7.01(c)
(d)(1)........................7.01(c)(1)
(d)(2)........................7.01(c)(2)
(d)(3)........................7.01(c)(3)
(e).................................6.11
(S) 316 (a)(1)(A)...........................6.05
(a)(1)(B)...........................6.04
(a)(2)....................Not Applicable
i
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(a)(last sentence)................2.11
(b)...............................6.07
(S) 317 (a)(1)............................6.08
(a)(2)............................6.09
(b)...............................2.06
(S) 318 (a)..............................10.01
____________
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.
ii
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE............. 1
SECTION 1.01 Definitions............................................ 1
SECTION 1.02 Other Definitions...................................... 7
SECTION 1.03 Incorporation by Reference of Trust Indenture Act...... 7
SECTION 1.04 Rules of Construction.................................. 8
ARTICLE II THE SECURITIES......................................... 8
SECTION 2.01 Amount Unlimited; Issuable in Series................... 8
SECTION 2.02 Denominations.......................................... 11
SECTION 2.03 Forms Generally........................................ 11
SECTION 2.04 Execution, Authentication, Delivery and Dating......... 12
SECTION 2.05 Registrar and Paying Agent............................. 14
SECTION 2.06 Paying Agent to Hold Money in Trust.................... 14
SECTION 2.07 Holder Lists........................................... 15
SECTION 2.08 Transfer and Exchange.................................. 15
SECTION 2.09 Replacement Securities................................. 16
SECTION 2.10 Outstanding Securities................................. 16
SECTION 2.11 Original Issue Discount, Foreign-Denominated and
Treasury Securities................................... 17
SECTION 2.12 Temporary Securities................................... 17
SECTION 2.13 Cancellation........................................... 17
SECTION 2.14 Payments; Defaulted Interest........................... 18
SECTION 2.15 Persons Deemed Owners.................................. 18
SECTION 2.16 Computation of Interest................................ 18
SECTION 2.17 Global Securities; Book-Entry Provisions............... 18
ARTICLE III REDEMPTION............................................. 21
SECTION 3.01 Applicability of Article............................... 21
SECTION 3.02 Notice to the Trustee.................................. 21
SECTION 3.03 Selection of Securities To Be Redeemed................. 21
SECTION 3.04 Notice of Redemption................................... 22
SECTION 3.05 Effect of Notice of Redemption......................... 22
SECTION 3.06 Deposit of Redemption Price............................ 23
SECTION 3.07 Securities Redeemed or Purchased in Part............... 23
SECTION 3.08 Purchase of Securities................................. 23
SECTION 3.09 Mandatory and Optional Sinking Funds................... 24
SECTION 3.10 Satisfaction of Sinking Fund Payments with Securities.. 24
SECTION 3.11 Redemption of Securities for Sinking Fund.............. 24
i
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ARTICLE IV COVENANTS.............................................. 25
SECTION 4.01 Payment of Securities.................................. 25
SECTION 4.02 Maintenance of Office or Agency........................ 25
SECTION 4.03 SEC Reports; Financial Statements ..................... 26
SECTION 4.04 Compliance Certificate................................. 26
SECTION 4.05 Corporate Existence.................................... 27
SECTION 4.06 Waiver of Stay, Extension or Usury Laws................ 27
SECTION 4.07 Additional Amounts..................................... 28
SECTION 4.08 Limitation on Liens.................................... 28
SECTION 4.09 Limitation on Sale and Lease-Back Transactions......... 30
ARTICLE V............................................................ 30
SECTION 5.01 Consolidation, Merger and Sale of Assets............... 30
SECTION 5.02 Successor Person Substituted........................... 31
ARTICLE VI DEFAULTS AND REMEDIES.................................. 31
SECTION 6.01 Events of Default...................................... 31
SECTION 6.02 Acceleration........................................... 34
SECTION 6.03 Other Remedies......................................... 34
SECTION 6.04 Waiver of Existing or Past Defaults.................... 34
SECTION 6.05 Control by Majority.................................... 35
SECTION 6.06 Limitations on Suits................................... 35
SECTION 6.07 Rights of Holders to Receive Payment................... 36
SECTION 6.08 Collection Suit by Trustee............................. 36
SECTION 6.09 Trustee May File Proofs of Claim....................... 36
SECTION 6.10 Priorities............................................. 37
SECTION 6.11 Undertaking for Costs.................................. 38
ARTICLE VII TRUSTEE................................................ 38
SECTION 7.01 Other Definitions...................................... 38
SECTION 7.02 Rights of Trustee...................................... 39
SECTION 7.03 May Hold Securities.................................... 40
SECTION 7.04 Trustees Disclaimer.................................... 41
SECTION 7.05 Notice of Defaults..................................... 41
SECTION 7.06 Reports by Trustee to Holders.......................... 41
SECTION 7.07 Compensation and Indemnity............................. 41
SECTION 7.08 Replacement of Trustee................................. 42
SECTION 7.09 Successor Trustee by Merger, etc....................... 44
SECTION 7.10 Eligibility; Disqualification.......................... 44
SECTION 7.11 Preferential Collection of Claims Against Issuers...... 45
ii
<PAGE>
ARTICLE VIII DISCHARGE OF INDENTURE................................. 45
SECTION 8.01 Termination of Issuers Obligations..................... 45
SECTION 8.02 Application of Trust Money............................. 49
SECTION 8.03 Repayment to Issuers................................... 49
SECTION 8.04 Reinstatement.......................................... 50
ARTICLE IX SUPPLEMENTAL INDENTURES AND AMENDMENTS................. 50
SECTION 9.01 Without Consent of Holders............................. 50
SECTION 9.02 With Consent of Holders................................ 52
SECTION 9.03 Compliance with Trust Indenture Act.................... 53
SECTION 9.04 Revocation and Effect of Consents...................... 53
SECTION 9.05 Notation on or Exchange of Securities.................. 54
SECTION 9.06 Trustee to Sign Amendments, etc........................ 54
ARTICLE X MISCELLANEOUS.......................................... 55
SECTION 10.01 Trust Indenture Act Controls........................... 55
SECTION 10.02 Notices................................................ 55
SECTION 10.03 Communication by Holders with Other Holders............ 56
SECTION 10.04 Certificate and Opinion as to Conditions Precedent..... 56
SECTION 10.05 Statements Required in Certificate or Opinion.......... 56
SECTION 10.06 Rules by Trustee and Agents............................ 57
SECTION 10.07 Legal Holidays......................................... 57
SECTION 10.08 No Recourse Against Others............................. 57
SECTION 10.09 Governing Law.......................................... 57
SECTION 10.10 No Adverse Interpretation of Other Agreements.......... 58
SECTION 10.11 Successors............................................. 58
SECTION 10.12 Severability........................................... 58
SECTION 10.13 Counterpart Originals.................................. 58
SECTION 10.14 Table of Contents, Headings, etc....................... 58
iii
<PAGE>
INDENTURE dated as of January 15, 1999 among Equistar Chemicals, LP, a
Delaware limited partnership ("Equistar"), Equistar Funding Corporation, a
Delaware corporation ("Equistar Funding" and, together with Equistar, the
"Issuers"), and The Bank of New York, a New York banking corporation, as trustee
(the "Trustee").
Each party agrees as follows for the benefit of the other parties and for
the equal and ratable benefit of the Holders of the Issuers' (i) unsecured
debentures, notes or other evidences of indebtedness (the "Initial Securities")
to be issued from time to time in one or more series as provided in this
Indenture, and, (ii) if and when issued in exchange for Initial Securities,
exchange securities (the "Exchange Securities" and, together with the Initial
Securities, the "Securities" ) as provided in the Registration Rights Agreement
or a similar agreement:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 DEFINITIONS.
"Additional Amounts" means any additional amounts required by the express
terms of a Security or by or pursuant to a Resolution, under circumstances
specified therein or pursuant thereto, to be paid by the Issuers with respect to
certain taxes, assessments or other governmental charges imposed on certain
Holders and that are owing to such Holders.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, such specified Person. For purposes of this definition, "control"
of a Person shall mean the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" shall have meanings correlative to the foregoing.
"Agent" means any Registrar or Paying Agent.
"Bankruptcy Law" means Title 11 of the United States Code or any similar
federal, state or foreign law for the relief of debtors.
"Business Day" means any day that is not a Legal Holiday.
"Consolidated Net Tangible Assets" means the total amount of assets (less
applicable reserves and other properly deductible items) after deducting
therefrom (a) all current liabilities (excluding any thereof which are by their
terms extendible or renewable at the option of the obligor thereon to a time
more than 12 months after the time as of which the amount thereof is being
computed), and (b) all goodwill, trade names, trademarks, patents, purchased
technology, unamortized debt discount and other like intangible assets, all as
set forth on the most recent
1
<PAGE>
quarterly balance sheet of Equistar and computed in accordance with generally
accepted accounting principles.
"Corporate Trust Office" of the Trustee means the principal corporate trust
office of the Trustee located at 101 Barclay Street, New York, New York 10286,
and as may be located at such other address as the Trustee may give notice to
the Issuers.
"Debt" means notes, bonds, Securities or other similar evidences of
indebtedness for money borrowed.
"Default" means any event, act or condition that is, or after notice or the
passage of time or both would be, an Event of Default.
"Depositary" means, with respect to the Securities of any series issuable
or issued in whole or in part in global form, The Depository Trust Company or
the Person specified pursuant to Section 2.01 hereof as the initial Depositary
with respect to the Securities of such series, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and thereafter "Depositary" shall mean or include such successor.
"Dollar" or "$" means a dollar or other equivalent unit in such currency of
the United States as at the time shall be legal tender for the payment of public
and private debt.
"Equistar Funding Board of Directors" means the Board of Directors of
Equistar Funding or any committee thereof duly authorized, with respect to any
particular matter, to act by or on behalf of the Board of Directors of Equistar
Funding.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
any successor statute.
"Funded Debt" means indebtedness of either of the Issuers (including
Securities, provided that Securities may only be redeemed at the redemption
prices and in accordance with the other provisions of the form thereof),
maturing by the terms thereof more than one year after the original creation
thereof and ranking at least pari passu with the Securities.
"GAAP" means generally accepted accounting principles in the United States
set forth in the opinions 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 in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, as in effect from time to time.
"Global Security" means a Security that is issued in global form and
registered in the name of the Depositary with respect thereto or its nominee.
2
<PAGE>
"Government Obligations" means, with respect to a series of Securities,
direct obligations of the government that issues the currency in which the
Securities of the series are payable for the payment of which the full faith and
credit of such government is pledged, or obligations of a person controlled or
supervised by and acting as an agency or instrumentality of such government, the
payment of which is unconditionally guaranteed as a full faith and credit
obligation by such government.
"Holder" means a Person in whose name a Security is registered.
"Indenture" means this Indenture as amended or supplemented from time to
time, and includes the terms of a particular series of Securities established as
contemplated by Section 2.01.
"Interest" means, with respect to an Original Issue Discount Security that
by its terms bears interest only after Maturity, interest payable after
Maturity.
"Interest Payment Date," when used with respect to any Security, shall
have the meaning assigned to such term in the Security as contemplated by
Section 2.01.
"Issue Date" means, with respect to Securities of a series, the date on
which the Securities of such series are originally issued under this Indenture.
"Issuers" means the Persons named as the "Issuers" in the first paragraph
of this instrument until a successor or successors shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Issuers" shall mean such successor and the remaining Issuer or the successors,
as the case may be; provided, however, that for purposes of any provision
contained herein which is required by the TIA, "Issuers" shall also mean each
other obligor (if any) on the Securities of a series.
"Issuers Order" and "Issuers Request" mean, respectively, a written order
or request signed in the name of each of the Issuers by two Officers of each of
the Issuers, and delivered to the Trustee.
"Joint Venture" means (1) with respect to properties located in the United
States, any partnership, corporation or other entity, in which up to and
including 50% of the partnership interests, outstanding voting stock or other
equity interests is owned, directly or indirectly, by either of the Issuers
and/or one or more Subsidiaries, and (2) with respect to properties located
outside the United States, any partnership, corporation or other entity, in
which up to and including 60% of the partnership interests, outstanding voting
stock or other equity interests is owned, directly or indirectly, by either of
the Issuers and/or one or more Subsidiaries. A Joint Venture shall not be a
Subsidiary.
3
<PAGE>
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in any of The City of New York, New York, Houston, Texas or a Place
of Payment are authorized or obligated by law, regulation or executive order to
remain closed.
"Liens" means any mortgages, liens, pledges or other encumbrances.
"Maturity " means, with respect to any Security, the date on which the
principal of such Security or an installment of principal becomes due and
payable as therein or herein provided, whether at the Stated Maturity thereof,
or by declaration of acceleration, call for redemption or otherwise.
"Officer" means the Chief Executive Officer, the President, any Vice
President, the chief financial officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary or any Assistant Secretary of a Person.
"Officers' Certificate" means a certificate signed on behalf of Equistar by
two Officers of Equistar and on behalf of Equistar Funding by two Officers of
Equistar Funding.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. Such counsel may be an employee of or counsel to the
Issuers or the Trustee.
"Original Issue Discount Security" means any Security that provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 6.02.
"Partnership Governance Committee" means the Partnership Governance
Committee of Equistar or any committee thereof duly authorized, with respect to
any particular matter, to act by or on behalf of the Partnership Governance
Committee of Equistar.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof or other entity of any
kind.
"Place of Payment" means, with respect to the Securities of any series,
the place or places where the principal of, premium (if any) on and interest on
the Securities of that series are payable as specified in accordance with
Section 2.01 subject to the provisions of Section 4.02.
"Principal" of a Security means the principal of the Security plus, when
appropriate, the premium, if any, on the Security.
"Redemption Date" means, with respect to any Security to be redeemed, the
date fixed for such redemption pursuant to this Indenture.
4
<PAGE>
"Redemption Price" means, with respect to any Security to be redeemed, the
price at which it is to be redeemed pursuant to this Indenture.
"Registration Rights Agreement" means the Registration Rights Agreement
among the Issuers, Chase Securities Inc. and NationsBanc Montgomery Securities
LLC dated as of February 16, 1999.
"Repayment Date" means, with respect to any Security to be repaid, the date
fixed for such repayment pursuant to this Indenture.
"Resolution" means (i) a copy of a resolution certified by the Secretary or
an Assistant Secretary of Equistar to have been duly adopted by the Partnership
Governance Committee and to be in full force and effect on the date of such
certification, together with (ii) a copy of a resolution certified by the
Secretary or an Assistant Secretary of Equistar Funding to have been duly
adopted by the Equistar Funding Board of Directors and to be in full force and
effect on the date of such certification; and in the case of both of (i) and
(ii), delivered to the Trustee.
"Restricted Property" means:
(a) any plant for the production of petrochemicals owned by Equistar
or a Subsidiary, except (i) related facilities which in the opinion of the
Partnership Governance Committee are transportation or marketing
facilities, and (ii) any plant for the production of petrochemicals which
in the opinion of the Partnership Governance Committee is not a principal
plant of Equistar and its Subsidiaries; and
(b) any shares of capital stock or indebtedness of a Restricted
Subsidiary owned by Equistar or a Subsidiary.
"Restricted Subsidiary" means any Subsidiary which owns any Restricted
Property.
"Rule 144A Securities" means Securities of a series designated pursuant to
Section 2.01 as entitled to the benefits of Section 4.03(b).
"Sale and Lease-Back Transaction" means any arrangement with any Person
(other than Equistar or a Subsidiary), or to which any such Person is a party,
providing for the leasing to Equistar or a Restricted Subsidiary for a period of
more than five years of any Restricted Property which has been or is to be sold
or transferred by Equistar or such Restricted Subsidiary to such Person or to
any other Person (other than Equistar or a Subsidiary), to which funds have been
or are to be advanced by such Person on the security of the leased property.
"SEC" means the Securities and Exchange Commission.
5
<PAGE>
"Securities" has the meaning stated in the preamble of this Indenture and
more particularly means any Securities authenticated and delivered under this
Indenture.
"Security Custodian" means, with respect to Securities of a series, the
Trustee for Securities of such series, as custodian with respect to the
Securities of such series issued in global form, or any successor entity
thereto.
"Stated Maturity" means, when used with respect to any Security or any
installment of principal thereof or interest thereon, the date specified in such
Security as the fixed date on which the principal of such Security or such
installment of principal or interest is due and payable.
"Subsidiary" means any corporation at least a majority of the outstanding
securities of which having ordinary voting power to elect a majority of the
board of directors of such corporation (whether or not any other class of
securities has or might have voting power by reason of the happening of a
contingency) is at the time owned or controlled directly or indirectly by
Equistar or one or more Subsidiaries or by Equistar and one or more
Subsidiaries.
"TIA" means the Trust Indenture Act of 1939, as amended (15 U.S.C. (S)(S)
77aaa-77bbbb), as in effect on the date hereof.
"Trust Officer" means, when used with respect to the Trustee, any officer
within the corporate trust department of the Trustee, including any vice
president, assistant vice president, assistant secretary, assistant treasurer,
trust officer or any other officer of the Trustee who customarily performs
functions similar to those performed by the Persons who at the time shall be
such officers, respectively, or to whom any corporate trust matter is referred
because of such person's knowledge of and familiarity with the particular
subject and who shall have direct responsibility for the administration of this
Indenture.
"Trustee" means the Person, not in its individual capacity but solely as
Trustee, named as such above, until a successor replaces it in accordance with
the applicable provisions of this Indenture, and thereafter "Trustee" means each
Person who is then a Trustee hereunder, and if at any time there is more than
one such Person, "Trustee" as used with respect to the Securities of any series
means the Trustee with respect to Securities of that series.
"United States " means the United States of America (including the States
and the District of Columbia) and its "possessions," which include Puerto Rico,
the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern
Mariana Islands.
"United States Alien" means any Person who, for United States federal
income tax purposes, is a foreign corporation, a nonresident alien individual, a
nonresident alien or foreign fiduciary of an estate or trust, or a foreign
partnership.
6
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"U.S. Government Obligations" means Government Obligations with respect to
Securities payable in Dollars.
"Value" means, with respect to a Sale and Lease-Back Transaction, the
amount equal to the greater of (i) the net proceeds of the sale or transfer of
the property leased pursuant to such Sale and Lease-Back Transaction or (ii) the
fair value, in the opinion of the Partnership Governance Committee, of such
property at the time of entering into such Sale and Lease-Back Transaction, in
either case divided first by the number of full years of the term of the lease
and then multiplied by the number of full years of such term remaining at the
time of determination, without regard to any renewal or extension options
contained in the lease.
SECTION 1.02 OTHER DEFINITIONS
DEFINED TERM IN SECTION
"Bankruptcy Custodian".............................. 6.01
"covenant defeasance"............................... 8.01
"Conversion Event".................................. 6.01
"Event of Default".................................. 6.01
"Equistar"..........................................Preamble
"Equistar Funding"..................................Preamble
"Exchange Securities"...............................Preamble
"Exchange Rate"..................................... 2.11
"Initial Securities"................................Preamble
"Judgment Currency"................................. 6.10
"legal defeasance".................................. 8.01
"mandatory sinking fund payment".................... 3.09
"optional sinking fund payment"..................... 3.09
"Paying Agent"...................................... 2.05
"Registrar"......................................... 2.05
"Required Currency"................................. 6.10
"Successor"......................................... 5.01
SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"Indenture Securities" means the Securities.
7
<PAGE>
"Indenture Security Holder" means a Holder.
"Indenture to be Qualified" means this Indenture.
"Indenture Trustee" or "Institutional Trustee" means the Trustee.
"Obligor" on the indenture securities means the Issuers or any other
obligor on the Securities.
All terms used in this Indenture that are defined by the TIA, defined by a
TIA reference to another statute or defined by an SEC rule under the TIA have
the meanings so assigned to them.
SECTION 1.04 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) all references in this Agreement to Articles and Sections are
references to the corresponding Articles and Sections in and of this
Indenture.
ARTICLE II
THE SECURITIES
SECTION 2.01 AMOUNT UNLIMITED; ISSUABLE IN SERIES.
The aggregate principal amount of Securities that may be authenticated and
delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Resolution, and set forth in an Officers'
Certificate, or established in one or more indentures supplemental hereto, prior
to the issuance of Securities of any series:
8
<PAGE>
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from the Securities of all other
series);
(2) any limit upon the aggregate principal amount of the Securities
of the series that may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Section 2.08, 2.09, 2.12, 3.07 or 9.05);
(3) whether any Securities of the series are to be issuable initially
in temporary global form and whether any Securities of the series are to be
issuable in permanent global form, as Global Securities or otherwise, and,
if so, whether beneficial owners of interests in any such Global Security
may exchange such interests for Securities of such series and of like tenor
of any authorized form and denomination and the circumstances under which
any such exchanges may occur, if other than in the manner provided in
Section 2.17, and the initial Depositary for any Global Security or
Securities of such series, if other than The Depository Trust Company;
(4) the manner in which any interest payable on a temporary Global
Security on any Interest Payment Date will be paid if other than in the
manner provided in Section 2.14;
(5) the date or dates on which the principal of (and premium, if any,
on) the Securities of the series is payable or the method of determination
thereof;
(6) the rate or rates, or the method of determination thereof, at
which the Securities of the series shall bear interest, if any, whether and
under what circumstances Additional Amounts with respect to such Securities
shall be payable, the date or dates from which such interest shall accrue,
the Interest Payment Dates on which such interest shall be payable and the
record date for the interest payable on any Securities on any Interest
Payment Date, or if other than provided herein, the Person to whom any
interest on Securities of the series shall be payable;
(7) the place or places where, subject to the provisions of Section
4.02, the principal, premium (if any), interest and any Additional Amounts
with respect to the Securities of the series shall be payable;
(8) the period or periods within which, the price or prices (whether
denominated in cash, securities or otherwise) at which and the terms and
conditions upon which Securities of the series may be redeemed, in whole or
in part, at the option of the Issuers, if the Issuers are to have that
option, and the manner in which the Issuers must exercise any such option,
if different from those set forth herein;
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(9) the obligation, if any, of the Issuers to redeem, purchase or
repay Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of a Holder thereof and the period or periods
within which, the price or prices (whether denominated in cash, securities
or otherwise) at which and the terms and conditions upon which Securities
of the series shall be redeemed, purchased or repaid in whole or in part
pursuant to such obligation;
(10) if other than denominations of $1,000 and any integral multiple
thereof, the denomination in which any Securities of that series shall be
issuable;
(11) if other than Dollars, the currency or currencies (including
composite currencies) or the form, including equity securities, other debt
securities (including Securities), warrants or any other securities or
property of the Issuers or any other Person, in which payment of the
principal, premium (if any), interest and any Additional Amounts with
respect to the Securities of the series shall be payable;
(12) if the principal of, premium (if any) or interest on or any
Additional Amounts with respect to the Securities of the series are to be
payable, at the election of the Issuers or a Holder thereof, in a currency
or currencies (including composite currencies) other than that in which the
Securities are stated to be payable, the currency or currencies (including
composite currencies) in which payment of the principal, premium (if any),
interest and any Additional Amounts with respect to Securities of such
series as to which such election is made shall be payable, and the periods
within which and the terms and conditions upon which such election is to be
made;
(13) if the amount of payments of principal, premium (if any),
interest and any Additional Amounts with respect to the Securities of the
series may be determined with reference to any commodities, currencies or
indices, values, rates or prices or any other index or formula, the manner
in which such amounts shall be determined;
(14) if other than the entire principal amount thereof, the portion of
the principal amount of Securities of the series that shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section
6.02;
(15) any additional means of satisfaction and discharge of this
Indenture and any additional conditions or limitations to discharge with
respect to Securities of the series pursuant to Article VIII or any
modifications of or deletions from such conditions or limitations;
(16) any deletions or modifications of or additions to the Events of
Default set forth in Section 6.01 or covenants of the Issuers set forth in
Article IV pertaining to the Securities of the series;
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(17) any restrictions or other provisions with respect to the transfer
or exchange of Securities of the series, which may amend, supplement,
modify or supersede those contained in this Article II;
(18) if the Securities of the series are to be convertible into or
exchangeable for capital stock, other debt securities (including
Securities), warrants, other equity securities or any other securities or
property of the Issuers or any other Person, at the option of the Issuers
or the Holder or upon the occurrence of any condition or event, the terms
and conditions for such conversion or exchange;
(19) if the Securities of the series are to be entitled to the benefit
of Section 4.03(b) (and accordingly constitute Rule 144A Securities); and
(20) any other terms of the series (which terms shall not be
prohibited by the provisions of this Indenture).
All Securities of any one series shall be substantially identical except as
to denomination and except as may otherwise be provided in or pursuant to the
Resolution referred to and (subject to Section 2.03) set forth, or determined in
the manner provided, in the Officers' Certificate referred to or in any such
indenture supplemental hereto.
If any of the terms of the series are established by action taken pursuant
to a Resolution, a copy of an appropriate record of such actions together with
such Resolution shall be set forth in an Officers' Certificate or certified in
the case of each Issuer by the Secretary or an Assistant Secretary of such
Issuer and delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
SECTION 2.02 DENOMINATIONS.
The Securities of each series shall be issuable in such denominations as
shall be specified as contemplated by Section 2.01. In the absence of any such
provisions with respect to the Securities of any series, the Securities of such
series denominated in Dollars shall be issuable in denominations of $1,000 and
any integral multiples thereof.
SECTION 2.03 FORMS GENERALLY.
The Securities of each series shall be in fully registered form and in
substantially such form or forms (including temporary or permanent global form)
established by or pursuant to a Resolution or in one or more indentures
supplemental hereto. The Securities may have notations, legends or endorsements
required by law, securities exchange rule, Equistar's partnership agreement or
Equistar Funding's certificate of incorporation, bylaws or other similar
governing documents, agreements to which either of the Issuers are subject, if
any, or usage (provided that any such notation, legend or endorsement is in a
form acceptable to the Issuers). A copy of the
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Resolution establishing the form or forms of Securities of any series shall be
delivered to the Trustee at or prior to the delivery of the Issuers Order
contemplated by Section 2.04 for the authentication and delivery of such
Securities.
The definitive Securities of each series shall be printed, lithographed or
engraved on steel engraved borders or may be produced in any other manner, all
as determined by the officers executing such Securities, as evidenced by their
execution thereof.
The Trustee's certificate of authentication shall be in substantially the
following form:
"This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
The Bank of New York, as Trustee
Dated: By:
--------------------------------------
Authorized Signatory".
SECTION 2.04 EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
Two Officers of each of the Issuers shall sign the Securities on behalf of
the Issuers by manual or facsimile signature. The Issuers' seals, if any, shall
be impressed, affixed, imprinted or reproduced on the Securities and may be in
facsimile form.
If an Officer of either of the Issuers whose signature is on a Security no
longer holds that office at the time the Security is authenticated, the Security
shall be valid nevertheless.
A Security shall not be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose until authenticated by the manual signature
of an authorized signatory of the Trustee, which signature shall be conclusive
evidence that the Security has been authenticated under this Indenture.
Notwithstanding the foregoing, if any Security has been authenticated and
delivered hereunder but never issued and sold by the Issuers, and the Issuers
deliver such Security to the Trustee for cancellation as provided in Section
2.13 together with a written statement (which need not comply with Section 10.05
and need not be accompanied by an Opinion of Counsel) stating that such Security
has never been issued and sold by the Issuers, for all purposes of this
Indenture such Security shall be deemed never to have been authenticated and
delivered hereunder and shall never be entitled to the benefits of this
Indenture.
The Trustee shall authenticate and deliver Securities of a series for
original issue upon an Issuers Order for the authentication and delivery of such
Securities or pursuant to such procedures acceptable to the Trustee as may be
specified from time to time by Issuers Order. Such Issuers Order shall specify
the amount of the Securities to be authenticated, the date on
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which the original issue of Securities is to be authenticated, the name or names
of the initial Holder or Holders and any other terms of the Securities of such
series not otherwise determined. If provided for in such procedures, such
Issuers Order may authorize (1) authentication and delivery of Securities of
such series for original issue from time to time, with certain terms (including,
without limitation, the Maturity dates or dates, original issue date or dates
and interest rate or rates) that differ from Security to Security and (2)
authentication and delivery pursuant to oral or electronic instructions from the
Issuers or their duly authorized agent, which instructions shall be promptly
confirmed in writing.
If the form or terms of the Securities of the series have been established
in or pursuant to one or more Resolutions as permitted by Section 2.01, in
authenticating such Securities, and accepting the additional responsibilities
under this Indenture in relation to such Securities, the Trustee shall be
entitled to receive (in addition to the Issuers Order referred to above and the
other documents required by Section 10.04), and (subject to Section 7.01) shall
be fully protected in relying upon:
(a) an Officers' Certificate setting forth the Resolution and, if
applicable, an appropriate record of any action taken pursuant thereto, as
contemplated by the last paragraph of Section 2.01; and
(b) an Opinion of Counsel to the effect that:
(i) if the form of such Securities has been established by or
pursuant to a Resolution, as is permitted by Section 2.01, that such
form has been established in conformity with the provisions of this
Indenture;
(ii) if the terms of such Securities have been established by or
pursuant to a Resolution, as is permitted by Section 2.01, that such
terms have been established in conformity with the provisions of this
Indenture; and
(iii) that such Securities, when authenticated and delivered by
the Trustee and issued by the Issuers in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid
and binding obligations of the Issuers, enforceable against the
Issuers in accordance with their terms, except as the enforceability
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar
laws in effect from time to time affecting the rights of creditors
generally, and the application of general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
The Trustee shall not be required to authenticate such Securities if the
issuance of such Securities pursuant to this Indenture would affect the
Trustee's own rights, duties or immunities
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under the Securities and this Indenture or otherwise in a manner not reasonably
acceptable to the Trustee.
The Trustee may appoint an authenticating agent acceptable to the Issuers
to authenticate Securities. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Securities whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with the Issuers or an Affiliate of the Issuers.
Each Security shall be dated the date of its authentication.
SECTION 2.05 REGISTRAR AND PAYING AGENT.
The Issuers shall maintain an office or agency and may designate additional
offices or agencies for each series of Securities where Securities of such
series may be presented for registration of transfer or exchange ("Registrar")
and an office or agency where Securities of such series may be presented for
payment ("Paying Agent"). The Registrar shall keep a register of the Securities
of such series and of their transfer and exchange. The Issuers may appoint one
or more co-registrars and one or more additional paying agents. The term
"Registrar" includes any co-registrar and the term "Paying Agent" includes any
additional paying agent.
The Issuers shall enter into an appropriate agency agreement with any
Registrar or Paying Agent not a party to this Indenture. The agreement shall
implement the provisions of this Indenture that relate to such Agent. The
Issuers shall notify the Trustee of the name and address of any Agent not a
party to this Indenture. The Issuers may change any Paying Agent or Registrar
without notice to any Holder. If the Issuers fail to appoint or maintain
another entity as Registrar or Paying Agent, the Trustee shall act as such.
Either of the Issuers or any of Equistar's Subsidiaries may act as Paying Agent
or Registrar.
The Issuers initially appoint the Trustee as Registrar and Paying Agent.
SECTION 2.06 PAYING AGENT TO HOLD MONEY IN TRUST.
The Issuers shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the benefit of Holders
or the Trustee all money held by the Paying Agent for the payment of principal
of, premium, if any, or interest on or any Additional Amounts with respect to
Securities and will notify the Trustee of any default by the Issuers in making
any such payment. While any such default continues, the Trustee may require a
Paying Agent to pay all money held by it to the Trustee and to account for any
funds disbursed. The Issuers at any time may require a Paying Agent to pay all
money held by it to the Trustee and to account for any funds disbursed. Upon
payment over to the Trustee and upon accounting for any funds disbursed, the
Paying Agent (if other than either of the Issuers or a Subsidiary of Equistar)
shall have no further liability for the money. If either of the Issuers or a
Subsidiary of Equistar
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acts as Paying Agent, it shall segregate and hold in a separate trust fund for
the benefit of the Holders all money held by it as Paying Agent. Each Paying
Agent shall otherwise comply with TIA (S) 317(b).
SECTION 2.07 HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is not
the Registrar with respect to a series of Securities, the Issuers shall furnish
to the Trustee at least five Business Days before each Interest Payment Date
with respect to such series of Securities, and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Holders of such
series, and the Issuers shall otherwise comply with TIA (S) 312(a).
SECTION 2.08 TRANSFER AND EXCHANGE.
Except as set forth in Section 2.17 or as may be provided pursuant to
Section 2.01: When Securities of any series are presented to the Registrar with
the request to register the transfer of such Securities or to exchange such
Securities for an equal principal amount of Securities of the same series of
like tenor and of other authorized denominations, the Registrar shall register
the transfer or make the exchange as requested if is satisfied with the evidence
of ownership and identity of the Person making the request and if its other
requirements for such transactions are met; provided, however, that the
Securities presented or surrendered for registration of transfer or exchange
shall be duly endorsed or accompanied by a written instruction of transfer in
form reasonably satisfactory to the Registrar duly executed by the Holder
thereof or by his attorney, duly authorized in writing, on which instruction the
Registrar can rely.
To permit registrations of transfers and exchanges, the Issuers shall
execute and the Trustee shall authenticate Securities at the Issuers' written
request and submission of the Securities or Global Securities. No service
charge shall be made to a Holder for any registration of transfer or exchange
(except as otherwise expressly permitted herein), but the Issuers may require
payment of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than such transfer tax or similar
governmental charge payable upon exchanges pursuant to Section 2.12, 3.07 or
9.05). The Trustee shall authenticate Securities in accordance with the
provisions of Section 2.04. Notwithstanding any other provisions of this
Indenture to the contrary, in the event of any redemption in whole or in part,
the Issuers will not be required (i) to register the transfer of or exchange
Securities of any series during a period beginning at the opening of business 15
days before any selection of Securities of that series to be redeemed and ending
at the close of business on the date the relevant notice of redemption is
mailed, (ii) to register the transfer of or exchange any Security or portion
thereof called for redemption, except the unredeemed portion, if any, of a
Security being redeemed in part or (iii) to register the transfer of or exchange
any Security that has been surrendered for
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repayment at the option of the holder, except the portion, if any, of such
Security not to be so repaid.
The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture, a Resolution, any indenture supplemental hereto or under applicable
law with respect to any transfer of any interest in any Security (including any
transfers between or among Agent Members (as hereinafter defined) or beneficial
owners of interests in any Global Security) other than to require delivery of
such certificates and other documentation or evidence as are expressly required
by, and to do so if and when expressly required by the terms of, this Indenture,
a Resolution, or any indenture supplemental hereto and to examine the same to
determine substantial compliance as to form with the express requirements
hereof.
SECTION 2.09 REPLACEMENT SECURITIES.
If any mutilated Security is surrendered to the Trustee, or if the Holder
of a Security claims that the Security has been destroyed, lost or stolen and
the Issuers and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of such Security, the Issuers shall issue and the
Trustee shall authenticate a replacement Security of the same series if the
Trustee's requirements are met. If any such mutilated, destroyed, lost or
stolen Security has become or is to become due and payable, the Issuers in their
discretion may, instead of issuing a new Security, pay such Security. If
required by the Trustee or the Issuers, such Holder must furnish an indemnity
bond that is sufficient in the judgment of the Trustee and the Issuers to
protect the Issuers, the Trustee, any Agent or any authenticating agent from any
loss that any of them may suffer if a Security is replaced. The Issuers and the
Trustee may charge a Holder for their expenses in replacing a Security.
Every replacement Security is an additional obligation of the Issuers.
SECTION 2.10 OUTSTANDING SECURITIES.
The Securities outstanding at any time are all the Securities authenticated
by the Trustee except for those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Security effected by
the Trustee hereunder and those described in this Section 2.10 as not
outstanding.
If a Security is replaced pursuant to Section 2.09, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the principal amount of any Security is considered paid under Section
4.01, it ceases to be outstanding and interest on it ceases to accrue.
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A Security does not cease to be outstanding because the Issuers or an
Affiliate of the Issuers holds the Security.
SECTION 2.11 ORIGINAL ISSUE DISCOUNT, FOREIGN-DENOMINATED AND TREASURY
SECURITIES.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, amendment, supplement, waiver or
consent, (a) the principal amount of an Original Issue Discount Security shall
be the principal amount thereof that would be due and payable as of the date of
such determination upon acceleration of the Maturity thereof pursuant to Section
6.02, (b) the principal amount of a Security denominated in a foreign currency
shall be the Dollar equivalent, as determined by the Issuers by reference to the
noon buying rate in The City of New York for cable transfers for such currency,
as such rate is certified for customs purposes by the Federal Reserve Bank of
New York (the "Exchange Rate") on the date of original issuance of such
Security, of the principal amount (or, in the case of an Original Issue Discount
Security, the Dollar equivalent, as determined by the Issuers by reference to
the Exchange Rate on the date of original issuance of such Security, of the
amount determined as provided in (a) above), of such Security and (c) Securities
owned by the Issuers or any other obligor upon the Securities or any Affiliate
of the Issuers or of such other obligor shall be disregarded, except that, for
the purpose of determining whether the Trustee shall be protected in relying
upon any such direction, amendment, supplement, waiver or consent, only
Securities that the Trustee actually knows are so owned shall be so disregarded.
SECTION 2.12 TEMPORARY SECURITIES.
Until definitive Securities of any series are ready for delivery, the
Issuers may prepare and the Trustee shall authenticate temporary Securities.
Temporary Securities shall be substantially in the form of definitive
Securities, but may have variations that the Issuers consider appropriate for
temporary Securities. Without unreasonable delay, the Issuers shall prepare and
the Trustee shall authenticate definitive Securities in exchange for temporary
Securities. Until so exchanged, the temporary Securities shall in all respects
be entitled to the same benefits under this Indenture as definitive Securities.
SECTION 2.13 CANCELLATION.
The Issuers at any time may deliver Securities to the Trustee for cancellation.
The Registrar and the Paying Agent shall forward to the Trustee any Securities
surrendered to them for registration of transfer, exchange, payment or
redemption or for credit against any sinking fund payment. The Trustee shall
cancel all Securities surrendered for registration of transfer, exchange,
payment, redemption, replacement or cancellation or for credit against any
sinking fund. Unless the Issuers shall direct in writing that canceled
Securities be returned to them, after written notice to the Issuers all canceled
Securities held by the Trustee shall be disposed of in accordance with the usual
disposal procedures of the Trustee, and the Trustee shall maintain a record of
their
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disposal. The Issuers may not issue new Securities to replace Securities that
have been paid or that have been delivered to the Trustee for cancellation.
SECTION 2.14 PAYMENTS; DEFAULTED INTEREST.
The Issuers will pay interest on the Securities (except defaulted interest)
to the Persons who are registered Holders of Securities at the close of business
on the record date next preceding the Interest Payment Date, even if such
Securities are canceled after such record date and on or before such Interest
Payment Date. The Holder must surrender this Security to a Paying Agent to
collect principal payments. Unless otherwise provided with respect to the
Securities of any series, the Issuers will pay the principal of, premium (if
any) and interest on and Additional Amounts with respect to the Securities in
Dollars.
If the Issuers default in a payment of interest on the Securities, they
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest on the defaulted interest, in each case at the rate provided in
the Securities and in Section 4.01. The Issuers may pay the defaulted interest
to the Persons who are Holders on a subsequent special record date. At least 15
days before any special record date selected by the Issuers, the Issuers (or the
Trustee, in the name of and at the expense of the Issuers upon 20 days' prior
written notice from the Issuers setting forth such record date and the interest
amount to be paid) shall mail to Holders a notice that states the special record
date, the related payment date and the amount of such interest to be paid.
SECTION 2.15 PERSONS DEEMED OWNERS.
The Issuers, the Trustee, any Agent and any authenticating agent may treat
the Person in whose name any Security is registered as the owner of such
Security for the purpose of receiving payments of principal of, premium (if any)
or interest on, or any Additional Amounts with respect to such Security and for
all other purposes. None of the Issuers, the Trustee, any Agent or any
authenticating agent shall be affected by any notice to the contrary.
SECTION 2.16 COMPUTATION OF INTEREST.
Except as otherwise specified as contemplated by Section 2.01 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a year comprising twelve 30-day months.
SECTION 2.17 GLOBAL SECURITIES; BOOK-ENTRY PROVISIONS.
If Securities of a series are issuable in global form as a Global Security,
as contemplated by Section 2.01, then, notwithstanding clause (10) of Section
2.01 and the provisions of Section 2.02, any such Global Security shall
represent such of the outstanding Securities of such series as shall be
specified therein and may provide that it shall represent the aggregate amount
of
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outstanding Securities from time to time endorsed thereon and that the aggregate
amount of outstanding Securities represented thereby may from time to time be
reduced or increased to reflect exchanges or redemptions. Any endorsement of a
Global Security to reflect the amount, or any increase or decrease in the
amount, of outstanding Securities represented thereby shall be made by the
Trustee in such manner and upon instructions given by such Person or Persons as
shall be specified in such Security or in an Issuers Order to be delivered to
the Trustee pursuant to Section 2.04. Subject to the provisions of Section 2.04
and, if applicable, Section 2.12, the Trustee shall deliver and redeliver any
Security in permanent global form in the manner and upon instructions given by
the Person or Persons specified in such Security or in the applicable Issuers
Order. With respect to the Securities of any series that are represented by a
Global Security, the Issuers authorize the execution and delivery by the Trustee
of a letter of representations or other similar agreement or instrument in the
form customarily provided for by the Depositary appointed with respect to such
Global Security. Any Global Security may be deposited with the Depositary or its
nominee, or may remain in the custody of the Trustee pursuant to a FAST Balance
Certificate Agreement or similar agreement between the Trustee and the
Depositary. If an Issuers Order has been, or simultaneously is, delivered, any
instructions by the Issuers with respect to endorsement or delivery or
redelivery of a Security in global form shall be in writing but need not comply
with Section 10.05 and need not be accompanied by an Opinion of Counsel.
Members of, or participants in, the Depositary ("Agent Members") shall have
no rights under this Indenture with respect to any Global Security held on their
behalf by the Depositary, or the Trustee as its custodian, or under such Global
Security and the Depositary may be treated by the Issuers, the Trustee and any
agent of the Issuers or the Trustee as the absolute owner of such Global
Security for all purposes whatsoever. Notwithstanding the foregoing, (i) the
registered holder of a Global Security may grant proxies and otherwise authorize
any Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action that a Holder is entitled to take under this
Indenture or the Securities and (ii) nothing herein shall prevent the Issuers,
the Trustee or any agent of the Issuers or the Trustee, from giving effect to
any written certification, proxy or other authorization furnished by the
Depositary or shall impair, as between the Depositary and its Agent Members, the
operation of customary practices governing the exercise of the rights of a
beneficial owner of any Security. Notwithstanding Section 2.08, and except as
otherwise provided pursuant to Section 2.01 transfers of a Global Security shall
be limited to transfers of such Global Security in whole, but not in part, to
the Depositary, its successors or their respective nominees. Interests of
beneficial owners in a Global Security may be transferred in accordance with the
rules and procedures of the Depositary. Securities shall be transferred to all
beneficial owners in exchange for their beneficial interests in a Global
Security if, and only if, (1) the Issuers notify the Trustee in writing that the
Depositary is no longer willing or able to act as a depositary or if The
Depository Trust Company ceases to be registered as a clearing agency under the
Exchange Act and a successor Depositary is not appointed within 90 days of such
notice or cessation, (2) the Issuers notify the Trustee in writing that they
elect to cause the issuance of Securities in certificated form or (3) an Event
of Default has occurred with respect to such series and is continuing and the
Registrar has received a request from the Depositary to issue Securities in lieu
of all or a portion
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of the Global Security (in which case the Issuers shall deliver Securities
within 30 days of such request).
In connection with any transfer of a portion of the beneficial interest in
a Global Security to beneficial owners pursuant to this Section 2.17, the
Registrar shall reflect on its books and records the date and a decrease in the
principal amount of the Global Security in an amount equal to the principal
amount of the beneficial interest in the Global Security to be transferred, and
the Issuers shall execute, and the Trustee upon receipt of an Issuers Order for
the authentication and delivery of Securities shall authenticate and deliver,
one or more Securities of the same series of like tenor and amount.
In connection with the transfer of an entire Global Security to beneficial
owners pursuant to this Section 2.17, the Global Security shall be deemed to be
surrendered to the Trustee for cancellation, and the Issuers shall execute, and
the Trustee shall authenticate and deliver, to each beneficial owner identified
by the Depositary in exchange for its beneficial interest in the Global
Security, an equal aggregate principal amount of Securities of authorized
denominations.
Neither the Issuers nor the Trustee will have any responsibility or
liability for any aspect of the records relating to, or payments made on account
of, Securities by the Depositary, or for maintaining, supervising or reviewing
any records of the Depositary relating to such Securities. Neither the Issuers
nor the Trustee shall be liable for any delay by the related Global Security
Holder or the Depositary in identifying the beneficial owners, and each such
Person may conclusively rely on, and shall be protected in relying on,
instructions from such Global Security Holder or the Depositary for all purposes
(including with respect to the registration and delivery, and the respective
principal amounts, of the Securities to be issued).
The provisions of the last sentence of the third paragraph of Section 2.04
shall apply to any Global Security if such Global Security was never issued and
sold by the Issuers and the Issuers deliver to the Trustee the Global Security
together with written instructions (which need not comply with Section 10.05 and
need not be accompanied by an Opinion of Counsel) with regard to the
cancellation or reduction in the principal amount of Securities represented
thereby, together with the written statement contemplated by the last sentence
of the third paragraph of Section 2.04.
Notwithstanding the provisions of Sections 2.03 and 2.14, unless otherwise
specified as contemplated by Section 2.01, payment of principal of, premium (if
any) and interest on and any Additional Amounts with respect to any Global
Security shall be made to the Person or Persons specified therein.
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ARTICLE III
REDEMPTION
SECTION 3.01 APPLICABILITY OF ARTICLE.
Securities of any series that are redeemable before their Stated Maturity
shall be redeemable in accordance with their terms and (except as otherwise
specified as contemplated by Section 2.01 for Securities of any series) in
accordance with this Article III.
SECTION 3.02 NOTICE TO THE TRUSTEE.
If the Issuers elect to redeem Securities of any series pursuant to this
Indenture, they shall notify the Trustee of the Redemption Date and principal
amount of Securities of such series to be redeemed. The Issuers shall so notify
the Trustee at least 45 days before the Redemption Date (unless a shorter notice
shall be satisfactory to the Trustee) by delivering to the Trustee an Officers'
Certificate stating that such redemption will comply with the provisions of this
Indenture and of the Securities of such series. Any such notice may be canceled
at any time prior to the mailing of such notice of such redemption to any Holder
and shall thereupon be void and of no effect.
SECTION 3.03 SELECTION OF SECURITIES TO BE REDEEMED.
If less than all the Securities of any series are to be redeemed, the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the outstanding Securities of
such series not previously called for redemption, pro rata, by lot or by such
other method as the Trustee shall deem fair and appropriate and that may provide
for the selection for redemption of portions (equal to the minimum authorized
denomination for Securities of that series or any integral multiple thereof) of
the principal amount of Securities of such series of a denomination larger than
the minimum authorized denomination for Securities of that series or of the
principal amount of global Securities of such series.
The Trustee shall promptly notify the Issuers and the Registrar in writing
of the Securities selected for redemption and, in the case of any Securities
selected for partial redemption, the principal amount thereof to be redeemed.
For purposes of this Indenture, unless the context otherwise requires, all
provisions relating to redemption of Securities shall relate, in the case of any
of the Securities redeemed or to be redeemed only in part, to the portion of the
principal amount thereof which has been or is to be redeemed.
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SECTION 3.04 NOTICE OF REDEMPTION.
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the Redemption Date, to
each Holder of Securities to be redeemed, at the address of such Holder
appearing in the register of Securities maintained by the Registrar.
All notices of redemption shall identify the Securities to be redeemed and
shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) that, unless the Issuers defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the Redemption Date, and the only remaining right of the Holders
of such Securities is to receive payment of the Redemption Price upon
surrender to the Paying Agent of the Securities redeemed;
(4) if any Security is to be redeemed in part, the portion of the
principal amount thereof to be redeemed and that on and after the
Redemption Date, upon surrender for cancellation of such Security to the
Paying Agent, a new Security or Securities in the aggregate principal
amount equal to the unredeemed portion thereof will be issued without
charge to the Holder;
(5) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price and the name and address of
the Paying Agent;
(6) that the redemption is for a sinking or analogous fund, if such
is the case; and
(7) the CUSIP number, if any, relating to such Securities.
Notice of redemption of Securities to be redeemed at the election of the
Issuers shall be given by the Issuers or, at the Issuers' written request, by
the Trustee in the name and at the expense of the Issuers.
SECTION 3.05 EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed, Securities called for redemption
become due and payable on the Redemption Date and at the Redemption Price. Upon
surrender to the Paying Agent, such Securities called for redemption shall be
paid at the Redemption Price, but interest installments whose maturity is on or
prior to such Redemption Date will be payable on the
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relevant Interest Payment Dates to the Holders of record at the close of
business on the relevant record dates specified pursuant to Section 2.01.
SECTION 3.06 DEPOSIT OF REDEMPTION PRICE.
On or prior to any Redemption Date, the Issuers shall deposit with the
Trustee or the Paying Agent (or, if either of the Issuers are acting as Paying
Agent, segregate and hold in trust as provided in Section 2.06) an amount of
money in same day funds sufficient to pay the Redemption Price of, and (except
if the Redemption Date shall be an Interest Payment Date) accrued interest on
and any Additional Amounts with respect to, the Securities or portions thereof
which are to be redeemed on that date, other than Securities or portions thereof
called for redemption on that date which have been delivered by the Issuers to
the Trustee for cancellation.
If the Issuers comply with the preceding paragraph, then, unless the
Issuers default in the payment of such Redemption Price, interest on the
Securities to be redeemed will cease to accrue on and after the applicable
Redemption Date, whether or not such Securities are presented for payment, and
the Holders of such Securities shall have no further rights with respect to such
Securities except for the right to receive the Redemption Price upon surrender
of such Securities. If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal, premium, if any, any
Additional Amounts, and, to the extent lawful, accrued interest thereon shall,
until paid, bear interest from the Redemption Date at the rate specified
pursuant to Section 2.01 or provided in the Securities or, in the case of
Original Issue Discount Securities, such Securities' yield to maturity.
SECTION 3.07 SECURITIES REDEEMED OR PURCHASED IN PART.
Upon surrender to the Paying Agent of a Security to be redeemed in part, the
Issuers shall execute and the Trustee shall authenticate and deliver to the
Holder of such Security without service charge a new Security or Securities, of
the same series and of any authorized denomination as requested by such Holder
in aggregate principal amount equal to, and in exchange for, the unredeemed
portion of the principal of the Security so surrendered that is not redeemed.
SECTION 3.08 PURCHASE OF SECURITIES.
Unless otherwise specified as contemplated by Section 2.01, the Issuers and
any Affiliate of the Issuers may at any time purchase or otherwise acquire
Securities in the open market or by private agreement. Such acquisition shall
not operate as or be deemed for any purpose to be a redemption of the
indebtedness represented by such Securities. Any Securities purchased or
acquired by the Issuers may be delivered to the Trustee and, upon such delivery,
the indebtedness represented thereby shall be deemed to be satisfied. Section
2.13 shall apply to all Securities so delivered.
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SECTION 3.09 MANDATORY AND OPTIONAL SINKING FUNDS.
The minimum amount of any sinking fund payment provided for by the terms of
Securities of any series is herein referred to as a "mandatory sinking fund
payment," and any payment in excess of such minimum amount provided for by the
terms of Securities of any series is herein referred to as an "optional sinking
fund payment." Unless otherwise provided by the terms of Securities of any
series, the cash amount of any sinking fund payment may be subject to reduction
as provided in Section 3.10. Each sinking fund payment shall be applied to the
redemption of Securities of any series as provided for by the terms of
Securities of such series and by this Article III.
SECTION 3.10 SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES.
The Issuers may deliver outstanding Securities of a series (other than any
previously called for redemption) and may apply as a credit Securities of a
series that have been redeemed either at the election of the Issuers pursuant to
the terms of such Securities or through the application of permitted optional
sinking fund payments pursuant to the terms of such Securities, in each case in
satisfaction of all or any part of any sinking fund payment with respect to the
Securities of such series required to be made pursuant to the terms of such
series of Securities; provided that such Securities have not been previously so
credited. Such Securities shall be received and credited for such purpose by
the Trustee at the Redemption Price specified in such Securities for redemption
through operation of the sinking fund and the amount of such sinking fund
payment shall be reduced accordingly.
SECTION 3.11 REDEMPTION OF SECURITIES FOR SINKING FUND.
Not less than 45 days prior (unless a shorter period shall be satisfactory
to the Trustee) to each sinking fund payment date for any series of Securities,
the Issuers will deliver to the Trustee an Officers' Certificate specifying the
amount of the next ensuing sinking fund payment for that series pursuant to the
terms of that series, the portion thereof, if any, which is to be satisfied by
payment of cash and the portion thereof, if any, which is to be satisfied by
delivery of or by crediting Securities of that series pursuant to Section 3.10
and will also deliver to the Trustee any Securities to be so delivered. Failure
of the Issuers to timely deliver such Officers' Certificate and Securities
specified in this paragraph, if any, shall not constitute a Default but shall
constitute the election of the Issuers (i) that the mandatory sinking fund
payment for such series due on the next succeeding sinking fund payment date
shall be paid entirely in cash without the option to deliver or credit
Securities of such series in respect thereof and (ii) that the Issuers will make
no optional sinking fund payment with respect to such series as provided in this
Section.
If the sinking fund payment or payments (mandatory or optional or both) to
be made in cash on the next succeeding sinking fund payment date plus any unused
balance of any preceding sinking fund payments made in cash shall exceed
$100,000 (or the Dollar equivalent thereof
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based on the applicable Exchange Rate on the date of original issue of the
applicable Securities) or a lesser sum if the Issuers shall so request with
respect to the Securities of any particular series, such cash shall be applied
on the next succeeding sinking fund payment date to the redemption of Securities
of such series at the sinking fund redemption price together with accrued
interest to the date fixed for redemption. If such amount shall be $100,000 (or
the Dollar equivalent thereof as aforesaid) or less and the Issuers make no such
request then it shall be carried over until a sum in excess of $100,000 (or the
Dollar equivalent thereof as aforesaid) is available. Not less than 30 days
before each such sinking fund payment date, the Trustee shall select the
Securities to be redeemed upon such sinking fund payment date in the manner
specified in Section 3.03 and cause notice of the redemption thereof to be given
in the name of and at the expense of the Issuers in the manner provided in
Section 3.04. Such notice having been duly given, the redemption of such
Securities shall be made upon the terms and in the manner stated in Sections
3.05, 3.06 and 3.07.
ARTICLE IV
COVENANTS
SECTION 4.01 PAYMENT OF SECURITIES.
The Issuers shall pay the principal of, premium (if any) and interest on
and any Additional Amounts with respect to the Securities of each series on the
dates and in the manner provided in the Securities of such series and in this
Indenture. Principal, premium, interest and any Additional Amounts shall be
considered paid on the date due if the Paying Agent, other than either of the
Issuers or a Subsidiary of Equistar, holds on that date money deposited by the
Issuers designated for and sufficient to pay all principal, premium, interest
and any Additional Amounts then due.
The Issuers shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium (if any),
at a rate equal to the then applicable interest rate on the Securities to the
extent lawful; and they shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest and
any Additional Amount (without regard to any applicable grace period) at the
same rate to the extent lawful.
SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY.
The Issuers will maintain in each Place of Payment for any series of
Securities an office or agency (which may be an office of the Trustee, the
Registrar or the Paying Agent) where Securities of that series may be presented
for registration of transfer or exchange, where Securities of that series may be
presented for payment and where notices and demands to or upon the Issuers in
respect of the Securities of that series and this Indenture may be served.
Unless otherwise designated by the Issuers by written notice to the Trustee,
such office or agency shall be the office of the Trustee in The City of New
York, which on the date hereof, is located at
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101 Barclay Street, New York, New York 10286. The Issuers will give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Issuers shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office of the Trustee.
The Issuers may also from time to time designate one or more other offices
or agencies where the Securities of one or more series may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Issuers of their obligation to maintain an office or
agency in each Place of Payment for Securities of any series for such purposes.
The Issuers will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
Notwithstanding the foregoing, at the option of the Issuers, interest, if
any, may be paid on Securities (i) by check mailed to the Person entitled
thereto at such Person's address appearing in the register maintained by the
Registrar or (ii) by wire transfer to an account located inside the United
States maintained by the Person entitled thereto as specified in the register
maintained by the Registrar.
SECTION 4.03 SEC REPORTS; FINANCIAL STATEMENTS.
(a) The Issuers shall file with the Trustee, within 15 days after
they file the same with the SEC, copies of the annual reports and the
information, documents and other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) that either of
the Issuers are required to file with the SEC pursuant to Section 13 or 15(d) of
the Exchange Act. The Issuers shall also comply with the provisions of TIA (S)
314(a).
(b) If the Issuers are not subject to the requirements of Section 13
or 15(d) of the Exchange Act, the Issuers shall furnish to all Holders of Rule
144A Securities and prospective purchasers of Rule 144A Securities designated by
the Holders of Rule 144A Securities, promptly upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) promulgated
under the Securities Act of 1933, as amended.
Delivery of such reports, information and documents to the Trustee is for
informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Issuers'
compliance with any of their covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
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SECTION 4.04 COMPLIANCE CERTIFICATE.
(a) The Issuers shall deliver to the Trustee, within 120 days after
the end of each fiscal year of Equistar, a statement signed by two Officers of
each of the Issuers, which need not constitute an Officers' Certificate,
complying with TIA (S) 314(a)(4) and stating that in the course of performance
by the signing Officers of the Issuers of their duties as such Officers of the
Issuers they would normally obtain knowledge of the keeping, observing,
performing and fulfilling by the Issuers of their obligations under this
Indenture, and further stating, as to each such Officer signing such statement,
that to the best of his knowledge the Issuers have kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and are not in
default in the performance or observance of any of the terms, provisions and
conditions hereof (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which such Officer may have
knowledge and what action the Issuers are taking or proposes to take with
respect thereto).
(b) The Issuers shall, so long as Securities of any series are
outstanding, deliver to the Trustee, forthwith upon any Officer of either of the
Issuers becoming aware of any Default or Event of Default under this Indenture,
an Officers' Certificate specifying such Default or Event of Default and what
action the Issuers are taking or propose to take with respect thereto.
SECTION 4.05 CORPORATE EXISTENCE.
Subject to Article V hereof, the Issuers shall do or cause to be done all
things necessary to preserve and keep in full force and effect their existence
and the corporate, partnership and other existence of each of Equistar's
Subsidiaries and all rights (charter and statutory) and franchises of the
Issuers and Equistar's Subsidiaries, provided that Equistar shall not be
required to preserve the corporate existence of any Subsidiary or any such right
or franchise if the Partnership Governance Committee shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
Equistar and its Subsidiaries taken as a whole and that the loss thereof would
not have a material adverse effect on the business, prospects, assets or
financial condition of the Issuers and Equistar's Subsidiaries taken as a whole
and would not have any material adverse effect on the payment and performance of
the obligations of the Issuers under the Securities and this Indenture.
SECTION 4.06 WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Issuers covenant (to the extent that they may lawfully do so) that they
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Issuers from paying all or any
portion of the principal of or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture; and (to the extent
that they may lawfully do so) the Issuers hereby expressly waive all benefit or
advantage of any such law, and covenant that they will not hinder, delay or
impede the execution of any power herein granted to the Trustee,
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but will suffer and permit the execution of every such power as though no such
law had been enacted.
SECTION 4.07 ADDITIONAL AMOUNTS.
If the Securities of a series expressly provide for the payment of
Additional Amounts, the Issuers will pay to the Holder of any Security of such
series Additional Amounts as expressly provided therein. Whenever in this
Indenture there is mentioned, in any context, the payment of the principal of or
any premium or interest on, or in respect of, any Security of any series or the
net proceeds received from the sale or exchange of any Security of any series,
such mention shall be deemed to include mention of the payment of Additional
Amounts provided for in this Section 4.07 to the extent that, in such context,
Additional Amounts are, were or would be payable in respect thereof pursuant to
the provisions of this Section 4.07 and express mention of the payment of
Additional Amounts (if applicable) in any provisions hereof shall not be
construed as excluding Additional Amounts in those provisions hereof where such
express mention is not made.
Unless otherwise provided pursuant to Section 2.01 with respect to
Securities of any series: If the Securities of a series provide for the payment
of Additional Amounts, at least ten days prior to the first Interest Payment
Date with respect to that series of Securities (or if the Securities of that
series will not bear interest prior to Maturity, the first day on which a
payment of principal and any premium is made), and at least ten days prior to
each date of payment of principal and any premium or interest if there has been
any change with respect to the matters set forth in the below-mentioned
Officers' Certificate, the Issuers shall furnish the Trustee and the Issuers'
principal Paying Agent or Paying Agents, if other than the Trustee, with an
Officers' Certificate instructing the Trustee and such Paying Agent or Paying
Agents whether such payment of principal of and any premium or interest on the
Securities of that series shall be made to Holders of Securities of that series
who are United States Aliens without withholding for or on account of any tax,
assessment or other governmental charge described in the Securities of that
series. If any such withholding shall be required, then such Officers'
Certificate shall specify by country the amount, if any, required to be withheld
on such payments to such Holders of Securities and the Issuers will pay to such
Paying Agent the Additional Amounts required by this Section. The Issuers
covenant to indemnify the Trustee and any Paying Agent for and to hold them
harmless against any loss, liability or expense reasonably incurred without
negligence or bad faith on their part arising out of or in connection with
actions taken or omitted by any of them in reliance on any Officers' Certificate
furnished pursuant to this Section 4.07.
SECTION 4.08 LIMITATION ON LIENS.
Equistar will not, and will not permit any Restricted Subsidiary to, issue,
assume or guarantee any Debt secured by Liens upon any Restricted Property,
without effectively providing that any Securities then outstanding and
thereafter created (together with, if Equistar so determines, any other
indebtedness or obligation then existing and any other indebtedness or
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obligation thereafter created ranking equally with the Securities then
outstanding or thereafter created which is not subordinated to the Securities of
each series) shall be secured equally and ratably with (or prior to) such Debt
so long as such Debt shall be so secured, except that the foregoing provision
shall not apply to:
(a) Liens affecting property of a corporation existing at the time it
becomes a Subsidiary or at the time it is merged into or consolidated with
Equistar or a Subsidiary;
(b) Liens on property existing at the time of acquisition thereof or
incurred to secure payment of all or part of the purchase price thereof or
to secure Debt incurred prior to, at the time of or within 24 months after
acquisition thereof for the purpose of financing all or part of the
purchase price thereof;
(c) Liens on property of Equistar or a Subsidiary existing on the
date of this Indenture;
(d) Liens on any property to secure all or part of the cost of
construction or improvements thereon or Debt incurred to provide funds for
any such purpose in a principal amount not exceeding the cost of such
construction or improvements;
(e) Liens which secure only an indebtedness owing by a Subsidiary to
Equistar or a Subsidiary;
(f) Liens in favor of the United States or any state thereof, or any
department, agency, instrumentality, or political subdivision of any such
jurisdiction, to secure partial progress, advance or other payments
pursuant to any contract or statute or to secure any indebtedness incurred
for the purpose of financing all or any part of the purchase price or cost
of constructing or improving the property subject thereto, including,
without limitation, Liens to secure Debt of the pollution control or
industrial revenue bond type;
(g) Liens required by any contract or statute in order to permit
Equistar or a Subsidiary to perform any contract or subcontract made by it
with or at the request of the United States of America, any state or any
department, agency or instrumentality or political subdivision of either;
or
(h) any extension, renewal or replacement (or successive extensions,
renewals or replacements), in whole or in part, of any Lien referred to in
the foregoing clauses (a) to (g) inclusive, or of any Debt secured thereby,
provided that the principal amount of Debt secured thereby shall not exceed
the greater of (i) the principal amount of Debt so secured or (ii) the fair
market value of the underlying property or assets to which such Lien
relates at the time of such extension, renewal or replacement, and that
such extension, renewal or replacement Lien shall be limited to all or part
of substantially the
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same property which secured the Lien extended, renewed or replaced (plus
improvements on such property).
Notwithstanding the foregoing provisions of this Section 4.08, Equistar and
any one or more Restricted Subsidiaries may issue, assume or guarantee Debt
secured by Liens which would otherwise be subject to the foregoing restrictions
in an aggregate principal amount which, together with the aggregate outstanding
principal amount of all other Debt of Equistar and the Restricted Subsidiaries
which would otherwise be subject to the foregoing restrictions (not including
Debt permitted to be secured under clauses (a) to (h) inclusive above) and the
aggregate Value of the Sale and Lease-Back Transactions in existence at such
time (not including Sale and Lease-Back Transactions as to which Equistar has
complied with Section 4.09(b)), does not at any one time exceed 15% of the
Consolidated Net Tangible Assets of Equistar and its consolidated Subsidiaries.
SECTION 4.09 LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS.
Equistar will not, and will not permit any Restricted Subsidiary to, enter
into any Sale and Lease-Back Transactions unless either:
(a) Equistar or such Restricted Subsidiary would be entitled,
pursuant to Section 4.08, to incur Debt in a principal amount equal to or
exceeding the Value of such Sale and Lease-Back Transaction, secured by a
Lien on the property to be leased, without equally and ratably securing the
Securities; or
(b) Equistar (and in any such case Equistar covenants and agrees that
it will do so) within four months after the effective date of such Sale and
Lease-Back Transaction (whether made by Equistar or a Restricted
Subsidiary) applies to the voluntary retirement of Funded Debt, an amount
equal to the Value of such Sale and Lease-Back Transaction, less the
principal amount of Securities delivered, within four months after the
effective date of such arrangements, to the Trustee for retirement and
cancellation and the principal amount of other Funded Debt voluntarily
retired by the Issuers within such four-month period, excluding retirements
of Securities and other Funded Debt as a result of conversions or pursuant
to mandatory sinking fund or prepayment provisions or by payment at
maturity.
ARTICLE V
SECTION 5.01 CONSOLIDATION, MERGER AND SALE OF ASSETS
Each of the Issuers may not consolidate with or merge into, or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its assets to, any Person, unless each of the following conditions is
satisfied.
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(a) Immediately after giving effect to such transaction, no Default
or Event of Default will have happened and be continuing;
(b) Either (i) the applicable Issuer shall be the continuing
partnership or corporation, as applicable, or (ii) the entity formed by
such consolidation or into which the applicable Issuer is merged, or the
Person to which such properties and assets will have been conveyed,
transferred or leased, assumes the applicable Issuer's obligation as to the
due and punctual payment of the principal of (and premium, if any, on) and
interest, if any, on the Securities and the performance and observance of
every covenant to be performed by the applicable Issuer hereunder; any such
entity will be organized under the laws of the United States, one of the
States thereof or the District of Columbia; and
The Issuers have delivered to the Trustee an Officers' Certificate and
Opinion of Counsel stating that the transaction complies with these
conditions.
In the event of any transaction described in this Section 5.01, if any
Restricted Property would thereupon become subject to any Lien, the Securities
will be secured, as to such Restricted Property, equally and ratably with (or
prior to) the Debt that upon the occurrence of such transaction would become
secured by such Lien, unless such Lien could be created under this Indenture
without equally and ratably securing such Securities.
SECTION 5.02 SUCCESSOR PERSON SUBSTITUTED.
Upon any consolidation or merger of either of the Issuers or any sale,
assignment, transfer, lease, conveyance or other disposition of all or
substantially all of the assets of either of the Issuers in accordance with
Section 5.01, the Successor formed by such consolidation or into or with which
the applicable Issuer is merged or to which such sale, assignment, transfer,
lease, conveyance or other disposition is made shall succeed to, and be
substituted for, and may exercise every right and power of the applicable Issuer
under this Indenture and the Securities with the same effect as if such
Successor had been named as the Issuer herein and the predecessor Issuer shall
be discharged from all obligations and covenants under this Indenture and all
obligations under the Securities.
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT.
Unless either inapplicable to a particular series or specifically deleted
or modified in or pursuant to the supplemental indenture or Resolution
establishing such series of Securities or in
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the form of Security for such series, an "Event of Default," wherever used
herein with respect to Securities of any series, occurs if:
(1) the Issuers default in the payment of interest on or any
Additional Amounts with respect to any Security of that series when the
same becomes due and payable and such default continues for a period of 30
days;
(2) the Issuers default in the payment of (A) the principal of any
Security of that series at its Maturity or (B) premium (if any) on any
Security of that series when the same becomes due and payable;
(3) the Issuers default in the deposit of any sinking fund payment,
when and as due by the terms of a Security of that series, and such default
continues for a period of 30 days;
(4) the Issuers fail to observe or perform any other covenant or
agreement contained herein for 60 days after written notice of such failure
(other than an agreement, covenant or provision that has expressly been
included in this Indenture solely for the benefit of one or more series of
Securities other than that series), requiring the Issuers to remedy the
same, has been given to the Issuers by the Trustee or to the Issuers and
the Trustee by the holders of at least 25% in aggregate principal amount of
outstanding Securities affected by such default;
(5) either of the Issuers pursuant to or within the meaning of any
Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in
an involuntary case,
(C) consents to the appointment of a Bankruptcy Custodian of it
or for all or substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors;
(6) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that remains unstayed and in effect for 90 days and
that:
(A) is for relief against either of the Issuers as debtor in an
involuntary case,
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(B) appoints a Bankruptcy Custodian of either of the Issuers or
a Bankruptcy Custodian for all or substantially all of the property of
either of the Issuers, or
(C) orders the liquidation of either of the Issuers; or
(D) any other Event of Default provided with respect to
Securities of that series occurs.
The term "Bankruptcy Custodian" means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
The Trustee shall not be deemed to know or have notice of a Default unless
a Trust Officer at the Corporate Trust Office of the Trustee receives written
notice at the Corporate Trust Office of the Trustee of such Default with
specific reference to such Default.
When a Default is cured, it ceases.
Notwithstanding the foregoing provisions of this Section 6.01, if the
principal of, premium or interest on or Additional Amounts with respect to any
Security is payable in a currency or currencies (including a composite currency)
other than Dollars and such currency or currencies are not available to the
Issuers for making payment thereof due to the imposition of exchange controls or
other circumstances beyond the control of the Issuers (a "Conversion Event"),
the Issuers will be entitled to satisfy their obligations to Holders of the
Securities by making such payment in Dollars in an amount equal to the Dollar
equivalent of the amount payable in such other currency, as determined by the
Issuers by reference to the Exchange Rate on the date of such payment, or, if
such rate is not then available, on the basis of the most recently available
Exchange Rate. Notwithstanding the foregoing provisions of this Section 6.01,
any payment made under such circumstances in Dollars where the required payment
is in a currency other than Dollars will not constitute an Event of Default
under this Indenture.
Promptly after the occurrence of a Conversion Event, the Issuers shall give
written notice thereof to the Trustee; and the Trustee, promptly after receipt
of such notice, shall give notice thereof in the manner provided in Section
10.02 to the Holders. Promptly after the making of any payment in Dollars as a
result of a Conversion Event, the Issuers shall give notice in the manner
provided in Section 10.02 to the Holders, setting forth the applicable Exchange
Rate and describing the calculation of such payments.
A Default under clause (7) of this Section 6.01 is not an Event of Default
until the Trustee notifies the Issuers, or the Holders of at least 25% in
principal amount of the then outstanding Securities of the series affected by
such Default notify the Issuers and the Trustee, of the Default, and the Issuers
fails to cure the Default within 90 days after receipt of the notice. The
notice
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must specify the Default, demand that it be remedied and state that the notice
is a "Notice of Default."
SECTION 6.02 ACCELERATION.
If an Event of Default with respect to any Securities of any series at the
time outstanding (other than an Event of Default specified in clause (5) or (6)
of Section 6.01) occurs and is continuing, the Trustee by notice to the Issuers,
or the Holders of at least 25% in principal amount of the then outstanding
Securities of the series affected by such Default (or, in the case of an Event
of Default described in clause (4) of Section 6.01, if outstanding Securities of
other series are affected by such Default, then at least 25% in principal amount
of the then outstanding Securities so affected by notice to the Issuers and the
Trustee, may declare the principal of (or, if any such Securities are Original
Issue Discount Securities, such portion of the principal amount as may be
specified in the terms of that series) and accrued and unpaid interest on all
then outstanding Securities of such series or of all series, as the case may
be), to be due and payable. Upon any such declaration the amounts due and
payable on the Securities shall be due and payable immediately. If an Event of
Default specified in clause (5) or (6) of Section 6.01 hereof occurs, such
amounts shall ipso facto become and be immediately due and payable without any
declaration, notice or other act on the part of the Trustee or any Holder. At
any time after a declaration of acceleration with respect to Securities has been
made, but before judgment or decree for payment of money has been obtained by
the Trustee (as hereinafter in this Article provided), the Holders of a majority
in principal amount of the then outstanding Securities of the series affected by
such Default or all series, as the case may be, by written notice to the Trustee
may rescind and annul an acceleration and its consequences (other than
nonpayment of principal of or premium or interest on or any Additional Amounts
with respect to the Securities) if all existing Events of Default with respect
to Securities of that series (or of all series, as the case may be) have been
cured or waived, except nonpayment of principal, premium, interest or any
Additional Amounts that has become due solely because of the acceleration.
SECTION 6.03 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal of, or premium, if any, or
interest on the Securities or to enforce the performance of any provision of the
Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. All remedies are cumulative
to the extent permitted by law.
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SECTION 6.04 WAIVER OF EXISTING OR PAST DEFAULTS.
Subject to Sections 6.07 and 9.02, the Holders of a majority in aggregate
principal amount of the then outstanding Securities of any series or of all
series (acting as one class) by notice to the Trustee may waive an existing or
past Default or Event of Default with respect to such series or all series, as
the case may be, and its consequences (including waivers obtained in connection
with a tender offer or exchange offer for Securities of such series or all
series or a solicitation of consents in respect of Securities of such series or
all series, provided that in each case such offer or solicitation is made to all
Holders of then outstanding Securities of such series or all series (but the
terms of such offer or solicitation may vary from series to series)), except (1)
a continuing Default or Event of Default in the payment of the principal of, or
premium, if any, or interest on or any Additional Amounts with respect to any
Security or (2) a continued Default in respect of a provision that under Section
9.02 cannot be amended or supplemented without the consent of each Holder
affected. Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
SECTION 6.05 CONTROL BY MAJORITY.
With respect to Securities of any series, the Holders of a majority in
principal amount of the then outstanding Securities of such series may direct in
writing the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on it
relating to or arising under an Event of Default described in clause (1), (2),
(3) or (7) of Section 6.01, and with respect to all Securities, the Holders of a
majority in principal amount of all the then outstanding Securities affected may
direct in writing the time, method and place of conducting any proceeding for
any remedy available to the Trustee or exercising any trust or power conferred
on it not relating to or arising under such an Event of Default. However, the
Trustee may refuse to follow any direction that conflicts with applicable law or
this Indenture, that the Trustee determines may be unduly prejudicial to the
rights of other Holders, or that may involve the Trustee in personal liability;
provided, however, that the Trustee may take any other action deemed proper by
the Trustee that is not inconsistent with such direction. Prior to taking any
action hereunder, the Trustee shall be entitled to indemnification satisfactory
to it in its sole discretion from Holders directing the Trustee against all
losses and expenses caused by taking or not taking such action.
SECTION 6.06 LIMITATIONS ON SUITS.
Subject to Section 6.07 hereof, a Holder of a Security of any series may
pursue a remedy with respect to this Indenture or the Securities of such series
only if:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default with respect to such series;
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(2) the Holders of at least 25% in principal amount of the then
outstanding Securities of such series make a written request to the Trustee
to pursue the remedy;
(3) such Holder or Holders offer to the Trustee indemnity reasonably
satisfactory to the Trustee against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(5) during such 60-day period the Holders of a majority in principal
amount of the Securities of that series do not give the Trustee a direction
inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
SECTION 6.07 RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Security to receive payment of principal of and premium, if any, and
interest on and any Additional Amounts with respect to the Security, on or after
the respective due dates expressed in the Security, or to bring suit for the
enforcement of any such payment on or after such respective dates, is absolute
and unconditional and shall not be impaired or affected without the consent of
the Holder.
SECTION 6.08 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in clause (1) or (2) of Section 6.01
hereof occurs and is continuing, the Trustee is authorized to recover judgment
in its own name and as trustee of an express trust against the Issuers for the
amount of principal, premium (if any), interest and any Additional Amounts
remaining unpaid on the Securities of the series affected by the Event of
Default, and interest on overdue principal and premium, if any, and, to the
extent lawful, interest on overdue interest, and such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other papers or
documents and to take such actions, including participating as a member, voting
or otherwise, of any committee of creditors, as may be necessary or advisable to
have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel) and the Holders allowed in any judicial proceedings relative to the
Issuers or
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its creditors or properties and shall be entitled and empowered to collect,
receive and distribute any money or other property payable or deliverable on any
such claims and any Bankruptcy Custodian in any such judicial proceeding is
hereby authorized by each Holder to make such payments to the Trustee, and in
the event that the Trustee shall consent to the making of such payments directly
to the Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07. To the
extent that the payment of any such compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 out of the estate in any such proceeding, shall be
denied for any reason, payment of the same shall be secured by a lien on, and
shall be paid out of, any and all distributions, dividends, money, securities
and other properties which the Holders of the Securities may be entitled to
receive in such proceeding whether in liquidation or under any plan of
reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10 PRIORITIES.
If the Trustee collects any money pursuant to this Article VI, it shall pay
out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the Securities in
respect of which or for the benefit of which such money has been collected,
for principal, premium (if any), interest and any Additional Amounts
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal, premium (if any),
interest and any Additional Amounts, respectively; and
Third: to the Issuers.
The Trustee, upon prior written notice to the Issuers, may fix record dates
and payment dates for any payment to Holders pursuant to this Article VI.
To the fullest extent allowed under applicable law, if for the purpose of
obtaining a judgment against the Issuers in any court it is necessary to convert
the sum due in respect of the principal of, premium (if any) or interest on or
Additional Amounts with respect to the Securities of any series (the "Required
Currency") into a currency in which a judgment will be rendered (the "Judgment
Currency"), the rate of exchange used shall be the rate at which in accordance
with normal banking procedures the Trustee could purchase in The City of New
York the Required Currency with the Judgment Currency on the New York Business
Day next preceding
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that on which final judgment is given. Neither the Issuers nor the Trustee shall
be liable for any shortfall nor shall it benefit from any windfall in payments
to Holders of Securities under this Section 6.10 caused by a change in exchange
rates between the time the amount of a judgment against it is calculated as
above and the time the Trustee converts the Judgment Currency into the Required
Currency to make payments under this Section to Holders of Securities, but
payment of such judgment shall discharge all amounts owed by the Issuers on the
claim or claims underlying such judgment.
SECTION 6.11 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 6.11
does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section
6.07, or a suit by a Holder or Holders of more than 10% in principal amount of
the then outstanding Securities of any series.
ARTICLE VII
TRUSTEE
SECTION 7.01 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in such exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default with respect
to the Securities of any series:
(1) the Trustee need perform only those duties that are specifically
set forth in this Indenture and no others, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine such certificates and opinions to determine
whether, on their face, they appear to conform to the requirements of this
Indenture.
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(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) this paragraph does not limit the effect of Section 7.01(b);
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to the
provisions of this Section 7.01.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee may refuse to
perform any duty or exercise any right or power unless it receives indemnity
reasonably satisfactory to it against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuers.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law. All money received by the Trustee shall,
until applied as herein provided, be held in trust for the payment of the
principal of, premium (if any) and interest on and Additional Amounts with
respect to the Securities.
SECTION 7.02 RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely on any document believed by it
to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
instruction, an Officers' Certificate or an Opinion of Counsel or both to be
provided. The Trustee shall not be liable for any action it takes or omits to
take in good faith in reliance on such instruction, Officers' Certificate or
Opinion of Counsel. The Trustee may consult at the Issuers' expense with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
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(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Issuers shall be sufficient if
signed by an Officer of the Issuers.
(f) the Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon;
(g) subject to the Trustee's duty to act during a Default with the
required standard of care, the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such Holders
shall have offered to the Trustee security or indemnity satisfactory to the
Trustee against the costs, expenses and liabilities which might be incurred by
it in compliance with such request or direction;
(h) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Issuers, personally or by agent or attorney
at the sole cost of the Issuers and shall incur no liability or additional
liability of any kind by reason of such inquiry or investigation;
(i) the Trustee shall not be liable for any action taken, suffered,
or omitted to be taken by it in good faith and reasonably believed by it to be
authorized or within the discretion or rights or powers conferred upon it by
this Indenture; and
(j) the rights, privileges, protections, immunities and benefits
given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, the Trustee in each
of its capacities hereunder, and to each agent, custodian and other Person
employed to act hereunder.
SECTION 7.03 MAY HOLD SECURITIES.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Securities and may otherwise deal with the Issuers or any of its
Affiliates with the same rights it
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would have if it were not Trustee. Any Agent may do the same with like rights
and duties. However, the Trustee is subject to Sections 7.10 and 7.11.
SECTION 7.04 TRUSTEES DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of this
Indenture or the Securities, it shall not be accountable for the Issuers' use of
the proceeds from the Securities or any money paid to the Issuers or upon the
Issuers' direction under any provision hereof, it shall not be responsible for
the use or application of any money received by any Paying Agent other than the
Trustee and it shall not be responsible for any statement or recital herein or
any statement in the Securities other than its certificate of authentication.
SECTION 7.05 NOTICE OF DEFAULTS.
If a Default or Event of Default with respect to the Securities of any
series occurs and is continuing and it is known to the Trustee, the Trustee
shall mail to Holders of Securities of such series a notice of the Default or
Event of Default within 90 days after it occurs. Except in the case of a
Default or Event of Default in payment of principal of, premium (if any) and
interest on and Additional Amounts or any sinking fund installment with respect
to the Securities of such series, the Trustee may withhold the notice if and so
long as a committee of its Trust Officers in good faith determines that
withholding the notice is in the interests of Holders of Securities of such
series.
SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each May 15 of each year after the execution of this
Indenture, the Trustee shall mail to Holders of a series and the Issuers a brief
report dated as of such reporting date that complies with TIA (S) 313(a);
provided, however, that if no event described in TIA (S) 313(a) has occurred
within the twelve months preceding the reporting date with respect to a series,
no report need be transmitted to Holders of such series. The Trustee also shall
comply with TIA (S) 313(b). The Trustee shall also transmit by mail all reports
if and as required by TIA (S)(S) 313(c) and 313(d).
A copy of each report at the time of its mailing to Holders of a series of
Securities shall be filed by the Issuers with the SEC and each securities
exchange, if any, on which the Securities of such series are listed. The
Issuers shall notify the Trustee if and when any series of Securities is listed
on any stock exchange and of any delisting thereof.
SECTION 7.07 COMPENSATION AND INDEMNITY.
The Issuers agree to pay to the Trustee from time to time such compensation
for its acceptance of this Indenture and services hereunder as the Issuers and
the Trustee shall from time to time agree in writing. The Trustee's
compensation shall not be limited by any law on
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compensation of a trustee of an express trust. The Issuers agree to reimburse
the Trustee upon request for all reasonable disbursements, advances and expenses
incurred by it. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Issuers hereby indemnify the Trustee against any loss, liability or
expense incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture, except as set forth in the
next paragraph. The Trustee shall notify the Issuers promptly of any claim for
which it may seek indemnity. The Issuers shall defend the claim and the Trustee
shall cooperate in the defense. The Trustee may have separate counsel and the
Issuers shall pay the reasonable fees and expenses of such counsel. The Issuers
need not pay for any settlement made without their consent.
The Issuers shall not be obligated to reimburse any expense or indemnify
against any loss or liability incurred by the Trustee through negligence or bad
faith.
To secure the payment obligations of the Issuers in this Section 7.07, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee, except that held in trust to pay principal of,
premium (if any) and interest on and any Additional Amounts with respect to
Securities of series. Such lien and the indemnity obligation under this Section
7.07 shall survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(5) or (6) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 7.08 REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.08.
The Trustee may resign and be discharged at any time with respect to the
Securities of one or more series by so notifying the Issuers. The Holders of a
majority in principal amount of the then outstanding Securities of any series
may remove the Trustee with respect to the Securities of such series by so
notifying the Trustee and the Issuers. The Issuers may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
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(3) a Bankruptcy Custodian or public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, with respect to the Securities of one or more series,
the Issuers shall promptly appoint a successor Trustee or Trustees with respect
to the Securities of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the Securities of one or more
or all of such series and that at any time there shall be only one Trustee with
respect to the Securities of any particular series). Within one year after the
successor Trustee with respect to the Securities of any series takes office, the
Holders of a majority in principal amount of the Securities of such series may
appoint a successor Trustee to replace the successor Trustee appointed by the
Issuers.
If a successor Trustee with respect to the Securities of any series does
not take office within 60 days after the retiring Trustee resigns or is removed,
the retiring Trustee, the Issuers or the Holders of at least 10% in principal
amount of the then outstanding Securities of such series may petition any court
of competent jurisdiction for the appointment of a successor Trustee with
respect to the Securities of such series.
If the Trustee with respect to the Securities of a series fails to comply
with Section 7.10, any Holder of Securities of such series may petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee with respect to the Securities of such
series.
In case of the appointment of a successor Trustee with respect to all
Securities, each such successor Trustee shall deliver a written acceptance of
its appointment to the retiring Trustee and to the Issuers. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the retiring
Trustee under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
In case of the appointment of a successor Trustee with respect to the
Securities of one or more (but not all) series, the Issuers, the retiring
Trustee and each successor Trustee with respect to the Securities of one or more
(but not all) series shall execute and deliver an indenture supplemental hereto
in which each successor Trustee shall accept such appointment and that (1) shall
confer to each successor Trustee all the rights, powers and duties of the
retiring Trustee with respect to the Securities of that or those series to which
the appointment of such successor Trustee relates, (2) if the retiring Trustee
is not retiring with respect to all Securities, shall confirm that all the
rights, powers and duties of the retiring Trustee with respect to the Securities
of that or those series as to which the retiring Trustee is not retiring shall
continue to be vested in
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the retiring Trustee and (3) shall add to or change any of the provisions of
this Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee. Nothing herein
or in such supplemental indenture shall constitute such Trustees co-trustees of
the same trust, and each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee. Upon the execution and delivery of such supplemental
indenture, the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee shall
have all the rights, powers and duties of the retiring Trustee with respect to
the Securities of that or those series to which the appointment of such
successor Trustee relates. On request of the Issuers or any successor Trustee,
such retiring Trustee shall transfer to such successor Trustee all property held
by such retiring Trustee as Trustee with respect to the Securities of that or
those series to which the appointment of such successor Trustee relates.
Notwithstanding replacement of the Trustee or Trustees pursuant to this Section
7.08, the obligations of the Issuers under Section 7.07 shall continue for the
benefit of the retiring Trustee or Trustees.
SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC.
Subject to Section 7.10, if the Trustee consolidates, merges or converts
into, or transfers all or substantially all of its corporate trust business to,
another corporation, the successor corporation without any further act shall be
the successor Trustee; provided, however, that in the case of a transfer of all
or substantially all of its corporate trust business to another corporation, the
transferee corporation expressly assumes all of the Trustee's liabilities
hereunder.
In case any Securities shall have been authenticated, but not delivered, by
the Trustee then in office, any successor by merger, conversion or consolidation
to such authenticating Trustee may adopt such authentication and deliver the
Securities so authenticated; and in case at that time any of the Securities
shall not have been authenticated, any successor to the Trustee may authenticate
such Securities either in the name of any predecessor hereunder or in the name
of the successor to the Trustee; and in all such cases such certificates shall
have the full force which it is anywhere in the Securities or in this Indenture
provided that the certificate of the Trustee shall have.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States,
any State thereof or the District of Columbia and authorized under such laws to
exercise corporate trust power, shall be subject to supervision or examination
by Federal or State (or the District of Columbia) authority and shall have, or
be a Subsidiary of a bank or bank holding company having, a combined capital and
surplus of at least $50 million as set forth in its most recent published annual
report of condition.
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The Indenture shall always have a Trustee who satisfies the requirements of
TIA (S)(S) 310(a)(1), 310(a)(2) and 310(a)(5). The Trustee is subject to and
shall comply with the provisions of TIA (S) 310(b) during the period of time
required by this Indenture. Nothing in this Indenture shall prevent the Trustee
from filing with the SEC the application referred to in the penultimate
paragraph of TIA (S) 310(b).
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUERS.
The Trustee is subject to and shall comply with the provisions of TIA (S)
311(a), excluding any creditor relationship listed in TIA (S) 311(b). A Trustee
who has resigned or been removed shall be subject to TIA (S) 311(a) to the
extent indicated therein.
ARTICLE VII
DISCHARGE OF INDENTURE
SECTION 8.01 TERMINATION OF ISSUERS OBLIGATIONS.
This Indenture shall cease to be of further effect with respect to the
Securities of a series (except that the Issuers' obligations under Section 7.07,
the Trustee's and Paying Agent's obligations under Section 8.03 and the rights,
powers, protections and privileges accorded the Trustee under Article VII shall
survive), and the Trustee, on demand of the Issuers, shall execute proper
instruments acknowledging the satisfaction and discharge of this Indenture with
respect to the Securities of such series, when:
(1) either
(A) all outstanding Securities of such series theretofore
authenticated and issued (other than destroyed, lost or stolen
Securities that have been replaced or paid) have been delivered to the
Trustee for cancellation; or
(B) all outstanding Securities of such series not theretofore
delivered to the Trustee for cancellation:
(i) have become due and payable,
(ii) will become due and payable at their Stated Maturity
within one year,
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of
the Issuers,
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and, in the case of clause (i), (ii) or (iii) above, the Issuers have
irrevocably deposited or caused to be deposited with the Trustee as
funds (immediately available to the Holders in the case of clause (i))
in trust for such purpose (x) cash in an amount, or (y) U.S.
Government Obligations, maturing as to principal and interest at such
times and in such amounts as will insure the availability of cash in
an amount or (z) a combination thereof, which will be sufficient, in
the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge the entire indebtedness on the
Securities of such series for principal and interest to the date of
such deposit (in the case of Securities which have become due and
payable) or for principal, premium, if any, and interest to the Stated
Maturity or Redemption Date, as the case may be; or
(C) the Issuers have properly fulfilled such other means of
satisfaction and discharge as is specified, as contemplated by Section
2.01, to be applicable to the Securities of such series;
(2) the Issuers have paid or caused to be paid all other sums payable
by them hereunder with respect to the Securities of such series; and
(3) the Issuers have delivered to the Trustee an Officers'
Certificate stating that all conditions precedent to satisfaction and
discharge of this Indenture with respect to the Securities of such series
have been complied with, together with an Opinion of Counsel to the same
effect.
(b) Unless this Section 8.01(b) is specified as not being applicable
to Securities of a series as contemplated by Section 2.01, the Issuers may
terminate certain of their obligations under this Indenture, and failure to
comply with such covenants will not constitute a Default or an Event of Default
("covenant defeasance") with respect to the Securities of a series if:
(1) the Issuers have irrevocably deposited or caused to be
irrevocably deposited with the Trustee as trust funds in trust for the
purpose of making the following payments, specifically pledged as security
for and dedicated solely to the benefit of the Holders of Securities of
such series, (i) money in the currency in which payment of the Securities
of such series is to be made in an amount, or (ii) Government Obligations
with respect to such series, maturing as to principal and interest at such
times and in such amounts as will insure the availability of money in the
currency in which payment of the Securities of such series is to be made in
an amount or (iii) a combination thereof, that is sufficient, in the
opinion (in the case of (ii) and (iii)) of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay, without consideration of the reinvestment
of any such amounts and after payment of all taxes or other charges or
assessments in respect thereof payable by
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the Trustee, the principal of and premium (if any) and interest on all
Securities of such series on each date that such principal, premium (if
any) or interest is due and payable and (at the Stated Maturity thereof or
upon redemption as provided in Section 8.01(e)) to pay all other sums
payable by it hereunder; provided that the Trustee shall have been
irrevocably instructed to apply such money and/or the proceeds of such U.S.
Government Obligations to the payment of said principal, premium (if any)
and interest with respect to the Securities of such series as the same
shall become due;
(2) the Issuers have delivered to the Trustee an Officers'
Certificate stating that all conditions precedent to satisfaction and
discharge of this Indenture with respect to the Securities of such series
have been complied with and an Opinion of Counsel to the same effect;
(3) no Default or Event of Default with respect to the Securities of
such series shall have occurred and be continuing on the date of such
deposit;
(4) the Issuers shall have delivered to the Trustee an Opinion of
Counsel from a nationally recognized counsel acceptable to the Trustee or a
tax ruling to the effect that the Holders will not recognize income, gain
or loss for Federal income tax purposes as a result of the Issuers'
exercise of their option under this Section 8.01(b) and will be subject to
Federal income tax on the same amount and in the same manner and at the
same times as would have been the case if such option had not been
exercised;
(5) the Issuers have complied with any additional conditions
specified pursuant to Section 2.01 to be applicable to the discharge of
Securities of such series pursuant to this Section 8.01; and
(6) such deposit and discharge shall not cause the Trustee to have a
conflicting interest as defined in TIA (S) 310(b).
In such event, this Indenture shall cease to be of further effect (except
as set forth in this paragraph), and the Trustee, on demand of the Issuers,
shall execute proper instruments acknowledging satisfaction and discharge under
this Indenture. However, the Issuers' obligations in Sections 2.05, 2.06, 2.07,
2.08, 2.09, 4.01, 4.02, 5.01, 7.07, 7.08 and 8.04, the Trustee's and Paying
Agent's obligations in Section 8.03 and the rights, powers, protections and
privileges accorded the Trustee under Article VII shall survive until all
Securities of such series are no longer outstanding. Thereafter, only the
Issuers' obligations in Section 7.07 and the Trustee's and Paying Agent's
obligations in Section 8.03 shall survive with respect to Securities of such
series.
After such irrevocable deposit made pursuant to this Section 8.01(b) and
satisfaction of the other conditions set forth herein, the Trustee upon request
shall acknowledge in writing the
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discharge of the Issuers' obligations under this Indenture with respect to the
Securities of such series except for those surviving obligations specified
above.
In order to have money available on a payment date to pay principal of or
premium (if any) or interest on the Securities, the Government Obligations shall
be payable as to principal or interest on or before such payment date in such
amounts as will provide the necessary money. Government Obligations shall not be
callable at the issuer's option.
(c) If the Issuers have previously complied or are concurrently
complying with Section 8.01(b) (other than any additional conditions specified
pursuant to Section 2.01 that are expressly applicable only to covenant
defeasance) with respect to Securities of a series, then, unless this Section
8.01(c) is specified as not being applicable to Securities of such series as
contemplated by Section 2.01, the Issuers may elect to be discharged ("legal
defeasance") from their obligations to make payments with respect to Securities
of such series, if:
(1) no Default or Event of Default under clauses (6) and (7) of
Section 6.01 hereof shall have occurred at any time during the period
ending on the 91st day after the date of deposit contemplated by Section
8.01(b) (it being understood that this condition shall not be deemed
satisfied until the expiration of such period);
(2) unless otherwise specified with respect to Securities of such
series as contemplated by Section 2.01, the Issuers have delivered to the
Trustee an Opinion of Counsel from a nationally recognized counsel
acceptable to the Trustee to the effect referred to in Section 8.01(b)(4)
with respect to such legal defeasance, which opinion is based on (i) a
private ruling of the Internal Revenue Service addressed to the Issuers,
(ii) a published ruling of the Internal Revenue Service or (iii) a change
in the applicable federal income tax law (including regulations) after the
date of this Indenture;
(3) the Issuers have complied with any other conditions specified
pursuant to Section 2.01 to be applicable to the legal defeasance of
Securities of such series pursuant to this Section 8.01(c); and
(4) the Issuers have delivered to the Trustee an Issuers Request
requesting such legal defeasance of the Securities of such series and an
Officers' Certificate stating that all conditions precedent to with respect
to such legal defeasance of the Securities of such series have been
complied with, together with an Opinion of Counsel to the same effect.
In such event, the Issuers will be discharged from their obligations under
this Indenture and the Securities of such series to pay principal of, premium
(if any) and interest on, and Additional Amounts with respect to, Securities of
such series, the Issuers' obligations under Sections 4.01 and 5.01 shall
terminate with respect to such Securities, and the entire indebtedness of the
Issuers evidenced by such Securities shall be deemed paid and discharged.
However,
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Sections 2.08, 2.09, 4.02, 7.07, 7.08, 8.02 and 8.04, the Trustee's and Paying
Agent's obligations in Section 8.03 and the rights, powers, protections and
privileges accorded the Trustee under Article VII shall survive until all
Securities of such series are no longer outstanding.
(d) If and to the extent additional or alternative means of
satisfaction, discharge or defeasance of Securities of a series are specified to
be applicable to such series as contemplated by Section 2.01, the Issuers may
terminate any or all of their obligations under this Indenture with respect to
Securities of a series and any or all of their obligations under the Securities
of such series if they fulfill such other means of satisfaction and discharge as
may be so specified, as contemplated by Section 2.01, to be applicable to the
Securities of such series.
(e) If Securities of any series subject to subsections (a), (b), (c)
or (d) of this Section 8.01 are to be redeemed prior to their Stated Maturity,
whether pursuant to any optional redemption provisions or in accordance with any
mandatory or optional sinking fund provisions, the terms of the applicable trust
arrangement shall provide for such redemption, and the Issuers shall make such
arrangements as are reasonably satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at the expense, of the
Issuers.
SECTION 8.02 APPLICATION OF TRUST MONEY.
The Trustee or a trustee satisfactory to the Trustee and the Issuers shall
hold in trust money or U.S. Government Obligations deposited with it pursuant to
Section 8.01 hereof. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of, premium (if any) and interest on and
any Additional Amounts with respect to the Securities of the series with respect
to which the deposit was made.
The Issuers shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 8.01 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of Outstanding Securities.
SECTION 8.03 REPAYMENT TO ISSUERS.
The Trustee and the Paying Agent shall promptly pay to the Issuers upon
written request any excess money or U.S. Government Obligations (or proceeds
therefrom) held by them at any time upon the written request of the Issuers.
Subject to the requirements of any applicable abandoned property laws, the
Trustee and the Paying Agent shall pay to the Issuers upon written request any
money held by them for the payment of principal, premium (if any), interest or
any Additional Amounts that remains unclaimed for two years after the date upon
which such payment shall have become due. After payment to the Issuers, Holders
entitled to the money must look to the Issuers for payment as
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general creditors unless an applicable abandoned property law designates another
Person, and all liability of the Trustee and the Paying Agent with respect to
such money shall cease.
SECTION 8.04 REINSTATEMENT.
If the Trustee or the Paying Agent is unable to apply any money or U.S.
Government Obligations deposited with respect to Securities of any series in
accordance with Section 8.01 by reason of any legal proceeding or by reason of
any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, the obligations of the
Issuers under this Indenture with respect to the Securities of such series and
under the Securities of such series shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.01 hereof until such time as the
Trustee or the Paying Agent is permitted to apply all such money or U.S.
Government Obligations in accordance with Section 8.01; provided, however, that
if the Issuers have made any payment of principal of, premium (if any) or
interest on or any Additional Amounts with respect to any Securities because of
the reinstatement of its obligations, the Issuers shall be subrogated to the
rights of the Holders of such Securities to receive such payment from the money
or U.S. Government Obligations held by the Trustee or the Paying Agent.
ARTICLE IX
SUPPLEMENTAL INDENTURES AND AMENDMENTS
SECTION 9.01 WITHOUT CONSENT OF HOLDERS.
The Issuers and the Trustee may amend or supplement this Indenture or the
Securities or waive any provision hereof or thereof without the consent of any
Holder:
(1) to cure any ambiguity, omission, defect or inconsistency provided
such action does not adversely affect in any material respect the interests
of the holders of Securities of any series hereunder;
(2) to comply with Section 5.01;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities, or to provide for the issuance of bearer
Securities (with or without coupons);
(4) to provide any security for any series of Securities or to add
guarantees of any series of Securities;
(5) to comply with any requirement in order to effect or maintain the
qualification of this Indenture under the TIA;
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(6) to add to the covenants of the Issuers for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be
for the benefit of less than all series of Securities, stating that such
covenants are expressly being included solely for the benefit of such
series), or to surrender any right or power herein conferred upon the
Issuers;
(7) to add any additional Events of Default with respect to all or
any series of the Securities (and, if such Event of Default is applicable
to less than all series of Securities, specifying the series to which such
Event of Default is applicable);
(8) to change or eliminate any of the provisions of this Indenture;
provided that any such change or elimination shall become effective only
when there is no outstanding Security of any series created prior to the
execution of such amendment or supplemental indenture that is adversely
affected in any material respect by such change in or elimination of such
provision;
(9) to establish the form or terms of Securities of any series as
permitted by Section 2.01;
(10) to supplement any of the provisions of this Indenture to such
extent as shall be necessary to permit or facilitate the defeasance and
discharge of any series of Securities pursuant to Section 8.01; provided,
however, that any such action shall not adversely affect the interest of
the Holders of Securities of such series or any other series of Securities
in any material respect;
(11) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this Indenture
as shall be necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee, pursuant to the requirements
of Section 7.08;
(12) to provide for the issuance of Exchange Securities pursuant to
the Registration Rights Agreement; or
(13) to make any other change that does not adversely affect the
rights of any Holder.
Upon the request of the Issuers, accompanied by a Resolution, and upon
receipt by the Trustee of the documents described in Section 9.06, the Trustee
shall join with the Issuers in the execution of any supplemental indenture
authorized or permitted by the terms of this Indenture and make any further
appropriate agreements and stipulations that may be therein contained.
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SECTION 9.02 WITH CONSENT OF HOLDERS.
Except as provided below in this Section 9.02, the Issuers and the Trustee
may amend or supplement this Indenture to add any provisions to or change or
eliminate any provisions of the Indenture or modify the rights of such Holders,
with the written consent (including consents obtained in connection with a
tender offer or exchange offer for Securities of any one or more series or all
series or a solicitation of consents in respect of Securities of any one or more
series or all series, provided that in each case such offer or solicitation is
made to all Holders of then outstanding Securities of each such series (but the
terms of such offer or solicitation may vary from series to series)) of the
Holders of at least a majority in aggregate principal amount of the then
outstanding Securities of all series affected by such amendment or supplement
(acting as one class).
Upon the request of the Issuers, accompanied by a Resolution, and upon the
filing with the Trustee of evidence of the consent of the Holders as aforesaid,
and upon receipt by the Trustee of the documents described in Section 9.06, the
Trustee shall join with the Issuers in the execution of such amendment or
supplemental indenture.
It shall not be necessary for the consent of the Holders under this Section
9.02 to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
The Holders of a majority in principal amount of the then outstanding
Securities of one or more series or of all series may waive compliance in a
particular instance by the Issuers with any provision of this Indenture with
respect to Securities of such series (including waivers obtained in connection
with a tender offer or exchange offer for Securities of such series or a
solicitation of consents in respect of Securities of such series, provided that
in each case such offer or solicitation is made to all Holders of then
outstanding Securities of such series (but the terms of such offer or
solicitation may vary from series to series)).
However, without the consent of each Holder affected, an amendment,
supplement or waiver under this Section 9.02 may not:
(1) change the Stated Maturity of the principal of (or premium, if
any, on) or any installment of interest on any Security, or reduce the
principal amount thereof (or any premium, if any, thereon) or the rate of
interest, if any, thereon, or adversely affect the right of repayment, if
any, at the option of the Holder, or change any Place of Payment where any
Security or any premium or interest thereon is payable, or impair the right
to institute suit for the enforcement of any such payment on or after the
Stated Maturity thereof (or on or after any Redemption Date or Repayment
Date);
(2) reduce the percentage in aggregate principal amount of
Securities, the consent of the Holders of which is necessary to execute any
supplemental indenture; or
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(3) reduce the percentage in principal amount of outstanding
Securities, the consent of the Holders of which is necessary to modify or
waive any Default hereunder.
A supplemental indenture that changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
The right of any Holder to participate in any consent required or sought
pursuant to any provision of this Indenture (and the obligation of the Issuers
to obtain any such consent otherwise required from such Holder) may be subject
to the requirement that such Holder shall have been the Holder of record of any
Securities with respect to which such consent is required or sought as of a date
identified by the Issuers in a notice furnished to Holders in accordance with
the terms of this Indenture.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Issuers shall mail to the Holders of each Security affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Issuers to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amendment,
supplement or waiver.
SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Securities shall
comply in form and substance with the TIA as then in effect.
SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder is a continuing consent by the Holder and every subsequent Holder of
a Security or portion of a Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent is not made on any
Security. However, any such Holder or subsequent Holder may revoke the consent
as to his or her Security or portion of a Security if the Trustee receives
written notice of revocation before the date the amendment, supplement or waiver
becomes effective. An amendment, supplement or waiver becomes effective in
accordance with its terms and thereafter binds every Holder.
The Issuers may, but shall not be obligated to, fix a record date (which
need not comply with Section 316(c) of the TIA) for the purpose of determining
the Holders entitled to consent to any amendment, supplement or waiver or to
take any other action under this Indenture. If a record date is fixed, then
notwithstanding the provisions of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies),
and only
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those Persons, shall be entitled to consent to such amendment, supplement or
waiver or to revoke any consent previously given, whether or not such Persons
continue to be Holders after such record date. No consent shall be valid or
effective for more than 90 days after such record date unless consents from
Holders of the principal amount of Securities required hereunder for such
amendment or waiver to be effective shall have also been given and not revoked
within such 90-day period.
After an amendment, supplement or waiver becomes effective, it shall bind
every Holder, unless it is of the type described in any of clauses (1) through
(9) of Section 9.02 hereof. In such case, the amendment, supplement or waiver
shall bind each Holder who has consented to it and every subsequent Holder that
evidences the same debt as the consenting Holder's Security.
SECTION 9.05 NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment or supplement changes the terms of an outstanding Security,
the Issuers may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security at the request of
the Issuers regarding the changed terms and return it to the Holder.
Alternatively, if the Issuers so determine, the Issuers in exchange for the
Security shall issue and the Trustee shall authenticate a new Security that
reflects the changed terms. Failure to make the appropriate notation or to
issue a new Security shall not affect the validity of such amendment or
supplement.
Securities of any series authenticated and delivered after the execution of
any amendment or supplement may, and shall if required by the Trustee, bear a
notation in form approved by the Trustee as to any matter provided for in such
amendment or supplement.
SECTION 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment or supplement authorized pursuant to
this Article if the amendment or supplement does not adversely affect the
rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign it. In signing or refusing to sign such
amendment or supplement, the Trustee shall be entitled to receive, and, subject
to Section 7.01 hereof, shall be fully protected in relying upon, an Opinion of
Counsel provided at the expense of the Issuers as conclusive evidence that such
amendment or supplement is authorized or permitted by this Indenture, that it is
not inconsistent herewith, and that it will be valid and binding upon the
Issuers in accordance with its terms.
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ARTICLE X
MISCELLANEOUS
SECTION 10.01 TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by operation of TIA (S) 318(c), the imposed duties shall control.
SECTION 10.02 NOTICES.
Any notice or communication by the Issuers or the Trustee to the other is
duly given if in writing and delivered in person or mailed by first-class mail
(registered or certified, return receipt requested), telex, facsimile or
overnight air courier guaranteeing next day delivery, to the other's address:
If to the Issuers:
Equistar Chemicals, LP
Equistar Funding Corporation
One Houston Center, Suite 1600
1221 McKinney Street
Houston, Texas 77010
Attention: Gerald A. O'Brien
If to the Trustee:
The Bank of New York
101 Barclay Street, 21W
New York, New York 10286
Attention: Corporate Trust Administration
The Issuers or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices or communications.
All notices and communications shall be deemed to have been duly given: at
the time delivered by hand, if personally delivered; five Business Days after
being deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt acknowledged, if by facsimile; and the next Business Day
after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first-class
mail, postage prepaid, to the Holder's address shown on the register kept by the
Registrar. Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders.
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If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it,
except in the case of notice to the Trustee, it is duly given only when
received.
If the Issuers mail a notice or communication to Holders, they shall mail a
copy to the Trustee and each Agent at the same time.
All notices or communications, including without limitation notices to the
Trustee or the Issuers by Holders, shall be in writing, except as otherwise set
forth herein.
In case by reason of the suspension of regular mail service, or by reason
of any other cause, it shall be impossible to mail any notice required by this
Indenture, then such method of notification as shall be made with the approval
of the Trustee shall constitute a sufficient mailing of such notice.
SECTION 10.03 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders with
respect to their rights under this Indenture or the Securities. The Issuers,
the Trustee, the Registrar and anyone else shall have the protection of TIA (S)
312(c).
SECTION 10.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Issuers to the Trustee to take any
action under this Indenture, the Issuers shall, if requested by the Trustee,
furnish to the Trustee at the expense of the Issuers:
(1) an Officers' Certificate (which shall include the statements set
forth in Section 10.05) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel (which shall include the statements set
forth in Section 10.05 hereof) stating that, in the opinion of such
counsel, all such conditions precedent and covenants have been complied
with.
SECTION 10.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA (S)
314(e) and shall include:
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(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him or her
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with.
SECTION 10.06 RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or the Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 10.07 LEGAL HOLIDAYS.
If a payment date is a Legal Holiday at a Place of Payment, payment may be
made at that place on the next succeeding day that is not a Legal Holiday, and
no interest shall accrue for the intervening period.
SECTION 10.08 NO RECOURSE AGAINST OTHERS.
A director, officer, employee, stockholder, partner or other owner of
either of the Issuers or the Trustee, as such, shall not have any liability for
any obligations of the Issuers under the Securities or for any obligations of
the Issuers or the Trustee under this Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. Each Holder by
accepting a Security waives and releases all such liability. The waiver and
release shall be part of the consideration for the issue of Securities.
SECTION 10.09 GOVERNING LAW.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS TO THE EXTENT THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.
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SECTION 10.10 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Issuers or any other Subsidiary. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
SECTION 10.11 SUCCESSORS.
All agreements of the Issuers in this Indenture and the Securities shall
bind their successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 10.12 SEVERABILITY.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall, to the fullest extent permitted by applicable
law, not in any way be affected or impaired thereby.
SECTION 10.13 COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
SECTION 10.14 TABLE OF CONTENTS, HEADINGS, ETC
The table of contents, cross-reference table and headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof and shall in no way modify or
restrict any of the terms or provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
EQUISTAR CHEMICALS, LP
By: /s/ Gerald A. O'Brien
--------------------------------------
Name: Gerald A. O'Brien
Title: Vice President and General Counsel
EQUISTAR FUNDING CORPORATION
By: /s/ Gerald A. O'Brien
--------------------------------------
Name: Gerald A. O'Brien
Title: Vice President and General Counsel
THE BANK OF NEW YORK, AS TRUSTEE
By: /s/ Van K. Brown
--------------------------------------
Name: Van K. Brown
Title: Assistant Vice President
59
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EXHIBIT 4.2(a)
EQUISTAR CHEMICALS, LP
EQUISTAR FUNDING CORPORATION
8 1/2% Notes Due 2004
8 3/4% Notes Due 2009
______________
FIRST SUPPLEMENTAL INDENTURE
Dated as of February 16, 1999
_____________
The Bank of New York
TRUSTEE
<PAGE>
FIRST SUPPLEMENTAL INDENTURE dated as of February 16, 1999 among Equistar
Chemicals, LP, a Delaware limited partnership ("Equistar"), Equistar Funding
Corporation, a Delaware corporation ("Equistar Funding" and, together with
Equistar, the "Issuers"), and The Bank of New York, a New York banking
corporation, as trustee (the "Trustee").
W I T N E S S E T H:
WHEREAS, the Issuers have heretofore entered into an Indenture, dated as of
January 15, 1999 (the "Original Indenture"), with the Trustee;
WHEREAS, the Original Indenture is incorporated herein by this reference
and the Original Indenture, as supplemented by this First Supplemental
Indenture, is herein called the "Indenture";
WHEREAS, under the Original Indenture, a new series of Initial Securities
may at any time be established pursuant to a supplemental indenture executed by
the Issuers and the Trustee;
WHEREAS, the Issuers propose to create under the Indenture two new series
of Initial Securities; and
WHEREAS, all conditions necessary to authorize the execution and delivery
of this First Supplemental Indenture and to make it a valid and binding
obligation of each of the Issuers have been done or performed.
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
Section 1.01 Establishment and Terms.
(a) There is hereby established a new series of Initial Securities to be
issued under the Indenture, to be designated as the Issuers' 8 1/2% Notes Due
2004 (the "8 1/2% Notes").
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There are to be authenticated and delivered $300,000,000 principal amount
of 8 1/2% Notes to be issued at 99.992% of principal amount. The 8 1/2% Notes
shall be issued in definitive fully registered form.
The 8 1/2% Notes shall be issued in the form of three Global Securities in
substantially the form set out in Exhibit A hereto and as further provided in
Section 1.03. The initial Depositary with respect to the 8 1/2% Notes shall be
The Depository Trust Company ("DTC").
There shall be no limit upon the aggregate principal amount of 8 1/2% Notes
that may be authenticated and delivered under this Indenture.
The 8 1/2% Notes will mature on February 15, 2004.
The 8 1/2% Notes will bear interest at the rate of 8 1/2% per annum.
Interest Payment Dates will be February 15 and August 15 of each year. The
first Interest Payment Date will be August 15, 1999. Interest shall be paid to
the Person in whose name the applicable 8 1/2% Note is registered at the close
of business on February 1, in the case of the February 15 Interest Payment Date,
and August 1, in the case of the August 15 Interest Payment Date. Interest will
accrue from February 16, 1999. Interest will be computed on the basis of a 360-
day year of twelve 30-day months. No Additional Amounts will be payable on the 8
1/2% Notes.
The 8 1/2% Notes will be redeemable as provided in Section 1.02.
The 8 1/2% Notes will not be subject to a sinking fund.
The 8 1/2% Notes are being sold pursuant to Rule 144A and Regulation S
under the Securities Act of 1933. They are entitled to the benefits of the
Registration Rights Agreement and Section 4.03(b) of the Original Indenture.
The 8 1/2% Notes shall, together with any Exchange Securities for which the 8
1/2% Notes are exchanged pursuant to the Registration Rights Agreement,
constitute a single series of Securities under the Indenture.
All payments of principal, premium (if any) and interest on the 8 1/2%
Notes shall be made in accordance with Section 4.02 of the Original Indenture.
The 8 1/2% Notes shall be subject to the restrictions on transfer and
exchange set forth in Section 1.03, which restrictions on transfer and exchange
shall amend, supplement,
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modify or supersede those contained in Article II of the Original Indenture to
the extent applicable.
(b) There is hereby established a new series of Initial Securities to be
issued under the Indenture, to be designated as the Issuers' 8 3/4% Notes Due
2009 (the "8 3/4% Notes").
There are to be authenticated and delivered $600,000,000 principal amount
of 8 3/4% Notes to be issued at 99.718% of principal amount. The 8 3/4% Notes
shall be issued in definitive fully registered form.
The 8 3/4% Notes shall be issued in the form of four Global Securities in
substantially the form set out in Exhibit A hereto and as further provided in
Section 1.03. The initial Depositary with respect to the 8 3/4% Notes shall be
The Depository Trust Company.
There shall be no limit upon the aggregate principal amount of 8 3/4% Notes
that may be authenticated and delivered under this Indenture.
The 8 3/4% Notes will mature on February 15, 2009.
The 8 3/4% Notes will bear interest at the rate of 8 3/4% Notes per annum.
Interest Payment Dates will be February 15 and August 15 of each year. The
first Interest Payment Date will be August 15, 1999. Interest shall be paid to
the Person in whose name the applicable 8 3/4% Note is registered at the close
of business on February 1, in the case of the February 15 Interest Payment Date,
and August 1, in the case of the August 15 Interest Payment Date. Interest will
accrue from February 16, 1999. Interest will be computed on the basis of a 360-
day year of twelve 30-day months. No Additional Amounts will be payable.
The 8 3/4% Notes will be redeemable as provided in Section 1.02.
The 8 3/4% Notes will not be subject to a sinking fund.
The 8 3/4% Notes are being sold pursuant to Rule 144A and Regulation S
under the Securities Act of 1933. They are entitled to the benefits of the
Registration Rights Agreement and Section 4.03(b) of the Original Indenture.
The 8 3/4% Notes shall, together with any Exchange Securities for which the 8
3/4% Notes are exchanged pursuant
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<PAGE>
to the Registration Rights Agreement, constitute a single series of Securities
under the Indenture.
All payments of principal, premium (if any) and interest on the 8 3/4%
Notes shall be made in accordance with Section 4.02 of the Original Indenture.
The 8 3/4% Notes shall be subject to the restrictions on transfer and
exchange set forth in Section 1.03, which restrictions on transfer and exchange
shall amend, supplement, modify or supersede those contained in Article II of
the Original Indenture to the extent applicable.
SECTION 1.02. Optional Redemption.
The 8 1/2% Notes and the 8 3/4% Notes (together the "Notes") will be
redeemable only in accordance with this Section 1.02.
Each of the 8 1/2% Notes and the 8 3/4% Notes will be redeemable, in whole
or in part, at any time at the option of the Issuers at a redemption price (the
"Redemption Price") equal to the greater of (i) 100% of the principal amount of
the Notes to be redeemed, or (ii) as determined by a Quotation Agent, the sum of
the present values of the remaining scheduled payments of principal and interest
of the Notes to be redeemed discounted to the date of redemption (the
"Redemption Date") on a semiannual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate, plus, in each case, accrued
but unpaid interest to the Redemption Date.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of the Notes to be redeemed.
Unless the Issuers default in payment of the Redemption Price, interest will
cease to accrue on the Notes to be redeemed, or portions thereof called for
redemption on and after the Redemption Date.
CERTAIN DEFINITIONS
"Adjusted Treasury Rate" means, with respect to any Redemption Date, the
rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such Redemption Date, plus 0.25%.
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"Comparable Treasury Issue" means the United States Treasury security
selected by a Quotation Agent as having a maturity comparable to the remaining
term of the 8 1/2% Notes or the 8 3/4% Notes, as applicable, to be redeemed that
would be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of
comparable maturity to the remaining term of such 8 1/2% Notes or the 8 3/4%
Notes, as applicable.
"Comparable Treasury Price" means, with respect to any Redemption Date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such Redemption Date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, (a) the average
of the Reference Treasury Dealer Quotations for such Redemption Date or (b) if
the Issuers obtain only one Reference Treasury Dealer Quotation, the Reference
Treasury Dealer Quotation.
"Quotation Agent" means one of the Reference Treasury Dealers appointed by
the Issuers and certified to the Trustee by the Issuers.
"Reference Treasury Dealer" means each of Chase Securities Inc.,
NationsBanc Montgomery Securities LLC, ABN AMRO Incorporated, BNY Capital
Markets, Inc., First Chicago Capital Markets, Inc. and J.P. Morgan Securities
Inc. and their respective successors; provided, however, that if any of the
foregoing shall cease to be a primary U.S. Government Securities dealer in New
York City (a "Primary Treasury Dealer"), the Issuers shall substitute therefor
another Primary Treasury Dealer and certify same to the Trustee.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Issuers and certified to the Trustee by the Issuers, of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case as a percentage
of its principal amount) quoted in writing to the Issuers by such Reference
Treasury Dealer at 5:00 p.m. on the third Business Day preceding such Redemption
Date.
5
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SECTION 1.03 Form; Restrictions on Transfer and Exchange.
(a) Rule 144A Global Notes. The Notes offered and sold to "qualified
institutional buyers" (which term shall have the meaning assigned to it in Rule
144A under the Securities Act of 1933 (the "Act")) in the United States of
America in reliance on Rule 144A will be issued as permanent Global Securities
(the "Rule 144A Global Notes"), without interest coupons, substantially in the
form of Exhibit A. The Rule 144A Global Notes will be duly executed by the
Issuers, authenticated by the Trustee and deposited with the Trustee, on behalf
of DTC.
(b) Regulation S Global Notes. Notes offered and sold in offshore
transactions to Non-U.S. Persons (which term shall have the meaning assigned to
it in Regulation S under the Act ("Regulation S") in reliance on Regulation S
will initially be issued in the form of one or more registered notes in
temporary global form, without interest coupons (collectively, the "Regulation S
Temporary Global Notes"), substantially in the form of Exhibit A hereto.
Beneficial interests in the Regulation S Temporary Global Notes will be
exchanged for beneficial interests in a corresponding note in permanent global
form (the "Regulation S Permanent Global Notes" and, together with the
Regulation S Temporary Global Notes, the "Regulation S Global Notes") within a
reasonable period after the expiration of the Restricted Period (as defined
below) upon certification that the beneficial interests in the Regulation S
Temporary Global Notes are owned by either Non-U.S. Persons or U.S. persons who
purchased such interests pursuant to an exemption from, or in transactions not
subject to, the registration requirements of the Act.
Each Regulation S Global Note will be deposited with, or on behalf of, a
custodian for DTC for credit to the respective accounts of the purchasers (or to
such other accounts as they may direct) at Morgan Guaranty Trust Company of New
York, Brussels Office, as operator of the Euroclear System ("Euroclear"), or
Cedel Bank, societe anonyme ("Cedel"). Prior to the 40th day after the later of
the commencement of the offering of the Notes and February 16, 1999 (such period
through and including such 40th day, the "Restricted Period"), interests in the
Regulation S Temporary Global Notes may only be held through Euroclear or Cedel
(as indirect participants in DTC) unless exchanged for interests in the Rule
144A Global Notes.
(c) Exchanges Among the Global Notes. Prior to the expiration of the
Restricted Period, transfers by an owner of a beneficial interest in the
Regulation S Temporary Global Notes to a transferee who takes delivery of such
interest through the applicable Rule 144A Global Note will be made only in
accordance with applicable procedures and upon receipt by the
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Trustee of a written certification from the transferor of the beneficial
interest substantially in the form of Exhibit B hereto.
Transfers by an owner of a beneficial interest in a Rule 144A Global
Note to a transferee who takes delivery of such interest through a Regulation S
Global Note, whether before or after the expiration of the Restricted Period,
will be made only upon receipt by the Trustee of a certification from the
transferor substantially in the form of Exhibit C hereto.
ARTICLE II
SECTION 2.01. All moneys paid by the Issuers to the Trustee or a Paying
Agent for the payment of principal of (or premium, if any) or interest, if any,
on any Note that remains unclaimed for two years after such principal, premium
or interest becomes due and payable will be repaid to the Issuers, and the
holders of such Notes will (subject to applicable abandoned property or similar
laws) thereafter, as unsecured general creditors, look only to the Issuers.
SECTION 2.02. The recitals in this First Supplemental Indenture are made
by the Issuers only and not by the Trustee, and all of the provisions contained
in the Original Indenture in respect of the rights, privileges, immunities,
powers and duties of the Trustee shall be applicable in respect of the 8 1/2%
Notes or the 8 3/4% Notes, as applicable, and of this First Supplemental
Indenture as fully and with like effect as if set forth herein in full.
SECTION 2.03. The Original Indenture is in all respects ratified and
confirmed, and the Original Indenture and this First Supplemental Indenture
shall be read, taken and construed as one and the same instrument; provided
that, in case of conflict between this First Supplemental Indenture and the
Original Indenture, this First Supplemental Indenture shall control.
SECTION 2.04. This First Supplemental Indenture may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts shall together constitute one and the same
instrument.
SECTION 2.05. Nothing in the Indenture expressed or implied is intended or
shall be construed to confer upon, or to give or grant to, any person or entity,
other than the Issuers, the Trustee, the Paying Agent and the registered owners
of the Notes, any right, remedy or claim under or by reason of the Indenture or
any covenant, condition or stipulation hereof, and all covenants, stipulations,
promises and agreements in the Indenture contained by and on behalf of
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<PAGE>
the Issuers shall be for the sole and exclusive benefit of the Issuers, the
Trustee, the Paying Agent and the registered owners of the Notes.
SECTION 2.06. Neither the Issuers nor the Trustee will have any
responsibility for the performance of DTC, Euroclear or Cedel, or any of their
participants, direct or indirect, of their respective obligations under the
rules and procedures governing their operations.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed as of the day and year first above written.
EQUISTAR CHEMICALS, LP
By: /s/ Gerald A. O'Brien
Name: Gerald A. O'Brien
Title: Vice President and General
Counsel
EQUISTAR FUNDING CORPORATION
By: /s/ Gerald A. O'Brien
Name: Gerald A. O'Brien
Title: Vice President and General
Counsel
THE BANK OF NEW YORK, AS TRUSTEE
By: /s/ Van K. Brown
Name: Van K. Brown
Title: Assistant Vice President
9
<PAGE>
EXHIBIT A
FORM OF NOTE
[FACE OF SECURITY]
[Rule 144A Global Note]
[Regulation S Temporary Global Note]
[Regulation S Permanent Global Note]
[THIS GLOBAL NOTE IS A TEMPORARY GLOBAL NOTE FOR PURPOSES OF
REGULATIONS UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). NEITHER THIS TEMPORARY GLOBAL NOTE NOR ANY INTEREST HEREIN
MAY BE OFFERED, SOLD, OR DELIVERED, EXCEPT AS PERMITTED BELOW.
NO BENEFICIAL OWNERS OF THIS TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF PRINCIPAL OR INTEREST HEREON UNLESS THE REQUIRED
CERTIFICATIONS HAVE BEEN DELIVERED PURSUANT TO THE TERMS OF THE INDENTURE (AS
DEFINED HEREAFTER).]/1/
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUERS OR ANY
AFFILIATE OF THE ISSUERS WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY) ONLY (A) TO THE ISSUERS, (B) PURSUANT TO A REGISTRATION STATEMENT
THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A OR (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, SUBJECT TO
THE ISSUERS' AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSE (D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS
LEGEND WILL BE
- ------------
/1/ To be included in a Regulation S Temporary Global Note.
<PAGE>
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
[Unless and until it is exchanged in whole or in part for Securities
in definitive form, this Security may not be transferred except as a whole by
the Depositary to a nominee of the Depositary or by a nominee of the Depositary
to the Depositary or another nominee of the Depositary or by the Depositary or
any such nominee to a successor Depositary or a nominee of such successor
Depositary. The Depository Trust Company (55 Water Street, New York, New York)
("DTC"), shall act as the Depositary until a successor shall be appointed by the
Issuers and the Registrar. Unless this certificate is presented by an
authorized representative of DTC to the Issuers or their agent for registration
of transfer, exchange or payment, and any certificate issued is registered in
the name of Cede & Co. or such other name as may be requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or such other
entity as may be requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.]/2/
- ------------
/2/ To be included in any Global Note.
2
<PAGE>
EQUISTAR CHEMICALS, LP
EQUISTAR FUNDING CORPORATION
____% NOTE DUE ______
No. ___ CUSIP No. _________
$
Equistar Chemicals, LP, a Delaware limited partnership (the
"Partnership," which term includes any successor Person under the Indenture
hereinafter referred to), and Equistar Funding Corporation, a Delaware
corporation (the "Corporation," which term includes any successor person under
the Indenture hereinafter referred to, and, together with the Partnership, the
"Issuers"), for value received promises to pay to _________ or registered
assigns, the principal sum of_______________ Dollars[, or such greater or lesser
amount as indicated on the Schedule of Exchanges of Securities hereto,]/2/ on
February 15, _____.
Interest Payment Dates: February 15 and August 15
Record Dates: February 1 and August 1
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
IN WITNESS WHEREOF, each of the Partnership and the Corporation has
caused this Security to be signed manually or by facsimile by their respective
duly authorized officers.
Dated: February 16, 1999
EQUISTAR CHEMICALS, LP
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
- ---------------
/2/ To be included in any Global Note.
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EQUISTAR FUNDING CORPORATION
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
Certificate of Authentication:
This is one of the Securities of the series
designated therein referred to in the within-
mentioned Indenture.
THE BANK OF NEW YORK
By: Dated: February 16, 1999
-----------------------------------
Authorized Signatory
4
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[REVERSE OF SECURITY]
EQUISTAR CHEMICALS, LP
EQUISTAR FUNDING CORPORATION
____% NOTE DUE _____
This Security is one of a duly authorized issue of ____% Notes Due
_____ (the "Securities") of Equistar Chemicals, LP, a Delaware limited
partnership (the "Partnership") and Equistar Funding Corporation, a Delaware
corporation (the "Corporation" and together referred to as the "Issuers").
1. Interest. The Issuers promise to pay interest on the principal
amount of this Security at ____% per annum from February 16, 1999 until
maturity. The Issuers will pay interest semiannually on February 15 and August
15 of each year (each an "Interest Payment Date"), or if any such day is not a
Business Day, on the next succeeding Business Day. Interest on the Securities
will accrue from the most recent Interest Payment Date on which interest has
been paid or, if no interest has been paid, from February 16, 1999; provided
that if there is no existing Default in the payment of interest, and if this
Security is authenticated between a record date referred to on the face hereof
and the next succeeding Interest Payment Date, interest shall accrue from such
next succeeding Interest Payment Date; provided, further, that the first
Interest Payment Date shall be August 15, 1999. The Issuers shall pay interest
on overdue principal from time to time on demand at a rate equal to the interest
rate then in effect; they shall pay interest on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. Method of Payment. The Issuers will pay interest on the
Securities (except defaulted interest) to the Persons who are registered Holders
of Securities at the close of business on the record date next preceding the
Interest Payment Date, even if such Securities are canceled after such record
date and on or before such Interest Payment Date. The Holder must surrender
this Security to a Paying Agent to collect principal payments. The Issuers will
pay the principal of and interest on the Securities in money of the United
States of America that at the time of payment is legal tender for payment of
public and private debts. The Issuers, however, may pay such amounts by check
payable in such money. The Issuers may make payments in respect of the
Securities evidenced by a Global Security (including principal, premium, if any,
and interest) by wire transfer of immediately available funds to the accounts
specified by the Holder of the Global Security. In all other cases, payment of
interest may be made at the option of the Issuers by check to a Holder's
registered address.
3. Paying Agent and Registrar. Initially, The Bank of New York (the
"Trustee"), the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Issuers may change any Paying Agent, Registrar, co-registrar or
additional paying agent without notice to any Holder. The Partnership, the
Corporation, or any of the Partnership's subsidiaries may act in any such
capacity.
4. Indenture. The Issuers issued the Securities under an Indenture
dated as of January 15, 1999 among the Partnership, the Corporation and the
Trustee, as supplemented by the First Supplemental Indenture dated as of
February 16, 1999 (the "Indenture"). The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb) (the
"TIA"), as in
1
<PAGE>
effect on the date of execution of the Indenture. The Securities are subject to
all such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. The Securities are unsecured general obligations of the
Issuers and are unlimited in aggregate principal amount. The Indenture provides
for the issuance of other series of debt securities (including the Securities,
the "Debt Securities") thereunder.
5. Denominations, Transfer, Exchange. The Securities are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Securities may be registered and
Securities may be exchanged as provided in the Indenture. The Registrar and the
Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not exchange or register
the transfer of any Securities during the period between a record date and the
corresponding Interest Payment Date or of any Security selected for redemption,
except the unredeemed portion of any Security being redeemed in part.
6. Persons Deemed Owners. The registered Holder of a Security shall
be treated as its owner for all purposes.
7. Redemption. The Securities will be redeemable, in whole or in
part, at any time at the option of the Issuers, upon not less than 30 nor more
than 60 days' prior notice as provided in the Indenture, at a redemption price
(the "Redemption Price") equal to the greater of (i) 100% of the principal
amount of the Securities to be redeemed or (ii) as determined by a Quotation
Agent, the sum of the present values of the remaining scheduled payments of
principal and interest on the Securities to be redeemed discounted to the date
of redemption (the "Redemption Date") on a semiannual basis (assuming 360-day
year consisting of twelve 30-day months) at the Adjusted Treasury Rate (as
hereafter defined), plus, in each case, accrued but unpaid interest to the
Redemption Date.
The Adjusted Treasury rate means, with respect to any Redemption Date,
the rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue (as hereafter defined), assuming a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price (as hereafter defined) for such
Redemption Date, plus 0.25%.
Comparable Treasury Issue means the United States Treasury security
selected by a Quotation Agent (as hereafter defined) as having a maturity
comparable to the remaining term of the Securities to be redeemed that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of such Securities.
Comparable Treasury Price means, with respect to any Redemption Date,
(i) the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such Redemption Date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, (a) the average
of the Reference Treasury Dealer Quotations (as hereafter defined) for such
Redemption Date or (b) if the Issuers obtain only one Reference Treasury Dealer
Quotation, the Reference Treasury Dealer Quotation.
2
<PAGE>
Quotation Agent means one of the Reference Treasury Dealers appointed
by the Issuers and certified to the Trustee by the Issuers.
Reference Treasury Dealer means each of Chase Securities Inc.,
NationsBanc Montgomery Securities LLC, ABN AMRO Incorporated, BNY Capital
Markets, Inc., First Chicago Capital Markets, Inc. and J.P. Morgan Securities
Inc. and their respective successors; provided, however, that if any of the
foregoing shall cease to be a primary U.S. Government Securities dealer in New
York City (a "Primary Treasury Dealer"), the Issuers shall substitute therefor
another Primary Treasury Dealer and certify same to the Trustee.
Reference Treasury Dealer Quotations means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Issuers and certified to the Trustee by the Issuers, of the bid and asked
priced for the Comparable Treasury Issue (expressed in each case as a percentage
of its principal amount) quoted in writing to the Issuers by such Reference
Treasury Dealer at 5:00 p.m. on the third Business Day preceding such Redemption
Date.
8. Amendments and Waivers. Subject to certain exceptions and
limitations, the Indenture or the Securities may be amended or supplemented with
the consent of the Holders of at least a majority in aggregate principal amount
of the then outstanding Debt Securities of all series of Debt Securities
affected by such amendment or supplement (acting as one class), and any existing
or past Default or Event of Default under, or compliance with any provision of,
the Indenture may be waived (other than any continuing Default or Event of
Default in the payment of the principal of or premium, if any, or interest on
the Securities) by the Holders of at least a majority in principal amount of the
then outstanding Debt Securities of any series or of all series (acting as one
class) in accordance with the terms of the Indenture. Without the consent of
any Holder, the Partnership, the Corporation and the Trustee may amend or
supplement the Indenture or the Securities or waive any provision of either, to
cure any ambiguity, omission, defect or inconsistency (provided such action does
not adversely affect in any material respect the interests of the Holders); to
comply with the provisions of the Indenture relating to merger, consolidation
and certain other transactions; to provide for uncertificated Securities in
addition to or in place of certificated Securities or to provide for the
issuance of bearer securities; to provide any security for the Securities or to
add guarantees of the Securities; to comply with any requirement in order to
effect or maintain the qualification of the Indenture under the TIA; to add to
the covenants of the Issuers for the benefit of the Holders of the Securities,
or to surrender any right or power conferred by the Indenture upon the Issuers;
to add any additional Events of Default with respect to all or any series of the
Debt Securities; to change or eliminate any of the provisions of the Indenture,
provided that any such change or elimination shall become effective only when
there is no outstanding Debt Security of any series created prior to the
execution of such amendment or supplemental indenture that is adversely affected
in any material respect by such changes in or elimination of such provisions; to
establish the form or terms of Debt Securities of any series; to supplement any
of the provisions of the Indenture to such extent as shall be necessary to
permit or facilitate the defeasance and discharge of the Securities pursuant to
the Indenture, provided that any such action shall not adversely affect the
interest of the Holders of the Securities or any other series of Debt Securities
in any material respect; to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee with respect to the Securities and
to add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
thereunder by more than one Trustee, pursuant to the requirements of the
Indenture; to provide for the issuance of Exchange Securities (as defined in the
Indenture) pursuant to the Registration Rights Agreement (as defined in the
Indenture); or to make any other change that does not adversely affect the
rights of any Holder.
3
<PAGE>
The right of any Holder to participate in any consent required or
sought pursuant to any provision of the Indenture (and the obligation of the
Issuers to obtain any such consent otherwise required from such Holder) may be
subject to the requirement that such Holder shall have been the Holder of record
of any Securities with respect to which such consent is required or sought as of
a date fixed in accordance with the terms of the Indenture.
Without the consent of each Holder affected, the Issuers may not (i)
change the Stated Maturity of the principal of (or premium, if any, on) or any
installment of interest on any Security, or reduce the principal amount thereof
(or any premium, if any, thereon) or the rate of interest, if any, thereon, or
adversely affect the right of repayment, if any, at the option of the Holder, or
change any Place of Payment where any Security or any premium or interest
thereon is payable, or impair the right to institute suit for the enforcement of
any such payment on or after the Stated Maturity thereof (or on or after any
Redemption Date or Repayment Date); (ii) reduce the aforesaid percentage in
aggregate principal amount of Debt Securities, the consent of the Holders of
which is necessary to execute any supplemental indenture; or (iii) reduce the
percentage in principal amount of outstanding Debt Securities, the consent of
the Holders of which is necessary to modify or waive any Default under the
Indenture.
A supplemental indenture that changes or eliminates any covenant or
other provision of the Indenture which has expressly been included solely for
the benefit of one or more particular series of Debt Securities under the
Indenture, or which modifies the rights of the Holders of Debt Securities of
such series with respect to such covenant or other provision, shall be deemed
not to affect the rights under the Indenture of the Holders of Debt Securities
of any other series.
9. Defaults and Remedies. Events of Default are defined in the
Indenture and generally include: (i) default by the Issuers for 30 days in
payment of any interest on the Securities; (ii) default by the Issuers in any
payment of principal of (or premium, if any, on) the Securities; (iii) default
by the Issuers in observing or performing any of their other covenants or
agreements in, or provisions of, the Securities or in the Indenture which shall
not have been remedied within 60 days after written notice to the Issuers by the
Trustee or to the Issuers and Trustee by the holders of at least 25% in
aggregate principal amount of the Debt Securities then outstanding affected by
such default; or (iv) certain events involving bankruptcy, insolvency or
reorganization affecting the Issuers. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of the outstanding Securities of the series affected by such default (or,
in the case of an Event of Default described in clause (iii) above, if
outstanding Debt Securities of other series are affected by such Default, then
at least 25% in principal amount of the then outstanding Debt Securities so
affected), may declare the principal of and interest on all the Securities to be
immediately due and payable, except that in the case of an Event of Default
arising from certain events of bankruptcy, insolvency or reorganization
affecting the Issuers, all outstanding Securities become due and payable
immediately without further action or notice. The amount due and payable upon
the acceleration of any Security is equal to 100% of the principal amount
thereof plus accrued interest to the date of payment. Holders may not enforce
the Indenture or the Securities except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Securities. Subject to certain limitations, Holders of a
majority in aggregate principal amount of the then outstanding Securities (or
affected Debt Securities) may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or may direct the
Trustee in its exercise of any trust or power conferred on the Trustee. The
Trustee may withhold from Holders notice of any continuing default (except a
default in payment of principal or interest) if it determines that withholding
notice is in their interests. The Issuers must furnish an annual compliance
certificate to the Trustee.
4
<PAGE>
10. Discharge Prior to Maturity. The Indenture with respect to the
Securities shall be discharged and canceled upon the payment of all of the
Securities and shall be discharged except for certain obligations upon the
irrevocable deposit with the Trustee of funds or U.S. Government Obligations
sufficient for such payment.
11. Trustee Dealings with the Issuers. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Issuers or their Affiliates, and may otherwise deal
with the Issuers or their Affiliates, as if it were not Trustee.
12. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Issuers shall not have any liability for any
obligations of the Issuers under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder by accepting a Security waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Securities.
13. Authentication. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
14. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuers have caused
CUSIP numbers to be printed on the Securities as a convenience to the Holders of
the Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the other
identification numbers printed thereon.
15. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
16. Restrictions on Transfer; Additional Rights of Holders of
Transfer Restricted Securities. By its acceptance of any Security bearing a
legend restricting transfer, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in the officers' certificate
executed pursuant to Section 2.04 of the Indenture in respect of the Securities
and such legend and agrees that it will transfer such Security only as provided
in such officers' certificate and in the Indenture. In addition to the rights
provided by Holders of Securities under the Indenture, Holders shall have all
the rights set forth in the Registration Rights Agreement.
THE ISSUERS WILL FURNISH TO ANY HOLDER UPON WRITTEN REQUEST AND
WITHOUT CHARGE A COPY OF THE INDENTURE. REQUEST MAY BE MADE TO:
EQUISTAR CHEMICALS, LP
1221 MCKINNEY
HOUSTON, TEXAS 77010
TELEPHONE: (713) 652-7200
ATTENTION: GENERAL COUNSEL
5
<PAGE>
SCHEDULE OF EXCHANGES OF SECURITIES
The following exchanges of a part of this Global Note for Definitive Notes [or a
part of a Regulation S Global Note]/3/ [or a part of a Rule 144A Global Note]/4/
have been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of Amount of of this Global Signature of
decrease in increase in Note following authorized officer
Principal Amount Principal Amount such decrease of Trustee or
Date of Exchange of this Global Note of this Global Note (or increase) Security Custodian
- ------------------- ------------------- ------------------- ----------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
- -----------------
/3/ To be included in a Rule 144A Global Note.
/4/ To be included in a Regulation S Global Note.
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign
and transfer this Security to_______________________________________________
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint_______________________________________________________
as agent to transfer this Security on the books of the Issuers. The agent may
substitute another to act for him.
- --------------------------------------------------------------------------------
Date: Your Signature:
--------------------- ----------------------------------
(Sign exactly as your name appears on
the face of this Security)
Signature Guarantee:
------------------------------------------------------------
(Participant in a Recognized Signature
Guaranty Medallion Program)
This assignment relates to $_____ principal amount of ___% Notes held
in /5/______ book-entry or /5/ ______ definitive form by _____________________
(the "Transferor").
The Transferor has requested the Trustee by written order to exchange
or register the transfer of a Note or Notes.
In connection with such request and in respect of each such Note, the
Transferor does hereby certify that the Transferor is familiar with the
Indenture, as supplemented, relating to the above-captioned Notes and that the
transfer of this Note does not require registration under the Securities Act (as
defined below) because:/5/
[_] Such Note is being acquired for the Transferor's own account without
transfer.
[_] Such Note is being transferred to the Issuers.
[_] Such Note is being transferred pursuant to a registration statement
that has been declared effective under the Securities Act of 1933, as amended
(the "Securities Act").
[_] Such Note is being transferred to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act), in accordance with Rule 144A
under the Securities Act.
- ------------------
/5/ Fill in blank or check appropriate box, as applicable.
<PAGE>
[_] Such Note is being transferred pursuant to an exemption from
registration in accordance with Rule 904 of Regulation S under the Securities
Act, based upon an opinion of counsel if the Issuers or the Trustee so requests,
together with a certification in substantially the form of attached to the
Indenture.
------------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
---------------------------------------
Name:
Title:
Address:
Date:
--------------------
<PAGE>
EXHIBIT B
FORM OF TRANSFER CERTIFICATE FOR TRANSFER TO QUALIFIED INSTITUTIONAL BUYERS
[Date]
The Bank of New York
Re: __% Notes Due ___ of Equistar Chemicals, LP and Equistar Funding
Corporation
(the "Notes")
Dear Sirs:
Reference is hereby made to the Indenture dated as of January 15, 1999, as
amended and supplemented by the First Supplemental Indenture thereto, and as
from time to time thereafter, (the "Indenture") between Equistar Chemicals, LP
and Equistar Funding Corporation, as issuers, and The Bank of New York, as
Trustee. Capitalized terms used but not defined herein shall have the meanings
given them in the Indenture. This letter relates to $___________ aggregate
principal amount of Notes which are held in the name of [name of transferor]
(the "Transferor") to effect the transfer of such Notes in exchange for an
equivalent beneficial interest in the Rule 144A Global Note.
In connection with such request, and with respect to such Notes, the
Transferor does hereby certify that such Notes are being transferred in
accordance with (i) the transfer restrictions set forth in the Notes and (ii)
Rule 144A under the United States Securities Act of 1933, as amended ("Rule
144A"), to a transferee that the Transferor reasonably believes is purchasing
the Notes for its own account or an account with respect to which the transferee
exercises sole investment discretion, and the transferee, as well as any such
account, is a "qualified institutional buyer" within the meaning of Rule 144A,
in a transaction meeting the
B-1
<PAGE>
requirements of Rule 144A and in accordance with applicable securities laws of
any state of the United States or any other jurisdiction.
You and the issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
Very truly yours,
[Name of Transferor]
By:____________________________
_______________________________
Authorized Signature Signature Medallion Guaranteed
B-2
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH
TRANSFERS PURSUANT TO REGULATION S
[Date]
The Bank of New York
Re: __% Notes Due ___ of Equistar Chemicals, LP and Equistar Funding
Corporation
(the "Notes")
C-1
<PAGE>
Dear Sirs:
In connection with our proposed sale of $________ aggregate principal
amount of the Notes, we confirm that such sale has been effected pursuant to and
in accordance with Regulation S under the United States Securities Act of 1933,
as amended (the "Securities Act"), and, accordingly, we represent that:
(a) the offer of the Notes was not made to a person in the United States;
(b) either (i) at the time the buy order was originated, the transferee
was outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States or (ii)
the transaction was executed in, on or through the facilities of a designated
off-shore securities market and neither we nor any person acting on our behalf
knows that the transaction has been pre-arranged with a buyer in the United
States;
C-2
<PAGE>
(c) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S,
as applicable;
(d) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(e) we are the beneficial owner of the principal owner of Notes being
transferred.
In addition, if the sale is made during a restricted period and the
provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable
thereto, we confirm that such sale has been made in accordance with the
applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be.
C-3
<PAGE>
You and the issuers are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby. Terms used in this certificate have the meanings set
forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:____________________________
_______________________________
Authorized Signature Signature Medallion Guaranteed
C-4
<PAGE>
EXHIBIT 4.3
CONFORMED COPY
================================================================================
CREDIT AGREEMENT
Dated as of November 25, 1997
among
EQUISTAR CHEMICALS, LP, as Borrower
MILLENNIUM AMERICA INC., as Guarantor,
and
THE LENDERS PARTY HERETO
================================================================================
[CS&M Ref. No. 4408-140]
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
SECTION 1.01. Definitions............................................. 1
SECTION 1.02. Accounting Terms........................................ 21
SECTION 1.03. Terms Generally......................................... 22
SECTION 1.04. Classification of Loans and Borrowings.................. 22
ARTICLE II
The Loans
SECTION 2.01. Commitments............................................. 22
SECTION 2.02. Loans................................................... 22
SECTION 2.03. Competitive Bid Procedure............................... 25
SECTION 2.04. Notice of Borrowings.................................... 27
SECTION 2.05. Conversions and Continuations........................... 28
SECTION 2.06. Swingline Loans......................................... 29
SECTION 2.07. Letters of Credit....................................... 31
SECTION 2.08. Fees.................................................... 36
SECTION 2.09. Repayment of Loans; Evidence of Debt.................... 37
SECTION 2.10. Interest on Loans....................................... 38
SECTION 2.11. Interest on Overdue Amounts; Alternative Rate
of Interest............................................ 39
SECTION 2.12. Termination and Reduction of Commitments................ 40
SECTION 2.13. Prepayment of Loans..................................... 41
SECTION 2.14. Reserve Requirements; Change in Circumstances........... 41
SECTION 2.15. Change in Legality...................................... 44
SECTION 2.16. Indemnity............................................... 45
SECTION 2.17. Pro Rata Treatment...................................... 46
SECTION 2.18. Sharing of Setoffs...................................... 46
SECTION 2.19. Taxes................................................... 47
SECTION 2.20. Duty to Mitigate; Assignment of Commitments Under
Certain Circumstances................................. 49
<PAGE>
2
Page
----
ARTICLE III
Representations and Warranties
SECTION 3.01. Organization............................................ 50
SECTION 3.02. Authorization........................................... 50
SECTION 3.03. Absence of Conflicts.................................... 50
SECTION 3.04. Governmental Approvals.................................. 51
SECTION 3.05. Enforceability.......................................... 51
SECTION 3.06. Financial Statements.................................... 51
SECTION 3.07. Material Adverse Effect................................. 52
SECTION 3.08. Litigation.............................................. 52
SECTION 3.09. Compliance with Laws and Agreements..................... 53
SECTION 3.10. Federal Reserve Regulations............................. 53
SECTION 3.11. Tax Returns............................................. 53
SECTION 3.12. Employee Benefit Plans.................................. 53
SECTION 3.13. Accuracy of Information................................. 54
SECTION 3.14. Investment Company Act; Public Utility Holding
Company Act........................................... 54
SECTION 3.15. Environmental and Safety Matters........................ 54
SECTION 3.16. Title to Properties..................................... 55
SECTION 3.17. Senior Ranking.......................................... 55
SECTION 3.18 Representations of MAI.................................. 55
ARTICLE IV
Conditions of Lending
SECTION 4.01. All Borrowings.......................................... 55
SECTION 4.02. Effective Date.......................................... 57
ARTICLE V
Affirmative Covenants
SECTION 5.01. Existence............................................... 59
SECTION 5.02. Businesses and Properties............................... 59
SECTION 5.03. Insurance............................................... 59
SECTION 5.04. Taxes................................................... 59
SECTION 5.05. Financial Statements, Reports, etc...................... 59
SECTION 5.06. Litigation and Other Notices............................ 61
SECTION 5.07. ERISA................................................... 61
SECTION 5.08. Access to Premises and Records.......................... 62
SECTION 5.09. Compliance with Laws.................................... 62
SECTION 5.10. Environmental Compliance................................ 62
<PAGE>
3
Page
----
ARTICLE VI
Negative Covenants
SECTION 6.01. Liens................................................... 63
SECTION 6.02. Sale and Leaseback Transactions......................... 66
SECTION 6.03. Subsidiary Indebtedness and Preferred Stock............. 67
SECTION 6.04. Leverage Ratio.......................................... 67
SECTION 6.05. Interest Coverage Ratio................................. 67
SECTION 6.06. Consolidations, Mergers, Sales of Assets................ 67
SECTION 6.07. Change of Business...................................... 68
SECTION 6.08. Use of Proceeds......................................... 69
SECTION 6.09. Restrictive Agreements.................................. 69
ARTICLE VII
Events of Default........................... 69
ARTICLE VIII
Administrative Agents......................... 73
ARTICLE IX
Guarantee............................... 76
ARTICLE X
Miscellaneous
SECTION 10.01. Notices................................................ 77
SECTION 10.02. No Waivers; Amendments................................. 79
SECTION 10.03. Payments............................................... 80
SECTION 10.04. Governing Law; Submission to Jurisdiction.............. 80
SECTION 10.05. Expenses; Documentary Taxes; Indemnity................. 81
SECTION 10.06. Survival of Agreements, Representations and
Warranties, etc....................................... 82
SECTION 10.07. Successors and Assigns................................. 82
SECTION 10.08. Right of Setoff........................................ 86
<PAGE>
4
Page
----
SECTION 10.09. Severability........................................... 87
SECTION 10.10. Cover Page, Table of Contents and Section Headings..... 87
SECTION 10.11. Counterparts; Effectiveness............................ 87
SECTION 10.12. WAIVER OF JURY TRIAL................................... 87
SECTION 10.13. Entire Agreement....................................... 88
SECTION 10.14 Confidentiality........................................ 87
SECTION 10.15. Limitation on Recourse to General Partners; Pari Passu
Obligations............................................ 88
Schedules
Schedule 2.01 Lenders' Commitments
Exhibits
Exhibit A Form of Assignment and Acceptance
Exhibit B Form of Revolving Borrowing Request
Exhibit C-1 Form of Competitive Bid Request
Exhibit C-2 Form of Notice of Competitive Bid Request
Exhibit C-3 Form of Competitive Bid
Exhibit C-4 Form of Competitive Bid Accept/Reject Letter
Exhibit D Form of Letter of Credit Application
Exhibit E-1 Opinion of Baker & Botts L.L.P., counsel for the Borrower
Exhibit E-2 Opinion of Kerry Galvin, Esq., General Counsel
of Lyondell GP
Exhibit E-3 Opinion of George H. Hempstead, III, Esq., General
Counsel of MAI
<PAGE>
CREDIT AGREEMENT dated as of November 25, 1997, among
EQUISTAR CHEMICALS, LP, a Delaware limited partnership;
MILLENNIUM AMERICA INC., a Delaware corporation, as Guarantor;
the lenders from time to time party hereto, initially consisting
of those listed on Schedule 2.01 hereto; BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION ("BofA"), as Servicing Agent and
Documentation Agent; THE CHASE MANHATTAN BANK ("Chase"), as
Syndication Agent; and BofA and Chase as administrative agents
(in such capacity, the "Administrative Agents").
The Borrower (such term and each other capitalized term used but not
otherwise defined herein having the meaning assigned to it in Article I) has
requested the Lenders to extend credit in order to enable it to borrow on a
revolving basis an aggregate principal amount not in excess of $1,250,000,000.
The proceeds of such Borrowings are to be used to finance a $750,000,000 payment
to Millennium at the closing of the Joint Venture, to provide working capital
availability (including the financing of $250,000,000 required by the Borrower
as a result of retention of certain accounts receivable by Millennium
Petrochemicals Inc.) and for general partnership purposes, including non-hostile
acquisitions and capital expenditures. The Lenders are willing to extend such
credit to the Borrower on the terms and subject to the conditions set forth
herein.
Accordingly, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. As used in this Agreement, the following
terms shall have the meanings specified below:
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
"ABR Loan" shall mean any Revolving Loan bearing interest at a rate
determined by reference to the Alternate Base Rate in accordance with Article
II.
<PAGE>
2
"Acceptable Subordinated Loan" shall mean any loan to the Borrower
from a Partner or an Affiliate of a Partner (other than the Borrower or a
Subsidiary), but only to the extent that (a) such loan does not mature, and no
payment, prepayment, redemption or repurchase of the principal amount thereof is
required by the terms thereof, prior to the Maturity Date and (b) such loan is
subordinated to the Obligations on terms acceptable to the Administrative
Agents.
"Administrative Fees" shall have the meaning assigned to such term in
Section 2.08(c).
"Affiliate" shall mean, with respect to any person, any other person
which directly or indirectly controls, is under common control with or is
controlled by such person. As used in this definition, "control" (including,
with correlative meanings, "controlled by" and "under common control with")
shall mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise).
"Alternate Base Rate" shall mean, for any day, a rate per annum
(rounded upwards to the next higher 1/16th of 1%) equal to the greater of (a)
the Reference Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day plus 1/2 of 1%. If for any reason the Servicing
Agent shall have determined (which determination shall be conclusive absent
manifest error) that it is unable to ascertain the Federal Funds Effective Rate
for any reason, including, without limitation, the inability of the Servicing
Agent to obtain sufficient bids in accordance with the terms hereof, the
Alternate Base Rate shall be determined without regard to clause (b) of the
first sentence of this definition until the circumstances giving rise to such
inability no longer exist.
"Applicable Lending Office" shall mean, with respect to each Lender,
(i) such Lender's domestic lending office in the case of an ABR Loan, a NIBOR
Loan or a Fixed Rate Loan or (ii) such Lender's LIBOR Lending Office in the case
of a LIBOR Loan.
"Applicable Percentage" shall mean, for any day, with respect to any
LIBOR Loan (other than any Competitive Loan) or NIBOR Loan, or with respect to
the Facility Fee, as the case may be, the applicable percentage set forth below
under the caption
<PAGE>
3
"LIBOR/NIBOR Spread" or "Facility Fee Percentage", as the case may be, based
upon the Index Ratings:
Facility
Index LIBOR/NIBOR Fee
Ratings Spread Percentage
------- ------ -----------
- ----------------------------------------------------------------------
Category 1 .170% .080%
A-/A3 or higher
- ----------------------------------------------------------------------
Category 2 .200% .100%
BBB+/Baa1
- ----------------------------------------------------------------------
Category 3 .275% .125%
BBB/Baa2
- ----------------------------------------------------------------------
Category 4 .350% .150%
BBB-/Baa3
- ----------------------------------------------------------------------
Category 5 .450% .200%
BB+/Ba1
- ----------------------------------------------------------------------
Category 6 .500% .250%
BB/Ba2 or lower
- ----------------------------------------------------------------------
For purposes of the foregoing, (i) if either Moody's or S&P shall not
have in effect an Index Rating (other than by reason of the circumstances
referred to in the last sentence of this definition), then such rating agency
shall be deemed to have established an Index Rating in Category 6; (ii) if the
Index Ratings established or deemed to have been established by Moody's and S&P
shall fall within adjacent Categories, the Applicable Percentage shall be based
on the higher of the two ratings; provided, that if the ratings established or
deemed to have been established by Moody's and S&P differ by two or more
Categories, the Applicable Percentage shall be based on the Category next below
that in which the higher rating falls; and (iii) if the Index Ratings
established or deemed to have been established by Moody's and S&P shall be
changed (other than as a result of a change in the rating system of Moody's or
S&P), such change shall be effective as of the date on which it is first
announced by the applicable rating agency. Each change in the Applicable
Percentage shall apply during the period commencing on the effective date of
such change and ending on the date immediately preceding the effective date of
the next such change. If the rating system of Moody's or S&P shall change, or
if either such rating agency shall cease to be in the business of rating
corporate debt obligations, the Borrower and the Administrative Agents shall
negotiate in good faith to amend this definition to reflect such changed rating
system or the non-availability of ratings from such rating agency and, pending
the effectiveness of any such amendment, the Applicable Percentage shall be
determined by reference to the Index Rating of such rating agency most
<PAGE>
4
recently in effect prior to such change or cessation. Notwithstanding any other
provision of this definition, if the Index Ratings at any time in effect shall
be the ratings applicable to the Assumed Lyondell Debt and the Administrative
Agents or the Required Lenders shall notify the Borrower that, in their good
faith judgment, the Index Ratings are affected by the status of Lyondell as an
obligor on the Assumed Lyondell Debt in such a manner that they do not fairly
represent the Borrower's creditworthiness, the Borrower shall within 180 days
either (i) obtain from S&P and Moody's ratings or indicative ratings of the sort
referred to in clauses (a) and (b) of the definition of "Index Ratings" or (ii)
agree with the Lenders on amendments to the definition of "Applicable
Percentage" that in the judgment of the Borrower and the Lenders are appropriate
to reflect the creditworthiness of the Borrower (which agreement will be set
forth in an amendment to this Agreement). Pending the obtaining of such ratings
or indicative ratings or such agreement, the Applicable Percentage will be
determined by reference to the Index Ratings in effect on the 60th day prior to
the giving of such notice by the Administrative Agents or the Required Lenders.
"Asset Contribution Agreements" shall mean (i) the Asset Contribution
Agreement between Lyondell, Lyondell LP and the Borrower and (ii) the Asset
Contribution Agreement between Millennium Petrochemicals Inc., Millennium LP and
the Borrower, each dated as of the Effective Date and as amended, supplemented
or otherwise modified from time to time.
"Assignment and Acceptance" shall mean an assignment and acceptance
entered into by a Lender and an assignee, in the form of Exhibit A.
"Assumed Lyondell Debt" shall mean outstanding Indebtedness of
Lyondell in an aggregate principal amount of $745,000,000 outstanding under the
Lyondell Indentures and to be assumed by the Borrower.
"Availability Period" shall mean the period from and including the
Effective Date to but excluding the earlier of the Maturity Date and the date of
termination of the Commitments.
"Board" shall mean the Board of Governors of the Federal Reserve
System of the United States.
"Borrower" shall mean Equistar Chemicals, LP, a Delaware limited
partnership.
"Borrowing" shall mean (a) a Loan or group of Loans of a single Type
made by the Lenders on a single date and as to which a single Interest Period is
in effect, (b) a Competitive Loan or group of Competitive Loans made by the
Lender or Lenders whose
<PAGE>
5
Competitive Bids have been accepted pursuant to Section 2.03 and made on a
single date and as to which a single Interest Period is in effect or (c) a
Swingline Loan.
"Business Day" shall mean any day which is not a Saturday, Sunday or
legal holiday in the State of New York or the State of Texas on which banks are
open for business in New York City and Houston; provided, however, that (i) when
used in connection with a LIBOR Loan, the term "Business Day" shall also exclude
any day on which banks are not open for dealings in deposits in Dollars in the
London interbank market and (ii) when used in connection with a NIBOR Loan, the
term "Business Day" shall also exclude any day on which the lending offices of
the Lender that is the Servicing Agent where its Eurodollar funding operations
are customarily conducted are closed.
"Capitalized Lease Obligations" of any person shall mean obligations
of such person and its consolidated subsidiaries to pay rent or other amounts
under any lease of (or other arrangement conveying the right to use) real and/or
personal property, which obligations are accounted for as a capital lease on the
consolidated balance sheet of such person, and the amount of such obligations
shall be the capitalized amount thereof determined in accordance with GAAP.
"Cash Management Subsidiary" shall mean a Subsidiary engaged solely in
borrowing, lending and investing in the Borrower and its Subsidiaries and short-
term investment activities in connection with the Borrower and its Subsidiaries
and that holds no material assets other than cash, cash equivalents and
intercompany receivables.
A "Change in Control" shall occur if at any time Lyondell and
Millennium cease to own in the aggregate partnership interests representing at
least a majority of the total equity interest and voting power of the Borrower.
"Class", when used in respect of any Loan or Borrowing, shall refer to
whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans,
Competitive Loans or Swingline Loans.
"Closing Date" shall mean the date of this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as the same may
be amended from time to time.
"Commitment" shall mean, with respect to each Lender, the commitment
of such Lender to make Revolving Loans and to acquire participations in Letters
of Credit and Swingline Loans hereunder, expressed as an amount representing the
maximum
<PAGE>
6
aggregate amount of such Lender's Revolving Credit Exposure hereunder, as such
commitment may be (a) reduced from time to time pursuant to Section 2.11 and (b)
reduced or increased from time to time pursuant to assignments by or to such
Lender pursuant to Section 10.07. The initial amount of each Lender's Commitment
is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to
which such Lender shall have assumed its Commitment, as applicable. The initial
aggregate amount of the Lenders' Commitments is $1,250,000,000.
"Competitive Bid" shall mean an offer by a Lender to make a
Competitive Loan pursuant to Section 2.03.
"Competitive Bid Accept/Reject Letter" shall mean a notification made
by the Borrower pursuant to Section 2.03(d) in the form of Exhibit C-4.
"Competitive Bid Rate" shall mean, as to any Competitive Bid made by
a Lender pursuant to Section 2.03(b), (i) in the case of a LIBOR Loan, the
Margin and (ii) in the case of a Fixed Rate Loan, the fixed rate of interest
offered by the Lender making such Competitive Bid. The Competitive Bid Rate
submitted by any Lender shall include any and all reserve requirement costs of
such Lender of the type referred to in Section 2.14(a) which shall be in effect
on the date of the submission of such Bid.
"Competitive Bid Request" shall mean a request made pursuant to
Section 2.03 in the form of Exhibit C-1.
"Competitive Borrowing" shall mean a Borrowing consisting of a
Competitive Loan or concurrent Competitive Loans from the Lender or Lenders
whose Competitive Bids for such Borrowing have been accepted by the Borrower
under the bidding procedure described in Section 2.03.
"Competitive Loan" shall mean a loan from a Lender to the Borrower
pursuant to the bidding procedure described in Section 2.03. Each Competitive
Loan shall be a LIBOR Competitive Loan or a Fixed Rate Loan.
"Competitive Loan Exposure" shall mean, with respect to any Lender at
any time, the aggregate principal amount at such time of all outstanding
Competitive Loans made by such Lender.
"Confidential Information Memorandum" shall mean the Confidential
Information Memorandum dated October 1997 relating to the Borrower, the
transactions contemplated herein and the Joint Venture.
"Consolidated Net Tangible Assets" shall mean the total amount of
assets of the Borrower and its Subsidiaries (less
<PAGE>
7
applicable depreciation, amortization and other valuation reserves), except to
the extent resulting from the write-ups of capital assets (excluding write-ups
in connection with accounting for acquisitions in conformity with GAAP), after
deducting therefrom all goodwill, trade names, trademarks, patents, unamortized
debt issuance fees and expenses and other like intangibles, determined on a
consolidated basis.
"Credit Event" shall mean any Borrowing (including a Borrowing
resulting from a conversion or continuation of Loans pursuant to Section 2.05)
or any issuance, amendment, renewal or extension of a Letter of Credit.
"Default" shall mean any event which with the giving of notice or
lapse of time or both would constitute an Event of Default.
"Dollars" or "$" shall mean lawful currency of the United States of
America.
"EBITDA" shall mean, with respect to the Borrower and its Subsidiaries
for any period, the sum, without duplication, of (a) Operating Income, (b)
amortization, depreciation and depletion and (c) non-cash compensation expense
(including deferred compensation expense), determined on a consolidated basis;
provided, that for any fiscal quarter in which the Borrower or any Subsidiary
shall incur downtime at or with respect to any plant or manufacturing or
processing unit (as determined in good faith by the Borrower), the Borrower
shall have the right to add up to the lesser of (i) the estimated amount by
which EBITDA is impacted by such downtime or (ii) $20,000,000 to the amount of
EBITDA calculated for such fiscal quarter; provided further, that such addition
may only be made in the calculation of EBITDA for each of two fiscal quarters
during the term of this Agreement and that any such addition may only be made
for one fiscal quarter during any four consecutive fiscal quarters.
"Effective Date" shall mean the first date on which all the conditions
specified in Section 4.01 have been satisfied (or waived in accordance with
Section 10.02).
"Environmental Liability" shall mean any liability, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary
directly or indirectly resulting from or based upon (a) violation of any
Environmental and Safety Laws, (b) the generation, use, handling,
transportation, storage, treatment or disposal of any Hazardous Materials, (c)
exposure to any Hazardous Materials, (d) the release of any Hazardous Materials
into the environment or (e) any
<PAGE>
8
contract, agreement or other consensual arrangement pursuant to which liability
is assumed with respect to any of the foregoing.
"Environmental and Safety Laws" shall have the meaning assigned to
such term in Section 3.16.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same may be amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414 of the Code.
"Event of Default" shall have the meaning specified in Article VII.
"Exchangeable Notes" shall mean the 2.39% Senior Exchangeable Discount
Notes due 2001 of MAI (formerly Hanson America Inc.) (including the Rights
appurtenant thereto issued by Hanson (Bermuda) Limited, which permit the
Exchangeable Notes to be redeemed by MAI and the proceeds thereof to be used by
the holders thereof to purchase American Depositary Shares of Hanson PLC) in an
aggregate outstanding principal amount (including accretion of original issue
discount) of $42,866,000 on the date hereof.
"Excluded Taxes" shall mean, with respect to either Administrative
Agent, the Servicing Agent, any Lender, the Fronting Bank or any other recipient
of any payment to be made by or on account of any obligation of the Borrower
hereunder, (a) income, franchise or doing business taxes imposed on (or measured
by) its net income, or bank share taxes, imposed by the United States of
America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax imposed
by any other jurisdiction in which the Borrower is located and (c) in the case
of a Foreign Lender (other than an assignee pursuant to a request by the
Borrower under Section 2.20(b)), any withholding tax that is imposed on amounts
payable to such Foreign Lender at the time such Foreign Lender becomes a party
to this Agreement (or designates a new lending office) or is attributable to
such Foreign Lender's failure to comply with Section 2.19(e), except to the
extent that such Foreign Lender (or its assignor, if any) was entitled, at the
time of designation of a new lending office (or assignment), to receive
additional amounts from the Borrower with respect to such withholding tax
pursuant to Section 2.19(a).
<PAGE>
9
"Facility Fee" shall have the meaning assigned to such term in Section
2.08(a).
"Federal Funds Effective Rate" shall mean, for any day, a fluctuating
interest rate per annum equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by the Servicing Agent from three Federal funds brokers of recognized
standing selected by it.
"Fees" shall mean the Facility Fee, the Letter of Credit Fees and the
Administrative Fees.
"Financial Officer" of any person shall mean the chief financial
officer, the treasurer or the principal accounting officer of such person.
"Fixed Rate Borrowing" shall mean a Borrowing comprised of Fixed Rate
Loans.
"Fixed Rate Loan" shall mean any Competitive Loan bearing interest at
a fixed percentage rate per annum (expressed in the form of a decimal to no more
than four decimal places) specified by the Lender making such Loan in its
Competitive Bid.
"Foreign Lender" shall mean any Lender that is organized under the
laws of a jurisdiction other than that in which the Borrower is located. For
purposes of this definition, the United States of America, each State thereof
and the District of Columbia shall be deemed to constitute a single
jurisdiction.
"Fronting Bank" shall mean Chase, in its capacity as the issuer of
Letters of Credit hereunder, and its successors in such capacity as provided in
Section 2.07(i). The Fronting Bank may, in its discretion, arrange for one or
more Letters of Credit to be issued by Affiliates of the Fronting Bank, in which
case the term "Fronting Bank" shall include any such Affiliate with respect to
Letters of Credit issued by such Affiliate.
"GAAP" shall mean generally accepted accounting principles applied on
a consistent basis.
"Governmental Authority" shall mean any Federal, state, local or
foreign court or governmental agency, authority, department, instrumentality or
regulatory body.
<PAGE>
10
"Guarantee" of or by any person shall mean any obligation,
contingent or otherwise, of such person guaranteeing or having the economic
effect of guaranteeing any Indebtedness of any other person (the "primary
obligor") in any manner, whether directly or indirectly, and including any
obligation of such person, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or to
purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Indebtedness, (b) to purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness of the
payment of such Indebtedness or (c) to maintain working capital, equity capital
or other financial statement condition or liquidity of the primary obligor so as
to enable the primary obligor to pay such Indebtedness.
"Hazardous Materials" shall mean all substances or wastes of any
nature regulated pursuant to any Environmental and Safety Laws, including all
explosive or radioactive substances or wastes and all hazardous or toxic
substances, wastes or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos containing materials, polychlorinated
biphenyls, radon gas and infectious or medical wastes.
"Illegality" shall have the meaning assigned to such term in Section
2.15(a).
"Indebtedness" of any person shall mean, without duplication, (a) the
outstanding principal amounts of all obligations of such person for borrowed
money (including repurchase obligations), (b) the outstanding principal amounts
of all obligations of such person evidenced by bonds, debentures, notes or
similar instruments or letters of credit in support of bonds, notes, debentures
or similar instruments, (c) all obligations of such person upon which interest
charges are customarily paid, (d) all obligations of such person to pay the
deferred purchase price of property or services under any conditional sale or
other title retention agreement, (e) all obligations of such person issued or
assumed as the deferred purchase price of property or services (other than
accounts payable to suppliers and accrued liabilities (i) that are incurred in
the ordinary course of business and paid within 60 days after the date due or
(ii) that are being contested in good faith by appropriate proceedings and for
which appropriate reserves have been established in accordance with GAAP), (f)
all Capitalized Lease Obligations of such person, (g) all Indebtedness of others
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property or assets owned
or acquired by such person, whether or not the obligations secured thereby have
been assumed and (h) all Guarantees of such person.
<PAGE>
11
"Indemnified Taxes" shall mean Taxes other than Excluded Taxes.
"Index Debt" shall mean senior, unsecured, unguaranteed, non-credit
enhanced long-term debt of the Borrower.
"Index Ratings" shall mean (a) the ratings of S&P and Moody's
applicable on such date to outstanding Index Debt, or (b) if no Index Debt rated
by S&P and Moody's shall be outstanding, any indicative ratings made available
by S&P and Moody's for senior unsecured obligations of the Borrower that would,
if outstanding, constitute Index Debt, or (c) if no ratings or indicative
ratings of the sort referred to in the preceding clauses (a) and (b) shall be
available, the ratings of S&P and Moody's applicable on such date to the Assumed
Lyondell Debt.
"Interest Coverage Ratio" shall mean the ratio of EBITDA to Net
Interest Expense for the Borrower and its Subsidiaries, determined on a
consolidated basis and calculated to exclude interest expense on Acceptable
Subordinated Loans.
"Interest Payment Date" shall mean (a) with respect to any Loan, the
last day of each Interest Period applicable to the Borrowing of which such Loan
is a part and (b) in the case of a LIBOR Loan, a NIBOR Loan or a Fixed Rate Loan
with an Interest Period of more than three months' duration (unless otherwise
specified in the applicable Competitive Bid Request), each day that would have
been an Interest Payment Date had successive Interest Periods of three months'
duration been applicable to such Loan and, in addition, the date of any
continuation or conversion of such Loan with or to a Loan of a different Type.
"Interest Period" shall mean (a) as to any LIBOR Borrowing, the period
commencing on the date of such Borrowing or on the last day of the immediately
preceding Interest Period applicable to such Borrowing, as the case may be, and
ending on the numerically corresponding day (or, if there is no numerically
corresponding day, on the last day) in the calendar month that is 1, 2, 3 or 6
months (or, with the consent of the Servicing Agent, 9 or 12 months) thereafter,
as the Borrower may elect, (b) as to any NIBOR Borrowing, the period commencing
on the date of such Borrowing or on the last day of the immediately preceding
Interest Period applicable to such Borrowing, as the case may be, and ending (i)
on the corresponding day in the week that is 1, 2 or 3 weeks thereafter as the
Borrower may elect or (ii) after such other period of up to one month approved
by the Servicing Agent as the Borrower may elect, (c) as to any ABR Borrowing,
the period commencing on the date of such Borrowing or on the last day of the
immediately preceding Interest Period applicable to such Borrowing, as the case
may be, and ending on the next succeeding March 31, June 30, September 30 or
December 31 or, if earlier, the
<PAGE>
12
date of prepayment or conversion of such Borrowing, (d) as to any Fixed Rate
Borrowing, the period commencing on the date of such Borrowing and ending on the
date specified in the Competitive Bids in which the offers to make the Fixed
Rate Loans comprising such Borrowing were extended, which shall not be earlier
than 7 days after the date of such Borrowing or later than 360 days after the
date of such Borrowing, and (e) as to any Swingline Loan, the period commencing
on the date of such Loan and ending on the date specified by the Borrower as
provided in Section 2.06(b), which shall not be later than 7 Business Days after
the date of such Loan; provided, however, that (i) if any Interest Period would
end on a day that shall not be a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless, in the case of LIBOR Loans
or NIBOR Loans only, such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day, (ii) no Interest Period with respect to any Loan shall
end later than the Maturity Date and (iii) interest shall accrue from and
including the first day of an Interest Period to but excluding the last day of
such Interest Period.
"Joint Proxy Statement" shall mean the Joint Proxy Statement filed by
Lyondell and Millennium with the Securities and Exchange Commission on October
17, 1997.
"Joint Venture" shall mean the combination of certain of Lyondell's
and Millennium's respective petrochemicals businesses to form a joint venture,
which will be organized as a Delaware limited partnership named Equistar
Chemicals, LP and headquartered in Houston, Texas, all on terms and in a manner
not materially inconsistent with the Master Transaction Agreement, the Asset
Contribution Agreements, the Limited Partnership Agreement and the description
thereof in the Joint Proxy Statement.
"LC Disbursement" shall mean a payment made by the Fronting Bank
pursuant to a Letter of Credit.
"LC Exposure" shall mean, at any time, the sum of (a) the aggregate
amount available for drawing (assuming satisfaction of applicable drawing
conditions) under all outstanding Letters of Credit at such time plus (b) the
aggregate amount of all LC Disbursements that have not yet been reimbursed by or
on behalf of the Borrower at such time. The LC Exposure of any Lender at any
time shall be its Pro Rata Percentage of the total LC Exposure at such time.
"Lenders" shall mean the persons listed on Schedule 2.01 and any other
person that shall have become a party hereto pursuant to an Assignment and
Acceptance, other than any such Person that ceases to be party hereto pursuant
to an Assignment
<PAGE>
13
and Acceptance. Unless the context otherwise requires, the term "Lenders"
includes the Swingline Lender.
"Letter of Credit" shall mean any letter of credit issued pursuant to
this Agreement.
"Letter of Credit Fees" shall mean the fees payable under paragraph
(b) of Section 2.08.
"Leverage Ratio" shall mean the ratio of Total Indebtedness (minus
Acceptable Subordinated Debt) to Total Capitalization, determined for the
Borrower and its Subsidiaries at any time on a consolidated basis.
"LIBO Rate" shall mean, with respect to any Borrowing comprised of
LIBOR Loans for any Interest Period, the rate appearing on Page 3750 of the
Telerate Service (or on any successor or substitute page of such Service), or,
if no such page of the Telerate Service shall be available, on the Bloomberg
Screen British Banker's LIBOR fixing, at approximately 11:00 a.m., London time,
two Business Days prior to the commencement of such Interest Period, as the rate
for dollar deposits with a maturity comparable to such Interest Period. In the
event that such rate is not available at such time for any reason, then the
"LIBO Rate" with respect to such Borrowing for such Interest Period shall be the
rate at which dollar deposits of approximately $5,000,000 and for a maturity
comparable to such Interest Period are offered to the principal London office of
the Servicing Agent in immediately available funds by major banks in the London
interbank market at approximately 11:00 a.m., London time, two Business Days
prior to the commencement of such Interest Period.
"LIBOR Borrowing" shall mean a Borrowing comprised of LIBOR Loans.
"LIBOR Competitive Borrowing" shall mean a Competitive Borrowing
comprised of LIBOR Competitive Loans.
"LIBOR Competitive Loan" shall mean any Competitive Loan bearing
interest at a rate determined by reference to the LIBO Rate in accordance with
the provisions of Article II.
"LIBOR Lending Office" shall mean, with respect to each Lender, the
branches or Affiliates of such Lender which such Lender has designated as its
"LIBOR Lending Office" on Schedule 2.01 or, as to any person who becomes a
Lender after the Closing Date, in the Assignment and Acceptance executed by such
person or such other office of such Lender as such Lender may hereafter
designate from time to time as its "LIBOR Lending Office" by notice to the
Borrower, as applicable, and the Servicing Agent.
<PAGE>
14
"LIBOR Loan" shall mean any LIBOR Revolving Loan or any LIBOR
Competitive Loan.
"LIBOR Revolving Borrowing" shall mean a Borrowing comprised of LIBOR
Revolving Loans.
"LIBOR Revolving Loan" shall mean any Revolving Loan bearing interest
at a rate determined by reference to the LIBO Rate in accordance with the
provisions of Article II.
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed
of trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to such asset or
(c) in the case of securities, any purchase option, call or similar right of a
third party with respect to such securities.
"Limited Partnership Agreement" shall mean the Limited Partnership
Agreement dated as of October 10, 1997 and as amended, supplemented or otherwise
modified from time to time, by and among the Borrower, Lyondell GP, Millennium
GP, Lyondell LP and Millennium LP.
"Loan" shall mean a Competitive Loan or a Revolving Loan, whether made
as a LIBOR Loan, a NIBOR Loan, an ABR Loan or a Fixed Rate Loan, or a Swingline
Loan.
"Lyondell" shall mean Lyondell Petrochemical Company, a Delaware
corporation, and its successors and assigns.
"Lyondell GP" shall mean Lyondell Petrochemical G.P., Inc., the wholly
owned subsidiary of Lyondell that serves as one of the general partners of the
Joint Venture, and its successors and assigns.
"Lyondell Indentures" shall mean (i) the indenture dated as of May 31,
1989, as supplemented by the First Supplemental Indenture thereto dated as of
May 31, 1989, between Lyondell, as issuer, and Texas Commerce National Bank
Association, as trustee, providing for the issuance of 9.95% Notes due 1996 and
10.00% Notes due 1999; (ii) the indenture dated as of March 10, 1992, as
supplemented by the First Supplemental Indenture thereto dated as of March 10,
1992, between Lyondell, as issuer, and Continental Bank, National Association,
as trustee, providing for the issuance of 8.25% Notes due 1997 and 9.125% Notes
due 2002; (iii) the indenture dated as of January 29, 1996, as supplemented by
the First Supplemental Indenture thereto, dated as of February 15, 1996, between
Lyondell, as issuer, and Texas Commerce Bank National Association, as trustee,
providing for the issuance of 6.50% Notes due 2006 and 7.55% Debentures due
2026; (iv) the
<PAGE>
15
$200,000,000 of Medium-Term Notes issued by Lyondell on February 20, 1990, and
maturing on various dates from 1998 to 2005; and (v) the $150,000,000 of Medium-
Term Notes issued by Lyondell on August 21, 1991, and maturing on various dates
from 1998 to 2005, each as amended, supplemented or otherwise modified from time
to time.
"Lyondell LP" shall mean Lyondell Petrochemical L.P., Inc., the wholly
owned subsidiary of Lyondell that serves as one of the limited partners of the
Joint Venture, and its successors and assigns.
"MAI" shall mean Millennium America Inc., a Delaware corporation, and
its successors and assigns.
"Margin" shall mean, as to any LIBOR Competitive Loan, the margin
(expressed as a percentage rate per annum in the form of a decimal to no more
than four decimal places) to be added to or subtracted from the LIBO Rate in
order to determine the interest rate applicable to such Loan, as specified in
the Competitive Bid relating to such Loan.
"Margin Stock" shall have the meaning given such term under Regulation
U.
"Master Transaction Agreement" shall mean the Master Transaction
Agreement dated as of July 25, 1997, as amended by the First Amendment thereto
dated as of October 10, 1997 and as further amended, supplemented or otherwise
modified from time to time, between Lyondell and Millennium, pursuant to which
Lyondell and Millennium have agreed to form the Joint Venture.
"Material Adverse Effect" shall mean (a) a materially adverse effect
on the business, assets, operations or financial condition of the Borrower and
its Subsidiaries taken as a whole, (b) material impairment of the ability of the
Borrower to perform any of its obligations under this Agreement or (c) material
impairment of the rights of or benefits available to the Lenders, the
Administrative Agents or the Servicing Agent under this Agreement; provided,
however, that the term "Material Adverse Effect" shall exclude any changes that
both (i) affect the petrochemicals industry as a whole and (ii) would not
reasonably be expected to impair materially the ability of the Borrower to
perform its obligations under this Agreement.
"Material Subsidiary" shall mean (a) any Subsidiary other than
Subsidiaries that, individually or in the aggregate, do not account for more
than 5% of the assets, or more than 5% of the revenues for the four fiscal
quarters most recently ended, of the Borrower and its Subsidiaries on a
consolidated basis, and (b) any Subsidiary that owns a Material Subsidiary;
provided that the term
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16
"Material Subsidiary" shall exclude (i) any Cash Management Subsidiary and (ii)
any Subsidiary engaged solely in the business of purchasing and owning accounts
receivable generated by the Borrower and its other Subsidiaries in connection
with any Securitization Transaction.
"Maturity Date" shall mean the fifth anniversary of the Closing Date.
"Millennium" shall mean Millennium Chemicals Inc., a Delaware
corporation, and its successors and assigns.
"Millennium GP" shall mean Millennium Petrochemicals GP LLC, the
indirect, wholly owned subsidiary of MAI that serves as one of the general
partners of the Joint Venture, and its successors and assigns.
"Millennium Indentures" shall mean (i) the indenture dated as of March
1, 1994, as amended by the First Supplemental Indenture thereto dated as of May
16, 1994, the Second Supplemental Indenture thereto dated as of September 18,
1996 and the Third Supplemental Indenture dated as of October 1, 1996, among
MAI, as issuer, Millennium, as guarantor, and The Bank of New York, as trustee,
providing for the issuance of the Exchangeable Notes; and (ii) the indenture
dated as of November 27, 1996, among MAI, as issuer, Millennium, as guarantor,
and The Bank of New York, as trustee, providing for the issuance of 7% Senior
Notes due November 15, 2006 and 7.625% Senior Debentures due November 15, 2026,
each as amended, supplemented or otherwise modified from time to time.
"Millennium LP" shall mean Millennium Petrochemicals LP LLC, the
indirect, wholly owned subsidiary of MAI that serves as one of the limited
partners of the Joint Venture, and its successors and assigns.
"Moody's" shall mean Moody's Investors Service, Inc., and its
successors.
"Multiemployer Plan" shall mean a multiemployer plan as defined in
Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate (other
than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of
Section 414 of the Code) is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years made or
accrued an obligation to make contributions.
"Net Interest Expense" shall mean, with respect to the Borrower and
its Subsidiaries for any period, (a) the interest expense of the Borrower and
its Subsidiaries, including, without limitation, (i) the amortization of debt
discounts, (ii) the amortization
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17
of all fees (including, without limitation, fees with respect to interest rate
protection agreements) payable in connection with the incurrence of Indebtedness
to the extent included in interest expense and (iii) the portion of any payments
due under any Capitalized Lease Obligation allocable to interest expense, less
(b) the amount of interest income of the Borrower and its Subsidiaries for such
period, in each case determined on a consolidated basis. For purposes of the
fore going, interest expense shall be determined after giving effect to any net
payments made or received by the Borrower and its Subsidiaries with respect to
interest rate protection agreements entered into as a hedge against interest
rate exposure.
"NIBO Rate" shall mean, with respect to any Borrowing comprised of
NIBOR Loans for any Interest Period, an interest rate per annum (rounded
upwards, if necessary, to the next higher 1/16th of 1%) equal to the interest
rate (adjusted for reserve requirements as incurred) at which deposits in
Dollars approximately equal in principal amount to the NIBOR Loan of the
Lender that is the Servicing Agent for which the NIBO Rate is being determined
and for a maturity equal to the applicable Interest Period are offered in
immediately available funds to such Lender by major banks in the New York
interbank market at approximately 10:00 a.m., New York City time, two days prior
to the commencement of such Interest Period.
"NIBOR Borrowing" shall mean a Borrowing comprised of NIBOR Loans.
"NIBOR Loan" shall mean any Revolving Loan bearing interest at a rate
determined by reference to the NIBO Rate in accordance with the provisions of
Article II.
"Obligations" shall mean the obligations of the Borrower under this
Agreement (as the same may hereafter be amended, restated, extended,
supplemented or otherwise modified from time to time) with respect to the due
and punctual payment, whether at maturity, by acceleration or otherwise, of (i)
the principal amount of the Loans, (ii) interest on the Loans, (iii) LC
Disbursements and interest thereon and (iv) all other monetary obligations of
the Borrower, whether for fees, costs, indemnification or otherwise.
"Operating Income" shall mean with respect to the Borrower and its
Subsidiaries for any period the aggregate income (or deficit) of the Borrower
and its Subsidiaries for such period equal to operating revenues and other
proper income less, to the extent included in operating revenues or income, the
aggregate for the Borrower and its Subsidiaries of (i) operating expenses, (ii)
selling, administrative and general expenses and (iii) depreciation, depletion
and amortization of properties.
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18
"Other Taxes" shall mean any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made hereunder or from the execution, delivery
or enforcement of, or otherwise with respect to, this Agreement (but excluding
any Excluded Taxes).
"Partners" shall mean the direct or indirect wholly owned subsidiaries
through which Lyondell and Millennium hold their interests in the Joint Venture.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to
and defined in ERISA and any successor thereto.
"person" shall mean any natural person, judicial entity, corporation,
business trust, joint venture, association, company, limited liability company,
partnership or government, or any agency or political subdivision thereof.
"Plan" shall mean any employee pension benefit plan (as defined in
Section 3(2) of ERISA) (other than a Multiemployer Plan) subject to the
provisions of Title IV of ERISA or Section 412 of the Code with respect to which
the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section
3(5) of ERISA.
"Preferred Stock" of any person shall mean capital stock or other
ownership interests of or in such person of any class or classes (however
designated) that ranks prior, as to the payment of dividends and/or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such person, to shares of capital stock or other
ownership interests of or in any other class of such person. For purposes of
this Agreement, the "amount" of any Preferred Stock shall be the amount payable
to the holder thereof upon the liquidation or dissolution of the issuer thereof.
"Pro Rata Percentage" shall mean, with respect to any Lender, the
percentage of the Total Commitment represented by such Lender's Commitment. If
the Commitments shall have been terminated or shall have expired, the Pro Rata
Percentages shall be determined based upon the Commitments most recently in
effect, giving effect to any subsequent assignments pursuant to Section 10.07.
"Reference Rate" shall mean the rate of interest per annum publicly
announced from time to time by BofA in San Francisco as its "reference rate";
each change in the Reference
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19
Rate shall be effective on the date such change is announced. 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.
"Register" shall have the meaning assigned to such term in Section
10.07(f).
"Regulation G" shall mean Regulation G of the Board, as the same is
from time to time in effect, and all official rulings and interpretations
thereunder or thereof.
"Regulation U" shall mean Regulation U of the Board, as the same is
from time to time in effect, and all official rulings and interpretations
thereunder or thereof.
"Regulation X" shall mean Regulation X of the Board, as the same is
from time to time in effect, and all official rulings and interpretations
thereunder or thereof.
"Related Parties" shall mean, with respect to any specified person,
such person's Affiliates and the respective directors, officers, employees,
agents and advisors of such person and such person's Affiliates.
"Reportable Event" shall mean any reportable event as defined in
Section 4043(c) of ERISA or the regulations issued thereunder with respect to a
Plan (other than a Plan maintained by an ERISA Affiliate that is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the
Code).
"Required Lenders" shall mean Lenders representing at least 51% of the
Total Commitment; provided, however, that for purposes of acceleration of the
Loans pursuant to Article VII or following the termination of the Commitments,
"Required Lenders" shall mean Lenders holding Loans representing at least 51% of
the aggregate principal amount of the Revolving Loans and Competitive Loans
outstanding.
"Responsible Officer" of any person shall mean the chief executive
officer, the president, the treasurer, any assistant treasurer, any vice
president, the chief financial officer or the principal accounting officer of
such person.
"Revolving Borrowing" shall mean a Borrowing consisting of
simultaneous Revolving Loans from each of the Lenders.
"Revolving Borrowing Request" shall mean a request made pursuant to
Section 2.04 in the form of Exhibit B.
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20
"Revolving Credit Exposure" shall mean, with respect to any Lender at
any time, the sum of the outstanding principal amount of such Lender's Revolving
Loans and its LC Exposure and Swingline Exposure at such time.
"Revolving Loan" shall mean a Loan made pursuant to Section 2.02(a).
"S&P" means Standard & Poor's Ratings Group.
"SEC" shall mean the Securities and Exchange Commission.
"Securitization Transaction" shall mean any transaction in which the
Borrower or any Subsidiary sells or otherwise transfers accounts receivable (a)
to one or more third party purchasers or (b) to a special purpose entity that
borrows against such accounts receivable or sells such accounts receivable to
one or more third party purchasers, but only to the extent that (i) amounts
received in connection with the sale or other transfer of such accounts
receivable would not under GAAP be accounted for as liabilities on a
consolidated balance sheet of the Borrower, (ii) the aggregate outstanding
amount at any time of the accounts receivable sold pursuant to all such
transactions by the Borrower and the Subsidiaries (the "Aggregate Sold
Receivables") does not exceed $300,000,000 and (iii) the Commitments are
promptly reduced by any amount by which the Aggregate Sold Receivables at any
time shall exceed $150,000,000 (and any related prepayment required by Section
2.13(b) is promptly made).
"Servicing Agent" shall mean BofA, in its capacity as servicing agent
for the Lenders hereunder.
"Subsidiary" shall mean any subsidiary of the Borrower.
"subsidiary" shall mean, with respect to any person (the "parent"),
any corporation, association or other business entity of which securities or
other ownership interests representing 50% or more of the ordinary voting power
are, at the time as of which any determination is being made, beneficially owned
by the parent, by one or more subsidiaries of the parent or by the parent and
one or more subsidiaries of the parent.
"Swingline Exposure" shall mean, at any time, the aggregate principal
amount of all Swingline Loans outstanding at such time. The Swingline Exposure
of any Lender at any time shall be its Pro Rata Percentage of the total
Swingline Exposure at such time.
"Swingline Lender" shall mean BofA, in its capacity as lender of
Swingline Loans hereunder.
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21
"Swingline Loan" shall mean a Loan made pursuant to Section 2.06.
"Taxes" shall mean any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Total Capitalization" shall mean at any time, as to the Borrower and
its Subsidiaries, the sum of (a) the Total Indebtedness of the Borrower and its
Subsidiaries and (b) the partners' equity of the Borrower and its Subsidiaries
determined on a consolidated basis.
"Total Commitment" shall mean at any time the aggregate amount of the
Commitments at such time.
"Total Indebtedness" shall mean, as to any person, (a) all
Indebtedness of such person less (b) all cash and cash equivalents of such
person in excess of $25,000,000, all determined on a consolidated basis in
accordance with GAAP.
"Transferee" shall have the meaning assigned to such term in Section
2.19(a).
"Type", when used in respect of any Loan or Borrowing, shall refer to
the rate by reference to which interest on such Loan or on the Loans comprising
such Borrowing is determined. For purposes hereof, "rate" shall include the LIBO
Rate, the NIBO Rate, the Alternate Base Rate or, in the case of a Competitive
Loan or Borrowing, the LIBO Rate or any fixed rate.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as
a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Accounting Terms. Except as otherwise expressly
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided that
if the Borrower notifies the Servicing Agent that it requests an amendment to
any provision hereof to eliminate the effect of any change occurring after the
date hereof in GAAP or in the application thereof on the operation of such
provision (or if the Servicing Agent notifies the Borrower that the Required
Lenders request an amendment to any provision hereof for such purpose), then
such provision shall be interpreted on the basis of GAAP as in effect and
applied immediately before such change shall have become effective until such
notice shall have been withdrawn or such provision amended in accordance
herewith.
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22
SECTION 1.03. Terms Generally. Except where the context requires
otherwise, the definitions in Section 1.01 shall apply equally to the singular
and plural forms of the terms defined. Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter forms.
The words "include", "includes" and "including" shall be deemed to be followed
by the phrase "without limitation". Unless otherwise stated, references to
Sections, Articles, Schedules and Exhibits made herein are to Sections,
Articles, Schedules or Exhibits, as the case may be, of this Agreement.
SECTION 1.04. Classification of Loans and Borrowings. For purposes of
this Agreement, Loans may be classified and referred to by Class (e.g., a
"Revolving Loan") or by Type (e.g., a "LIBOR Loan") or by Class and Type (e.g.,
a "LIBOR Revolving Loan"). Borrowings also may be classified and referred to by
Class (e.g., a "Revolving Borrowing") or by Type (e.g., a "LIBOR Borrowing") or
by Class and Type (e.g., a "LIBOR Revolving Borrowing").
ARTICLE II
The Loans
SECTION 2.01. Commitments. (a) Subject to the terms and conditions
and relying upon the representations and warranties herein set forth, each
Lender agrees, severally and not jointly, to make Revolving Loans to the
Borrower from time to time during the Availability Period.
(b) Notwithstanding anything to the contrary contained in this
Agreement, in no event may Loans be borrowed under this Article II if, after
giving effect thereto (and to any concurrent repayment or prepayment of Loans
and/or LC Disbursements), (i) the aggregate Revolving Credit Exposures plus the
aggregate principal amount of outstanding Competitive Loans would exceed the
Total Commitment.
(c) Within the foregoing limits, the Borrower may borrow, pay or
prepay and reborrow Revolving Loans hereunder during the Availability Period and
subject to the terms, conditions and limitations set forth herein.
SECTION 2.02. Loans. (a) Each Revolving Loan shall be made as part
of a Borrowing consisting of Revolving Loans made ratably by the Lenders in
accordance with their respective Commitments; provided, however, that the
failure of any Lender to make any Revolving Loan shall not in itself relieve any
other Lender of its obligation to lend hereunder (it being understood, however,
that no Lender shall be responsible for the failure of
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23
any other Lender to make any Revolving Loan to be made by such other Lender).
Each Competitive Loan shall be made in accordance with the procedures set forth
in Section 2.03. The Loans comprising any Borrowing shall be (i) in the case of
Competitive Loans, in an aggregate principal amount which is not less than
$25,000,000, (ii) in the case of Revolving Loans (other than ABR Loans), in an
aggregate principal amount which is an integral multiple of $1,000,000 and not
less than the lesser of $5,000,000 and the remaining aggregate balance of the
Commitments and (iii) in the case of ABR Loans, in an aggregate principal amount
which is an integral multiple of $1,000,000.
(b) Each Competitive Borrowing shall be comprised entirely of LIBOR
Competitive Loans or Fixed Rate Loans and each Revolving Borrowing shall be
comprised entirely of LIBOR Revolving Loans, NIBOR Loans or ABR Loans, as the
Borrower may request pursuant to Section 2.03 or Section 2.04, as applicable.
Each Lender may at its option make any LIBOR Loan or NIBOR Loan by causing any
branch or Affiliate of such Lender to make such Loan; provided, however, that
any exercise of such option shall not affect the obligation of the Borrower to
repay such Loan in accordance with the terms of this Agreement; provided,
further, that if the designation of any such foreign branch or Affiliate shall
result in any costs, reductions or Taxes which would not otherwise have been
applicable and for which such Lender would, but for this proviso, be entitled to
request compensation under Section 2.15, 2.16 or 2.19, such Lender shall not be
entitled to request such compensation unless it shall in good faith have
determined such designation to be necessary or advisable to avoid any material
disadvantage to it. Borrowings of more than one Type may be outstanding at the
same time; provided, however, that the Borrower shall not be entitled to request
any Borrowing which, if made, would result in an aggregate of more than 20
separate Borrowings (excluding Competitive Borrowings) being outstanding
hereunder at any one time. For purposes of the fore going, Borrowings having
different Interest Periods, regardless of whether they commence on the same
date, shall be considered separate Borrowings.
(c) Subject to Section 2.05 and paragraph (d) below, each Lender
shall make its Loans on the proposed date or dates thereof (i) in the case of
Revolving Loans and Competitive Loans, by wire transfer of immediately available
funds to the Servicing Agent in New York, New York, not later than 12:00 noon,
New York City time, and (ii) in the case of Swingline Loans, as provided for in
Section 2.06. The Servicing Agent shall credit on such date the amounts so
received to the general deposit account of the Borrower with the Servicing Agent
or to another account specified by the Borrower and acceptable to the Servicing
Agent by 3:00 p.m., New York City time; provided that ABR Revolving Loans made
to finance the reimbursement of an LC Disbursement shall be
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24
remitted by the Servicing Agent to the Fronting Bank; and provided, further,
that if a Borrowing shall not occur on such date because any condition precedent
herein specified shall not have been met, the Servicing Agent shall return the
amounts so received to the respective Lenders. Loans shall be made by the
Lenders in accordance with their Pro Rata Percentages as provided in Section
2.17 and Competitive Loans shall be made by the Lender or Lenders whose
Competitive Bids therefor are accepted pursuant to Section 2.03 in the amounts
so accepted. Unless the Servicing Agent shall have received notice from a Lender
prior to the date of any Borrowing that such Lender will not make available to
the Servicing Agent such Lender's portion of such Borrowing, the Servicing Agent
may assume that such Lender has made such portion available to the Servicing
Agent on the date of such Borrowing in accordance with this paragraph (c) and
the Servicing Agent may, in reliance upon such assumption, make available to the
Borrower on such date a corresponding amount. If and to the extent that such
Lender shall not have made such portion available to the Servicing Agent, such
Lender and the Borrower severally agree to repay to the Servicing Agent
forthwith on demand such corresponding amount, together with interest thereon,
for each day from the date such amount is made available to the Borrower until
the date such amount is repaid to the Servicing Agent at (i) in the case of the
Borrower, the interest rate applicable to ABR Loans and (ii) in the case of such
Lender, the greater of the Federal Funds Effective Rate and a rate determined by
the Servicing Agent in accordance with banking industry rules on interbank
compensation. If such Lender shall repay to the Servicing Agent such
corresponding amount, such amount shall be deemed to constitute such Lender's
Loan as part of such Borrowing for purposes of this Agreement as if it were made
on the date of such Borrowing.
(d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request any Borrowing if the Interest Period
requested with respect thereto would end after the Maturity Date.
SECTION 2.03. Competitive Bid Procedure. (a) In order to request
Competitive Bids, the Borrower shall hand deliver or telecopy to the Servicing
Agent a duly completed Competitive Bid Request in the form of Exhibit C-1, to be
received by the Servicing Agent (i) in the case of a LIBOR Competitive
Borrowing, not later than 10:00 a.m., New York City time, four Business Days
before a proposed LIBOR Competitive Borrowing and (ii) in the case of a Fixed
Rate Borrowing, not later than 10:00 a.m., New York City time, one Business Day
before a proposed Competitive Borrowing. No ABR Borrowing or NIBOR Borrowing
shall be requested in, or made pursuant to, a Competitive Bid Request. A
Competitive Bid Request that does not conform substantially to the format of
Exhibit C-1 may be rejected in the Servicing Agent's sole discretion, and the
Servicing Agent shall promptly notify the
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25
Borrower of such rejection by telecopier. Such request shall in each case refer
to this Agreement and specify, (x) whether such Borrowing is to be a LIBOR
Competitive Borrowing or a Fixed Rate Borrowing, (y) the date of such Borrowing
(which shall be a Business Day) and the aggregate principal amount thereof
(which shall comply with the third sentence of Section 2.02(a)) and (z) the
Interest Period with respect thereto (which may not end after the Maturity
Date). Promptly after its receipt of a Competitive Bid Request that is not
rejected as aforesaid, the Servicing Agent shall invite by telecopier (in the
form set forth in Exhibit C-2) the Lenders to bid, on the terms and conditions
of this Agreement, to make Competitive Loans pursuant to such Competitive Bid
Request.
(b) Each Lender may, in its sole discretion, make one or more
Competitive Bids to the Borrower responsive to a Competitive Bid Request. Each
Competitive Bid by a Lender must be received by the Servicing Agent by
telecopier, in the form of Exhibit C-3, (i) in the case of a LIBOR Competitive
Borrowing, not later than 9:30 a.m., New York City time, three Business Days
before a proposed Competitive Borrowing and (ii) in the case of a Fixed Rate
Borrowing, not later than 9:30 a.m., New York City time, on the day of a
proposed Competitive Borrowing. Multiple bids will be accepted by the Servicing
Agent. Competitive Bids that do not conform substantially to the format of
Exhibit C-3 may be rejected by the Servicing Agent after conferring with, and
upon the instruction of, the Borrower, and the Servicing Agent shall notify the
Lender making such nonconforming bid of such rejection as soon as practicable.
Each Competitive Bid shall refer to this Agreement and specify (x) the principal
amount (which shall be in a minimum principal amount of $5,000,000 and which may
equal the entire principal amount of the Competitive Borrowing requested by the
Borrower) of the Competitive Loan that the Lender is willing to make to the
Borrower, (y) the Competitive Bid Rate or Rates at which such Lender is
prepared to make the Competitive Loan or Loans and (z) the Interest Period and
the last day thereof. A Competitive Bid submitted by a Lender pursuant to this
paragraph (b) shall be irrevocable.
(c) The Servicing Agent shall promptly notify the Borrower by
telecopier of all the Competitive Bids made, the Competitive Bid Rate and the
principal amount of each Competitive Loan in respect of which a Competitive Bid
was made and the identity of the Lender that made each bid. The Servicing Agent
shall send a copy of all Competitive Bids to the Borrower for its records as
soon as practicable after completion of the bidding process set forth in this
Section 2.03.
(d) The Borrower may in its sole and absolute discretion, subject
only to the provisions of this paragraph (d), accept or reject any Competitive
Bid referred to in paragraph (c) above.
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26
The Borrower shall notify the Servicing Agent by telephone, confirmed by
telecopier in the form of a Competitive Bid Accept/Reject Letter in the form of
Exhibit C-4, whether and to what extent it has decided to accept or reject any
of or all the bids referred to in paragraph (c) above, (x) in the case of a
LIBOR Competitive Borrowing, not later than 10:30 a.m., New York City time,
three Business Days before a proposed Competitive Borrowing and (y) in the case
of a Fixed Rate Borrowing, not later than 10:30 a.m., New York City time, on the
day of a proposed Competitive Borrowing; provided, however, that (i) the failure
by the Borrower to give such notice shall be deemed to be a rejection of all the
bids referred to in paragraph (c) above, (ii) the Borrower shall not accept a
bid made at a particular Competitive Bid Rate with respect to any Competitive
Bid Request if the Borrower has decided to reject a bid made at a lower
Competitive Bid Rate with respect to such Competitive Bid Request, (iii) the
aggregate amount of the Competitive Bids accepted by the Borrower shall not
exceed the principal amount specified in such Competitive Bid Request, (iv) to
the extent necessary to comply with clause (iii) above, the Borrower may accept
Competitive Bids at a single Competitive Bid Rate in part, which acceptance, in
the case of multiple bids at such Competitive Bid Rate, shall be made pro rata
in accordance with the amount of each such Competitive Bid and (v) no bid shall
be accepted for a Competitive Loan unless such Competitive Loan is in a minimum
principal amount of $5,000,000; provided further, however, that, if a
Competitive Loan must be in an amount less than $5,000,000 because of the
provisions of clause (iv) above, such Competitive Loan may be for a minimum of
$1,000,000 or any integral multiple thereof, and in calculating the pro rata
allo cation of acceptances of portions of multiple bids at a particular
Competitive Bid Rate pursuant to clause (iv) the amounts shall be rounded to
integral multiples of $1,000,000 in a manner which shall be in the discretion of
the Borrower. A notice given by the Borrower pursuant to this paragraph (d)
shall be irrevocable.
(e) The Servicing Agent shall promptly notify each bidding Lender
whether or not its Competitive Bid has been accepted (and, if so, in what amount
and at what Competitive Bid Rate) by telecopier sent by the Servicing Agent, and
each successful bidder will thereupon become bound, subject to the other
applicable conditions hereof, to make the Competitive Loan in respect of which
its bid has been accepted.
(f) The Borrower may submit Competitive Bid Requests for more than
one Type of Loan or for more than one Interest Period at the same time on any
day, but no Competitive Bid Request shall be made within five Business Days
after any date on which one or more Competitive Bid Requests have previously
been submitted.
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27
(g) If the Servicing Agent shall elect to submit a Competitive Bid in
its capacity as a Lender, it shall submit such bid directly to the Borrower one-
quarter of an hour earlier than the latest time at which the other Lenders are
required to submit their bids to the Servicing Agent pursuant to paragraph (b)
above.
(h) All notices required by this Section 2.03 shall be given in
accordance with Section 10.01.
SECTION 2.04. Notice of Borrowings. (a) In order to request a
Revolving Borrowing, the Borrower shall give written or telecopy notice (or
telephone notice promptly confirmed in writing or by telecopy) to the Servicing
Agent in the form of Exhibit B (i) in the case of a LIBOR Revolving Borrowing,
not later than 11:00 a.m., New York City time, three Business Days before a
proposed Borrowing, (ii) in the case of a NIBOR Borrowing, not later than 11:00
a.m., New York City time, two Business Days before a proposed Borrowing and
(iii) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City
time, on the day of a proposed Borrowing. No Fixed Rate Loan shall be requested
or made pursuant to a Revolving Borrowing Request.
(b) The Servicing Agent may waive any prior notice in connection with
any Revolving Borrowing to be made on the date hereof. Any notice given
pursuant to this Section 2.04 shall be irrevocable and shall in each case refer
to this Agreement and specify (x) whether such Borrowing is to be a LIBOR
Revolving Borrowing, a NIBOR Borrowing or an ABR Borrowing; (y) the date of such
Borrowing (which shall be a Business Day) and the amount thereof; and (z) if
such Borrowing is to be a LIBOR Borrowing or a NIBOR Borrowing, the Interest
Period with respect thereto. If no election as to the Type of Borrowing is
specified in any such notice, then the requested Borrowing shall be an ABR
Borrowing. If no Interest Period with respect to any LIBOR Revolving Borrowing
or NIBOR Borrowing is specified in any such notice, then the applicable Borrower
shall be deemed to have selected an Interest Period of one week's duration. The
Servicing Agent shall promptly advise the Lenders of each notice given pursuant
to this Section 2.04 and of each Lender's portion of the requested Borrowing.
SECTION 2.05. Conversions and Continuations. Each Revolving
Borrowing initially shall be of the Type specified in the applicable Borrowing
Request and, in the case of a LIBOR Revolving Borrowing or a NIBOR Borrowing,
shall have an initial Interest Period as specified in such Borrowing Request.
Thereafter, the Borrower shall have the right at any time upon prior
irrevocable telephonic notice (which shall be confirmed promptly in writing or
by telecopy) to the Servicing Agent by the time that a Borrowing Request would
be required under Section 2.04 if the
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28
Borrower were requesting a Revolving Borrowing of the Type resulting from such
election to be made on the effective date of such election, subject in each case
to the following:
(a) if fewer than all the Loans comprising any Borrowing are to be
converted or continued, such conversion or continuation shall be made pro
rata among the Lenders in accordance with the respective Loans of such
Lenders that are part of such Borrowing immediately prior to such
conversion or continuation;
(b) in the case of a conversion or continuation of fewer than all the
Loans comprising any Borrowing, the aggregate principal amount of Loans
converted or continued shall be an amount that would be a permitted
Borrowing amount for Loans of the same Type under the third sentence of
Section 2.02(a);
(c) accrued interest on a Loan (or portion thereof) being converted or
continued shall be paid by the Borrower at the time of conversion or
continuation;
(d) if any LIBOR Revolving Loan or NIBOR Loan is converted at a time
other than the end of an Interest Period applicable thereto, the Borrower
shall pay any increased costs associated therewith pursuant to Section
2.16; and
(e) no portion of a Loan may be converted into or continued as a LIBOR
Revolving Loan or a NIBOR Loan with an Interest Period ending after the
Maturity Date and any portion of a LIBOR Revolving Loan or NIBOR Loan for
which the shortest available Interest Period would extend beyond such date
shall be automatically converted at the end of the Interest Period at the
time in effect into an ABR Loan.
The Interest Period applicable to any LIBOR Revolving Loan or NIBOR
Loan resulting from a conversion of a Loan shall be specified by the Borrower in
the irrevocable notice of conversion delivered pursuant to this Section;
provided, however, that if no such Interest Period shall be specified, the
Borrower shall be deemed to have selected an Interest Period of one month's
duration, in the case of a LIBOR Loan, or one week's duration, in the case of a
NIBOR Loan. If the Borrower shall not have given timely notice to continue any
Loan (other than a Competitive Loan or a Swingline Loan) into a subsequent
Interest Period (and shall not otherwise have given notice to convert such
Loan), such Loan (unless repaid pursuant to the terms hereof) shall, subject to
clauses (c) and (e) above, automatically be continued into a new Interest
Period, which shall be of one month's duration, in the case of a LIBOR Loan, or
one week's duration, in the case of a NIBOR Loan. The Servicing Agent shall
promptly advise the Lenders
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29
of any notice given pursuant to this Section and of each Lender's portion of the
continuation or conversion hereunder. This Section shall not apply to
Competitive Borrowings or Swingline Borrowings, which may not be converted or
continued.
SECTION 2.06. Swingline Loans. (a) Subject to the terms and
conditions set forth herein, the Swingline Lender agrees to make Swingline Loans
to the Borrower from time to time during the Availability Period, in an
aggregate principal amount at any time outstanding that will not result in (i)
the aggregate principal amount of outstanding Swingline Loans exceeding
$35,000,000 or (ii) the sum of the total Revolving Credit Exposures plus the
aggregate principal amount of outstanding Competitive Loans exceeding the Total
Commitment; provided that the Swingline Lender shall not be required to make a
Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing
limits and subject to the terms and conditions set forth herein, the Borrower
may borrow, prepay and reborrow Swingline Loans.
(b) To request a Swingline Loan, the Borrower shall notify the
Swingline Lender of such request by telephone (confirmed by telecopy if
requested by the Swingline Lender), not later than 12:00 noon, New York City
time, on the day of a proposed Swingline Loan. Each such notice shall be
irrevocable and shall specify the requested date (which shall be a Business Day)
and amount of the requested Swingline Loan and the Interest Period to be
applicable thereto. If so requested by the Borrower, the Swingline Lender will
quote an interest rate that, if accepted by the Borrower, will be applicable to
the requested Swingline Loan, and the Borrower will promptly notify the
Swingline Lender in the event it accepts such rate. The Swingline Lender will
promptly advise the Servicing Agent of any such notice received from the
Borrower. The Swingline Lender shall make each Swingline Loan available to the
Borrower by means of a credit to the general deposit account of the Borrower
with the Swingline Lender (or, in the case of a Swingline Loan made to finance
the reimbursement of an LC Disbursement as provided in Section 2.07(e), by
remittance to the Fronting Bank) by 3:00 p.m., New York City time, on the
requested date of such Swingline Loan.
(c) The Swingline Lender may by written notice given to the Servicing
Agent not later than 10:00 a.m., New York City time, on any Business Day require
the Lenders to acquire participations on such Business Day in all or a portion
of the Swingline Loans outstanding. Such notice shall specify the aggregate
amount of Swingline Loans in which Lenders will participate. Promptly upon
receipt of such notice, the Servicing Agent will give notice thereof to each
Lender, specifying in such notice such Lender's Pro Rata Percentage of such
Swingline Loan or Loans. Each Lender hereby absolutely and unconditionally
agrees,
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30
upon receipt of notice as provided above, to pay to the Servicing Agent, for the
account of the Swingline Lender, such Lender's Pro Rata Percentage of such
Swingline Loan or Loans. Each Lender acknowledges and agrees that its obligation
to acquire participations in Swingline Loans pursuant to this paragraph is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including the occurrence and continuance of a Default or reduction
or termination of the Commitments, and that each such payment shall be made
without any offset, abatement, withholding or reduction whatsoever. Each Lender
shall comply with its obligation under this paragraph by wire transfer of
immediately available funds, in the same manner as provided in Section 2.02 with
respect to Loans made by such Lender (and Section 2.02 shall apply, mutatis
mutandis, to the payment obligations of the Lenders), and the Servicing Agent
shall promptly pay to the Swingline Lender the amounts so received by it from
the Lenders. The Servicing Agent shall notify the Borrower of any participations
in any Swingline Loan acquired pursuant to this paragraph, and thereafter
payments in respect of such Swingline Loan shall be made to the Servicing Agent
and not to the Swingline Lender. Any amounts received by the Swingline Lender
from the Borrower (or other party on behalf of the Borrower) in respect of a
Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale
of participations therein shall be promptly remitted to the Servicing Agent; any
such amounts received by the Servicing Agent shall be promptly remitted by the
Servicing Agent to the Lenders that shall have made their payments pursuant to
this paragraph and to the Swingline Lender, as their interests may appear. Any
payment by a Lender pursuant to this paragraph to purchase a participation in a
Swingline Loan shall not constitute a Revolving Loan and shall not relieve the
Borrower of its obligation to repay such Swingline Loan.
SECTION 2.07. Letters of Credit. (a) General. Subject to the terms
and conditions set forth herein, the Borrower may request the issuance of
Letters of Credit for its own account, in a form reasonably acceptable to the
Servicing Agent and the Fronting Bank, at any time and from time to time during
the period beginning on the Effective Date and ending on the fifth Business Day
prior to the Maturity Date. In the event of any inconsistency between the terms
and conditions of this Agreement and the terms and conditions of the letter of
credit application submitted by the Borrower to, or entered into by the Borrower
with, the Fronting Bank relating to any Letter of Credit, the terms and
conditions of this Agreement shall control.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so
<PAGE>
31
have been approved by the Fronting Bank) to the Fronting Bank and the Servicing
Agent (reasonably in advance of the requested date of issuance, amendment,
renewal or extension) a notice requesting the issuance of a Letter of Credit, or
identifying the Letter of Credit to be amended, renewed or extended, the date of
issuance, amendment, renewal or extension, the date on which such Letter of
Credit is to expire (which shall comply with paragraph (c) of this Section), the
amount of such Letter of Credit, the name and address of the beneficiary thereof
and such other information as shall be necessary to prepare, amend, renew or
extend such Letter of Credit. If requested by the Fronting Bank, the Borrower
also shall submit a letter of credit application in the form of Exhibit D hereto
in connection with any request for a Letter of Credit. A Letter of Credit shall
be issued, amended, renewed or extended only if (and upon issuance, amendment,
renewal or extension of each Letter of Credit the Borrower shall be deemed to
represent and warrant that), after giving effect to such issuance, amendment,
renewal or extension (i) the LC Exposure shall not exceed $100,000,000 and (ii)
the sum of the total Revolving Credit Exposures plus the aggregate principal
amount of outstanding Competitive Loans shall not exceed the Total Commitment.
(c) Expiration Date. Each Letter of Credit shall expire at or prior
to the close of business on the earlier of (i) the date one year after the date
of the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) and (ii) the date
that is five Business Days prior to the Maturity Date.
(d) Participations. By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Fronting Bank or the Lenders, the Fronting
Bank hereby grants to each Lender, and each Lender hereby acquires from the
Fronting Bank, a participation in such Letter of Credit equal to such Lender's
Pro Rata Percentage of the aggregate amount available to be drawn under such
Letter of Credit. In consideration and in furtherance of the foregoing, each
Lender hereby absolutely and unconditionally agrees to pay to the Servicing
Agent, for the account of the Fronting Bank, such Lender's Pro Rata Percentage
of each LC Disbursement made by the Fronting Bank and not reimbursed by the
Borrower on the date due as provided in paragraph (e) of this Section, or of any
reimbursement payment required to be refunded to the Borrower for any reason.
Each Lender acknowledges and agrees that its obligation to acquire
participations pursuant to this paragraph in respect of Letters of Credit is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including any amendment, renewal or extension of any Letter of
Credit or the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding
<PAGE>
32
or reduction whatsoever; provided that such participations by a Lender shall not
be construed as a waiver of any claims such Lender may have against the Fronting
Bank for gross negligence or wilful misconduct (as finally determined by a court
of competent jurisdiction).
(e) Reimbursement. If the Fronting Bank shall make any LC
Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such
LC Disbursement by paying to the Servicing Agent an amount equal to such LC
Disbursement not later than 12:00 noon, New York City time, on the date that
such LC Disbursement is made, if the Borrower shall have received notice of such
LC Disbursement prior to 10:00 a.m., New York City time, on such date, or, if
such notice has not been received by the Borrower prior to such time on such
date, then not later than 12:00 noon, New York City time, on (i) the Business
Day that the Borrower receives such notice, if such notice is received prior to
10:00 a.m., New York City time, on the day of receipt, or (ii) the Business Day
immediately following the day that the Borrower receives such notice, if such
notice is not received prior to such time on the day of receipt; provided that
the Borrower may, subject to the conditions to the Borrowing set forth herein,
request in accordance with Section 2.04 or 2.06 that such payment be financed
with an ABR Revolving Borrowing or Swingline Loan in an equivalent amount and,
to the extent so financed, the Borrower's obligation to make such payment shall
be discharged and replaced by the resulting ABR Revolving Borrowing or Swingline
Loan. If the Borrower fails to make such payment when due, the Servicing Agent
shall notify each Lender of the applicable LC Disbursement, the payment then due
from the Borrower in respect thereof and such Lender's Pro Rata Percentage
thereof. Promptly following receipt of such notice, each Lender shall pay to
the Servicing Agent its Pro Rata Percentage of the payment then due from the
Borrower, in the same manner as provided in Section 2.02 with respect to Loans
made by such Lender (and Section 2.02 shall apply, mutatis mutandis, to the
payment obligations of the Lenders), and the Servicing Agent shall promptly pay
to the Fronting Bank the amounts so received by it from the Lenders. Promptly
following receipt by the Servicing Agent of any payment from the Borrower
pursuant to this paragraph, the Servicing Agent shall distribute such payment to
the Fronting Bank or, to the extent that Lenders have made payments pursuant to
this paragraph to reimburse the Fronting Bank, then to such Lenders and the
Fronting Bank as their interests may appear. Any payment made by a Lender
pursuant to this paragraph to reimburse the Fronting Bank for any LC
Disbursement (other than the funding of ABR Revolving Loans or a Swingline Loan
as contemplated above) shall not constitute a Loan and shall not relieve the
Borrower of its obligation to reimburse such LC Disbursement.
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33
(f) Obligations Absolute. The Borrower's obligation to reimburse LC
Disbursements as provided in paragraph (e) of this Section shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit or this Agreement, or any term or provision therein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the Fronting Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Borrower's obligations hereunder. None
of the Administrative Agents, the Lenders nor the Fronting Bank, nor any of
their Related Parties shall have any liability or responsibility by reason of or
in connection with the issuance or transfer of any Letter of Credit or any
payment or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of the
Fronting Bank; provided that the foregoing shall not be construed to excuse the
Fronting Bank from liability to the Borrower to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby
waived by the Borrower to the extent permitted by applicable law) suffered by
the Borrower that are caused by the Fronting Bank's failure to exercise care
when determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof. The parties hereto expressly agree that,
in the absence of gross negligence or wilful misconduct on the part of the
Fronting Bank (as finally determined by a court of competent jurisdiction), the
Fronting Bank shall be deemed to have exercised care in each such determination.
In furtherance of the foregoing and without limiting the generality thereof, the
parties agree that, with respect to documents presented which appear on their
face to be in substantial compliance with the terms of a Letter of Credit, the
Fronting Bank may, in its sole discretion, either accept and make payment upon
such documents without responsibility for further investigation, regardless of
any notice or information to the contrary, or refuse to accept and make payment
upon such documents if such documents are not in strict compliance with the
terms of such Letter of Credit.
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34
(g) Disbursement Procedures. The Fronting Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Fronting Bank shall promptly
notify the Servicing Agent and the Borrower by telephone (confirmed by telecopy)
of such demand for payment and whether the Fronting Bank has made or will make
an LC Disbursement thereunder; provided that any failure to give or delay in
giving such notice shall not relieve the Borrower of its obligation to reimburse
the Fronting Bank and the Lenders with respect to any such LC Disbursement.
(h) Interim Interest. If the Fronting Bank shall make any LC
Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof shall
bear interest, for each day from and including the date such LC Disbursement is
made to but excluding the date that the Borrower reimburses such LC
Disbursement, at the rate per annum then applicable to ABR Revolving Loans;
provided that, if the Borrower fails to reimburse such LC Disbursement when due
pursuant to paragraph (e) of this Section, then Section 2.11 shall apply.
Interest accrued pursuant to this paragraph shall be for the account of the
Fronting Bank, except that interest accrued on and after the date of payment by
any Lender pursuant to paragraph (e) of this Section to reimburse the Fronting
Bank shall be for the account of such Lender to the extent of such payment.
(i) Replacement of the Fronting Bank. The Fronting Bank may be
replaced at any time by written agreement among the Borrower, the Administrative
Agents, the replaced Fronting Bank and the successor Fronting Bank. The
Servicing Agent shall notify the Lenders of any such replacement of the Fronting
Bank. At the time any such replacement shall become effective, the Borrower
shall pay all unpaid fees accrued for the account of the replaced Fronting Bank
pursuant to Section 2.08(b). From and after the effective date of any such
replacement, (i) the successor Fronting Bank shall have all the rights and
obligations of the Fronting Bank under this Agreement with respect to Letters of
Credit to be issued thereafter and (ii) references herein to the term "Fronting
Bank" shall be deemed to refer to such successor or to any previous Fronting
Bank, or to such successor and all previous Fronting Banks, as the context shall
require. After the replacement of an Fronting Bank hereunder, the replaced
Fronting Bank shall remain a party hereto and shall continue to have all the
rights and obligations of a Fronting Bank under this Agreement with respect to
Letters of Credit issued by it prior to such replacement, but shall not be
required to issue additional Letters of Credit.
(j) Cash Collateralization. If any Event of Default shall occur and
be continuing and the maturity of the Loans shall
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35
be accelerated or the Commitments terminated as provided in Article VII, on the
Business Day that the Borrower receives notice from the Administrative Agents or
Lenders with LC Exposure representing greater than 50% of the total LC Exposure
demanding the deposit of cash collateral pursuant to this paragraph, the
Borrower shall deposit in an account with the Servicing Agent, in the name of
the Servicing Agent and for the benefit of the Lenders, an amount in cash equal
to the LC Exposure as of such date plus any accrued and unpaid interest thereon;
provided that the obligation to deposit such cash collateral shall become
effective immediately, and such deposit shall become immediately due and
payable, without demand or other notice of any kind, upon the occurrence of any
Event of Default with respect to the Borrower described in clause (e) or (f) of
Article VII. Such deposit shall be held by the Servicing Agent as collateral for
the payment and performance of the obligations of the Borrower under this
Agreement. The Servicing Agent shall have exclusive dominion and control,
including the exclusive right of withdrawal, over such account. Such deposits
shall, pending their application as provided below, be invested by the Servicing
Agent, at the Borrower's risk and expense, in repurchase obligations with
respect to United States Treasury securities or other high-quality overnight or
short-term investments (which may include certificates of deposit of BofA), and
any interest earned through the investment of such deposits shall be for the
Borrower's account and shall be added to the deposits held by the Servicing
Agent under this Section and applied as provided herein. Moneys in such account
shall be applied by the Servicing Agent to reimburse the Fronting Bank for LC
Disbursements for which it has not been reimbursed and, to the extent not so
applied, shall be held for the satisfaction of the reimbursement obligations of
the Borrower for the LC Exposure at such time or, subject to the consent of
Lenders with LC Exposure representing greater than 50% of the total LC Exposure,
be applied to satisfy other obligations of the Borrower under this Agreement. If
the Borrower is required to provide an amount of cash collateral hereunder as a
result of the occurrence of an Event of Default, such amount, together with any
interest earned thereon (to the extent not applied as aforesaid), shall be
returned to the Borrower within three Business Days after all Events of Default
have been cured or waived.
SECTION 2.08. Fees. (a) The Borrower agrees to pay to each Lender,
through the Servicing Agent, on each March 31, June 30, September 30 and
December 31, commencing December 31, 1997, and on the date on which the
Commitment of such Lender shall be terminated as provided herein, a facility fee
(the "Facility Fee") equal to the Applicable Percentage in effect from time to
time on the amount of the Commitment of such Lender, whether used or unused,
during the preceding quarter (or other period commencing on the Closing Date or
ending on the Maturity Date or
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36
any date on which the Commitment of such Lender shall be terminated). The
Facility Fee shall be computed on the basis of the actual number of days elapsed
over a year of 360 days (including the first day but excluding the last day).
The Facility Fee due to each Lender shall commence to accrue on the Closing Date
and shall cease to accrue on the earlier of the Maturity Date and the
termination of the Commitment of such Lender as provided herein.
(b) The Borrower agrees to pay (i) to the Servicing Agent for the
account of each Lender a participation fee with respect to its participations in
Letters of Credit, which shall accrue at the same Applicable Percentage as shall
be used in determining the interest rate applicable to LIBOR Revolving Loans on
the average daily amount of such Lender's LC Exposure (excluding any portion
thereof attributable to unreimbursed LC Disbursements) during the period from
and including the Closing Date to but excluding the later of the date on which
such Lender's Commitment terminates and the date on which such Lender ceases to
have any LC Exposure, and (ii) to the Fronting Bank a fronting fee, which shall
accrue at the rate of 0.100% per annum on the average daily amount of the LC
Exposure (excluding any portion thereof attributable to unreimbursed LC
Disbursements) during the period from and including the Closing Date to but
excluding the later of the date of termination of the Commitments and the date
on which there ceases to be any LC Exposure. Participation fees and fronting
fees shall be payable on each March 31, June 30, September 30 and December 31,
commencing March 31, 1998; provided that all such fees shall be payable on the
date on which the Commitments terminate and any such fees accruing after the
date on which the Commitments terminate shall be payable on demand. All
participation fees and fronting fees shall be computed on the basis of a year of
360 days and shall be payable for the actual number of days elapsed (including
the first day but excluding the last day).
(c) The Borrower agrees to pay to the Administrative Agents, for
their respective accounts, agent and administrative fees (the "Administrative
Fees") at the times and in the amounts agreed upon in the fee letter agreements
dated October 9, 1997, between Lyondell and Millennium and BofA and between
Lyondell and Millennium and Chase, respectively.
(d) All Fees shall be paid on the dates due, in immediately available
funds, to the Servicing Agent (or to the Fronting Bank, in the case of fees
payable to it) for distribution, if and as appropriate, among the Lenders. The
Administrative Fees of BofA and Chase shall be paid on the dates due, in
immediately available funds, to BofA and Chase directly. Once paid, none of the
Fees shall be refundable under any circumstances.
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37
SECTION 2.09. Repayment of Loans; Evidence of Debt. (a) The Borrower
hereby agrees as to Loans made to it that (i) the outstanding principal balance
of each Revolving Loan shall be payable on the Maturity Date, (ii) the
outstanding principal balance of each Competitive Loan shall be payable on the
last day of the Interest Period applicable thereto and (iii) the outstanding
principal balance of each Swingline Loan shall be payable to the Swingline
Lender on the last day of the Interest Period applicable to such Swingline Loan;
provided that on each date that a Revolving Borrowing or Competitive Borrowing
is made, the Borrower shall repay all Swingline Loans then outstanding.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness to such Lender resulting from
each Loan made by such Lender from time to time, including the amounts of
principal and interest payable and paid to such Lender from time to time under
this Agreement.
(c) The Servicing Agent shall maintain accounts in which it will
record (i) the amount of each Loan made hereunder, the Class and Type of each
Loan and the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) the amount of any sum received by
the Servicing Agent hereunder for the account of the Lenders and each Lender's
share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraphs (b) and (c) above shall, to the extent permitted by applicable law,
be prima facie evidence of the existence and amounts of the obligations therein
recorded; provided, however, that the failure of any Lender or the Servicing
Agent to maintain such accounts or any error therein shall not in any manner
affect the obligations of the Borrower to repay the Loans in accordance with
their terms.
(e) Notwithstanding any other provision of this Agreement, in the
event any Lender shall request a promissory note or notes evidencing the Loans
made by it hereunder, the Borrower shall deliver such a note or notes,
satisfactory to the Administrative Agents, payable to such Lender and its
registered assigns, and the interests represented by such note or notes shall at
all times (including after any assignment of all or part of such interests
pursuant to Section 10.07) be represented by one or more promissory notes
payable to the payee named therein or its registered assigns.
SECTION 2.10. Interest on Loans. (a) Subject to the provisions of
Section 2.11, each ABR Loan (including any Swingline Loan that is not bearing
interest at a rate quoted by the
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38
Swingline Lender in accordance with paragraph (d) below) shall bear interest
(computed on the basis of the actual number of days elapsed over a year of 365
or 366 days, as the case may be, for periods during which the Alternate Base
Rate is determined by reference to the Reference Rate and 360 days for other
periods) at a rate per annum equal to the Alternate Base Rate. Interest on each
ABR Loan shall be payable on each applicable Interest Payment Date. The
Alternate Base Rate shall be determined by the Servicing Agent, and such
determination shall be conclusive absent manifest error.
(b) Subject to the provisions of Section 2.11, (i) each LIBOR Loan
(other than a LIBOR Competitive Loan) and each NIBOR Loan shall bear interest
(computed on the basis of the actual number of days elapsed over a year of 360
days) at a rate per annum equal to the LIBO Rate or NIBO Rate, as the case may
be, for the Interest Period in effect for such Loan plus the Applicable
Percentage, and (ii) each LIBOR Competitive Loan shall bear interest (computed
on the basis of the actual number of days elapsed over a year of 360 days) at a
rate per annum equal to the LIBO Rate for the Interest Period in effect for such
Competitive Loan plus (or minus, as applicable) the Margin offered by the Lender
making such Competitive Loan and accepted by the Borrower pursuant to Section
2.03. Interest on each LIBOR Loan shall be payable on each applicable Interest
Payment Date (and, in the case of Revolving Loans, upon termination of the
Commitments). The LIBO Rate or NIBO Rate, as applicable, for each Interest
Period shall be determined by the Servicing Agent, and such determination shall
be conclusive absent manifest error. The Servicing Agent shall promptly advise
the Borrower and each applicable Lender of such determination.
(c) Subject to the provisions of Section 2.11, each Fixed Rate Loan
shall bear interest at a rate per annum (computed on the basis of the actual
number of days elapsed over a year of 360 days) equal to the fixed rate of
interest offered by the Lender making such Loan and accepted by the Borrower
pursuant to Section 2.03. Interest on each Fixed Rate Loan shall be payable on
the Interest Payment Dates applicable to such Loan except as otherwise provided
in this Agreement.
(d) Subject to the provisions of Section 2.11, each Swingline Loan
shall bear interest at (i) the rate per annum applicable to ABR Loans as
provided in paragraph (a) above or (ii) any other rate per annum (computed on
the basis of the actual number of days elapsed over a year of 360 days) which
shall be quoted by the Swingline Lender on the date such Loan is made and
accepted by the Borrower as provided in Section 2.06; provided, that commencing
on any date on which the Swingline Lender requires the Lenders to acquire
participations in a Swingline Loan pursuant
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39
to Section 2.06(c), such Loan shall bear interest at the rate per annum
applicable to ABR Loans as provided in paragraph (a) above.
(e) Interest on each Loan shall accrue from and including the date on
which such Loan is made and to but excluding the date such Loan is repaid.
SECTION 2.11. Interest on Overdue Amounts; Alternative Rate of
Interest. (a) If the Borrower shall default in the payment of the principal of
or interest on any Loan or any Fees or other amount becoming due hereunder,
whether by scheduled maturity, notice of prepayment, acceleration or otherwise,
the Borrower shall on demand from time to time from the Servicing Agent pay
interest from and including the date of such default, to the extent permitted by
law, on such defaulted amount up to (but not including) the date of actual
payment (after as well as before judgment) at a rate per annum (computed as
provided in Section 2.10(a)) equal to (i) in the case of the principal of any
Loan, the rate otherwise applicable to such Loan plus 2% per annum and (ii) in
the case of any other amount, the Alternate Base Rate plus 2% per annum.
(b) In the event, and on each occasion, that on the day two Business
Days prior to the commencement of any Interest Period for a LIBOR Borrowing or
NIBOR Borrowing the Servicing Agent shall have determined that deposits in the
requested principal amounts of the LIBOR Loans or NIBOR Loans, as applicable,
are not generally available in the London interbank market or the New York
interbank market, as applicable, to the Required Lenders (or, in the case of a
LIBOR Competitive Loan, the Lender that is required to make such Loan) or that
reasonable means do not exist for ascertaining the LIBO Rate or the NIBO Rate or
that the rate at which such deposits are being offered will not adequately and
fairly reflect the cost to the Required Lenders (or, in the case of a LIBOR
Competitive Loan, the Lender that is required to make such Loan) of making such
LIBOR Loan or NIBOR Loan, as applicable, during such Interest Period, the
Servicing Agent shall, as soon as practicable thereafter, give written or
telecopy notice of such determination to the Borrower and any request by the
Borrower for a LIBOR Borrowing or a NIBOR Borrowing shall, until the
circumstances giving rise to such notice no longer exist, (i) if such notice
relates to a Revolving Borrowing, be deemed a request for an ABR Borrowing;
provided, however, that the Borrower may withdraw any such request prior to the
making of any such ABR Borrowing, (ii) if such notice relates to the conversion
of any Revolving Borrowing to, or continuation of any Revolving Borrowing as, a
LIBOR Borrowing or a NIBOR Borrowing, be deemed ineffective, as applicable, or
(iii) if such notice relates to a LIBOR Competitive Borrowing, be deemed
ineffective; provided that (A) if the circumstances giving rise to such notice
do not affect all the Lenders, then requests by the Borrower for LIBOR
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40
Competitive Borrowings may be made to Lenders that are not affected thereby and
(B) if the circumstances giving rise to such notice affect only one Type of
Borrowings, then the other Type of Borrowings shall be permitted. Each
determination by the Servicing Agent hereunder shall be conclusive absent
manifest error.
SECTION 2.12. Termination and Reduction of Commitments. (a) Unless
previously terminated, the Commitments shall be automatically and permanently
terminated on the Maturity Date.
(b) Upon at least three Business Days' prior irrevocable written or
telecopy notice to the Servicing Agent (a copy of which the Servicing Agent
shall promptly provide to each Lender), the Borrower may at any time in whole
permanently terminate, or from time to time in part permanently reduce, the
Total Commitment; provided, however, that (i) each partial reduction of the
Total Commitment shall be in an integral multiple of $1,000,000 and in a minimum
principal amount of $25,000,000 and (ii) no such termination or reduction shall
be made (A) which would reduce the Total Commitment to an amount less than the
sum of the aggregate Revolving Credit Exposures plus the aggregate principal
amount of outstanding Competitive Loans or (B) which would reduce any Lender's
Commitment to an amount that is less than the sum of such Lender's Revolving
Credit Exposure.
(c) Each reduction in the Total Commitment hereunder shall be made
ratably among the Lenders in accordance with their respective Commitments. The
Borrower shall pay to the Servicing Agent for the account of the Lenders, on the
date of each termination or reduction of the Total Commitment, the Facility Fee
on the amount of the Total Commitment so terminated or reduced accrued through
the date of such termination or reduction.
SECTION 2.13. Prepayment of Loans. (a) The Borrower shall have the
right at any time and from time to time to prepay any Borrowing, in whole or in
part, upon giving telephonic notice (which shall be confirmed promptly in
writing or by telecopy) to the Servicing Agent (which shall promptly provide a
copy to each Lender): (i) before 11:00 a.m., New York City time, three Business
Days prior to prepayment, in the case of LIBOR Loans or NIBOR Loans, (ii) before
11:00 a.m., New York City time, one Business Day prior to prepayment, in the
case of ABR Loans and (iii) before 12:00 noon, New York City time, on the date
of prepayment, in the case of Swingline Loans; provided, however, that each such
partial prepayment of principal shall be in a minimum principal amount of
$1,000,000 and an integral multiple of $1,000,000. The Borrower shall not have
the right to prepay any Competitive Borrowing without the prior consent of the
Lender thereof.
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41
(b) On the date of any termination or reduction of the Total
Commitment pursuant to Section 2.12, the Borrower shall pay or prepay so much of
the Borrowings as shall be necessary in order that the sum of the aggregate
Revolving Credit Exposures plus the aggregate principal amount of outstanding
Competitive Loans will not exceed the Total Commitment after giving effect to
such termination or reduction.
(c) Except to the extent otherwise specified by the Borrower making a
prepayment, all prepayments under this Section 2.13 shall be applied to
outstanding ABR Loans up to the full amount thereof and then shall be applied to
outstanding LIBOR Loans (other than LIBOR Competitive Loans) up to the full
amount thereof.
(d) All prepayments under this Section shall be subject to Section
2.16 but otherwise without premium or penalty. All prepayments other than
prepayments of ABR Loans shall be accompanied by accrued interest on the
principal amount being prepaid to the date of prepayment.
SECTION 2.14. Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision herein (but subject to paragraph (d) below
and Section 2.20), if after the date of this Agreement any change in applicable
law or regulation or in the interpretation or administration thereof by any
Governmental Authority charged with the interpretation or administration thereof
(whether or not having the force of law) shall change the basis of taxation of
payments to any Lender or the Fronting Bank, as applicable, of the principal of
or interest on any LIBOR Loan, NIBOR Loan or Fixed Rate Loan made by such Lender
or any Letter of Credit or participation therein or any fees or other amounts
payable hereunder (other than changes in respect of Taxes referred to in clause
(a) or (b) of the definition of "Excluded Taxes") or by any political
subdivision or taxing authority therein), or shall impose, modify or deem
applicable any reserve, special deposit or similar requirement against assets
of, deposits with or for the account of or credit extended by such Lender or
Fronting Bank or shall impose on such Lender, the Fronting Bank or the London
interbank market any other condition affecting this Agreement or LIBOR Loans,
NIBOR Loans or Fixed Rate Loans made by such Lender or any Letter of Credit or
participation therein, and the result of any of the foregoing shall be to
increase the cost to such Lender of making or maintaining any such Loan or to
increase the cost to such Lender or the Fronting Bank of participating in,
issuing or maintaining any Letter of Credit or to reduce the amount of any sum
received or receivable by such Lender or the Fronting Bank hereunder (whether of
principal, interest or otherwise) in respect thereof by an amount deemed by such
Lender to be material, then the Borrower
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42
will pay to such Lender or the Fronting Bank, as the case may be, upon demand
such additional amount or amounts as will compensate such Lender or the Fronting
Bank for such additional costs incurred or reduction suffered.
(b) Subject to Section 2.20, if any Lender or the Fronting Bank shall
have determined that the adoption after the date hereof of any law, rule,
regulation or guideline regarding capital adequacy, or any change after the date
hereof in any of the foregoing or in the interpretation or administration of any
of the foregoing by any Governmental Authority charged with the interpretation
or administration thereof, or compliance by any Lender or the Fronting Bank (or
any lending office of such Lender or the Fronting Bank) or any Lender's or the
Fronting Bank's holding company with any request or directive regarding capital
adequacy (whether or not having the force of law) made or promulgated after the
date hereof by any such Governmental Authority, has or would have the effect of
reducing the rate of return on such Lender's or the Fronting Bank's capital or
on the capital of such Lender's or the Fronting Bank's holding company, if any,
as a consequence of its obligations under this Agreement or the Loans made by,
or participations in Letters of Credit held by, such Lender, or the Letters of
Credit issued by the Fronting Bank, pursuant hereto to a level below that which
such Lender or the Fronting Bank or such Lender's or the Fronting Bank's holding
company could have achieved but for such adoption, change or compliance (taking
into consideration such Lender's or the Fronting Bank's guidelines with respect
to capital adequacy) by an amount deemed by such Lender or the Fronting Bank to
be material, then from time to time the Borrower shall pay to such Lender or the
Fronting Bank such additional amount or amounts as will compensate such Lender
or the Fronting Bank or such Lender's or the Fronting Bank's holding company for
any such reduction suffered.
(c) A certificate of each Lender or the Fronting Bank setting forth
such amount or amounts as shall be necessary to compensate such Lender or the
Fronting Bank (or its participating banks or other entities pursuant to Section
10.07) as specified in paragraph (a) or (b) above, as the case may be, shall be
delivered to the Borrower and shall be conclusive absent manifest error. Except
as provided in paragraph (d) below, the Borrower shall pay each Lender or the
Fronting Bank the amount shown as due on any such certificate delivered by such
Lender or the Fronting Bank within 30 days after receipt of the same. Each
Lender or the Fronting Bank shall submit such a certificate no more often than
monthly; provided, however, that certificates with respect to amounts due with
respect to identifiable Loans may be submitted at the ends of such Loans'
Interest Periods.
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43
(d) Failure on the part of any Lender or the Fronting Bank to demand
compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital shall not constitute a waiver of
such Lender's or the Fronting Bank's rights with respect to any period to demand
compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital with respect to such period or any
other period; provided, however, that neither any Lender nor the Fronting Bank
shall be entitled to compensation under this Section 2.14 for any costs incurred
or reductions suffered more than 90 days prior to the date on which it shall
have requested compensation therefor; provided further, that if the change in
law or regulation or in the interpretation or administration thereof that shall
give rise to any such costs or reductions shall be retroactive, then the 90-day
period referred to above shall be extended to include the period of retroactive
effect thereof. Notwithstanding any other provision of this Section 2.14,
neither any Lender nor the Fronting Bank shall demand compensation for any
increased cost or reduction referred to above if it shall not at the time be the
general policy or practice of such Lender or the Fronting Bank to demand such
compensation in similar circumstances under comparable provisions of other
credit agreements, if any. If any Lender or the Fronting Bank shall receive as
a refund any moneys from any source that it has listed on the certificate
provided pursuant to (c) above as an increased cost, to the extent that the
Borrower has previously paid such increased cost to such Lender or the Fronting
Bank, such Lender or the Fronting Bank shall promptly forward such refund to the
Borrower without interest.
(e) Notwithstanding the foregoing provisions of this Section, no
Lender shall demand compensation pursuant to this Section in respect of any
Competitive Loan for any increased cost or reduction referred to above if the
circumstance that would otherwise entitle it to such compensation shall have
been publicly announced prior to submission of the Competitive Bid pursuant to
which such Loan was made.
SECTION 2.15. Change in Legality. (a) Notwithstanding anything to
the contrary herein contained (but subject to Section 2.20), if after the date
of this Agreement any change in any law or regulation or in the interpretation
thereof or any new law, regulation or interpretation by any Governmental
Authority charged with the administration or interpretation thereof or any
judgment, order or directive of any competent court, tribunal or authority shall
make it unlawful for any Lender or its Applicable Lending Office to make or
maintain any LIBOR Loan or NIBOR Loan or to give effect to its obligations as
contemplated hereby with respect to any LIBOR Loan or NIBOR Loan (collectively,
an
<PAGE>
44
"Illegality"), then, by written notice to the Borrower and to the Servicing
Agent, such Lender, so long as such Illegality continues to exist:
(i) may declare that LIBOR Loans or NIBOR Loans, as applicable, will
not thereafter be made by such Lender hereunder, whereupon any request by
the Borrower for a LIBOR Borrowing or a NIBOR Borrowing, as applicable, (x)
shall, as to such Lender only, be deemed a request for an ABR Borrowing or
(y) at the option of the Borrower, shall be withdrawn as to the Lender
prior to the time for making the Borrowing; and
(ii) shall promptly enter into negotiations with the Borrower and
negotiate in good faith to agree to a solution to such Illegality;
provided, however, that if such an agreement has not been reached by the
date at which such change in law is given effect with respect to the
outstanding LIBOR Loans or NIBOR Loans of such Lender, the Borrower shall
immediately prepay the affected Loans.
(b) For purposes of this Section 2.15, a notice by a Lender shall be
effective as to each Loan, if lawful, on the last day of the then current
Interest Period with respect thereto; provided, however, that such notice shall
be effective on the date of receipt if there are no outstanding LIBOR Loans or
NIBOR Loans; provided further, that if it is not lawful for such Lender to
maintain any Loan in its current form until the end of the Interest Period
applicable thereto, then the notice shall be effective upon receipt.
(c) Each Lender that has delivered a notice of Illegality pursuant to
paragraph (a) above agrees that it will notify the Borrower as soon as
practicable if the conditions giving rise to the Illegality cease to exist.
SECTION 2.16. Indemnity. The Borrower agrees to indemnify each
Lender against any loss or expense which such Lender may sustain or incur as a
consequence of (a) any payment, prepayment or conversion of a LIBOR Loan, NIBOR
Loan or Fixed Rate Loan made to it required by any provision of this Agreement
or otherwise made, or any transfer of any such Loan pursuant to Section 2.20(b),
on a date other than the last day of the applicable Interest Period, (b) any
default in payment or prepayment of the principal amount of any Loan made to
it or any part thereof or interest accrued thereon, as and when due and payable
(whether at scheduled maturity, by notice of prepayment, acceleration or
otherwise), (c) the occurrence of any Event of Default, including any loss
sustained or incurred or to be sustained or incurred in liquidating or
employing deposits from third parties acquired to effect or maintain such Loan
or any part thereof as a LIBOR Loan, NIBOR Loan or Fixed Rate Loan, (d) any
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45
failure by the Borrower to fulfill on the date of any Borrowing by it hereunder
the applicable conditions set forth in Article IV, (e) any failure of the
Borrower to borrow or to convert or continue any Loan made to it hereunder after
irrevocable notice of such Borrowing, conversion or continuation has been
given pursuant to Section 2.03, 2.04 or 2.05 or (f) any failure of the Borrower
to borrow any Competitive Loan after accepting the Competitive Bid to make such
Loan. Such loss or expense shall be the difference as reasonably determined by
such Lender between (x) an amount equal to the principal amount of such LIBOR
Loan, NIBOR Loan or Fixed Rate Loan being paid, prepaid, converted or
transferred or not borrowed, converted or continued multiplied by a percentage
per annum (computed on the basis of a 360-day year and actual days remaining for
the balance of the Interest Period applicable, or which would have been
applicable, to such LIBOR Loan, NIBOR Loan or Fixed Rate Loan being paid,
prepaid, converted, transferred or not borrowed, converted or continued) equal
to the greater of (i) the LIBO Rate or NIBO Rate applicable to such LIBOR Loan
or NIBOR Loan being paid, prepaid, converted or transferred or not borrowed,
converted or continued or, in the case of a Fixed Rate Loan, the fixed rate of
interest applicable thereto or (ii) such Lender's cost of obtaining the funds
for such LIBOR Loan, NIBOR Loan or such Fixed Rate Loan being paid, prepaid,
converted, transferred or not borrowed, converted or continued, but in the case
of LIBOR Loans or NIBOR Loans, not in excess of the LIBO Rate or NIBO Rate
applicable to such Loan plus 1/16th of 1% per annum, and (y) any lesser amount
that would be realized by such Lender in reemploying the funds received in
payment, prepayment, conversion or transfer or as a result of the failure to
borrow, convert or continue during the period from the date of such payment,
prepayment, conversion or transfer or failure to borrow, convert or continue to
the end of the Interest Period applicable to such LIBOR Loan, NIBOR Loan or
Fixed Rate Loan at the interest rate that would apply to an interest period of
approximately such duration. Any such Lender shall provide to the Borrower a
statement explaining the amount of any such loss or expense, which statement
shall, in the absence of manifest error, be conclusive.
SECTION 2.17. Pro Rata Treatment. Each Revolving Borrowing, each
payment of the Facility Fee and each reduction of the Total Commitment shall be
allocated among the Lenders in accordance with their respective Pro Rata
Percentages. Except as required under Section 2.15, each payment or prepayment
of principal of any Revolving Borrowing and each continuation or conversion of
any Revolving Borrowing shall be allocated pro rata among the Lenders in
accordance with the respective principal amounts of their outstanding Revolving
Loans comprising such Borrowing. Each payment of interest on any Revolving
Borrowing shall be allocated pro rata among the Lenders in accordance with the
respective amounts of accrued and unpaid interest on their outstanding Revolving
Loans comprising such Borrowing. Each
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46
payment of principal of any Competitive Borrowing shall be allocated pro rata
among the Lenders participating in such Borrowing in accordance with the
respective principal amounts of their outstanding Competitive Loans comprising
such Borrowing. Each payment of interest on any Competitive Borrowing shall be
allocated pro rata among the Lenders participating in such Borrowing in
accordance with the respective amounts of accrued and unpaid interest on their
outstanding Competitive Loans comprising such Borrowing. Each payment of
interest on any Swingline Borrowing or LC Disbursement shall be allocated in
accordance with Sections 2.06 and 2.07, respectively.
SECTION 2.18. Sharing of Setoffs. Each Lender agrees that if it
shall, through the exercise of a right of banker's lien, setoff or counterclaim
or pursuant to a secured claim under Section 506 of Title 11 of the United
States Code or other security or interest arising from, or in lieu of, such
secured claim, received by such Lender under any applicable bankruptcy,
insolvency or other similar law or otherwise, obtain payment (voluntary or
involuntary) in respect of any Revolving Loans or participations in LC
Disbursements or Swingline Loans as a result of which the unpaid principal
portion of its Revolving Loans or participations in LC Disbursements or
Swingline Loans shall be proportionately less than the unpaid principal portion
of the Revolving Loans or participations in LC Disbursements or Swingline Loans
of any other Lender, it shall be deemed simultaneously to have purchased from
such other Lender at face value, and shall promptly pay to such other Lender the
purchase price for, a participation in the applicable Revolving Loans or
participations in LC Disbursements or Swingline Loans of such other Lender, so
that the aggregate unpaid principal amount of such Revolving Loans or
participations in LC Disbursements or Swingline Loans and participations in the
foregoing held by each Lender shall be in the same proportion to the aggregate
unpaid principal amount of all such Revolving Loans or participations in LC
Disbursements or Swingline Loans then outstanding as the principal amount of its
Revolving Loans or participations in LC Disbursements or Swingline Loans prior
to such exercise of banker's lien, setoff or counterclaim or other event was to
the principal amount of all such Revolving Loans or participations in LC
Disbursements or Swingline Loans outstanding prior to such exercise of such
banker's lien, setoff or counterclaim or other event; provided, however, that
(i) if any such purchase or adjustments shall be made pursuant to this Section
2.18 and the payment giving rise thereto shall thereafter be recovered, such
purchase or purchases or adjustments shall be rescinded to the extent of such
recovery and the purchase price or prices or adjustment restored without
interest and (ii) the provisions of this Section shall not be construed to apply
to any payment obtained by a Lender as consideration for the assignment of or
sale of a participation in any of its Loans or participations in LC
Disbursements or
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47
Swingline Loans to any assignee or participant other than the Borrower or any
Affiliate thereof. The Borrower expressly consents to the foregoing arrangements
and agrees that any Lender holding a participation in a Loan made to it or
participations in LC Disbursements or Swingline Loans deemed to have been so
purchased may exercise any and all rights of banker's lien, setoff or
counterclaim with respect to any and all moneys owing by the Borrower to such
Lender by reason thereof as fully as if such Lender had made a Loan directly to
the Borrower in the amount of such participation.
SECTION 2.19. Taxes. (a) Any and all payments by or on account of
any obligation of the Borrower hereunder shall be made free and clear of and
without deduction for any Indemnified Taxes or Other Taxes; provided that if the
Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent, Servicing
Agent, Lender (which term, as used in this Section, shall include any assignee
or transferee of a Lender, including any participation holder, subject to
Section 10.07) or Fronting Bank (as the case may be) receives an amount equal to
the sum it would have received had no such deductions been made, (ii) the
Borrower shall make such deductions and (iii) the Borrower shall pay the full
amount deducted to the relevant Governmental Authority in accordance with
applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify each Administrative Agent, the
Servicing Agent, each Lender and the Fronting Bank, within 10 days after written
demand therefor, for the full amount of any Indemnified Taxes or Other Taxes
paid by such Administrative Agent, the Servicing Agent, such Lender or the
Fronting Bank, as the case may be, on or with respect to any payment by or on
account of any obligation of the Borrower hereunder (including Indemnified Taxes
or Other Taxes imposed or asserted on or attributable to amounts payable under
this Section) and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability delivered to the Borrower by an Administrative Agent, a Lender or the
Fronting Bank, or by the Servicing Agent on its own behalf or on behalf of a
Lender or the Fronting Bank, shall be conclusive absent manifest error.
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48
(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the Servicing Agent the original or a certified copy of a receipt
issued by such Governmental Authority evidencing such payment, a copy of the
return reporting such payment or other evidence of such payment reasonably
satisfactory to the Servicing Agent.
(e) Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which the
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver to the Borrower (with a
copy to the Servicing Agent), at the time or times prescribed by applicable law,
such properly completed and executed documentation prescribed by applicable law
or reasonably requested by the Borrower as will permit such payments to be made
without withholding or at a reduced rate.
(f) If an Administrative Agent, the Servicing Agent, a Lender or the
Fronting Bank shall become aware that it is entitled to receive a refund in
respect of Indemnified Taxes or Other Taxes for which it shall have received
payment from the Borrower under this Section, it shall promptly notify the
Borrower of the availability of such refund and shall, within 10 days after
receipt of a request by the Borrower, apply for such refund at the Borrower's
expense. If an Administrative Agent, the Servicing Agent, any Lender or the
Fronting Bank shall receive a refund in respect of any such Indemnified Taxes or
Other Taxes, it shall promptly repay such refund (including any penalties or
interest received with respect thereto) to the Borrower, net of all out-of-
pocket expenses of such Administrative Agent, the Servicing Agent, such Lender
or the Fronting Bank, provided that the Borrower, upon the request of such
Administrative Agent, the Servicing Agent, such Lender or the Fronting Bank,
agrees to return such refund (plus penalties, interest or other charges) to such
Administrative Agent, the Servicing Agent, such Lender or the Fronting Bank in
the event such Administrative Agent, the Servicing Agent, such Lender or the
Fronting Bank shall be required to repay such refund.
SECTION 2.20. Duty to Mitigate; Assignment of Commitments Under
Certain Circumstances. (a) If any Lender (or Transferee) claims any additional
amounts payable pursuant to Section 2.14 or exercises its rights under Section
2.15 or if the Borrower is required to pay any additional amount to any Lender
or any Governmental Authority for the account of any Lender pursuant to Section
2.19, then such Lender shall use reasonable efforts (consistent with legal and
regulatory restrictions) to file any certificate or document, including, without
limitation, any such certificate or document reasonably requested by the
Borrower, or
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49
to change the jurisdiction of its Applicable Lending Office or to take other
actions (including the filing of certificates or documents) known to it to be
available if the making of such a filing or change or the taking of such other
action would avoid the need for or reduce the amount of any such additional
amounts which may thereafter accrue or avoid the circumstances giving rise to
such exercise and would not, in the sole determination of such Lender (or
Transferee), be otherwise disadvantageous to such Lender (or Transferee).
(b) In the event that any Lender shall have delivered a notice or
certificate pursuant to Section 2.14 or 2.15, or the Borrower shall be required
to make additional payments to any Lender under Section 2.19, the Borrower shall
have the right, at its own expense (which shall include the processing and
recordation fee referred to in Section 10.07(b)), upon notice to such Lender and
the Servicing Agent, to require such Lender to transfer and assign without
recourse (in accordance with and subject to the restrictions contained in
Section 10.07) all its interests, rights and obligations hereunder (other than
any outstanding Competitive Loans held by it) to another financial institution
approved by the Servicing Agent (and, if a Commitment is being assigned, the
Fronting Bank and the Swingline Lender) (which approval shall not be
unreasonably withheld) which shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment); provided, however, that
(i) no such assignment shall conflict with any law, rule or regulation or order
of any Governmental Authority and (ii) the assignee or the Borrower shall pay to
the affected Lender in immediately available funds on the date of such
assignment the outstanding principal of its Loans (other than Competitive Loans)
and participations in LC Disbursements and Swingline Loans, accrued interest
thereon, accrued fees and all other amounts accrued for its account or owed to
it hereunder (including the additional amounts asserted and payable pursuant to
Section 2.14 or 2.19, if any).
ARTICLE III
Representations and Warranties
The Borrower (and, in the case of Section 3.18, MAI) represents and
warrants to the Lenders that:
SECTION 3.01. Organization. Each of the Borrower and its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has the requisite power and
authority under its constitutive documents and applicable law to own its
property and assets and to carry on its business as now conducted and is duly
qualified and is in good standing and is authorized to do business in every
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50
jurisdiction where such qualification or authorization is required, except where
the failure so to qualify, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 3.02. Authorization. It has the power and authority under
its constitutive documents and applicable law to execute, deliver and carry out
the provisions of this Agreement and to borrow hereunder and all such actions
have been duly and validly authorized by all necessary proceedings on its part
under its constitutive documents and applicable law.
SECTION 3.03. Absence of Conflicts. The execution, delivery and
performance by it of this Agreement, any Borrowings by it hereunder, the
formation of the Joint Venture and the other transactions contemplated hereby
will not (a) violate (i) any provision of the Master Transaction Agreement, the
Limited Partnership Agreement or any other agreement governing its organization
and/or scope of power and authority or (ii) any applicable law, rule, regulation
(including Regulation G, U or X) or order of any Governmental Authority binding
upon it, (b) result in a breach of or constitute (alone or with notice or lapse
of time or both) a material default under any indenture or any material
agreement or other instrument to which it is a party, or by which it or any of
its properties or assets are bound, or (c) result in or require the creation or
imposition of any Lien upon any of its material property or assets.
SECTION 3.04. Governmental Approvals. No registration with or
consent or approval of, or other action by, any Governmental Authority is or
will be required in connection with its execution, delivery or performance of
this Agreement or any Borrowing hereunder, or in connection with the Joint
Venture or the other transactions contemplated hereby, other than any which have
been made or obtained or the failure to obtain, give, file or take which could
not reasonably be expected to result in a Material Adverse Effect.
SECTION 3.05. Enforceability. This Agreement will constitute its
legal, valid and binding obligation, enforceable in accordance with the terms
hereof, except as such enforce ability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws of general application
from time to time affecting the rights of creditors generally and by general
principles of equity, including implied obligations of good faith and fair
dealing.
SECTION 3.06. Financial Statements. (a) The Borrower has heretofore
furnished to the Lenders balance sheets, statements of income, invested capital
and cash flows for the respective businesses to be contributed by each of
Lyondell and Millennium to
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51
the Joint Venture in accordance with the Master Transaction Agreement and the
Asset Contribution Agreements (each a "Contributed Business", and together, the
"Contributed Businesses") (i) as of and for the fiscal year ended December 31,
1996, reported on by independent public accountants (Coopers & Lybrand L.L.P, in
the case of the Lyondell Contributed Business, and Price Waterhouse LLP, in the
case of the Millennium Contributed Business), and (ii) as of and for the fiscal
quarter and the portion of the fiscal year ended June 30, 1997, each certified
by the chief financial officer of Lyondell or Millennium, as the case may be.
Such financial statements present fairly, in all material respects, the
financial position and results of operations and cash flows of each of
Contributed Businesses as of such dates and for such periods in accordance with
GAAP, subject in the case of such quarterly statements to year-end audit
adjustments.
(b) The Borrower has heretofore furnished to the Lenders (i) the
unaudited income statement of the Borrower and its Subsidiaries prepared on a
pro forma combined basis for the 12-month period ended December 31, 1996 and for
the six-month period ended June 30, 1997, and (ii) the unaudited balance sheet
of the Borrower and its Subsidiaries prepared on a pro forma combined basis, as
of June 30, 1997. Such pro forma income statements and balance sheet have been
prepared in good faith based on the assumptions used to prepare the pro forma
financial information contained in the Joint Proxy Statement (which assumptions
are believed by the Borrower on the date hereof to be reasonable), are based on
the best information available to the Borrower as of the date of delivery
thereof, accurately reflect all adjustments required to be made to give effect
to the Joint Venture and present fairly on a pro forma basis the estimated
combined financial position of the Borrower and its Subsidiaries as of June 30,
1997, and the estimated combined results of operations of the Borrower and its
Subsidiaries for the 12-month period ended December 31, 1996 and the six-month
period ended June 30, 1997, assuming that the Joint Venture had been consummated
at such date or at the beginning of each such period, as the case may be.
(c) The projections contained in the Confidential Information
Memorandum were prepared in good faith on the basis of the assumptions described
in the Confidential Information Memorandum, which assumptions were believed by
the Borrower in good faith to be reasonable in light of conditions existing at
the time of preparation thereof, and the Borrower has no knowledge of any event
or circumstance that would cause it to change any such assumptions in any
material respect as of the date hereof, it being understood by the
Administrative Agents and the Lenders that actual results may vary from the
projected results set forth therein.
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52
(d) Each financial statement delivered pursuant to Section 5.05 (a)
or (b) will, at the time it is delivered, present fairly, in all material
respects, the financial position, results of operations or cash flows, as the
case may be, of the Borrower as of the date or for the period to which it
relates in accordance with GAAP, subject in the case of quarterly statements to
year-end audit adjustments.
SECTION 3.07. Material Adverse Effect. From June 30, 1997, to the
date of this Agreement, there has not occurred any development or event
affecting, or any change in the business, assets, results of operations,
financial condition or prospects of, the Borrower and its Subsidiaries, taken as
a whole, which has had or could reasonably be expected to have a Material
Adverse Effect.
SECTION 3.08. Litigation. There are no actions, suits or proceedings
at law or in equity or by or before any Governmental Authority now pending or,
to its knowledge, threatened against or affecting it or any of its Subsidiaries
or the businesses, assets or rights of it or any of its Subsidiaries as to which
there is a reasonable possibility of an adverse determination and which, if
adversely determined, could, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.
SECTION 3.09. Compliance with Laws and Agreements. (a) Neither it
nor any of its Subsidiaries is in violation of any law, or in default with
respect to any judgment, writ, injunction, decree, rule or regulation of any
Governmental Authority, where such violation or default could reasonably be
expected to result in a Material Adverse Effect.
(b) Neither it nor any of its Subsidiaries is in default under any
provision of any indenture or other agreement or instrument evidencing
Indebtedness, or any other material agreement or instrument to which it is a
party or by which it or any of its properties or assets are or may be bound,
where such default could reasonably be expected to result in a Material Adverse
Effect.
SECTION 3.10. Federal Reserve Regulations. (a) Neither it nor any of
its Subsidiaries is engaged principally, or as one of its important activities,
in the business of extending credit for the purpose of purchasing or carrying
Margin Stock.
(b) No part of the proceeds of the Loans has been or will be used,
whether directly or indirectly, and whether immediately, incidentally or
ultimately, for any purpose which entails a violation of the provisions of the
Regulations of the
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53
Board, including, without limitation, Regulation G, U or X thereof. After giving
effect to each Credit Event and the application of the proceeds thereof, not
more than 25% of the value, determined in accordance with Regulation U, of the
assets subject to Section 6.01 will consist of Margin Stock.
SECTION 3.11. Tax Returns. All Federal, state, local and foreign tax
returns which to its knowledge are required to have been filed by or on behalf
of the Borrower and its Subsidiaries, or by Lyondell or Millennium or their
subsidiaries, with respect to the assets or operations of the Borrower and its
Subsidiaries, have been filed, and all taxes shown to be due and payable on such
returns or on any assessments received by the Borrower and its Subsidiaries (or
by Lyondell or Millennium or their subsidiaries) have been paid, except where
the failure to do so could not reasonably be expected to result in a Material
Adverse Effect.
SECTION 3.12. Employee Benefit Plans. (a) It and its ERISA
Affiliates are in compliance in all material respects with those provisions of
ERISA and the regulations and published interpretations thereunder which are
applicable to it, except where noncompliance could not reasonably be expected to
result in a Material Adverse Effect. No Reportable Event has occurred with
respect to any Plan that could reasonably be expected to result in a Material
Adverse Effect, and no unfunded liabilities exist under all of the Plans in the
aggregate that could reasonably be expected to result in a Material Adverse
Effect.
(b) Neither it nor any ERISA Affiliate has incurred any Withdrawal
Liability that materially and adversely affects the financial condition of it
and its Subsidiaries taken as a whole or that materially and adversely impairs
its ability to perform its obligations under this Agreement or any other Loan
Document. Neither it nor any ERISA Affiliate has received any notification that
any Multiemployer Plan is in reorganization or has been terminated within the
meaning of Title IV of ERISA, and no Multiemployer Plan is reasonably expected
to be in reorganization or to be terminated, where such reorganization or
termination has resulted or is likely to result in an increase in the
contributions required to be made to such Multiemployer Plan that could
reasonably be expected to result in a Material Adverse Effect.
SECTION 3.13. Accuracy of Information. (a) No information, report,
exhibit or schedule furnished by or on behalf of it to the Administrative Agents
or any Lender in connection with the negotiation of this Agreement or included
herein contained or contains any material misstatement of fact or omitted or
omits to state any material fact necessary to make the statements
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54
therein, in the light of the circumstances under which they were made, not
misleading.
(b) The representations and warranties set forth in the Master
Transaction Agreement and the Asset Contribution Agreements are and will be true
and correct in all material respects on and as of the date hereof and on and as
of the Effective Date, except to the extent that (i) the accuracy of any thereof
has been waived by the party or parties to such agreements for whose benefit the
same shall have been made and (ii) the event or circumstance necessitating such
waiver could not reasonably be expected to result in a Material Adverse Effect.
SECTION 3.14. Investment Company Act; Public Utility Holding Company
Act. Neither it nor any of its Subsidiaries is an "investment company" as
defined in, or is otherwise subject to regulation under, the Investment Company
Act of 1940. Neither it nor any of its Subsidiaries is subject to regulation as
a "holding company" under the Public Utility Holding Company Act of 1935.
SECTION 3.15. Environmental and Safety Matters. It and each of its
Subsidiaries and the businesses conducted by them have complied in all material
respects with all Federal, state, local and other statutes, ordinances, orders,
judgments, rulings and regulations relating to the environment or to protection
of the environment or to employee health and safety ("Environmental and Safety
Laws") except for violations that either alone or in the aggregate could not
reasonably be expected to result in a Material Adverse Effect. Neither it nor
any of its Subsidiaries manages or handles any hazardous wastes, hazardous
substances, hazardous materials, toxic substances or toxic pollutants regulated
by Environmental and Safety Laws in violation of such Environmental and Safety
Laws where such violation could reasonably be expected to result, individually
or together with other violations, in a Material Adverse Effect. To the best of
its knowledge, neither it nor any of its Subsidiaries has any liabilities or
contingent liabilities relating to environmental or employee health and safety
matters which, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect.
SECTION 3.16. Title to Properties. It and each of its Material
Subsidiaries has good and, in the case of real property, marketable title to, or
valid leasehold interests in or other rights to use, all its material assets and
properties (including, on the Effective Date, all the assets and properties
referred to in the Joint Proxy Statement as being transferred to or owned by
it), except for such assets and properties as are no longer being used or useful
in the conduct of its businesses or have been disposed of in the ordinary course
of business and except for defects in title and exceptions to leasehold
interests that either
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55
alone or in the aggregate could not reasonably be expected to result in a
Material Adverse Effect. All such material assets and properties are free and
clear of all mortgages, pledges, liens, charges, security interests and other
encumbrances other than those permitted by Section 6.01.
SECTION 3.17. Senior Ranking. The Obligations will rank equally with
all of its senior, unsecured indebtedness, whether now existing or hereafter
created.
SECTION 3.18. Representations of MAI. (a) MAI is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization. MAI has the corporate power and authority to execute and deliver
this Agreement and to carry out the provisions of Article IX hereof, and all
such actions have been duly and validly authorized by all necessary corporate
proceedings on its part. The execution and delivery by MAI of this Agreement
and the performance of its obligations hereunder will not (a) violate (i) any
provision of its certificate of incorporation or by-laws or (ii) any applicable
law, rule, regulation or order of any Governmental Authority binding upon it,
(b) result in a breach of or constitute (alone or with notice or lapse of time
or both) a material default under any indenture, agreement or other instrument
to which it is a party, or by which it or any of its properties or assets are
bound, or (c) result in or require the creation or imposition of any Lien upon
any of its material property or assets. No registration with or consent or
approval of, or other action by, any Governmental Authority is or will be
required in connection with MAI's execution or delivery of this Agreement or the
performance of its obligations under Article IX hereof, other than any which
have been made or obtained or the failure to obtain, give, file or take which
could not reasonably be expected to result in a Material Adverse Effect.
ARTICLE IV
Conditions of Lending
SECTION 4.01. All Borrowings. On the date of each Credit Event, the
obligations of the Lenders to make Loans and the obligation of the Fronting Bank
to issue, amend, renew or extend any Letter of Credit hereunder shall be subject
to the satisfaction of the following conditions:
(a) The Servicing Agent or the Fronting Bank shall have received a
notice of such Credit Event as required by Section 2.03, Section 2.04 or
Section 2.07, as applicable.
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56
(b) Except in the case of Borrowings that do not increase the
aggregate principal amount of the Loans of any Lender outstanding, the
representations and warranties set forth in Article III shall be true and
correct in all material respects on and as of the date of such Credit Event
with the same effect as though made on and as of such date, except to the
extent such representations and warranties expressly relate to an earlier
date.
(c) At the time of and immediately after such Credit Event, no Event
of Default or Default shall have occurred and be continuing.
Each Credit Event shall be deemed to constitute a representation and warranty on
the date of such Credit Event as to the matters specified in paragraphs (b) and
(c) of this Section.
SECTION 4.02. Effective Date. The obligations of the Lenders and the
Fronting Bank to make Loans and issue Letters of Credit hereunder shall not
become effective until the date on which each of the following conditions has
been satisfied (or waived in accordance with Section 10.02):
(a) The Administrative Agents shall have received a certificate dated
the Effective Date and signed by a Financial Officer of the Borrower,
confirming compliance with the conditions precedent set forth in paragraphs
(b) and (c) of Section 4.01 and paragraph (g) of this Section (with
compliance with the conditions set forth in such paragraphs (b) and (c)
being determined after giving effect to the transactions referred to in
such paragraph (i)).
(b) The Administrative Agents shall have received for the benefit of
each Lender a signed copy of the favorable written opinion, dated the
Effective Date and addressed to the Lenders, of (i) Baker & Botts L.L.P.,
counsel for the Borrower, substantially in the form set forth in Exhibit E-
1, (ii) Kerry Galvin, Esq., General Counsel of Lyondell GP, substantially
in the form set forth in Exhibit E-2 and (iii) George H. Hempstead, III,
Esq., General Counsel of MAI, substantially in the form set forth in
Exhibit E-3, in each case satisfactory to Cravath, Swaine & Moore, counsel
for the Administrative Agents.
(c) The Administrative Agents shall have received such documents and
certificates as the Administrative Agents or their counsel may reasonably
request relating to the organization, existence and good standing of each
of the Borrower, Lyondell, Millennium, Lyondell GP, Millennium GP, Lyondell
LP, Millennium LP and MAI, the authorization of the Joint Venture and the
transactions contemplated hereby and
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57
any other legal matters relating to the foregoing, all in form and
substance satisfactory to the Administrative Agents and their counsel.
(d) The Administrative Agents shall have received counterparts of
this Agreement which, when taken together, bear the signatures of all the
parties hereto.
(e) The Administrative Agents shall have received, for each Lender,
copies certified by a Financial Officer of the Borrower of (i) the Master
Transaction Agreement, (ii) the Limited Partnership Agreement, and (iii)
the Asset Contribution Agreements, each of which shall be in full force and
effect.
(f) All consents, approvals and waivers sought to be obtained from
the respective noteholders under each of the Millennium Indentures in
connection with the Joint Venture and the other transactions contemplated
hereby shall have been obtained, and no default will exist under the
Millennium Indentures or will result under such Indentures from the
consummation of the Joint Venture or the other transactions contemplated
hereby; provided, however, that the consent of the holders of the
Exchangeable Notes need not be obtained if, after a reasonable effort on
the part of Millennium, such consent has not been obtained.
(g) The closing of the Joint Venture, and the related transfers of
assets by Lyondell and Millennium, shall have occurred or shall
simultaneously occur in accordance with applicable law and on terms and in
a manner not materially inconsistent with the Master Transaction Agreement,
the Asset Contribution Agreements, the Limited Partnership Agreement and
the description thereof in the Joint Proxy Statement.
(h) The Administrative Agents shall have received all Fees and other
amounts due and payable on or prior to the Effective Date, including to the
extent invoiced, reimbursement or payment of all out-of-pocket expenses
required to be reimbursed or paid by the Borrower hereunder.
(i) All legal matters incidental to this Agreement and the Borrowings
hereunder shall be satisfactory to the Lenders and to Cravath, Swaine &
Moore, counsel for the Administrative Agents.
The Administrative Agents shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding.
Notwithstanding the foregoing, the obligations of the Lenders to make Loans and
of the Fronting Bank to issue Letters of Credit hereunder shall not become
effective unless each
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58
of the foregoing conditions is satisfied (or waived pursuant to Section 10.02)
at or prior to 3:00 p.m., New York City time, on December 31, 1997 (and, in the
event such conditions are not so satisfied or waived, the Commitments shall
terminate at such time).
ARTICLE V
Affirmative Covenants
Until the Commitments have expired or been terminated, the principal
of and interest on each Loan and all Fees payable hereunder shall have been paid
in full, all Letters of Credit shall have expired or terminated and all LC
Disbursements shall have been reimbursed, the Borrower covenants and agrees with
the Lenders that it will, and will cause each of its Material Subsidiaries to:
SECTION 5.01. Existence. Do or cause to be done all things necessary
to preserve, renew and keep in full force and effect its legal existence, except
as otherwise permitted by Section 6.06.
SECTION 5.02. Businesses and Properties. Except as otherwise
permitted by Section 6.06, at all times (a) do or cause to be done all things
reasonably necessary to preserve, renew and keep in full force and effect the
rights, licenses, permits, franchises, patents, copyrights, trademarks and trade
names material to the conduct of its business; and (b) maintain, preserve and
protect all property material to the conduct of such business.
SECTION 5.03. Insurance. Maintain insurance consistent either with
the insurance maintained on the date hereof with respect to the businesses to be
contributed to the Borrower or with general practices in effect from time to
time in the Borrower's industry, in either case to the extent available to the
Borrower and the Subsidiaries on commercially reasonable terms, and furnish to
the Administrative Agents upon request information in reasonable detail as to
the insurance so carried.
SECTION 5.04. Taxes. Pay and discharge promptly when due all
material taxes, assessments and governmental charges or levies imposed upon it
or upon its income or profits or in respect of its property before the same
shall become delinquent or in default, as well as all lawful material claims for
labor, materials and supplies or otherwise, which, if unpaid, might give rise to
liens or charges upon such properties or any part thereof, unless and to the
extent that any such tax, assessment, charge, levy or claim is being contested
in good faith by appropriate
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59
proceedings and adequate reserves are being maintained on its books with respect
thereto to the extent required by GAAP.
SECTION 5.05. Financial Statements, Reports, etc. Furnish to each
Administrative Agent and to the Servicing Agent with a copy for each of the
Lenders:
(a) Within 105 days after the end of each fiscal year of the
Borrower, financial statements (which shall include a balance sheet and income
statement, as well as statements of partners' equity and cash flows) showing the
financial condition and results of operations of the Borrower and its
Subsidiaries as of the end of and for such fiscal year prepared on a
consolidated basis. The financial statements of the Borrower and its
consolidated Subsidiaries delivered pursuant to this paragraph will be audited
and reported on by independent public accountants of recognized standing.
(b) Within 60 days after the end of each of the first three fiscal
quarters of each fiscal year of the Borrower, unaudited financial statements
(which shall include a balance sheet and income statement, as well as statements
of partners' equity and cash flow) showing the financial condition and results
of operations of the Borrower and its Subsidiaries as of the end of and for such
fiscal quarter prepared on a consolidated basis, in each case certified by a
Financial Officer of the Borrower as presenting fairly the financial position
and results of operations of the Borrower and its consolidated Subsidiaries
and as having been prepared in accordance with GAAP, subject to year-end
adjustments.
(c) Promptly after the same shall have been filed or furnished as
described below, copies of such registration statements, annual, periodic and
other reports, and such proxy statements and other information, if any, as shall
be filed by the Borrower or any Subsidiary with the SEC pursuant to the
requirements of the Securities Act of 1933 or the Securities Exchange Act of
1934 or the rules promulgated thereunder.
(d) Concurrently with (a) and (b) above, a certificate of a
Financial Officer of the Borrower, (i) certifying compliance, as of the dates of
the financial statements being furnished at such time and for the periods then
ended, with the covenants set forth in Sections 6.01, 6.02 and 6.03, and
demonstrating compliance with the covenants set forth in Sections 6.04 and 6.05
and (ii) certifying that to the best knowledge of such Financial Officer no
Event of Default or Default has occurred and is continuing or, if an Event of
Default or Default has occurred and is continuing, specifying the nature and
extent thereof and any corrective action taken or proposed to be taken with
respect thereto.
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60
(e) Promptly, from time to time, such other information regarding
this Agreement or the affairs, operations or condition (financial or otherwise)
of the Borrower or any Subsidiary as the Servicing Agent may reasonably request
at the request of any Lender and which is susceptible of being obtained,
produced or generated by any of them or of which any of them has knowledge.
SECTION 5.06. Litigation and Other Notices. Give the Servicing Agent
prompt written notice (which the Servicing Agent shall promptly deliver to the
Lenders) after any Responsible Officer learns of the following:
(i) the issuance by any Governmental Authority of any injunction,
order, decision or other restraint prohibiting, or having the effect of
prohibiting, the making of the Loans, or having the effect of invalidating
any provision of this Agreement or the initiation of any litigation or
similar proceeding seeking any such injunction, order, decision or other
restraint;
(ii) the filing or commencement of any action, suit or proceeding
against the Borrower or any Subsidiary, whether at law or in equity or by
or before any Governmental Authority or any arbitrator, as to which action,
suit or proceeding there is a reasonable possibility of an adverse
determination and which, if determined adversely to the Borrower or any
Subsidiary, could reasonably be expected to result in a Material Adverse
Effect;
(iii) the occurrence of any development or event or any change in the
business, assets, results of operations or financial condition of the
Borrower and its Subsidiaries, taken as a whole, which could reasonably be
expected to result in a Material Adverse Effect; and
(iv) any Default or Event of Default, specifying the nature and extent
thereof and the action (if any) which is proposed to be taken with respect
thereto.
SECTION 5.07. ERISA. (a) Comply in all material respects with the
applicable provisions of ERISA, except where noncompliance could not reasonably
be expected to result in a Material Adverse Effect, and (b) furnish to the
Administrative Agents and each Lender (i) as soon as possible, and in any event
within 30 days after any Responsible Officer of the Borrower or any ERISA
Affiliate knows that any Reportable Event has occurred that alone or together
with any other Reportable Event could reasonably be expected to result in
liability of the Borrower or any Subsidiary to the PBGC that could reasonably be
expected to result in a Material Adverse Effect, a statement of a Financial
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61
Officer setting forth details as to such Reportable Event and the action
proposed to be taken with respect thereto, together with a copy of the notice,
if any, of such Reportable Event given to the PBGC, (ii) promptly after receipt
thereof, a copy of any notice that the Borrower or any Subsidiary may receive
from the PBGC of an intent to terminate any Plan or Plans (other than a Plan
maintained by an ERISA Affiliate that is considered an ERISA Affiliate only
pursuant to subsection (m) or (o) of Section 414 of the Code) or to appoint a
trustee to administer any Plan or Plans and (iii) promptly and in any event
within 30 days after receipt thereof by the Borrower or any ERISA Affiliate from
the sponsor of a Multiemployer Plan, a copy of each notice concerning (A) the
imposition of any Withdrawal Liability in an amount that could reasonably be
expected to result in a Material Adverse Effect or (B) a determination that a
Multiemployer Plan is, or is expected to be, terminated or in reorganization,
both within the meaning of Title IV of ERISA, which, in each case, is expected
to result in an increase in annual contributions of the Borrower or any
Subsidiary to such Multiemployer Plan in an amount that could reasonably be
expected to result in a Material Adverse Effect.
SECTION 5.08. Access to Premises and Records. Keep and maintain
proper books of record and account and a system of accounting established and
administered in accordance with sound business practice and adequate to permit
the preparation of the financial statements required to be delivered under
Section 5.05, and upon reasonable notice permit representatives of the Lenders
to have access to such books of record and account and the premises of the
Borrower or any Subsidiary at reasonable times and to make such excerpts from
such books of record and account as such representatives deem necessary in
connection with their evaluation of the ability of the Borrower to repay the
Loans.
SECTION 5.09. Compliance with Laws. Comply with all applicable laws,
rules and regulations, and all orders of any Governmental Authority applicable
to it or any of its property, business, operations or transactions to the extent
noncompliance could reasonably be expected to result in a Material Adverse
Effect.
SECTION 5.10. Environmental Compliance. Comply with all
Environmental and Safety Laws, except where the failure so to comply could not
reasonably be expected to result in a Material Adverse Effect, and provide
prompt written notice to the Servicing Agent following the receipt of any notice
of any violation of any Environmental and Safety Laws from any Federal, state
or local Governmental Authority charged with enforcing such Environmental and
Safety Laws which could reasonably be expected to result in a Material Adverse
Effect.
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62
ARTICLE VI
Negative Covenants
Until the Commitments have expired or been terminated, the principal
of and interest on each Loan and all Fees payable hereunder have been paid in
full, all Letters of Credit have expired or terminated and all LC Disbursements
shall have been reimbursed, the Borrower covenants and agrees with the Lenders
that it will not, and will not permit any of its Material Subsidiaries, either
directly or indirectly, to:
SECTION 6.01. Liens. Incur, create, assume or permit to exist any
Lien on any of its property or assets, whether owned at the date hereof or
hereafter acquired, or assign or convey any rights to or security interests in
any future revenues, except:
(a) Liens incurred and pledges and deposits made in the ordinary
course of business in connection with workmen's compensation, disability or
unemployment insurance, old-age pensions, retiree health benefits and other
social security benefits and deposits securing liabilities to insurance
carriers under insurance or self-insurance arrangements;
(b) Liens securing the performance of bids, tenders, leases,
government contracts, other contracts (other than for the repayment of
borrowed money), statutory and regulatory obligations, surety, customs and
appeal bonds and other obligations of a like nature, incurred as an
incident to and in the ordinary course of business;
(c) Liens encumbering pipelines or pipeline facilities that arise by
operation of law, and other Liens imposed by law, such as carriers',
warehousemen's, mechanics', materialmen's and vendors' liens, incurred in
good faith in the ordinary course of business and securing obligations
which are not overdue for a period of more than 60 days or which are being
contested in good faith by appropriate proceedings as to which the Borrower
or any such Subsidiary, as the case may be, shall have, to the extent
required by GAAP, set aside on its books adequate reserves;
(d) Liens securing the payment of taxes, assessments and governmental
charges or levies, either (i) not delinquent or (ii) being contested in
good faith by appropriate legal or administrative proceedings and as to the
Borrower or any such Subsidiary, as the case may be, shall have, to the
extent required by GAAP, set aside on its books adequate reserves;
(e) (i) zoning restrictions, easements, licenses, reservations,
provisions, covenants, conditions, waivers,
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restrictions on the use of property, minor irregularities of title and
similar encumbrances incurred or suffered in the ordinary course of
business (and with respect to leasehold interests, the interest of the
landlord or owner in the leased property and mortgages, obligations, liens
and other encumbrances incurred, created, assumed or permitted to exist and
arising by, through or under a landlord or owner of the leased property,
with or without consent of the lessee) and (ii) licenses or leases of
patents, copyrights, trademarks, tradenames and other intellectual
property, which do not in the aggregate materially detract from the value
of its property or assets or materially impair the use thereof in the
operation of its business;
(f) Liens upon any real property or equipment acquired (by merger or
otherwise), constructed or improved by the Borrower or any Subsidiary which
are created or incurred prior to or within 180 days after such acquisition,
construction or improvement to secure or provide for the payment of any
part of the purchase price of such real property or equipment or the cost
of such construction or improvement, including carrying costs (but no
additional amounts); provided that any such Lien shall not apply to any
other property of the Borrower or any Subsidiary;
(g) Liens on property existing at the time such property is acquired
(by merger or otherwise) by the Borrower or a Subsidiary (provided that
such Liens do not apply to any other property of the Borrower or any
Subsidiary and such Liens and the obligations secured thereby were not
created in contemplation of the acquisition by the Borrower or such
Subsidiary of such property) and Liens on property of any person at the
time such person becomes a Subsidiary (provided that such Liens do not
apply to any other property of the Borrower or any Subsidiary and such
Liens and the obligations secured thereby (other than any Liens on real
property or equipment and the obligations secured thereby) were not created
in contemplation of such Subsidiary of such property or of such person
becoming a Subsidiary);
(h) Liens on the property or assets of any Material Subsidiary in
favor of the Borrower or any other Subsidiary;
(i) Liens on accounts receivable deemed to arise in connection with
any Securitization Transaction;
(j) extensions, renewals and replacements of Liens referred to in
clauses (a) through (i) above; provided that any such extension, renewal or
replacement Lien shall be limited to the property or assets covered by the
Lien extended, renewed or replaced and that the obligations
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secured by any such extension, renewal or replacement Lien shall be in an
amount not greater than the amount of the obligations secured by the Lien
extended, renewed or replaced;
(k) prejudgment, attachment or judgment Liens not giving rise to a
Default or Event of Default and which are being contested in good faith by
appropriate proceedings;
(l) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of the Borrower and its
Subsidiaries;
(m) customary Liens for the fees, costs and expenses of trustees and
escrow agents pursuant to any indenture, escrow agreement or similar
agreement establishing a trust or escrow arrangement, and Liens pursuant to
merger agreements, stock purchase agreements, asset sale agreements, option
agreements and similar agreements in respect of the disposition of property
or assets of the Borrower and the Subsidiaries, to the extent such
dispositions are permitted hereunder and such Liens relate only to the
assets or properties to be disposed of;
(n) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(o) customary Liens in favor of issuers of documentary letters of
credit;
(p) netting provisions and setoff rights in favor of counterparties
to swap and other interest or exchange rate hedging agreements; and
(q) other Liens to secure Indebtedness or other monetary obligations
if, immediately after the incurrence thereof, the sum (without duplication)
of (i) all amounts of Indebtedness and other monetary obligations secured
by Liens which would not be permitted but for this clause (q), (ii) the
obligations of the Borrower and its Material Subsidiaries in respect of
sale and leaseback transactions referred to in Section 6.02 and (iii) all
amounts of unsecured Indebtedness and Preferred Stock of Material
Subsidiaries which would not be permitted but for clause (d) of Section
6.03, does not exceed the greater of $250,000,000 or 15% of Consolidated
Net Tangible Assets as shown on the most recent audited consolidated
balance sheet of the Borrower and its Subsidiaries delivered pursuant to
Section 5.05(a); provided, that for purposes of determining compliance at
any time with this clause (q), the amounts of
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65
any other monetary obligations referred to in subclause (i) above or of any
obligations (other than Capitalized Lease Obligations) referred to in
subclause (ii) above shall be the stated or determinable amounts of such
obligations at such time, unless the amounts of such obligations shall not
be stated or determinable, in which case the amounts of such obligations
shall be deemed to be the maximum reasonably anticipated liability of the
Borrower and the Material Subsidiaries in respect thereof as determined in
good faith by the Borrower;
provided that, except for the Liens referred to in clause (m) above, none of the
foregoing exceptions shall permit the Borrower or any Material Subsidiary to
incur, create, assume or permit to exist any consensual Lien on the capital
stock owned by it of any Material Subsidiary.
SECTION 6.02. Sale and Leaseback Transactions. Enter into any
arrangement, directly or indirectly, with any person whereby the Borrower or a
Material Subsidiary shall sell or transfer any property, real or personal, and
used or useful in its business, whether now owned or hereafter acquired, and
thereafter rent or lease such property or other property which it intends to use
for substantially the same purpose or purposes as the property being sold or
transferred, without the consent of the Required Lenders. Notwithstanding the
foregoing, the Borrower or any Material Subsidiary may engage in any sale and
leaseback transaction, without seeking the consent of the Required Lenders, if,
immediately after the consummation of such transaction, the sum (without
duplication) of (a) all amounts of Indebtedness and other monetary obligations
secured by Liens which would not be permitted but for clause (q) of Section
6.01, (b) the obligations of the Borrower and its Material Subsidiaries in
respect of sale and leaseback transactions referred to in this Section 6.02 and
(c) all amounts of unsecured Indebtedness and Preferred Stock of Material
Subsidiaries which would not be permitted but for clause (d) of Section 6.03,
does not exceed the greater of $250,000,000 or 15% of Consolidated Net Tangible
Assets as shown on the most recent audited consolidated balance sheet of the
Borrower and its Subsidiaries delivered pursuant to Section 5.05(a); provided,
that for purposes of determining compliance at any time with this sentence, the
amounts of any other monetary obligations referred to in subclause (a) above or
of any obligations (other than Capitalized Lease Obligations) referred to in
subclause (b) above shall be the stated or determinable amounts of such
obligations at such time, unless the amounts of such obligations shall not be
stated or determinable, in which case the amounts of such obligations shall be
deemed to be the maximum reasonably anticipated liability of the Borrower and
the Material Subsidiaries in respect thereof as determined in good faith by the
Borrower; provided, further, that the
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consideration received for the sale of such assets shall be at least equal to
the then-current fair market value of such assets. For purposes of the
foregoing, the value of each such sale and leaseback transaction shall (except
as the Borrower and the Required Lenders shall otherwise agree) be deemed to be
(a) the price at which the property pertaining thereto is sold or transferred
to the lessor thereof or (b) (if higher than (a) and if the relevant lease or
leases represent Capitalized Lease Obligations) the balance sheet value of such
lease or leases.
SECTION 6.03. Subsidiary Indebtedness and Preferred Stock. In the
case of the Material Subsidiaries, incur, issue, create, assume or permit to
exist any Indebtedness or Preferred Stock other than (a) Indebtedness or
Preferred Stock of any Material Subsidiary issued to or held by the Borrower or
any other Material Subsidiary, (b) Indebtedness consisting of obligations for
the purchase price of real property or equipment or the cost of construction or
improvement thereof referred to in Section 6.01(f) and secured by Liens
permitted under such Section, (c) Indebtedness consisting of obligations
referred to in Section 6.01(g) and secured by Liens permitted under such
Section, and (d) any other Indebtedness or Preferred Stock; provided that the
sum (without duplication) of (i) all Indebtedness and Preferred Stock of
Material Subsidiaries which would not be permitted but for this clause (d), (ii)
all Indebtedness and other monetary obligations secured by Liens which would not
be permitted but for clause (q) of Section 6.01 and (iii) all obligations of the
Borrower and its Material Subsidiaries in respect of sale and leaseback
transactions referred to in Section 6.02, shall not exceed the greater of
$250,000,000 or 15% of Consolidated Net Tangible Assets as shown on the most
recent audited consolidated balance sheet of the Borrower and its Subsidiaries
delivered pursuant to Section 5.05(a); provided further, that for purposes of
determining compliance at any time with this clause (d), the amounts of any
other monetary obligations referred to in subclause (i) above or of any
obligations (other than Capitalized Lease Obligations) referred to in subclause
(ii) above shall be the stated or determinable amounts of such obligations at
such time, unless the amounts of such obligations shall not be stated or
determinable, in which case the amounts of such obligations shall be deemed to
be the maximum reasonably anticipated liability of the Borrower and the Material
Subsidiaries in respect thereof as determined in good faith by the Borrower.
SECTION 6.04. Leverage Ratio. Permit the Leverage Ratio at any time
to exceed 0.60 to 1.
SECTION 6.05. Interest Coverage Ratio. At any time on or after March
31, 1998, permit the Interest Coverage Ratio for the most recently ended period
of four consecutive fiscal quarters
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(or such lesser number of fiscal quarters as shall have elapsed since December
31, 1997) to be less than 3.0 to 1.
SECTION 6.06. Consolidations, Mergers, Sales of Assets. (a)
Consolidate with or merge into any other person, or permit another person to
merge into it, except that, so long as at the time thereof and immediately after
giving effect thereto no Event of Default or Default has occurred and is
continuing, (i) any Material Subsidiary may be merged, liquidated or dissolved
into the Borrower or into another Material Subsidiary and (ii) any other person
may be merged into the Borrower or a Subsidiary in a transaction in which the
surviving person is the Borrower or a wholly owned Subsidiary and, in the case
of any transaction in which the consideration (other than equity interests of
the Borrower) paid by the Borrower and the Subsidiaries has an aggregate value
in excess of 10% of Consolidated Net Tangible Assets as of the most recently
ended fiscal quarter, the Borrower has submitted to the Administrative Agents
calculations reasonably satisfactory to the Administrative Agents showing pro
forma compliance with the covenants in Sections 6.04 and 6.05 assuming that such
transaction had occurred at the most recent fiscal quarter end for which
financial statements shall have been delivered pursuant to Section 5.05 (in the
case of Section 6.04) or at the beginning of the period of four fiscal quarters
ended on such date (in the case of Section 6.05).
(b) Sell, lease, transfer or assign to any person or otherwise
dispose of (i) in one transaction or a series of related transactions, the
assets of the Borrower and its consolidated Subsidiaries (whether now owned or
hereafter acquired) substantially as an entirety or (ii) in one transaction or a
series of related transactions, assets representing more than 10% of
Consolidated Net Tangible Assets as of the most recently ended fiscal quarter
(other than to the Borrower or another Subsidiary) unless, in the case of any
transaction or series of related transactions referred to in this clause (ii),
the Borrower shall first have delivered to the Administrative Agents pro forma
consolidated financial information demonstrating compliance with the covenants
set forth in Sections 6.04 and 6.05 as of the most recent fiscal quarter end and
for the period of four quarters or other relevant period then ended on a pro
forma basis as if such transaction or series of related transactions had
occurred at the beginning of such period.
SECTION 6.07. Change of Business. The Borrower will not, and will
not permit any of its Subsidiaries to, engage to any material extent in any
business other than businesses of the type conducted by the Borrower and its
Material Subsidiaries on the date of execution of this Agreement and businesses
reasonably related thereto; provided that the Borrower and its Material
Subsidiaries may engage in other businesses representing not more
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than 10% of Consolidated Net Tangible Assets of the Borrower as shown on the
most recent audited consolidated balance sheet of the Borrower and its
Subsidiaries delivered pursuant to Section 5.05(a).
SECTION 6.08. Use of Proceeds. (a) Use or permit the use of the
proceeds of Borrowings or other extensions of credit hereunder for purposes
other than those set forth in the preamble to this Agreement.
(b) Use the proceeds of Borrowings or other extensions of credit
hereunder to acquire capital stock of or other ownership interests in any
publicly held company unless such acquisition shall have been approved by the
board of directors or comparable governing body of such company prior to the
acquisition by the Borrower of a controlling interest in such company or the
commencement by the Borrower of a tender offer or proxy solicitation with
respect to shares of capital stock of, or other ownership interests in, such
company.
SECTION 6.09. Restrictive Agreements. Enter into or permit to exist
any agreement that restricts the ability of any Material Subsidiary to pay
dividends or other distributions, or to make or repay loans or advances, to the
Borrower or, in the case of dividends, to any other Subsidiary owning capital
stock of such Subsidiary; provided that the foregoing shall not apply to (a)
customary restrictions and conditions contained in (i) any agreement relating to
the sale of a Material Subsidiary, or all or substantially all of its assets,
pending such sale or (ii) any agreement relating to secured Indebtedness
permitted by this Agreement, if such restrictions or conditions apply only to
such Subsidiary or to the property or assets securing such Indebtedness, as the
case may be, (b) customary provisions in leases and other contracts restricting
the assignment thereof or (c) restrictions and conditions existing with respect
to any Material Subsidiary at the time it becomes a Subsidiary and not created
in contemplation of such Subsidiary becoming a Subsidiary.
ARTICLE VII
Events of Default
In case of the happening of any of the following events (herein called
"Events of Default"):
(a) any representation or warranty made or deemed made in or in
connection with this Agreement or the extensions of credit hereunder or any
representation, warranty or statement made or deemed made with respect to
any financial statement
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or in any report, certificate or other instrument or agreement furnished in
connection with this Agreement or in connection with the extensions of
credit hereunder shall prove to have been false or misleading in any
material respect when made or deemed made;
(b) default shall be made in the payment of any principal of any Loan
or any reimbursement obligation in respect of any LC Disbursement when and
as the same shall become due and payable, whether at the due date thereof
or at a date fixed for prepayment thereof or by acceleration thereof or
otherwise;
(c) default shall be made in the payment of any interest on any Loan
or any Fee or any other amount due under this Agreement when and as the
same shall become due and payable, and such default shall continue for a
period of five days;
(d) (i) default shall be made in the due observance or performance of
any covenant, condition or agreement contained in Section 5.01 or 5.06 or
in Article VI; (ii) default shall be made in the due observance or
performance of any covenant, condition or agreement contained in Section
5.05, which default referred to in this clause (ii) shall continue for a
period of five days or (iii) default shall be made in the due observance or
performance of any other covenant, condition or agreement to be observed or
performed on the part of the Borrower or any Subsidiary pursuant to the
terms of this Agreement, which default referred to in this clause (iii)
shall continue for a period of 30 days after notice thereof from either
Administrative Agent or the Required Lenders to the Borrower;
(e) the Borrower or any Material Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking relief under Title 11
of the United States Code or any other Federal or state bankruptcy,
insolvency, liquidation or similar law, (ii) consent to the institution of,
or fail to contravene in a timely and appropriate manner, any such
proceeding or the filing of any such petition, (iii) apply for or consent
to the appointment of a receiver, trustee, custodian, sequestrator or
similar official for the Borrower or any Subsidiary or for a substantial
part of its property or assets, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make
a general assignment for the benefit of creditors or (vi) become unable or
fail generally to pay its debts as they become due;
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(f) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i)
relief in respect of the Borrower or any Material Subsidiary or of a
substantial part of the property or assets of the Borrower or any Material
Subsidiary, under Title 11 of the United States Code or any other Federal
or state bankruptcy, insolvency, receivership or similar law, (ii) the
appointment of a receiver, trustee, custodian, sequestrator or similar
official for the Borrower or any Material Subsidiary or for a substantial
part of the property or assets of the Borrower or any Material Subsidiary
or (iii) the winding up or liquidation of the Borrower or any Material
Subsidiary; and such proceeding or petition shall continue undismissed for
60 days or an order or decree approving or ordering any of the foregoing
shall continue unstayed and in effect for 30 days;
(g) (i) default shall be made or another event shall occur with
respect to any Indebtedness of the Borrower or any Subsidiary if the effect
of any such default or other event shall be to accelerate, or to permit the
holder or obligee of any Indebtedness (or any trustee on behalf of such
holder or obligee) to accelerate (with or without the giving of notice or
lapse of time or both), such Indebted ness in an aggregate amount in
excess of $50,000,000; or (ii) any amount of principal of or interest on
any Indebtedness of the Borrower or any Subsidiary in an aggregate
principal amount in excess of $50,000,000 shall not be paid when due,
whether at maturity, by acceleration or otherwise (after giving effect to
any period of grace specified in the instrument evidencing or governing
such Indebtedness); or (iii) without limiting the rights of the Lenders
under clauses (g)(i) and (g)(ii) above, the Borrower or any Subsidiary
shall default in the payment of principal of any Indebtedness, which
principal, individually or in the aggregate with other defaulted principal,
shall be in excess of $15,000,000, when due and payable (after giving
effect to any period of grace specified in the instrument evidencing or
governing such Indebtedness), or the principal of such Indebtedness in
excess of $15,000,000 shall be declared due and payable prior to the date
on which it would otherwise be due and payable and such acceleration shall
not have been rescinded or annulled, or such accelerated Indebtedness shall
not have been discharged, within five Business Days of such acceleration;
(h) (A) a Reportable Event or Reportable Events, or a failure to make
a required payment (within the meaning of Section 412(n)(1) of the Code),
shall have occurred with respect to any Plan or Plans that reasonably could
be expected to result in a Material Adverse Effect; or (B) a
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trustee shall be appointed by a United States District Court to administer
any such Plan or Plans or the PBGC shall institute proceedings to terminate
any Plan or Plans and such appointment or termination proceedings could
reasonably be expected to result in a Material Adverse Effect;
(i) (i) the Borrower or any ERISA Affiliate shall have been notified
by the sponsor of a Multiemployer Plan that it has incurred Withdrawal
Liability to such Multiemployer Plan, (ii) the Borrower or such ERISA
Affiliate does not have reasonable grounds for contesting such Withdrawal
Liability or is not, in fact, contesting such Withdrawal Liability in a
timely and appropriate manner and (iii) the amount of the Withdrawal
Liability specified in such notice, when aggregated with all other amounts
required to be paid by the Borrower and its ERISA Affiliates to
Multiemployer Plans in connection with Withdrawal Liabilities (determined
as of the date or dates of such notification), could reasonably be expected
to result in a Material Adverse Effect;
(j) the Borrower or any ERISA Affiliate shall have been notified by
the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of Title IV of
ERISA, if solely as a result of such reorganization or termination the
aggregate annual contributions of the Borrower and its ERISA Affiliates to
all Multiemployer Plans that are then in reorganization or have been or are
being terminated have been or will be increased could reasonably be
expected to result in a Material Adverse Effect;
(k) one or more judgments for the payment of money (not reimbursed by
insurance policies of the Borrower or any Subsidiary) in excess of
$20,000,000 in the aggregate shall be rendered by a court or other tribunal
against the Borrower or any Subsidiary and shall remain undischarged for a
period of 30 consecutive days during which the execution of such judgments
shall not have been stayed effectively or any action shall be legally taken
by a judgment creditor to levy upon assets or properties of the Borrower or
any Subsidiary to enforce any such judgment; or
(l) a Change in Control shall occur;
then, and in any such event (other than an event with respect to the Borrower
described in paragraph (e) or (f) above), and at any time thereafter during the
continuance of such event, the Administrative Agents may, or at the written
direction of the Required Lenders shall, by written or telecopied notice to the
Borrower, take either or both of the following actions, at the same or different
times: (i) terminate forthwith the Commitments,
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(ii) demand cash collateral as provided in Section 2.07(j) and (iii) declare the
Loans then outstanding to be forth with due and payable, whereupon the principal
of the Loans so declared due and payable, together with accrued interest and any
unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder,
shall become forthwith due and payable both as to principal and interest,
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived by the Borrower, anything contained herein to
the contrary notwithstanding; provided, however, that, in the event of a default
with respect to the Borrower described in paragraph (e) or (f) above, the
Commitments shall automatically terminate, the deposit of cash collateral as
provided in Section 2.07(j) shall automatically be required and the principal of
the Loans then outstanding, together with accrued interest thereon and any
unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder,
shall automatically become due and payable, without presentment, demand, protest
or notice of any kind, all of which are hereby expressly waived by the Borrower,
anything contained herein to the contrary notwithstanding.
ARTICLE VIII
Administrative Agents
Each of the Lenders and the Fronting Bank irrevocably authorizes the
Administrative Agents (and for purposes of this Article VIII, the term
"Administrative Agent" or "Administrative Agents" shall include BofA in its
capacity as Servicing Agent, as applicable) to take such action on its behalf
and to exercise such powers hereunder as are specifically delegated to the
Administrative Agents by the terms hereof together with such powers as are
reasonably incidental thereto. Each of the Administrative Agents may perform
any and all its duties and exercise its rights and powers by or through any one
or more sub-agents selected and appointed by such Administrative Agent. Each of
the Administrative Agents and any such sub-agent may perform any and all its
duties and exercise its rights and powers through Affiliates or its or its
Affiliates' employees. The exculpatory provisions of the following paragraphs
shall apply to any such sub-agent, to the Affiliates of the Administrative
Agents and any such sub-agent and to the directors, officers and employees of
the Administrative Agents, any such sub-agent and their respective Affiliates.
The Administrative Agents are hereby expressly authorized and directed
by the Lenders to the extent provided in this Agreement, without hereby limiting
any implied authority, (a) to receive on behalf of the Lenders all payments of
principal of and interest on the Loans and all other amounts due to the
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73
Lenders hereunder, and promptly to distribute to each Lender its proper share of
each payment so received; (b) to give notice on behalf of each of the Lenders to
the Borrower of any Event of Default specified in this Agreement of which the
Administrative Agents have actual knowledge acquired in connection with its
agency hereunder; and (c) to distribute to each Lender copies of all notices,
financial statements and other materials delivered by the Borrower pursuant to
this Agreement as received by the Administrative Agents.
Neither the Administrative Agents nor any of their directors,
officers, employees or agents shall be liable as such for any action taken or
omitted to be taken by it or them hereunder or in connection herewith (a) at the
request or with the approval of the Required Lenders (or, if otherwise
specifically required hereunder, the consent of all the Lenders) or (b) in the
absence of its or their own gross negligence or wilful misconduct. Each Lender
acknowledges that it has decided to enter into this Agreement and to extend the
Loans hereunder based on its own analysis of the creditworthiness of the
Borrower and agrees that the Administrative Agents shall bear no responsibility
for such creditworthiness.
The Administrative Agents shall not be responsible in any manner to
any of the Lenders for the effectiveness, enforceability, genuineness, validity
or due execution of this Agreement or any other agreements or certificates,
requests, financial statements, notices or opinions of counsel or for any
recitals, statements, warranties or representations contained herein or in any
such instrument or be under any obligation to ascertain or inquire as to the
performance or observance of any of the terms, provisions, covenants,
conditions, agreements or obligations of this Agreement or any other agreements
on the part of the Borrower and, without limiting the generality of the
foregoing, the Administrative Agents shall, in the absence of knowledge to the
contrary, be entitled to accept any certificate furnished pursuant to this
Agreement as conclusive evidence of the facts stated therein and shall be
entitled to rely on any note, notice, consent, certificate, affidavit, letter,
telegram, teletype or telecopy message, statement, order or other document which
it reasonably believes to be genuine and correct and to have been signed or sent
by the proper person or persons. It is understood and agreed that each of the
Administrative Agents may exercise its rights and powers under other agreements
and instruments to which it is or may be a party and engage in other
transactions with the Borrower or any Subsidiary or other Affiliate as though it
were not the agent of the Lenders hereunder.
The Administrative Agents may consult with legal counsel selected by
them in connection with matters arising under this Agreement and any action
taken or suffered in good faith by
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either of them in accordance with the opinion of such counsel shall be full
justification and protection to it. Each of the Administrative Agents may
exercise any of its powers and rights and perform any duty under this Agreement
through agents or attorneys.
The Lenders shall, in accordance with their Pro Rata Percentages at
the time of demand for indemnification hereunder, indemnify each of the
Administrative Agents, in its capacity as agent on behalf of the Lenders (to the
extent not reimbursed by the Borrower pursuant to the terms hereof and without
limiting the obligations of the Borrower to do so) against any cost, expense
(including reasonable counsel fees and disbursements), claim, demand, action,
loss or liability (except such as results from such Administrative Agent's gross
negligence or wilful misconduct) that such Administrative Agent may suffer or
incur in connection with this Agreement or any action taken or omitted by it
hereunder.
Subject to the appointment and acceptance of a successor
Administrative Agent as provided below, the Administrative Agents may resign at
any time by notifying the Lenders, the Fronting Bank and the Borrower. Upon any
such resignation, the Required Lenders shall have the right to appoint a
successor Administrative Agent; provided that if only one Administrative Agent
resigns, the remaining Administrative Agent automatically shall be deemed to
have been appointed as, and have accepted the position of, successor to the
resigning Administrative Agent. If no successor Administrative Agent shall have
been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agents give notice
of resignation, then the retiring Administrative Agents may, on behalf of the
Lenders, appoint a successor Administrative Agent which shall be a bank having
an office (or an Affiliate with an office) in New York, New York, with a
combined capital and surplus of at least $500,000,000. Upon the acceptance of
any appointment as Administrative Agent hereunder by a successor bank, or upon
the deemed appointment of one of the Administrative Agent or Agents as successor
to the other, such successor shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Administrative
Agents and each of the retiring Administrative Agents shall be discharged from
its duties and obligations hereunder. After any Administrative Agent's
resignation hereunder, the provisions of this Article shall continue in effect
for its benefit in respect of any actions taken or omitted to be taken by it
while it was acting as Administrative Agent.
The Lenders hereby acknowledge that the Administrative Agents shall
not be under any duty to take any discretionary
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action permitted to be taken by them pursuant to the provisions of this
Agreement unless they shall be requested in writing to do so by the Required
Lenders or, where required, all the Lenders.
ARTICLE IX
Guarantee
In order to induce the Lenders to extend credit hereunder, MAI hereby
irrevocably and unconditionally guarantees, on the terms and subject to the
limitations set forth in this Article, the Borrower's obligations in respect of
up to $750,000,000 principal amount of the Loans and LC Disbursements
outstanding at any time together with all interest accrued and unpaid thereon
(such obligations being called the "Guaranteed Obligations"), which guarantee of
MAI will remain in effect as long as any Guaranteed Obligations remain
outstanding.
Notwithstanding any other provision of this Article, MAI is executing
this Agreement as a secondary rather than as a primary obligor, and the
guarantee of MAI hereunder shall be a guarantee of collection rather than of
payment when and as due, it being agreed that MAI shall be obligated to pay the
Guaranteed Obligations only after the Lenders shall have pursued their other
remedies to compel payment of such Guaranteed Obligations by the Borrower and
after exhaustion of all available remedies, including without limitation, the
liquidation of assets, payment cannot be obtained from the Borrower.
The obligations of MAI hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, and shall not
be subject to any defense or setoff, counterclaim, recoupment or termination
whatsoever, by reason of the invalidity, illegality or unenforceability of the
Guaranteed Obligations, any impossibility in the performance of the Guaranteed
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of MAI hereunder shall not be discharged or impaired or otherwise
affected by the failure of the Administrative Agents or any Lender to assert any
claim or demand or to enforce any remedy under this Agreement or under any other
agreement, by any waiver or modification of any of the Guaranteed Obligations,
by any default, failure or delay, wilful or otherwise, in the performance of the
Guaranteed Obligations, or by any other act or omission which may or might in
any manner or to any extent vary the risk of MAI or otherwise operate as a
discharge of MAI as a matter of law or equity.
MAI further agrees that its obligations hereunder shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any Guaranteed
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Obligation is rescinded or must otherwise be restored by the Administrative
Agents, the Servicing Agent, the Fronting Bank or any Lender upon the bankruptcy
or reorganization of the Borrower or otherwise, unless those obligations of MAI
have otherwise been terminated in accordance with the terms of this Agreement.
Upon payment by MAI of any Guaranteed Obligations, each Lender shall,
in a reasonable manner, assign to MAI the amount of the Guaranteed Obligations
owed to it and so paid, such assignment to be pro tanto to the extent to which
the Guaranteed Obligations in question were discharged by MAI, or make such
disposition thereof as MAI shall direct (all without recourse to and without any
representation or warranty by any Lender).
Upon payment by MAI of any sums as provided above, all rights of MAI
against the Borrower arising as a result thereof by way of right of subrogation
or otherwise shall in all respects be subordinate and junior in right of payment
to the prior indefeasible payment in full of all the Guaranteed Obligations to
the Lenders.
ARTICLE X
Miscellaneous
SECTION 10.01. Notices. Except as specifically provided elsewhere
herein, notices and other communications provided for herein shall be in writing
and shall be delivered or mailed (or, if by telecopy equipment of the sending
party, delivered by such equipment) addressed:
(a) If to the Borrower, in all cases to it at
Equistar Chemicals, LP
1221 McKinney Street, Suite 1600
Houston, Texas 77010
Telecopy: 713-652-4538
Attention of Joseph M. Putz
(b) If to the Administrative Agents, in all cases to:
Bank of America National Trust and Savings Association
1850 Gateway Blvd.
Concord, California 94520
Telecopy: 510-675-8500
Attention of Ando Perlas
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The Chase Manhattan Bank
712 Main Street, 7th Floor
Houston, Texas 77002
Telecopy: 713-216-6387
Attention of David Mills
(c) If to the Servicing Agent, in all cases to it at:
Bank of America National Trust and Savings Association
1850 Gateway Blvd.
Concord, California 94520
Telecopy: 510-675-8500
Attention of Ando Perlas
(d) If to any Lender, in all cases to it at its address as set forth
in Schedule 2.01 or as it shall subsequently specify in writing to the Borrower
and the Administrative Agents.
(e) If to the Swingline Lender, to it at:
Bank of America National Trust and Savings Association
1850 Gateway Blvd.
Concord, California 94520
Telecopy: 510-675-8500
Attention of Ando Perlas
(f) If to the Fronting Bank, to it at:
The Chase Manhattan Bank
712 Main Street, 7th Floor
Houston, Texas 77002
Telecopy: 713-216-6387
Attention of David Mills
All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt if delivered by hand or overnight courier service
or sent by telecopy equipment of the sender, or on the date five Business Days
after dispatch by certified or registered mail if mailed, in each case
delivered, sent or mailed (properly addressed) to such party as provided in this
Section 10.01 or in accordance with the latest unrevoked direction from such
party given in accordance with this Section 10.01.
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SECTION 10.02. No Waivers; Amendments. (a) No failure or delay of
the Administrative Agents, the Servicing Agent, the Fronting Bank or any Lender
in exercising any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Administrative Agents, the
Servicing Agent, the Fronting Bank and the Lenders hereunder are cumulative and
not exclusive of any rights or remedies which they would otherwise have. Except
as may be otherwise expressly provided herein, no waiver of any provision of
this Agreement nor any consent to any departure by the Borrower therefrom shall
in any event be effective unless the same shall be in writing and signed by the
Required Lenders (unless otherwise specified herein), and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given. No notice or demand on the Borrower in any case shall entitle the
Borrower to any other or further notice or demand in similar or other
circumstances. Without limiting the generality of the foregoing, the making of
a Loan or issuance of a Letter of Credit shall not be construed as a waiver of
any Default, regardless of whether the Administrative Agents, the Servicing
Agent, any Lender or the Fronting Bank may have had notice or knowledge of such
Default at the time.
(b) Neither this Agreement or any Exhibit or Schedule hereto may be
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrower and by the Required Lenders; provided, however,
that no such agreement shall (i) change the Commitment of any Lender without the
prior written consent of such Lender, (ii) postpone the scheduled date of
payment of the principal amount of any Loan or LC Disbursement, or any interest
thereon, or any Fee payable hereunder, or reduce the amount of, waive or excuse
any such payment, or postpone the scheduled date of expiration of any
Commitment, without the written consent of each Lender affected thereby, (iii)
amend or modify or otherwise affect the rights or duties of the Administrative
Agents, the Servicing Agent, the Fronting Bank or the Swingline Lender without
the prior written consent of the Administrative Agents, the Servicing Agent, the
Fronting Bank or the Swingline Lender, as the case may be, or (iv) amend or
modify the definition of "Required Lenders", Section 2.17, this Section 10.02 or
Section 10.07, without the prior written consent of each Lender.
(c) Notwithstanding any other provision of this Agreement, MAI may
terminate its guarantee under Article IX at any time that it may do so under
Section 8.6(c) of the Limited
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Partnership Agreement (as Section 8.6(c) is in effect on the date hereof or as
such Section is hereafter amended with the consent of the Required Lenders);
provided, however, that no such termination shall be effective to the extent of
the amount of any Guaranteed Obligations with respect to which an Event of
Default under Article VII (b) or (c) has occurred and is continuing at the time
that those conditions have been satisfied until such amount has been paid in
full, together with all accrued and unpaid interest thereon (it being expressly
understood that under certain circumstances MAI's guarantee under Article IX may
be effectively terminated by MAI as to all Guaranteed Obligations upon
satisfaction of such Section 8.6(c) conditions even though an Event of Default
may have occurred and be continuing).
SECTION 10.03. Payments. Except as otherwise provided in this
Agreement, all payments to be made by the Borrower to the Lenders hereunder
shall be made to the Servicing Agent in immediately available funds at Bank of
America National Trust and Savings Association (ABA #121000358, Account #12339-
15888 and Reference: Equistar) not later than 11:00 a.m., New York City time, on
the date due. Funds received after the applicable time shall be deemed to have
been received by the Lenders on the following Business Day.
Unless otherwise provided herein, if any payment of principal,
interest or any other amount payable by the Borrower hereunder shall fall due on
a day that is not a Business Day, then such due date shall be extended to the
next succeeding Business Day, and such extension of time shall be included in
computing interest, if any, in connection with such payment.
Upon receipt of any payment for the accounts of the Lenders hereunder,
the Servicing Agent will promptly distribute to each Lender its share of such
payment.
SECTION 10.04. Governing Law; Submission to Jurisdiction. (a) THIS
AGREEMENT SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK.
(b) To the extent it may effectively do so under applicable law, each
of the Borrower and MAI irrevocably (i) submits to the nonexclusive jurisdiction
of any New York State or Federal court sitting in the Borough of Manhattan, The
City of New York, over any suit, action or proceeding arising out of or relating
to this Agreement or any other document contemplated hereby, irrevocably waives
and (ii) agrees not to assert, by way of motion, as a defense or otherwise, any
claim that it is not subject to the jurisdiction of any such court, any
objection that it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding brought in any such court and any
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claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
(c) Each of the Borrower and MAI agrees, to the fullest extent it may
effectively do so under applicable law, that a judgment in any suit, action or
proceeding of the nature referred to in paragraph (b) above brought in any such
court shall be conclusive and binding upon the Borrower or MAI, as the case may
be, and may be enforced in the courts of the United States of America or the
State of New York (or any other courts to the jurisdiction of which the Borrower
or MAI, as the case may be, is or may be subject) by a suit upon such judgment.
(d) To the extent it may effectively do so under applicable law, each
of the Borrower and MAI consents to process being served in any suit, action or
proceeding of the nature referred to in paragraph (b) by mailing a copy thereof
by registered or certified mail, postage prepaid, return receipt requested, to
the address of the Borrower or MAI, as the case may be, as set forth or referred
to in Section 10.01. To the extent it may effectively do so under applicable
law, each of the Borrower and MAI agrees that such service (i) shall be deemed
in every respect effective service of process upon the Borrower or MAI, as the
case may be, in any such suit, action or proceeding and (ii) shall be taken and
held to be valid personal service upon and personal delivery to the Borrower or
MAI, as the case may be.
(e) Nothing in this Section 10.04 shall affect the right of the
Administrative Agents, the Servicing Agent or any Lender to serve process in any
manner permitted by law, or limit any right that the Administrative Agents, the
Servicing Agent or any Lender may have to bring proceedings against the Borrower
or MAI, as the case may be, in the courts of any jurisdiction or to enforce in
any lawful manner a judgment obtained in one jurisdiction in any other
jurisdiction.
SECTION 10.05. Expenses; Documentary Taxes; Indemnity. (a) The
Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agents, the Servicing Agent, the Fronting Bank and their
respective Affiliates, including the reasonable fees, charges and disbursements
of counsel for the Administrative Agents, in connection with the syndication of
the credit facilities provided for herein, the preparation and administration 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 the
Fronting Bank in connection with the issuance, amendment, renewal or extension
of any Letter of Credit or any demand for payment thereunder and (iii) all out-
of-pocket expenses incurred by the Administrative Agents, the Servicing Agent,
the
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Fronting Bank or any Lender, including the fees, charges and disbursements of
any counsel for the Administrative Agents, the Servicing Agent, the Fronting
Bank or any Lender, in connection with the enforcement or protection of its
rights in connection with this Agreement, including its rights under this
Section, or in connection with the Loans made or Letters of Credit issued
hereunder, including all such out-of-pocket expenses incurred during any workout
or restructuring in respect of such Loans or Letters of Credit.
(b) The Borrower shall indemnify the Administrative Agents, the
Servicing Agent, the Fronting Bank and each Lender, and each Related Party of
any of the foregoing Persons (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 for any Indemnitee, incurred by or asserted against
any Indemnitee arising out of, in connection with, or as a result of any actual
or threatened claim, litigation, investigation or proceeding, whether based on
contract, tort or any other theory and regardless of whether any Indemnitee is a
party thereto, relating to (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 Letter of Credit or the use
of the proceeds therefrom (including any refusal by the Fronting 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), or (iii) any actual or alleged presence or release of Hazardous
Materials on or from any property owned or operated by the Borrower or any of
its Subsidiaries, or any Environmental Liability related in any way to the
Borrower or any of its Subsidiaries; provided that such indemnity shall not, as
to any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses resulted from the gross negligence or wilful
misconduct of such Indemnitee.
(c) The provisions of this Section 10.05 shall remain operative and
in full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of the Loans, the invalidity or unenforceability of any term or
provision of this Agreement, or any investigation made by or on behalf of the
Lenders or the Administrative Agents. All amounts due under this Section 10.05
shall be payable on written demand therefor.
SECTION 10.06. Survival of Agreements, Representations and
Warranties, etc. All warranties, representations and covenants made by the
Borrower herein or in any certificate or
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other instrument delivered by the Borrower or on its behalf in connection with
this Agreement shall be considered to have been relied upon by the Lenders and
shall survive the making of the Loans and issuance of any Letters of Credit
herein contemplated regardless of any investigation made by the Lenders, the
Administrative Agents or the Servicing Agent or on their behalf and shall
continue in full force and effect so long as any amount due or to become due
hereunder is outstanding and unpaid. The right of each Lender to receive
payments pursuant to Sections 2.14, 2.16 and 2.19 shall survive the termination
of this Agreement and the repayment of the Loans.
SECTION 10.07. Successors and Assigns. (a) This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns (including any Affiliate of the Fronting Bank that issues
any Letter of Credit). The Borrower may not assign or transfer any of its
rights or obligations hereunder without the prior written consent of all the
Lenders.
(b) Each Lender may assign all or a portion of its interests, rights
and obligations under this Agreement (including all or a portion of its
Commitment (and the Loans at the time owing to it)); provided, however, that (i)
except in the case of an assignment by a Lender to an Affiliate of such Lender
or to another Lender, the Borrower and the Servicing Agent (and, in the case of
an assignment of all or a portion of a Commitment or any Lender's obligations in
respect of its LC Exposure or Swingline Exposure, the Fronting Bank and the
Swingline Lender) must consent to such assignment in writing (which consent may
not be unreasonably withheld), (ii) each such assignment shall be of a constant,
and not a varying, percentage of all the assigning Lender's rights and
obligations under this Agreement, (iii) except in the case of an assignment to
another Lender or in the case of an assignment of the assigning Lender's total
Commitment, the aggregate amount of the Commitment of the assigning Lender
subject to any such assignment shall not be less than $10,000,000 (or any other
smaller amount agreed upon by the Administrative Agents and the Borrower, and
(iv) the parties to each such assignment shall execute and deliver to the
Servicing Agent for its acceptance and recording in the Register an Assignment
and Acceptance, together with a processing and recordation fee of $3,500; and
provided, further, that any consent of the Borrower otherwise required under
this paragraph shall not be required if an Event of Default under paragraph (e)
or (f) of Article VII has occurred and is continuing. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Assignment and Acceptance, which effective date shall be (unless waived
by the Servicing Agent) at least five Business Days after the execution thereof,
(A) the assignee thereunder shall be a party hereto, and, to the extent of the
interest assigned by such Assignment and Acceptance, have the rights and
obligations of a Lender under this Agreement, and (B) the assignor thereunder
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shall, to the extent of the interest assigned by such Assignment and Acceptance,
be released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of the
assignor's rights and obligations under this Agreement, the assignor shall cease
to be a party hereto but shall continue to be entitled to the benefits of
Sections 2.14, 2.16 and 10.05 as well as to any interest and Facility Fee
accrued for its account hereunder and not yet paid). Notwithstanding the
foregoing, any Lender assigning its rights and obligations under this Agreement
may retain any Competitive Loans made by it outstanding at such time, and in
such case shall retain its rights hereunder in respect of any Loans so retained
until such Loans have been repaid in full in accordance with this Agreement.
(c) By executing and delivering an Assignment and Acceptance, the
assignor and the assignee thereunder shall be deemed to confirm to and agree
with each other and the Borrower as follows: (i) such assignor warrants that it
is the legal and beneficial owner of the interest being assigned free and clear
of any adverse claim; (ii) except as set forth in clause (i) above, the assignor
makes no other representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement or any other instrument or document furnished
pursuant hereto or thereto, or the execution, legality, validity, enforce
ability, genuineness, sufficiency or value of this Agreement, or any other
instrument or document furnished pursuant hereto or thereto, or the financial
condition of the Borrower or the performance or observance by the Borrower of
any of its Obligations under this Agreement or any other instrument or
document furnished pursuant hereto or thereto; (iii) such assignee represents
and warrants that it is legally authorized to enter into such Assignment and
Acceptance; (iv) such assignee confirms that it has received a copy of this
Agreement, together with copies of the financial statements described in Section
3.06 or the most recent financial statements delivered pursuant to Section 5.05,
as applicable, and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (v) such assignee will independently and without
reliance upon the assignor 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 this Agreement; (vi) such assignee appoints
and authorizes the Administrative Agents and the Servicing Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement,
as are delegated to the Administrative Agents and the Servicing Agent by the
terms hereof, together with such powers as are reasonably incidental thereto;
and (vii) such assignee agrees that it will, to the extent of the interest
assigned to it, perform in accordance with their terms all the obligations which
by the terms of this Agreement are required to be performed by the Lenders.
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(d) The Borrower agrees that each Lender may without the consent of
the Borrower, the Servicing Agent, the Fronting Bank or the Swingline Lender
sell participations to one or more banks or other entities in all or a portion
of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment and the same portion of the Loans
owing to it) and the Borrower agrees that any purchaser of a participation in
such Loans so acquired may exercise any and all rights of banker's lien, setoff,
counterclaim or otherwise with respect to any and all moneys owing by the
Borrower to such purchaser as fully as if such purchaser were a Lender acquiring
such Loans hereunder in the amount of such participation; provided, however,
that (i) such selling Lender's obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the Borrower for
the performance of its obligations hereunder, (iii) the participating lenders
or other entities shall be entitled to the benefit of the cost protection
provisions contained in Sections 2.14, 2.16 and 2.19 to the same extent as if
they were such Lender (but the amount claimed by any participating lender or
other entity shall not exceed the amount that could have been claimed by the
Lender from which it acquired its participation) and (iv) the Borrower, the
Administrative Agents, the Fronting Bank and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement, and such Lender shall retain the
sole right to enforce the obligations of the Borrower relating to the Loans and
to approve, without the consent of or consultation with any participant, any
amendment, modification or waiver of any provision of this Agreement (other than
amendments, modifications or waivers with respect to Fees payable hereunder or
an increase in the amount of principal of or a decrease in the rate at which
interest is payable on the Loans, or an extension of the dates fixed for
payments of principal of or interest on the Loans or payments of Fees).
(e) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
10.07, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrower or the Subsidiaries
furnished to the Lenders (including pursuant to Section 5.08) by or on behalf of
the Borrower or the Subsidiaries, as applicable; provided that, prior to any
such disclosure, each such assignee or participant or proposed assignee or
participant shall execute an agreement whereby such assignee or participant
shall agree (subject to customary exceptions) to preserve the confidentiality of
any confidential information relating to the Borrower or any Subsidiary received
from the Lenders.
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(f) The Servicing Agent shall maintain at one of its offices in The
City of New York a copy of each Assignment and Acceptance delivered to it and a
register for the recordation of the names and addresses of the Lenders and the
Commitment of, and the principal amount of the Loans and LC Disbursements owing
to, each Lender pursuant to the terms hereof (the "Register"). The entries in
the Register shall be conclusive in the absence of manifest error and the
Borrower, the Administrative Agents, the Servicing Agent, the Fronting Bank and
the Lenders may treat each person whose name is recorded in the Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower at
any reasonable time and from time to time upon reasonable prior notice.
(g) Any Lender may at any time pledge all or any portion of its
rights under this Agreement to a Federal Reserve Bank; provided that no such
pledge shall release any Lender from its obligations hereunder or substitute any
such Federal Reserve Bank for such Lender as a party hereto.
(h) Notwithstanding anything to the contrary contained herein, any
Lender (a "Granting Bank") may grant to a special purpose funding vehicle (an
"SPC") of such Granting Bank, identified as such in writing from time to time by
the Granting Bank to the Administrative Agents and the Borrower, the option to
provide to the Borrower all or any part of any Loan that such Granting Bank
would otherwise be obligated to make to the Borrower pursuant to Section 2.02,
provided that (i) nothing herein shall constitute a commitment to make any Loan
by any SPC and (ii) if an SPC elects not to exercise such option or otherwise
fails to provide all or any part of such Loan, the Granting Bank shall be
obligated to make such Loan pursuant to the terms hereof. The making of a Loan
by an SPC hereunder shall be deemed to utilize the Commitments of all the
Lenders to the same extent, and as if, such Loan were made by the Granting Bank.
Each party hereto hereby agrees that no SPC shall be liable for any payment
under this Agreement for which a Lender would otherwise be liable, for so long
as, and to the extent, the related Granting Bank makes such payment. In
furtherance of the foregoing, each party hereto hereby agrees that, prior to the
date that is one year and one day after the payment in full of all outstanding
senior indebtedness of any SPC, it will not institute against, or join any other
person in instituting against, such SPC any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or similar proceedings under
the laws of the United States or any State thereof. In addition,
notwithstanding anything to the contrary contained in this Section 10.07, any
SPC may assign all
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or a portion of its interests in any Loans to its Granting Bank or to any
financial institutions providing liquidity and/or credit facilities to or for
the account of such SPC to fund the Loans made by such SPC or to support the
securities (if any) issued by such SPC to fund such Loans; provided, however,
that except in the case of an assignment to a Granting Bank or a financial
institution that is either an affiliate of such SPC or another Lender, the
Borrower and the Servicing Agent must consent to such assignment in writing
(which consent may not be unreasonably withheld).
SECTION 10.08. Right of Setoff. (a) Upon the occurrence and during
the continuation of any Event of Default each Lender is hereby authorized, in
addition to any other right or remedy that any Lender may have by operation of
law or otherwise, at any time and from time to time, without notice to the
Borrower except to the extent required by applicable law (any such notice being
expressly waived by the Borrower to the maximum extent possible under applicable
law), and subject to any requirements or limitations imposed by applicable law,
to exercise its banker's lien or right of setoff and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Lender or any of its Affiliates to
or for the credit or the account of the Borrower against any and all the
obligations of the Borrower now or hereafter existing under this Agreement,
irrespective of whether or not such Lender shall have made any demand under this
Agreement and although such obligations may be unmatured.
(b) Each Lender agrees promptly to notify the Administrative Agents
and the Borrower after any such setoff and application; provided, however, that,
to the extent permitted by applicable law, the failure to give any such notice
shall not affect the validity of such setoff and application.
(c) Upon the insolvency or bankruptcy of any Lender, the Borrower is
hereby authorized, in addition to any other right or remedy that it may have by
operation of law or otherwise, at any time and from time to time, to exercise a
right of setoff and apply any and all amounts due and owing it from such Lender
to or for the account of the Borrower against amounts due from the Borrower to
such Lender. Any such setoffs may be made only against payments due to such
insolvent or bankrupt Lender, when and as the same become due, and no setoff may
be made against any amount due and payable to any other Lender. The Borrower
may not exercise any right of setoff with respect to all or any portion of
deposits which are insured by the Federal Deposit Insurance Corporation.
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SECTION 10.09. Severability. In case any one or more of the
provisions contained in this Agreement shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 10.10. Cover Page, Table of Contents and Section Headings.
The cover page, Table of Contents and Section headings used herein are for
convenience of reference only, are not part of this Agreement and are not to
affect the construction of or be taken into consideration in interpreting this
Agreement.
SECTION 10.11. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts with the same effect as if the signatures
thereon and hereon were upon the same instrument. This Agreement shall become
effective when copies hereof which, when taken together, bear the signatures of
each of the parties hereto shall have been received by the Servicing Agent.
SECTION 10.12. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 10.12.
SECTION 10.13. Entire Agreement. This Agreement, the letter
agreements referred to in Section 2.08(c) and any promissory notes delivered
pursuant hereto constitute the entire contract between the parties relative to
the subject matter hereof. Any previous agreement among the parties with
respect to the subject matter hereof is superseded by this Agreement and such
letter agreements, except to the extent expressly provided therein. Nothing in
this Agreement or such letter agreements or promissory notes, expressed or
implied, is intended to confer upon any party other than the parties hereto and
thereto and Indemnitees referred to in Section 10.05(b) any rights, remedies,
obligations or liabilities under or by reason of this Agreement or such letter
agreements or promissory notes.
<PAGE>
88
SECTION 10.14. Confidentiality. Each of the Administrative Agents,
the Servicing Agent, the Fronting Bank, the Lenders and the SPC's (as defined in
Section 10.07(h)) agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its and its
Affiliates' directors, officers, employees and agents, including accountants,
legal counsel and other advisors (it being understood that the persons to whom
such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority, (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process, (d)
to any other party to this Agreement, (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement
or the enforcement of rights hereunder, (f) subject to obtaining a written
agreement containing provisions substantially the same as those of this Section
from the intended recipient of such Information, to any assignee of or
Participant in, or any prospective assignee of or Participant in, any of its
rights or obligations under this Agreement (including any assignee or any
prospective assignee of an SPC of the type described in the last sentence of
Section 10.07(h)), (g) with the consent of the Borrower, (h) for purposes of
Section 10.07(h) only, to any rating agency or (i) to the extent such
Information (x) becomes publicly available other than as a result of a breach of
this Section or (y) becomes available to the Administrative Agents, the
Servicing Agent, the Fronting Bank or any Lender on a nonconfidential basis from
a source other than the Borrower. For the purposes of this Section,
"Information" means all information received from the Borrower relating to the
Borrower or its business, other than any such information that is available to
the Administrative Agents, the Servicing Agent, the Fronting Bank or any Lender
on a nonconfidential basis prior to disclosure by the Borrower. Any person
required to maintain the confidentiality of Information as provided in this
Section shall be considered to have complied with its obligation to do so if
such person has exercised the same degree of care to maintain the
confidentiality of such Information as such person would accord to its own
confidential information.
SECTION 10.15. Limitation on Recourse to General Partners; Pari Passu
Obligations. (a) The Lenders, the Administrative Agents, the Servicing Agent
and the Fronting Bank agree that payment and performance of the obligations due
to them from the Borrower under this Agreement and any promissory notes
delivered hereunder shall be obligations of the Borrower only (and of MAI to the
extent set forth in Article IX), and none of the Lenders, the Administrative
Agents, the Servicing Agent or the Fronting Bank shall have any claim against or
recourse (whether by operation of law or otherwise) to Lyondell GP or Millennium
GP, any of their Affiliates (other than the Borrower and its
<PAGE>
89
Subsidiaries) or any director, officer, employee, agent or advisor of any such
person in respect of such obligations.
(b) The Asset Contribution Agreement between Lyondell, Lyondell LP
and the Borrower (as referred to in the definition of "Asset Contribution
Agreements") contains provisions under which the Borrower would be obligated to
reimburse Lyondell for any amounts paid by Lyondell on account of the principal
of or interest on the Assumed Lyondell Debt. The Lenders acknowledge and agree
that the obligations of the Borrower in respect of such reimbursement
obligations will rank pari passu with the Obligations.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized officers as of the day and year first
above written.
EQUISTAR CHEMICALS, LP,
by /s/ Joseph Putz
---------------------------------
Name: Joseph M. Putz
Title: Senior Vice President
Finance and Administration
MILLENNIUM AMERICA INC., as Guarantor,
by /s/ Christine Wubbolding
----------------------------------
Name: Christine Wubbolding
Title: V.P. & Treasurer
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, individually and as Administrative
Agent, Documentation Agent and Servicing Agent,
by /s/ Steve Aronowitz
----------------------------------------
Name: Steve Aronowitz
Title: Managing Director
<PAGE>
THE CHASE MANHATTAN BANK,
individually and as Administrative
Agent and Syndication Agent,
by /s/ Mary Elizabeth Swerz
----------------------------------------
Name: Mary Elizabeth Swerz
Title: Vice President
<PAGE>
ABN AMRO BANK N.V.,
by /s/ Micheal W. Nepveux
----------------------------------------
Name: Micheal W. Nepveux
Title: Vice President
by /s/ Collis G. Sanders
----------------------------------------
Name: Collis G. Sanders
Title: Sr. Vice President
<PAGE>
BANK AUSTRIA AG,
by /s/ Joseph A. Steiner
----------------------------------------
Name: Joseph A. Steiner
Title: Senior Vice President
by /s/ Jonathan B. Bakker
----------------------------------------
Name: Jonathan B. Bakker
Title: Vice President
<PAGE>
THE BANK OF NEW YORK,
by /s/ Raymond Palmer
----------------------------------------
Name: Raymond Palmer
Title: Vice President
<PAGE>
THE BANK OF NOVA SCOTIA,
by /s/ F.C.H. Ashby
----------------------------------------
Name: F.C.H. Ashby
Title: Senior Manger Loan Operations
<PAGE>
THE BANK OF TOKYO-MITSUBISHI,
by /s/ Takeshi Yokokawa
----------------------------------------
Name: Takeshi Yokokawa
Title: Deputy General Manager
<PAGE>
BANQUE NATIONALE DE PARIS
by /s/ Philip Ugalde
----------------------------------------
Name: Philip Ugalde
Title: Banking Officer
<PAGE>
CIBC INC.
by /s/ Neal A. Sobol
----------------------------------------
Name: Neal A. Sobol
Title: Executive Director
CIBC Oppenheimer Corp., as Agent
<PAGE>
COMMERZBANK AG, ATLANTA AGENCY
by /s/ D. Suttles
----------------------------------------
Name: D. Suttles
Title: Vice President
by /s/ P. Mahoney
----------------------------------------
Name: P. Mahoney
Title: Assistant Treasurer
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH,
by /s/ Pascal Poupelle
----------------------------------------
Name: Pascal Poupelle
Title: Executive Vice President
<PAGE>
THE DAI-ICHI-KANGO BANK, LTD.,
by /s/ Matthew G. Murphy
----------------------------------------
Name: Matthew G. Murphy
Title: Vice President
<PAGE>
DG BANK
By /s/ Mark Connelly
----------------------------------------
Name: Mark Connelly
Title: Vice President
By /s/ Wolfgang Bollman
----------------------------------------
Name: Wolfgang Bollman
Title: Senior Vice President
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO,
by /s/ Leo Loughead
----------------------------------------
Name: Leo Loughead
Title: Corporate Banking Officer
<PAGE>
THE INDUSTRIAL BANK OF JAPAN, LTD.,
NEW YORK BRANCH
by /s/ Kensaku Iwata
----------------------------------------
Name: Kensaku Iwata
Title: Senior Vice President & Deputy
General Manager, Houston Office
<PAGE>
KREDEITBANK N.V.
by /s/ Robert Snauffer
----------------------------------------
Name: Robert Snauffer
Title: Vice President
by /s/ Raymond F. Murray
----------------------------------------
Name: Raymond F. Murray
Title: Vice President
<PAGE>
THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED
by /s/ Douglas A. Whiddon
----------------------------------------
Name: Douglas A. Whiddon
Title: Senior Vice President
<PAGE>
MARINE MIDLAND BANK,
by /s/ Rochelle Forster
----------------------------------------
Name: Rochelle Forster
Title: Vice President
<PAGE>
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
by /s/ James S. Finch
----------------------------------------
Name: James S. Finch
Title: Vice President
<PAGE>
NATIONSBANK, N.A.,
by /s/ Marcus A. Boyer
----------------------------------------
Name: Marcus A. Boyer
Title: Senior Vice President
<PAGE>
PNC BANK, National Association
by /s/ Timothy J. Marchando
----------------------------------------
Name: Timothy J. Marchando
Title: Vice President
<PAGE>
THE SANWA BANK LIMITED,
by /s/ Ryoichi Shinke
----------------------------------------
Name: Ryoichi Shinke
Title: Assistant Vice President
<PAGE>
SOCIETE GENERALE, NEW YORK BRANCH
by /s/ Karen M. Sager
----------------------------------------
Name: Karen M. Sager
Title: Vice President
<PAGE>
THE SUMITOMO BANK, LIMITED
by /s/ Kazuyoshi Ogawa
----------------------------------------
Name: Kazuyoshi Ogawa
Title: Joint General Manager
<PAGE>
SUNTRUST BANK, ATLANTA,
by /s/ Steven J. Newby
----------------------------------------
Name: Steven J. Newby
Title: Corporate Banking Officer
<PAGE>
THE TORONTO-DOMINION BANK
by /s/ Jorge A. Garcia
----------------------------------------
Name: Jorge A. Garcia
Title: Manager Credit Administration
<PAGE>
EXHIBIT A TO THE
CREDIT AGREEMENT
[FORM OF]
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of November 25,
1997 (as amended, modified, supplemented or waived, the "Credit Agreement"),
among EQUISTAR CHEMICALS, LP, a Delaware limited partnership; MILLENNIUM AMERICA
INC., a Delaware corporation, as Guarantor; the lenders from time to time party
thereto; BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("BofA"), as
Servicing Agent and Documentation Agent; THE CHASE MANHATTAN BANK ("Chase"), as
Syndication Agent; and BofA and Chase as administrative agents (in such
capacity, the "Administrative Agents"). Capitalized terms used but not defined
herein shall have the meanings specified in the Credit Agreement.
1. The Assignor named below hereby sells and assigns, without
recourse to the Assignor, to the Assignee named below, and the Assignee hereby
purchases and assumes, without recourse to the Assignor, from the Assignor,
effective as of the Effective Date set forth below, the interests set forth
below (the "Assigned Interest") in the Assignor's rights and obligations under
the Credit Agreement, including, without limitation, the interests set forth
below in the Commitment of the Assignor on the Effective Date, and the
Competitive Loans and Revolving Loans owing to the Assignor which are
outstanding on the Effective Date, together with unpaid interest accrued on the
assigned Loans to the Effective Date. Each of the Assignor and the Assignee
hereby makes and agrees to be bound by all the representations, warranties and
agreements set forth in Section 10.07 of the Credit Agreement, a copy of which
has been received by each such party. From and after the Effective Date (i) the
Assignee shall be a party to and be bound by the provisions of the Credit
Agreement and, to the extent of the interests assigned by this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and (ii)
except as otherwise provided in the Credit Agreement, the Assignor shall, to the
extent of the interests assigned by this Assignment and Acceptance, relinquish
its rights and be released from its obligations under the Credit Agreement.
2. This Assignment and Acceptance is being delivered to the
Servicing Agent and the Borrower together with (i) if the Assignee is organized
under the laws of a jurisdiction outside the United States, the forms referred
to in Section 2.19 (e) of the Credit Agreement, duly completed and executed by
such Assignee, (ii) if the Assignee is not already a Lender under the Agreement,
an administrative questionnaire in the form provided by the Servicing Agent and
(iii) a processing and recordation fee of $3,500.
3. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
1
<PAGE>
Date of Assignment: ____________________________________________________________
Legal Name of Assignor: ________________________________________________________
Legal Name of Assignee: ________________________________________________________
Assignee's Address for Notices: ________________________________________________
________________________________________________________________________________
Assignee's Domestic Lending Office Address: ____________________________________
________________________________________________________________________________
Assignee's LIBOR Lending Office Address: _______________________________________
________________________________________________________________________________
Effective Date of Assignment (may
not be fewer than 5 Business Days
after the Date of Assignment except
as specified in the Credit Agreement): _________________________________________
2
<PAGE>
Percentage Assigned of
Principal Amount Facility/or Commitment
Assigned (set forth, to at least
(and identifying 8 decimals, as a
information percentage of the
as to individual Facility and the
Revolving Loans aggregate Commitments
and Competitive of all Lenders
Facility Loans) thereunder)
- ---------------------- ---------------- -----------------------
Commitment Assigned: $ %
Revolving Loans: $ %
Competitive Loans: $ %
The terms set forth herein
are hereby agreed to:
Accepted (if required):
_________________, as Assignor, EQUISTAR CHEMICALS, LP
By:__________________
Name: By:______________________
Title: Name:
Title:
_________________, as Assignee,
By:__________________
Name:
Title:
3
<PAGE>
EXHIBIT B TO THE
CREDIT AGREEMENT
[FORM OF]
STANDBY BORROWING REQUEST
Bank of America National Trust and Savings Association, as
Servicing Agent
for the Lenders referred to below,
1850 Gateway Blvd.
Concord, CA 94520
Attention: Agency Management Services
Dear Sirs:
The undersigned, Equistar Chemicals, LP (the "Borrower"), refers
to the Credit Agreement dated as of November 25, 1997 among EQUISTAR CHEMICALS,
LP, a Delaware limited partnership; MILLENNIUM AMERICA INC., a Delaware
corporation, as Guarantor; the lenders from time to time party thereto; BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("BofA"), as Servicing Agent and
Documentation Agent; THE CHASE MANHATTAN BANK ("Chase"), as Syndication Agent;
and BofA and Chase as administrative agents (in such capacity, the
"Administrative Agents") (as amended, modified, supplemented or waived, the
"Credit Agreement"). Capitalized terms used but not defined herein shall have
the meanings specified in the Credit Agreement.
The Borrower hereby gives you notice pursuant to Section 2.04 of
the Credit Agreement that it requests a Revolving Borrowing under the Credit
Agreement, and in that connection sets forth below the terms on which such
Revolving Borrowing is requested to be made:
(A) Date of Borrowing
(which is a Business Day) ______________________
(B) Principal amount of
Borrowing ______________________
(C) Interest rate basis/1/ ______________________
(D) Interest Period and the last
day thereof/2/
________________________
/1/ LIBOR Borrowing, NIBOR Borrowing or ABR Borrowing.
/2/ Which shall be subject to the definition of "Interest Period" and end
not later than the Maturity Date.
1
<PAGE>
Upon the making of any or all of the Loans made by the Lenders in
response to this request, the Borrower shall be deemed to have represented and
warranted that the conditions to lending specified in Sections 4.01(b), to the
extent applicable to this Revolving Borrowing, and (c) of the Credit Agreement
have been satisfied.
Very truly yours,
EQUISTAR CHEMICALS, LP
By
________________________
Title:[Responsible Officer]
2
<PAGE>
EXHIBIT C-1 TO THE
CREDIT AGREEMENT
[FORM OF]
COMPETITIVE BID REQUEST
Bank of America National Trust and Savings Association, as
Servicing Agent
for the Lenders referred to below,
1850 Gateway Blvd.
Concord, CA 94520 [Date]
Attention: Agency Management Services
Dear Sirs:
The undersigned, Equistar Chemicals, LP (the "Borrower"), refers to
the Credit Agreement dated as of November 25, 1997, among EQUISTAR CHEMICALS,
LP, a Delaware limited partnership; MILLENNIUM AMERICA INC., a Delaware
corporation, as Guarantor; the lenders from time to time party thereto; BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("BofA"), as Servicing Agent and
Documentation Agent; THE CHASE MANHATTAN BANK ("Chase"), as Syndication Agent;
and BofA and Chase as administrative agents (in such capacity, the
"Administrative Agents") (as amended, modified, supplemented or waived, the
"Credit Agreement"). Capitalized terms used but not defined herein shall have
the meanings specified in the Credit Agreement.
The Borrower hereby gives you notice pursuant to Section 2.03 (a) of
the Credit Agreement that it requests a Competitive Borrowing, and in that
connection sets forth below the terms on which such Competitive Borrowing is
requested to be made:
(A) Date of Competitive Borrowing
(which is a Business Day) ________________________
(B) Principal Amount of
Competitive Borrowing/1/ ________________________
(C) Interest rate basis/2/ ________________________
(D) Interest Period and the last
day thereof/3/ ________________________
___________________________
/1/ Not less than $5,000,000.
/2/ LIBOR Competitive Borrowing or Fixed Rate Borrowing.
/3/ Which shall be subject to the definition of "Interest Period" and end
not later than the Maturity Date.
1
<PAGE>
Upon acceptance of any or all of the Competitive Loans offered by the Lenders in
response to this request, the Borrower shall be deemed to have represented and
warranted that the conditions to lending specified in Sections 4.01(b), to the
extent applicable to this Borrowing, and (c) of the Credit Agreement have been
satisfied.
Very truly yours,
EQUISTAR CHEMICALS, LP
by
____________________________
Title: [Responsible Officer]
2
<PAGE>
EXHIBIT C-2 TO THE
CREDIT AGREEMENT
[FORM OF]
NOTICE OF COMPETITIVE BID REQUEST
[Name of Lender]
[Address]
[Date]
Attention:
Dear Sirs:
Reference is made to the Credit Agreement dated as of November 25, 1997,
among EQUISTAR CHEMICALS, LP, a Delaware limited partnership; MILLENNIUM AMERICA
INC., a Delaware corporation, as Guarantor; the lenders from time to time party
thereto; BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("BofA"), as
Servicing Agent and Documentation Agent; THE CHASE MANHATTAN BANK ("Chase"), as
Syndication Agent; and BofA and Chase as administrative agents (in such
capacity, the "Administrative Agents") (as amended, modified, supplemented or
waived, the "Credit Agreement"). Capitalized terms used but not defined herein
shall have the meanings specified in the Credit Agreement.
A Borrower made a Competitive Bid Request on [ ], 19[ ], pursuant to
Section 2.03(a) of the Credit Agreement, and in that connection you are invited
to submit a Competitive Bid by [Date] / [Time]./1/ Your Competitive Bid must
comply with Section 2.03(b) of the Credit Agreement and the terms set forth
below on which the Competitive Bid Request was made:
(A) Date of Competitive Borrowing _______________________________________
(B) Principal amount of
Competitive Borrowing ________________________________________
(C) Interest rate basis ________________________________________
(D) Interest Period and the last
day thereof ________________________________________
______________________
/1/ The Competitive Bid must be received by the Administrative Agent (i)
in the case of LIBOR Competitive Borrowing, not later than 9:30 a.m., New York
City time, three Business Days before the proposed Competitive Borrowing, and
(ii) in the case of a Fixed Rate Borrowing, not later than 9:30 a.m., New York
City time, on the day of the proposed Competitive Borrowing.
<PAGE>
Very truly yours,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Servicing Agent,
By________________________________________
Title:______________________________
2
<PAGE>
EXHIBIT C-3 TO THE
CREDIT AGREEMENT
[FORM OF]
COMPETITIVE BID
Bank of America National Trust and Savings Association, as
Servicing Agent
for the Lenders referred to below,
1850 Gateway Blvd.
Concord, CA 94520 [Date]
Attention: Agency Management Services
Dear Sirs:
The undersigned, [Name of Lender], refers to the Credit Agreement dated as
of November 25, 1997, among EQUISTAR CHEMICALS, LP, a Delaware limited
partnership; MILLENNIUM AMERICA INC., a Delaware corporation, as Guarantor; the
lenders from time to time party thereto; BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION ("BofA"), as Servicing Agent and Documentation Agent; THE
CHASE MANHATTAN BANK ("Chase"), as Syndication Agent; and BofA and Chase as
administrative agents (in such capacity, the "Administrative Agents") (as
amended, modified, supplemented or waived, the "Credit Agreement"). Capitalized
terms used but not defined herein shall have the meanings specified in the
Credit Agreement.
The undersigned hereby makes a Competitive Bid pursuant to Section 2.03(b)
of the Credit Agreement, in response to the Competitive Bid Request made by
Equistar Chemicals, LP (the "Borrower") on [ ], 19[ ], and in
that connection sets forth below the terms on which such Competitive Bid is
made:
(A) Principal Amount/1/ ___________________________________
(B) Competitive Bid Rate/2/ ___________________________________
_____________________
/1/ Not less than $5,000,000 and not greater than the requested
Competitive Borrowing. Multiple bids will be accepted by the Administrative
Agent.
/2/ I.e., LIBO Rate + or - %, in the case of LIBOR Competitive Loans, or
-----
%, in the case of Fixed Rate Loans. The Competitive Bid Rate shall be inclusive
of any and all reserve requirement costs of the Lender pursuant to Section
2.14(a) of the Credit Agreement.
<PAGE>
(C) Interest Period and last day thereof ______________________________
The undersigned hereby confirms that it is prepared to extend credit to the
Borrower upon acceptance by the Borrower of this bid in accordance with Section
2.03(d) of the Credit Agreement.
Very truly yours,
[NAME OF LENDER],
by
__________________________________
Title:
2
<PAGE>
EXHIBIT C-4 TO
CREDIT AGREEMENT
[FORM OF]
COMPETITIVE BID ACCEPT/REJECT LETTER
[Date]
Bank of America National Trust and Savings Association,
as Servicing Agent
for the Lenders referred to below
1850 Gateway Blvd.
Concord, CA 94520
Attention: Agency Management Services
Dear Sirs:
The undersigned, Equistar Chemicals, LP (the "Borrower"), refers to the
Credit Agreement dated as of November 25, 1997 (as amended, modified,
supplemented or waived, the "Credit Agreement"), among EQUISTAR CHEMICALS, LP, a
Delaware limited partnership; MILLENNIUM AMERICA INC., a Delaware corporation,
as Guarantor; the lenders from time to time party thereto; BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION ("BofA"), as Servicing Agent and
Documentation Agent; THE CHASE MANHATTAN BANK ("Chase"), as Syndication Agent;
and BofA and Chase as administrative agents (in such capacity, the
"Administrative Agents").
In accordance with Section 2.03(c) of the Credit Agreement, we have
received a summary of bids in connection with our Competitive Bid Request dated
____________ and, in accordance with Section 2.03(d) of the Credit Agreement, we
hereby accept following bids for maturity on [date]:
Principal Amount Fixed Rate/Margin
- ---------------- -----------------
Lender
------
$ [%] / [+ / -. %]
We hereby reject the following bids:
<PAGE>
Principal Amount Fixed Rate/Margin
- ---------------- -----------------
Lender
------
$ [%] / [+ / -. %]
The funds should be deposited in Bank of America National Trust and Savings
Association account number [ ] on [date] [or] [wire transferred to
[Name of Bank] account number [ ] [other wire instructions] on [date]].
Very truly yours,
EQUISTAR CHEMICALS, LP
by
___________________________
Name:
Title:
2
<PAGE>
EXHIBIT D TO THE
CREDIT AGREEMENT
APPLICATION AND AGREEMENT
FOR IRREVOCABLE STANDBY LETTER OF CREDIT
[_] WITHOUT RENEWALS [_] WITH RENEWALS Renewable until __________.
latest date
<TABLE>
<S> <C>
FOR BANK USE ONLY
--------------------------------------------
To: TEXAS COMMERCE BANK NATIONAL ASSOCIATION Date: L/C No.:
--------------------------------------------
P.O. Box 2558 Applicant No.:
--------------------------------------------
Houston, Texas 77252-8300 Beneficiary No.:
--------------------------------------------
Date of this Application _____________ Advising Bank No.:
--------------------------------------------
Gentlemen:
The undersigned Applicant(s) hereby request(s) you to establish an irrevocable Standby Letter of Credit as set forth below in such
language as you may deem appropriate, with such variations from such terms as you may in your discretion determine are necessary and
are not materially inconsistent with this Application and Agreement, and forward the same by:
[_] Cable/telex (full details) [_] Airmail [_] Brief Cable/telex [_] Other______________________________________________
[_] Through your correspondent for delivery to the beneficiary or advised through_________________________________________________
[_] Directly to beneficiary
All banking charges other than the issuing Bank's are for [_] Beneficiary [_] Applicant(s)
- ------------------------------------------------------------------------------------------------------------------------------------
Liability of on Behalf of (as to appear on Letter of Credit)
___________________In favor of (Beneficiary)___________________ ___________________________________________________
Amount
In figures:
In words:
- ------------------------------------------------------------------------------------------------------------------------------------
Partial drawings: [_] Allowed [_] Not Allowed Expiring at the close of business on
If drawings are allowed in installments within given periods and
no drawing is made for an installment within the applicable
period, the credit
___________________________________________________________
[_] Shall [_] Shall not be available for subsequent installments At your counters, unless otherwise indicated, for Sight
Payment
- ------------------------------------------------------------------------------------------------------------------------------------
To be available by drafts at sight drawn on you duly signed and endorsed, or specify any other drawee: _____________________________
And accompanied by documents as specified below:
Beneficiary's manually signed statement on its letterhead reading exactly as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
(Complete only when the beneficiary's bank or correspondent is to issue its undertaking based on the issued Standby Letter of
Credit)
[_] Request beneficiary's bank to issue and deliver their (specify type of undertaking, bid or performance bond, or other)
__________________________________________________________
In favor of:
__________________________________________________________
For an amount not exceeding that specified above, effective immediately and expiring
at their office on ____________________________________
(30 days prior to expiry date above)
relative to ___________________________________________________ .
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The opening of this credit is subject to the terms and conditions as set forth
in the Credit Agreement among EQUISTAR CHEMICALS, LP, a Delaware limited
partnership; MILLENNIUM AMERICA INC., a Delaware corporation, as Guarantor; the
lenders from time to time party hereto; BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION ("BofA"), as Servicing Agent and Documentation Agent; THE
CHASE MANHATTAN BANK ("Chase"), as Syndication Agent; and BofA and Chase as
administrative agents (in such capacity, the "Administrative Agents"), to which
terms and conditions agree.
APPLICANTS:
__________________________________ ___________________________________
Printed Name Printed Name
By:_______________________________ By: _______________________________
Authorized Signature Authorized Signature
CORRESPONDENT/MEMBER BANK:
__________________________________ ___________________________________
Printed Name Printed Name
By:_______________________________ By: _______________________________
Authorized Signature Authorized Signature
BANK ACCEPTANCE: The Bank's Acceptance evidenced by the undersigned authorized
representative's signature is provided as its acknowledgment that his agreement
represents the final agreement by the parties which may not be contradicted by
evidence of prior contemporaneous, or subsequent oral agreements between the
parties.
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By: _____________________________________
<PAGE>
[Letterhead of]
GEORGE H. HEMPSTEAD, III
GENERAL COUNSEL OF
MILLENNIUM AMERICA INC.
AND
MILLENNIUM PETROCHEMICALS GP LLC
December 1, 1997
To: Bank of American National Trust
and Savings Association, as Servicing
Agent and Documentation Agent, and
The Chase Manhattan Bank, as
Syndication Agent, and each Lender
named on the signature pages to the
Credit Agreement referred to below
EQUISTAR CHEMICALS, LP
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 4.02(b) of the
Credit Agreement dated as of November 25, 1997 among Equistar Chemicals, LP, as
Borrower; Millennium America Inc., as Guarantor; the Lenders from time to time
party thereto; Bank of America National Trust and Savings Association ("BofA"),
as Servicing Agent and Documentation Agent; The Chase Manhattan Bank ("Chase"),
as Syndication Agent; and each of BofA and Chase, as Administrative Agents (the
"Credit Agreement"). Capitalized terms used herein and not otherwise defined
herein have the meanings given to them in the Credit Agreement.
I am the General Counsel of Millennium America Inc. (the "Guarantor");
and I, or individuals under my direction, have examined originals, or copies
certified or otherwise identified, of the Credit Agreement, the Asset
Contribution Agreement to which the Borrower, Millennium Petrochemicals Inc. and
Millennium LP are a party (the "Millennium Asset Contribution Agreement"),
certificates of public officials and other documents, as the basis for my
opinion hereinafter set forth.
On the basis of the foregoing, and subject to the assumptions,
qualifications and limitations set forth below, I am of the opinion that:
1. The Guarantor is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. The Guarantor has
the requisite corporate power and authority to execute and deliver the Credit
Agreement and to perform its obligations under Article IX of the Credit
Agreement, and all such actions have been duly and validly authorized by all
necessary corporate proceedings on its part.
<PAGE>
2. The execution and delivery of the Credit Agreement and the
performance of the Guarantor's obligations under Article IX thereof do not (a)
require any consent or approval of, registration or filing with, or any other
action by, any Governmental Authority, except such as have been obtained, made
or taken or the failure to obtain, make or take which would not reasonably be
expected to result in a Material Adverse Effect, (b) violate any provision of
its certificate of incorporation or bylaws, (c) violate any applicable federal
law or regulation or any law or regulation of the State of New York or the
General Corporation Law of the State of Delaware or any order of any
Governmental Authority binding on it, (d) result in a material breach of or
constitute (alone or with notice or lapse of time or both) a material default
under any indenture, material agreement or other instrument to which it is a
party, or by which it or any of its properties or assets is bound or (e) result
in the creation or imposition of any Lien on any of its material properties or
assets.
3. The Credit Agreement has been duly executed and delivered by the
Guarantor and constitutes a legal, valid and binding obligation of the
Guarantor, enforceable against the Guarantor in accordance with its terms,
subject to (a) applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium and other laws affecting creditors' rights
and remedies generally, (b) general principles of equity (regardless of whether
considered in a proceeding in equity or at law) and (c) any implied covenants of
good faith and fair dealing.
4. Neither the Guarantor nor any of its Subsidiaries, is a "holding
company" or a "subsidiary company" of a "holding company", within the meaning of
the Public Utility Holding Company Act of 1935.
5. The Asset Contribution Agreement and the conveyancing documents
contemplated thereby are effective to transfer the assets covered thereby,
subject to obtaining from third parties all requisite consents to the transfer
of those assets (the "Third Party Consents"). No Third Party Consent is
required for the transfer of any assets covered by the Asset Contribution
Agreement, except such that have been obtained or the failure to obtain which
would not reasonably be expected to result in a Material Adverse Affect.
The foregoing opinion is subject to the following assumptions,
qualifications and limitations:
A. I have, without independent verification, relied on certificates
of representatives of the Guarantor and the representations and warranties
of the Guarantor contained in the Credit Agreement with respect to the
accuracy of the factual matters contained therein and assumed (i) that each
party to the Credit Agreement has the power and authority to enter into the
Credit Agreement and to perform its obligations thereunder (other than the
Guarantor), (ii) the due authorization, execution and delivery of the
Credit Agreement by each party thereto (other than the Guarantor), (iii)
that the Credit Agreement constitutes the legal, valid, binding and
enforceable obligation of each party thereto (other than the Guarantor) and
(iv) the genuineness of all signatures (other than the signature of the
Guarantor), the conformity to authentic, original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of all documents submitted to us as originals.
B. No opinion is expressed above as to the enforceability of Section
10.09 of the Credit Agreement or any provisions in the Credit Agreement
that purport to (i) provide that rights and remedies are not exclusive,
that every right and remedy is cumulative and may be exercised in addition
to any other right or remedy and that the election of a particular remedy
does not preclude recourse to one or more others, (ii) (a) prohibit oral
amendments to or waivers of provisions of the Credit Agreement or (b) waive
rights of any party that cannot be waived as a matter of applicable law,
(iii) entitle a party to indemnification or absolution from liability in
respect of any matters arising under any securities laws or in whole or in
part by reason of any illegal, wrongful or grossly negligent act or
omission of that party or (iv) establish any evidentiary standard.
<PAGE>
C. No opinion is expressed above as to various state and federal
laws and regulations regulating banks or other financial institutions or the
business or lending transactions of any Agent, Lender, SPC or the Fronting
Bank which may relate to the Credit Agreement or the transactions
contemplated thereby.
With respect to the opinion set forth in paragraph 4 above, I have
relied upon In the Matter of Suburban Propane Gas Corporation (SEC Release No.
-------------------------------------------------
22847) and In the Matter of National Distillers and Chemical Corporation (SEC
-------------------------------------------------------------
Release No. 22848) and the Application of Suburban Propane, L.P. for Declaration
of Non-Utility Company Status Pursuant to Section 2(a)(4) and for Exempt Holding
Company Status pursuant to Section 3(a)(3) under the Public Utility Company
Holding Act of 1935, filed with the Securities and Exchange Commission on
February 26, 1996.
This opinion is limited to applicable federal law, the applicable law
of the State of New York and the General Corporation Law of the State of
Delaware and is rendered solely to you in connection with the above matter.
This opinion may not be relied on by you for any other purpose or relied on by
any other Person without my prior written consent, except that copies of this
opinion may be furnished to, and relied on by, any Person who is an assignee
pursuant to Section 10.07 of the Credit Agreement, other than any assignee that
is an SPC or an assignee of an SPC.
Very truly yours,
George H. Hempstead, III
General Counsel
<PAGE>
Kerry A. Galvin
General Counsel
LYONDELL PETROCHEMICAL G.P. INC.
1221 McKinney, Suite 1600
Houston, TX 77010
December 1, 1997
To: Bank of American National Trust
and Savings Association, as Servicing
Agent and Documentation Agent, and
The Chase Manhattan Bank, as
Syndication Agent, and each Lender
named on the signature pages to the
Credit Agreement referred to below
EQUISTAR CHEMICALS, LP
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 4.02(b) of the
Credit Agreement dated as of November 25, 1997 among Equistar Chemicals, LP, as
Borrower; Millennium America Inc., as Guarantor; the Lenders from time to time
party thereto; Bank of America National Trust and Savings Association ("BofA"),
as Servicing Agent and Documentation Agent; The Chase Manhattan Bank ("Chase"),
as Syndication Agent; and each of BofA and Chase, as Administrative Agents (the
"Credit Agreement"). Capitalized terms used herein and not otherwise defined
herein have the meanings given to them in the Credit Agreement.
I am the General Counsel of Lyondell Petrochemical G.P. Inc., a
general partner of the Borrower, and I, or individuals under my direction, have
examined originals, or copies certified or otherwise identified, of the Credit
Agreement, the Limited Partnership Agreement, the Asset Contribution Agreement
to which the Borrower, Lyondell Petrochemical Company and Lyondell LP are a
party (the "Asset Purchase Agreement"), certificates of public officials and
other documents as the basis for my opinion hereinafter set forth.
On the basis of the foregoing, and subject to the assumptions,
qualifications and limitations set forth below, I am of the opinion that:
<PAGE>
-2- December 1 1997
1. The Borrower (a) is a limited partnership duly formed under the
Revised Uniform Limited Partnership Act of the State of Delaware (the "Delaware
Limited Partnership Act") and validly existing and in good standing under the
laws of that State, (b) has all requisite power and authority under the Limited
Partnership Agreement and the Delaware Limited Partnership Act to own its
property and assets and to carry on its business as now conducted and (c) except
where the failure to do so, individually or in the aggregate, would not
reasonably be expected to result in a Material Adverse Effect, is qualified,
licensed or registered to do business in, and is in good standing in, every
jurisdiction where such qualification, licensing or registration is required.
2. The Borrower has the requisite power and authority under the
Limited Partnership Agreement and the Delaware Limited Partnership Act to
execute, deliver and carry out the provisions of the Credit Agreement and to
borrow thereunder; and all such actions have been duly and validly authorized by
all necessary proceedings on its part under the Limited Partnership Agreement
and the Delaware Limited Partnership Act.
3. The execution, delivery and performance by the Borrower of the
Credit Agreement, the Borrowings by it thereunder and the other transactions of
the Borrower contemplated thereby and the transactions contemplated by the
Master Transaction Agreement do not (a) require any consent or approval of,
registration or filing with, or any other action by any Governmental Authority,
except such as have been obtained, made or taken and are in full force and
effect or the failure to obtain, make or take which would not reasonably be
expected to result in a Material Adverse Effect, (b) violate the Limited
Partnership Agreement, (c) violate any applicable federal law or regulation or
the Delaware Limited Partnership Act or any order of any Governmental Authority
binding on it, (d) result in a material breach of or constitute a material
default under any indenture, material agreement or other instrument to which it
is a party, or by which it or any of its properties or assets is bound or (e)
result in the creation or imposition of any Lien on any of its material
properties or assets.
4. There are no actions, suits or proceedings by or before any
Governmental Authority pending against or, to my knowledge, threatened against
or affecting the Borrower or any of its Subsidiaries or the respective
businesses, assets or rights of the Borrower or any of its Subsidiaries as to
which there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
5. Neither the Borrower nor any of its Subsidiaries is (a) an
"investment company" within the meaning of the Investment Company Act of 1940 or
(b) a "holding company" as defined in the Public Utility Holding Company Act of
1935.
<PAGE>
-3- December 1, 1997
6. The Asset Contribution Agreement and the conveyancing documents
contemplated thereby are effective to transfer the assets covered thereby,
subject to obtaining from third parties all requisite consents to the transfer
of those assets (the "Third Party Consents"). No Third Party Consent is required
for the transfer of any assets covered by the Asset Contribution Agreement,
except such that have been obtained or the failure to obtain which would not
reasonably be expected to result in a Material Adverse Effect.
7. If all material facts and issues of law were presented and
properly argued, a Texas court, or a federal court sitting in the State of
Texas, should give effect to the governing law provisions of the Credit
Agreement, subject to Section 35.51(f)(4) of the Texas Business and Commerce
Code.
The foregoing opinion is subject to the following assumptions,
qualifications and limitations:
A. I have, without independent verification, relied on certificates
of representatives of the Borrower and the representations and warranties
of the Borrower contained in the Credit Agreement with respect to the
accuracy of the factual matters contained therein and assumed (i) that each
party to the Credit Agreement (other than the Borrower) has the power and
authority to enter into the Credit Agreement and to perform its obligations
thereunder, (ii) the due authorization, execution and delivery of the
Credit Agreement by each party thereto (other than the Borrower), (iii)
that the Credit Agreement constitutes the legal, valid, binding and
enforceable obligation of each party thereto (other than the Borrower) and
(iv) the genuineness of all signatures (other than the Borrower's), the
conformity to authentic, original documents of all documents submitted to
me as certified or photostatic copies and the authenticity of all documents
submitted to me as originals.
B. No opinion is expressed above as to the enforceability of the
Credit Agreement.
C. No opinion is expressed above as to various state and federal
laws and regulations regulating banks or other financial institutions or
the business or lending transactions of any Agent, Lender, SPC or the
Fronting Bank which may relate to the Credit Agreement or the transactions
contemplated thereby.
This opinion is limited to applicable federal law, the applicable law
of the State of Texas and the Delaware Limited Partnership Act and is rendered
solely to you in connection with
<PAGE>
-4- December 1, 1997
the above matter. This opinion may not be relied on by you for any other purpose
or relied on by any other Person without my prior written consent, except that
copies of this opinion may be furnished to, and relied on by, any Person who is
an assignee pursuant to Section 10.07 of the Credit Agreement, other than any
assignee that is an SPC or an assignee of an SPC.
Very truly yours,
------------------------------
Kerry A. Galvin
General Counsel
<PAGE>
December 1, 1997
To: Bank of American National Trust
and Savings Association, as Servicing
Agent and Documentation Agent, and
The Chase Manhattan Bank, as
Syndication Agent, and each Lender
named on the signature pages to the
Credit Agreement referred to below
EQUISTAR CHEMICALS, LP
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 4.02(b) of the
Credit Agreement dated as of November 25, 1997 among Equistar Chemicals, LP, as
Borrower; Millennium America Inc., as Guarantor; the Lenders from time to time
party thereto; Bank of America National Trust and Savings Association ("BofA"),
as Servicing Agent and Documentation Agent; The Chase Manhattan Bank ("Chase"),
as Syndication Agent; and each of BofA and Chase, as Administrative Agents (the
"Credit Agreement"). Capitalized terms used herein and not otherwise defined
herein have the meanings given to them in the Credit Agreement.
We have acted as counsel to the Borrower in connection with the Credit
Agreement. In that connection we have examined the Credit Agreement and
originals, or copies certified or otherwise identified, of the Limited
Partnership Agreement furnished to us by the Borrower, certificates of public
officials and representatives of the Borrower and other documents as the basis
for our opinion hereinafter set forth.
Upon the basis of the foregoing, and subject to the assumptions,
qualifications and limitations set forth below, we are of the opinion that:
1. The Credit Agreement constitutes a legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its terms, subject to (a) applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance or transfer, moratorium and other laws affecting
creditors' rights and remedies generally, (b) general principles of equity
(regardless
<PAGE>
-2- December 1, 1997
of whether considered in a proceeding in equity or at law) and (c) any implied
covenants of good faith and fair dealing.
2. The credit transactions contemplated by the Credit Agreement do
not (a) require any consent or approval of, registration or filing with, or any
other action by, any Governmental Authority, except such as have been obtained,
made or taken and are in full force and effect or the failure to obtain, make or
take which would not reasonably be expected to result in a Material Adverse
Effect, (b) violate the terms of the Limited Partnership Agreement or (c)
violate any applicable federal law or regulation or any applicable law or
regulation of the State of New York or the Delaware Limited Partnership Act.
3. The Borrower is not (a) an "investment company" within the
meaning of the Investment Company Act of 1940 or (b) a "holding company" as
defined in the Public Utility Holding Company Act of 1935.
4. The execution, delivery and performance of the Credit Agreement
by the Borrower, the Borrowing by the Borrower thereunder and the use of the
proceeds thereof in accordance with Section 3.10 and the other provisions of the
Credit Agreement do not violate Regulation U or X of the Board of Governors of
the Federal Reserve System.
The foregoing opinion is subject to the following assumptions,
qualifications and limitations:
A. We have, without independent verification, relied on certificates
of representatives of the Borrower and the representations and warranties
of the Borrower contained in the Credit Agreement with respect to the
accuracy of the factual matters contained therein and assumed (i) that each
party to the Credit Agreement has the power and authority to enter into the
Credit Agreement and to perform its obligations thereunder, (ii) the due
authorization, execution and delivery of the Credit Agreement by each party
thereto, (iii) that the Credit Agreement constitutes the legal, valid,
binding and enforceable obligation of each party thereto (other than the
Borrower) and (iv) the genuineness of all signatures, the conformity to
authentic, original documents of all documents submitted to us as certified
or photostatic copies and the authenticity of all documents submitted to us
as originals.
B. No opinion is expressed above as to the enforceability of Section
10.09 of the Credit Agreement or any provisions in the Credit Agreement
that purport to (i) provide that rights and remedies are not exclusive,
that every right and remedy is cumulative and may be exercised in addition
to any other right or remedy and that the election of a particular remedy
<PAGE>
-3- December 1, 1997
does not preclude recourse to one or more others, (ii) (a) prohibit oral
amendments to or waivers of provisions of the Credit Agreement or (b) waive
rights of any party that cannot be waived as a matter of applicable law,
(iii) entitle a party to indemnification or absolution from liability in
respect of any matters arising under any securities laws or in whole or in
part by reason of any illegal, wrongful or grossly negligent act or
omission of that party or (iv) establish any evidentiary standard.
C. No opinion is expressed above as to various state and federal
laws and regulations regulating banks or other financial institutions or
the business or lending transactions of any Agent, Lender, SPC or the
Fronting Bank which may relate to the Credit Agreement or the transactions
contemplated thereby.
This opinion is limited to applicable federal law, the applicable law
of the State of New York and the Delaware Revised Uniform Limited Partnership
Act and is rendered solely to you in connection with the above matter. This
opinion may not be relied on by you for any other purpose or relied on by any
other Person without our prior written consent, except that copies of this
opinion may be furnished to, and relied on by, any Person who is an assignee
pursuant to Section 10.07 of the Credit Agreement, other than any assignee that
is an SPC or an assignee of an SPC.
Very truly yours,
KLW/SAM
<PAGE>
EXHIBIT 4.3(a)
AMENDED AND RESTATED CREDIT AGREEMENT dated as of November
25, 1997, as amended and restated February 5, 1999, among
EQUISTAR CHEMICALS, LP, a Delaware limited partnership;
MILLENNIUM AMERICA INC., a Delaware corporation, as Guarantor;
the Lenders party thereto; BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION as Servicing Agent, Documentation Agent and
Administrative Agent; and THE CHASE MANHATTAN BANK, as
Syndication Agent and Administrative Agent.
WHEREAS, the Borrower (such term and each other capitalized term used
but not defined herein having the meaning assigned to it in the Credit Agreement
as amended and restated hereby, the "Amendment and Restatement"), the Lenders,
BofA and Chase are parties to the Credit Agreement dated as of November 25, 1997
(the "Credit Agreement");
WHEREAS, the Borrower has requested that the Lenders amend and restate
the Credit Agreement; and
WHEREAS, the undersigned Lenders are willing, on the terms and subject
to the conditions set forth herein, to approve such Amendment and Restatement;
NOW, THEREFORE, in consideration of these premises, the Borrower,
Millennium America Inc. and the undersigned Lenders hereby agree as follows:
SECTION 1. Amendments. Effective as of the Amendment and Restatement
Effective Date (as defined in Section 3 hereof), the Credit Agreement is hereby
amended and restated in its current form with the following amendments:
(a) The following definitions are added to Section 1.01 of the Credit
Agreement in their appropriate alphabetical positions:
"Assumed Occidental Liabilities" shall mean amounts due under the
Lease Intended for Security, Corpus Christi Ethylene Cracking Facility,
dated December 18, 1991, among Oxy Petrochemicals Inc., as assignee of
Occidental Chemical Corporation, as Lessee, the institutions listed on the
Schedule I thereto, as Lessors, Norwest Bank Minnesota, N.A., as Agent and
Chemical Bank and the Bank of Nova Scotia, as Information Agents, as
amended and supplemented from time to time.
"Equistar GP" shall mean any general partner of the Borrower.
"Occidental Asset Contribution Agreement" means the Agreement and
Plan of Merger and Asset Contribution dated as of May 15, 1998, among
<PAGE>
2
Occidental GP, Occidental LP1, Occidental LP2, Oxy Petrochemicals Inc.
and the Borrower.
(b) The definition of "Applicable Percentage" in Section 1.01 of the
Credit Agreement is hereby amended by (i) replacing the table contained therein
with the following table:
Facility
Index LIBOR/NIBOR Fee
Ratings Spread Percentage
------- ----------- ----------
Category 1 .285% .090%
A-/A3 or higher
Category 2 .375% .125%
BBB+/Baa1
Category 3 .475% .150%
BBB/Baa2
Category 4 .675% .200%
BBB-/Baa3
Category 5 .775% .225%
BBB-/Ba1 or BB+/Baa3
Category 6 1.000% .250%
BB+/Ba1
Category 7 1.200% .300%
BB/Ba2 or lower
- --------------------------------------------------------
(ii) replacing the number "6" at the end of clause (i) thereof with the number
"7" and (iii) inserting immediately before the semicolon at the end of clause
(ii) thereof the following: "(except that for purposes of this clause (ii),
Category 5 shall be disregarded in determining the number of Categories by which
the Index Ratings differ)".
(c) The definition of "Change in Control" in Section 1.01 of the
Credit Agreement is hereby amended by replacing the definition in its entirety
with the following:
A "Change in Control" shall occur if at any time Lyondell,
Millennium and Occidental cease to own in the aggregate, through ownership
by one or more of them, partnership interests representing at least a
majority of the total equity interest and voting power of the Borrower.
(d) The second proviso in the definition of "EBITDA" in Section 1.01
of the Credit Agreement is hereby amended to read as follows: "provided
further, that after December 31, 1998, such addition may only be made in the
calculation of EBITDA for each of two fiscal quarters during the remaining term
of this Agreement and any such addition may only be made for one fiscal quarter
during any four consecutive fiscal quarters."
<PAGE>
3
(e) The Interest Coverage Ratio in Section 6.05 of the Credit
Agreement is hereby amended by inserting at the end thereof, the following:
"except that for any period of four consecutive fiscal quarters ending on any
date set forth below, the Interest Coverage Ratio shall not be less than the
ratio set forth below opposite such date:
Date Ratio
- ---- ------
March 31, 1999. . . . . . . . . . . . . . . .2.50 to 1.0
June 30, 1999 . . . . . . . . . . . . . . . .2.25 to 1.0
September 30, 1999. . . . . . . . . . . . . .2.00 to 1.0
December 31, 1999 . . . . . . . . . . . . . .2.00 to 1.0
March 31, 2000. . . . . . . . . . . . . . . .2.15 to 1.0
June 30, 2000 . . . . . . . . . . . . . . . .2.25 to 1.0
September 30, 2000. . . . . . . . . . . . . .2.50 to 1.0
December 31, 2000 . . . . . . . . . . . . . .2.75 to 1.0
(f) Section 10.15(a) of the Credit Agreement is hereby amended by
replacing "Lyondell GP or Millennium GP, or any of their Affiliates" with "any
Equistar GP or any of its Affiliates"
(g) Section 10.15(b) of the Credit Agreement is hereby amended by
replacing all the text immediately after the first sentence thereof with the
following: "The Occidental Asset Contribution Agreement contains provisions
under which the Borrower would be obligated to reimburse Occidental for any
amounts paid by Occidental or its Affiliates on account of the fixed rent,
purchase obligation and variable rent on the Assumed Occidental Liabilities.
The Lenders acknowledge and agree that the obligations of the Borrower in
respect of any such reimbursement obligations will rank pari passu with the
Obligations"
SECTION 3. Effectiveness. This Amendment and Restatement shall
become effective as of the date (the "Amendment and Restatement Effective Date")
when the Administrative Agents (or their counsel) shall have received copies
hereof that, when taken together, bear the signatures of the Borrower and the
Required Lenders.
SECTION 4. Amendment and Restatement Fee. The Borrower shall pay to
the Administrative Agents on the Amendment and Restatement Effective Date a fee
as separately agreed to for the account of each Lender executing this Amendment
and Restatement.
SECTION 5. Applicable Law. This Amendment and Restatement shall be
construed in accordance with and governed by the law of the State of New York.
SECTION 6. No Other Amendments. Except as expressly set forth
herein, this Amendment and Restatement shall not by implication or otherwise
limit, impair, constitute a waiver of, or otherwise affect the rights and
remedies of any party under, the Credit Agreement, nor alter, modify, amend or
in any way affect any of the terms, conditions, obligations, covenants or
agreements contained in the Credit Agreement, all of which are ratified and
<PAGE>
4
affirmed in all respects and shall continue in full force and effect. This
Amendment and Restatement shall apply and be effective only with respect to the
provisions of the Credit Agreement specifically referred to herein.
SECTION 7. Counterparts. This Amendment and Restatement may be
executed in two or more counterparts, each of which shall constitute an
original, but all of which when taken together shall constitute but one
contract. Delivery of an executed counterpart of a signature page of this
Amendment and Restatement by facsimile transmission shall be as effective as
delivery of a manually executed counterpart of this Amendment and Restatement.
SECTION 8. Headings. Section headings used herein are for
convenience of reference only, are not part of this Amendment and Restatement
and are not to affect the construction of, or to be taken into consideration in
interpreting, this Amendment and Restatement.
SECTION 9. Expenses. The Borrower shall reimburse the Administrative
Agents for their reasonable out-of-pocket expenses incurred in connection with
this Amendment and Restatement, including the reasonable fees and expenses of
Cravath, Swaine & Moore, counsel for the Administrative Agents.
IN WITNESS WHEREOF, the Borrower, Millennium America Inc. and the
undersigned Lenders have caused this Amendment and Restatement to be duly
executed by their duly authorized officers, all as of the date first above
written.
EQUISTAR CHEMICALS, LP
by /s/ Eugene R. Allspach
----------------------------
Name: Eugene R. Allspach
Title: President and Chief
Operating Officer
MILLENNIUM AMERICA, INC.
by /s/ Christine Wubbolding
----------------------------
Name: Christine Wubbolding
Title: Vice President and
Treasurer
<PAGE>
5
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
individually and as
Administrative Agent, Documentation
Agent and Servicing Agent,
by /s/ Michael J. Dillon
----------------------------
Name: Michael J. Dillon
Title: Managing Director
THE CHASE MANHATTAN BANK,
individually and as
Administrative Agent and
Syndication Agent,
by /s/ Mary Elizabeth Swerz
----------------------------
Name: Mary Elizabeth Swerz
Title: Vice President
ABN AMRO BANK N.V.,
by /s/ Collis G. Sanders
----------------------------
Name: Collis G. Sanders
Title:Senior Vice President
& Managing Director
by /s/ Gordon D. Chang
----------------------------
Name: Gordon D. Chang
Title: Vice President
<PAGE>
6
BANK AUSTRIA AG,
by /s/ R. Tenhave
----------------------------
Name: R. Tenhave
Title: Senior Vice President
/s/ Karen L. Jill
----------------------------
Name: Karen L. Jill
Title: Assistant Vice President
THE BANK OF NEW YORK,
by /s/ Raymond J. Palmer
---------------------------
Name: Raymond J. Palmer
Title: Vice President
THE BANK OF NOVA SCOTIA,
by /s/ F. C. H. Ashby
-------------------------
Name: F. C. H. Ashby
Title: Senior Manger Loan
Operations
THE BANK OF TOKYO-MITSUBISHI,
by /s/ Ichiro Otani
------------------------
Name: Ichiro Otani
Title: Deputy General Manager
<PAGE>
7
BANQUE NATIONALE DE PARIS,
by /s/ John Stacy
-------------------------
Name: John Stacy
Title: Vice President
CIBC INC.,
by CIBC OPPENHEIMER CORP,
as Agent,
by /s/ Ihor Zaluckyj
-------------------------
Name: Ihor Zaluckyj
Title: Executive Director
COMMERZBANK AG,
by /s/ W. David Suttles
-------------------------
Name: W. David Suttles
Title: Vice President
by /s/ D. L. Ward
-------------------------
Name: D. L. Ward
Title: Assistant Treasurer
CREDIT LYONNAIS NEW YORK BRANCH,
by /s/ Phillippe Soustra
-------------------------
Name: Phillippe Soustra
Title: Senior Vice President
<PAGE>
8
THE DAI-ICHI-KANGO BANK, LTD.,
by /s/ Timothy White
-------------------------
Name: Timothy White
Title: Senior Vice President
DEUTSCHE GENOSSENSCHAFTS BANK AG,
by /s/ Mark Connelly
-------------------------
Name: Mark Connelly
Title: Vice President
by /s/ Elizabeth L. Ryan
------------------------
Name: Elizabeth L. Ryan
Title: Vice President
THE FIRST NATIONAL BANK OF
CHICAGO,
by /s/ Dixon P. Schultz
------------------------
Name: Dixon P. Schultz
Title: First Vice President
<PAGE>
9
THE INDUSTRIAL BANK OF JAPAN,
LTD.,
by /s/ Mike Oakes
------------------------
Name: Mike Oakes
Title: Senior Vice President
Houston Office
KBC BANK N. V.,
by /s/ Robert Snauffer
-------------------------
Name: Robert Snauffer
Title: First Vice President
by /s/ Marcel Claes
-------------------------
Name: Marcel Claes
Title: Deputy General Manager
THE LONG-TERM CREDIT BANK OF
JAPAN, LIMITED,
by /s/ Sadao Muraoko
--------------------------
Name: Sadao Muraoko
Title: Head of Southwest Region
<PAGE>
10
MARINE MIDLAND BANK,
by /s/ George Linhart
--------------------------
Name: George Linhart
Title: Relationship Manager
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
by /s/ Anna Marie Fallon
----------------------------
Name: Anna Marie Fallon
Title: Vice President
NATIONSBANK, N.A.,
by /s/ Michael J. Dillon
----------------------------
Name: Michael J. Dillon
Title: Managing Director
PNC BANK,
by /s/ Marc T. Kennedy
---------------------------
Name: Marc T. Kennedy
Title: Vice President
THE SANWA BANK LIMITED,
by /s/ Jean-Michel Fatovic
----------------------------
Name: Jean-Michel Fatovic
Title: Vice President
<PAGE>
11
SOCIETE GENERALE,
by /s/ Karen M. Sager
--------------------------
Name: Karen M. Sager
Title: Vice President
THE SUMITOMO BANK, LTD.,
by /s/ J. Bruce Meredith
----------------------------
Name: J. Bruce Meredith
Title: Senior Vice President
SUNTRUST BANK, ATLANTA,
by /s/ M. Anne Ford
------------------------------
Name: M. Anne Ford
Title: Corporate Banking Officer
by /s/ Steven J. Newby
------------------------------
Name: Steven J. Newby
Title: Corporate Banking Officer
THE TORONTO-DOMINION BANK,
by /s/ Sonja R. Jordan
---------------------------
Name: Sonja R. Jordan
Title: Manager, Credit
Administration
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK BRANCH,
by /s/ Felicia LaForgia
---------------------------
Name: Felicia LaForgia
Title: Vice President
by /s/ Thomas Lee
--------------------------
Name: Thomas Lee
Title: Associate
<PAGE>
EXHIBIT 4.4
LYONDELL PETROCHEMICAL COMPANY
AND
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, Trustee
INDENTURE
Dated as of May 31, 1989
<PAGE>
TIE-SHEET
of provisions of Trust Indenture Act of 1939 with Indenture dated as of May 31,
1989, between Lyondell Petrochemical Company and Texas Commerce Bank National
Association, as Trustee;
Section of Act Section of Indenture
- -------------- --------------------
310 (a) (1) and (2)....................................... 8.09
310 (a) (3) and (4)....................................... Not applicable
310 (b)................................................... 8.08 and 8.10 (b)
310 (c)................................................... Not applicable
311 (a) and (b)........................................... 8.13
311 (c)................................................... Not applicable
312 (a)................................................... 6.01 and 6.02 (a)
312 (b) and (c)........................................... 6.02 (b) and (c)
313 (a)................................................... 6.04 (a)
313 (b) (1)............................................... Not applicable
313 (b) (2)............................................... 6.04 (b)
313 (c)................................................... 6.04 (c)
313 (d)................................................... 6.04 (d)
314 (a)................................................... 6.03
314 (b)................................................... Not applicable
314 (c) (1) and (2)....................................... 16.07
314 (c) (3)............................................... Not applicable
314 (d) .................................................. Not applicable
314 (e) .................................................. 16.07
315 (a), (c) and (d)...................................... 8.01
315 (b) .................................................. 7.08
315 (e) .................................................. 7.09
316 (a) (1)............................................... 7.01 and 7.07
316 (a) (2)............................................... Omitted
316 (a) last sentence..................................... 9.04
316 (b)................................................... 7.04
317 (a)................................................... 7.02
317 (b)................................................... 5.07
318 (a) .................................................. 16.09
- -----------
This tie-sheet is not part of the Indenture as executed
<PAGE>
TABLE OF CONTENTS
PAGE
----
PARTIES ............................................................. 1
RECITALS ............................................................ 1
ARTICLE ONE
DEFINITIONS
SECTION 1.01 Definitions............................................... 1
Authorized Newspaper...................................... 1
Board of Directors........................................ 1
Business Day.............................................. 1
Company................................................... 1
Consolidated Net Tangible Assets.......................... 2
Coupon Security........................................... 2
Dollar.................................................... 2
Event of Default.......................................... 2
Fully Registered Security................................. 2
Holder.................................................... 2
Indenture................................................. 2
Interest.................................................. 2
Interest Payment Date..................................... 3
Maturity.................................................. 3
Officers' Certificate..................................... 3
Opinion of Counsel........................................ 3
Original Issue Date....................................... 3
Original Issue Discount Security.......................... 3
Person.................................................... 3
Place of Payment.......................................... 3
Principal Office.......................................... 3
Registered Coupon Security................................ 4
Registered Holder......................................... 4
Registered Security....................................... 4
Responsible Officer....................................... 4
Restricted Property....................................... 4
Restricted Subsidiary..................................... 4
Security or Securities Outstanding........................ 4
Stated Maturity........................................... 5
Subsidiary................................................ 5
Trustee................................................... 5
Trust Indenture Act of 1939............................... 5
Unregistered Security .................................... 5
<PAGE>
ii
ARTICLE TWO
THE SECURITIES AND SECURITY FORMS
PAGE
----
SECTION 2.01 Amount Unlimited; Issuable in Series....................... 6
SECTION 2.02 Form of Securities and of Trustee's Certificate
of Authentication......................................... 7
SECTION 2.03 Denomination, Authentication and Dating of Securities...... 7
SECTION 2.04 Execution of Securities.................................... 8
SECTION 2.05 Registration, Registration of Transfer and Exchange........ 9
SECTION 2.06 Mutilated, Destroyed, Lost or Stolen Securities............ 10
SECTION 2.07 Temporary Securities....................................... 10
Section 2.08 Cancellation of Securities Paid, etc....................... 11
ARTICLE THREE
REDEMPTION OF SECURITIES
SECTION 3.01 Applicability of Article................................... 11
SECTION 3.02 Notice of Redemption; Selection of Securities.............. 11
SECTION 3.03 Payment of Securities Called for Redemption................ 12
ARTICLE FOUR
SINKING FUNDS
SECTION 4.01 Applicability of Article................................... 12
SECTION 4.02 Satisfaction of Mandatory Sinking Fund Payments
with Securities........................................... 12
SECTION 4.03 Redemption of Securities for Sinking Fund.................. 12
<PAGE>
iii
ARTICLE FIVE
PARTICULAR COVENANTS OF THE COMPANY
PAGE
----
SECTION 5.01 Payment of Principal, Premium and Interest................ 13
SECTION 5.02 Offices for Notices and Payments, etc..................... 13
SECTION 5.03 Limitation on Liens....................................... 14
SECTION 5.04 Limitation on Sale and Lease Back......................... 15
SECTION 5.05 Definition of "Value"..................................... 15
SECTION 5.06 Appointments to Fill Vacancies in Trustee's Office........ 15
SECTION 5.07 Provision as to Paying Agent.............................. 16
SECTION 5.08 Annual Certificate to Trustee............................. 16
ARTICLE SIX
HOLDERS LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
SECTION 6.01 Holders Lists............................................. 17
SECTION 6.02 Preservation and Disclosure of Lists...................... 17
SECTION 6.03 Reports by the Company.................................... 18
SECTION 6.04 Reports by the Trustee.................................... 18
ARTICLE SEVEN
REMEDIES OF THE TRUSTEE AND HOLDERS ON EVENT OF DEFAULT
SECTION 7.01 Events of Default......................................... 19
SECTION 7.02 Payment of Securities on Default; Suit Therefor........... 21
SECTION 7.03 Application of Moneys Collected by Trustee................ 22
SECTION 7.04 Proceedings by Holders.................................... 22
SECTION 7.05 Proceedings by Trustee.................................... 23
SECTION 7.06 Remedies Cumulative and Continuing........................ 23
SECTION 7.07 Direction of Proceedings and Waiver of Defaults by
Majority of Holders...................................... 23
SECTION 7.08 Notice of Defaults........................................ 24
SECTION 7.09 Undertaking to Pay Costs ................................ 24
<PAGE>
iv
ARTICLE EIGHT
CONCERNING THE TRUSTEE
PAGE
----
SECTION 8.01 Duties and Responsibilities of Trustee ................... 24
SECTION 8.02 Reliance on Documents, Opinions, etc. .................... 25
SECTION 8.03 No Responsibility for Recitals, etc. ..................... 26
SECTION 8.04 Trustee, Paying Agent or Registrar May Own Securities .... 26
SECTION 8.05 Moneys to be Held in Trust ............................... 26
SECTION 8.06 Compensation and Expenses of Trustee ..................... 26
SECTION 8.07 Officers' Certificate as Evidence ........................ 27
SECTION 8.08 Conflicting Interest of Trustee .......................... 27
SECTION 8.09 Eligibility of Trustee ................................... 30
SECTION 8.10 Resignation or Removal of Trustee ........................ 30
SECTION 8.11 Acceptance by Successor Trustee .......................... 31
SECTION 8.12 Succession by Merger, etc. ............................... 32
SECTION 8.13 Limitation on Rights of Trustee as a Creditor ............ 32
ARTICLE NINE
CONCERNING THE HOLDERS
SECTION 9.01 Action By Holders ........................................ 35
SECTION 9.02 Proof of Execution by Holders ............................ 35
SECTION 9.03 Who Deemed Absolute Owners ............................... 35
SECTION 9.04 Company-Owned Securities Disregarded ..................... 36
SECTION 9.05 Revocation of Consents; Future Holders Bound ............. 36
ARTICLE TEN
HOLDERS' MEETINGS
SECTION 10.01 Purposes of Meetings .................................... 37
SECTION 10.02 Call of Meetings by Trustee ............................. 37
SECTION 10.03 Call of Meetings by Company or Holders .................. 37
SECTION 10.04 Qualification for Voting ................................ 37
SECTION 10.05 Regulations ............................................. 38
SECTION 10.06 Voting .................................................. 38
SECTION 10.07 No Delay of Rights by Meeting ........................... 38
<PAGE>
V
ARTICLE ELEVEN
SUPPLEMENTAL INDENTURES
PAGE
----
SECTION 11.01 Supplemental Indentures without Consent of Holders....... 39
SECTION 11.02 Supplemental Indentures with Consent of Holders of
a Series................................................ 40
SECTION 11.03 Compliance with Trust Indenture Act; Effect of
Supplemental Indentures................................. 40
SECTION 11.04 Notation on Securities................................... 40
SECTION 11.05 Evidence of Compliance of Supplemental Indenture
to be Furnished Trustee................................. 40
ARTICLE TWELVE
CONSOLIDATION, MERGER AND SALE
SECTION 12.01 Company May Consolidate, etc, on Certain Terms........... 41
SECTION 12.02 Securities to be Secured in Certain Events............... 41
SECTION 12.03 Successor Corporation to be Substituted.................. 41
SECTION 12.04 Opinion of Counsel to be Given Trustee................... 42
ARTICLE THIRTEEN
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 13.01 Discharge of Indenture................................... 42
SECTION 13.02 Deposited Moneys to be Held in Trust by Trustee.......... 42
SECTION 13.03 Paying Agent to Repay Moneys Held........................ 42
SECTION 13.04 Return of Unclaimed Moneys............................... 42
ARTICLE FOURTEEN
DEFEASANCE
SECTION 14.01 Applicability of Article................................. 43
SECTION 14.02 Defeasance Upon Deposit of Moneys or US Government
Obligations............................................. 43
SECTION 14.03 Deposited Moneys and US Government Obligations
To Be Held in Trust..................................... 44
SECTION 14.04 Repayment to Company..................................... 44
SECTION 14.05 Reinstatement............................................ 44
<PAGE>
vi
ARTICLE FIFTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
PAGE
----
SECTION 15.01 Indenture and Securities Solely Corporate Obligations ... 44
ARTICLE SIXTEEN
MISCELLANEOUS PROVISIONS
SECTION 16.01 Provisions Binding on Company's Successors .............. 45
SECTION 16.02 Benefits of Indenture Restricted to Parties and Holders . 45
SECTION 16.03 Official Acts by Successor Corporation .................. 45
SECTION 16.04 Addresses for Notices, etc. ............................. 45
SECTION 16.05 Notices to Holders; Waiver .............................. 45
SECTION 16.06 New York Contract ....................................... 46
SECTION 16.07 Evidence of Compliance with Conditions Precedent ........ 46
SECTION 16.08 Legal Holidays .......................................... 46
SECTION 16.09 Trust Indenture Act to Control .......................... 46
SECTION 16.10 No Security Interest Created ............................ 46
SECTION 16.11 Table of Contents, Headings, etc. ....................... 46
SECTION 16.12 Execution in Counterparts ............................... 46
SECTION 16.13 Acceptance of Trust ..................................... 46
<PAGE>
INDENTURE, dated as of May 31,1989, between LYONDELL PETROCHEMICAL COMPANY,
a corporation duly organized and existing under the laws of the State of
Delaware (the "Company"), and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a
national banking association (the "Trustee").
RECITAL OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness to be issued in one or more
series (the "Securities"), as provided herein.
AGREEMENT
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.01. Definitions. The terms defined in this Section 1.01 (except
as herein otherwise expressly provided or unless the context otherwise requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section 1.01. All other
terms used in this Indenture which are defined in the Trust Indenture Act of
1939 or which are by reference therein defined in the Securities Act of 1933, as
amended, (except as herein otherwise expressly provided or unless the context
otherwise requires) shall have the meanings assigned to such terms in said Trust
Indenture Act and in said Securities Act as in force at the date of the
execution of this Indenture.
Authorized Newspaper:
The term "Authorized Newspaper" shall mean The Wall Street Journal or other
newspaper of general circulation in The City of Now York (and, if any Place of
Payment is not in The City of New York, in each such Place of Payment) printed
in the English language and customarily published on each Business Day, whether
or not published on Saturdays, Sundays or holidays. Whenever successive weekly
publications in an Authorized Newspaper are authorized hereunder, they may be
made (unless otherwise expressly provided herein) on the same or different days
of the week and in the same or different Authorized Newspapers.
Board of Directors:
The term "Board of Directors" shall mean the Board of Directors of the
Company or any committee of such Board duly authorized to act for such Board.
Business Day:
The term "Business Day" means any day, other than a Saturday or Sunday,
that is (a) not a day on which banking institutions are authorized or required
by law or regulation to be closed in The City of New York or The City of
Houston, and (b) if a Security has an interest rate determined with reference to
the London interbank offered rate for deposits in a particular currency, any day
on which dealings in deposits in such currency are transacted in the London
interbank market.
Company:
The term "Company" shall mean Lyondell Petrochemical Company, a Delaware
corporation, and subject to the provisions of Article Twelve shall include its
successors and assigns.
<PAGE>
2
Consolidated Net Tangible Assets:
The term "Consolidated Net Tangible Assets" shall mean the total amount of
assets (less applicable reserves and other properly deductible items) after
deducting therefrom (a) all current liabilities (excluding any thereof which are
by their terms extendible or renewable at the option of the obligor thereon to a
time more than 12 months after the time as of which the amount thereof is being
computed), and (b) all goodwill, trade names, trademarks, patents, purchased
technology, unamortized debt discount and other like intangible assets, all as
set forth on the most recent quarterly balance sheet of the Company and its
consolidated Subsidiaries and computed in accordance with generally accepted
accounting principles.
Coupon Security:
The term "Coupon Security" shall mean any Security authenticated and
delivered with one or more interest coupons appertaining thereto.
Dollar:
The term "Dollar" or "$" means the coin or currency of the United States of
America as at the time of payment is legal tender for the payment of public and
private debts.
Event of Default:
The term "Event of Default" shall mean any event specified in Section 7.01,
continued for the period of time, if any, and after the giving of the notice, if
any, therein designated.
Fully Registered Security:
The term "Fully Registered Security" shall mean any Security registered as
to principal and interest, if any.
Holder:
The term "Holder," "Holder of Securities," or other similar terms, when
used with respect to any Security shall mean a bearer of an Unregistered
Security or a Registered Holder of a Registered Security and when used with
respect to any coupon, means the bearer thereof.
Indenture:
The term "Indenture" shall mean this instrument as originally executed or,
if amended or supplemented as herein provided, as so amended or supplemented,
and shall include the form and terms of particular series of Securities
established as contemplated hereunder; provided, however, that if at any time
more than one Person is acting as Trustee under this instrument, "Indenture"
shall mean with respect to any one or more series of Securities for which such
Person is Trustee, this instrument as originally executed or as it may from time
to time be supplemented or amended by one or more indentures supplemental hereto
entered into pursuant to the applicable provisions hereof and shall include the
terms of a particular series of Securities established as contemplated by
Section 2.01, exclusive, however, of any provisions or terms which relate solely
to one or more series of Securities for which such Person is not Trustee,
regardless of when such terms or provisions were adopted, and exclusive of any
provisions or terms adopted by means of one or more indentures supplemental
hereto executed and delivered after such Person had become such Trustee but to
which such Person, as such Trustee, was not a party.
Interest:
The term "interest" when used with respect to any series of non-interest
bearing Securities, shall mean interest payable after Maturity.
<PAGE>
3
Interest Payment Date:
The term "Interest Payment Date," with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.
Maturity:
The term "Maturity," when used with respect to any Security, means the date
on which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption, repayment at the option of the Holder or
otherwise.
Officers' Certificate:
The term "Officers' Certificate" shall mean a certificate signed by the
President and Chief Executive Officer, the Executive Vice President and Chief
Financial Officer, or its Vice President and Treasurer, and by one of its
Assistant Treasurers, and delivered to the Trustee. If applicable, each
certificate shall include the statements provided for in Section 16.07 if and to
the extent required by the provisions of such Section.
Opinion of Counsel:
The term "Opinion of Counsel" shall mean an opinion in writing signed by
legal counsel, who may be an employee of, or of counsel to the Company, or may
be other counsel reasonably acceptable to Trustee. Each such opinion shall
include the statements provided for in Section 16.07 if and to the extent
required by the provisions of such Section.
Original Issue Date:
The term "original issue date" of any Security (or portion thereof) shall
mean the earlier of (a) the date of such Security or (b) the date of any
Security (or portion thereof) for which such Security was issued (directly or
indirectly) on registration of transfer, exchange or substitution.
Original Issue Discount Security:
The term "Original Issue Discount Security" shall mean (a) a Security which
has been issued at an issue price lower than the principal amount thereof and
which provides that upon redemption or acceleration of the maturity thereof an
amount less than the principal amount thereof shall become due and payable and
(b) any other Security which for United States federal income tax purposes would
be considered an original issue discount security.
Person:
The term "Person" shall mean any individual, corporation, partnership,
joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
Place of Payment:
The term "Place of Payment" for a series of Securities shall mean the Place
or Places of Payment designated for each series pursuant to Sections 2.01(5) and
5.02.
Principal Office:
The term "Principal Office" shall mean the principal corporate trust
office of the Trustee in Houston, Texas, at which at any particular time its
corporate trust business shall be administered and which on the date hereof is
at 600 Travis, Houston, Texas 77002, Attention: Corporate Trust Department,
(except that with respect to presentation of Securities for payment and under
transfer, such term shall mean the office or agency of the Trustee in the City
of Houston, Texas and the Borough of Manhattan, The City of New York, New York
at which at any
<PAGE>
4
particular time its corporate agency business shall be conducted, which on the
date hereof in Houston, Texas is at 811 Rusk, Houston, Texas 77002, Attention:
Corporate Trust Operations and in the Borough of Manhattan, The City of New
York, New York is at 80 Broad Street, 4th Floor, New York, New York 10004,
Attention: Corporate Trust Operations).
Registered Coupon Security:
The term "Registered Coupon Security" shall mean any Coupon Security
registered as to principal only.
Registered Holder:
The term "Registered Holder," when used with respect to a Registered
Security, shall mean the person in whose name such Security is registered on the
books of the Company kept for that purpose in accordance with the terms hereof.
Registered Security:
The term "Registered Security" shall mean any Security registered on the
books of the Company.
Responsible Officer:
The term "Responsible Officer" shall mean any officer to whom any corporate
trust matter is referred because of his knowledge of and familiarity with the
particular subject.
Restricted Property:
The term "Restricted Property" shall mean:
(a) any plant for the refining of petroleum or the production of
petrochemicals owned by the Company or a Subsidiary, except (1) related
facilities which in the opinion of the Board of Directors are transportation or
marketing facilities, and (2) any plant for the refining of petroleum or the
production of petrochemicals which in the opinion of the Board of Directors is
not a principal plant of the Company and its Subsidiaries; and
(b) any shares of capital stock or indebtedness of a Restricted Subsidiary
owned by the Company or a Subsidiary.
Restricted Subsidiary:
The term "Restricted Subsidiary" shall mean any Subsidiary which owns any
Restricted Property.
Security or Securities Outstanding:
The terms "Security" or "Securities" shall have the meaning stated in the
recital of this Indenture and shall mean any Security or Securities, as the case
may be, authenticated and delivered pursuant to this Indenture (including,
without limitation, the Securities of any series issued in temporary or
permanent global form pursuant to Section 2.01(12)); provided, however, that if
at any time there is more than one Person acting as Trustee under this
instrument, "Securities" with respect to the Indenture as to which such Person
is Trustee shall have the meaning stated in the recital and shall more
particularly mean Securities authenticated and delivered pursuant to this
instrument, exclusive of Securities of any series as to which such Person is not
Trustee.
The term "outstanding" when used with reference to Securities or Securities
of any series shall, subject to the provisions of Section 9.04, mean, as of any
particular time, all such Securities authenticated and delivered by the Trustee
pursuant to this Indenture, except:
(a) such Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
<PAGE>
5
(b) such Securities, or portions thereof, for the payment or redemption of
which moneys (or U.S. Government Obligations as provided in Article Fourteen) in
the necessary amount shall have been deposited in trust with the Trustee or with
any paying agent (other than the Company) or shall have been set aside and
segregated in trust by the Company (if the Company shall act as its own paying
agent), provided that if such Securities are to be redeemed prior to the
maturity thereof, notice of such redemption shall have been mailed as provided
in Article Three, of provision satisfactory to the Trustee shall have been made
for mailing such notice; and
(c) Securities in lieu of or in substitution for which other Securities
shall have been authenticated and delivered pursuant to the terms of
Section 2.06 except to the extent that a bona fide holder in due course of any
such Securities shall have presented proof satisfactory to the Trustee that such
holder is a bona ride holder in due course of any such Securities.
In determining whether the Holders of the requisite principal amount of
outstanding Securities of a series have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, the principal
amount of an Original Issue Discount Security that shall be deemed to be
outstanding for such purposes shall be the amount of the principal thereof that
would be due and payable as of the date of such determination upon a declaration
of acceleration of the Maturity thereof determined in accordance with Section
7.01.
Stated Maturity:
The term "Stated Maturity" when used with respect to any Security or any
installment of interest thereon shall mean the date specified in such Security
as the fixed date on which the principal of such Security or such installment of
interest is due and payable.
Subsidiary:
The term "Subsidiary" shall mean any corporation at least a majority of the
outstanding securities of which having ordinary voting power to elect a majority
of the board of directors of such corporation (whether or not any other class of
securities has or might have voting power by reason of the happening of a
contingency) is at the time owned or controlled directly or indirectly by the
Company or one or more Subsidiaries or by the Company and one or more
Subsidiaries.
Trustee:
The term "Trustee" shall mean Texas Commerce Bank National Association
until another or a successor trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter shall mean and include
each Person who is then a Trustee hereunder; provided, however, that if at any
time there is more than one such Person, "Trustee" as used with respect to the
Securities of any series shall mean only the Trustee with respect to the
Securities of that series.
Trust Indenture Act of 1939:
The term "Trust Indenture Act of 1939" shall mean the Trust Indenture Act
of 1939 as it was in force at the date of execution of this Indenture, except
as provided in Section 11.03.
Unregistered Security:
The term "Unregistered Security" shall mean any Security or temporary
bearer Security not registered as to principal.
<PAGE>
6
ARTICLE TWO
THE SECURITIES AND SECURITY FORMS
SECTION 2.01. Amount Unlimited; Issuable in Series. The aggregate principal
amount of Securities which may be authenticated and delivered under this
Indenture is unlimited. Securities may be issued in one or more series.
The terms and conditions listed below, as applicable, of any series of
Securities shall be established (i) in an indenture supplemental hereto, (ii) in
a resolution of the Board of Directors or (iii) by the certificate of an officer
of the Company authorized pursuant to a resolution of the Board of Directors:
(1) the title of the Securities of the series (which shall distinguish the
Securities of the series from Securities of all other series);
(2) any limit upon the aggregate principal amount of the Securities of the
series which may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Sections 2.05, 2.06, 2.07, 3.03 or 11.04);
(3) the date or dates on which the principal and premium, if any, of the
Securities of the series are payable;
(4) the rate or rates at which the Securities of the series shall bear
interest, if any, or the formula by which interest shall be calculated, the
date or dates from which such interest shall accrue, the interest payment
dates on which such interest shall be payable and the record dates for the
determination of Holders thereof to whom interest is payable;
(5) the place or places where the principal of, and premium, if any, and
any interest on Securities of the series shall be payable (herein called
the "Place of Payment"); provided, however, that payment of principal,
premium, if any, and interest with respect to Registered Securities may be
made as provided in Section 5.02;
(6) the price or prices at which, the period or periods within which and
the terms and conditions upon which Securities of the series may be
redeemed, in whole or in part, at the option of the Company, pursuant to
any sinking fund or otherwise;
(7) the obligation, if any, of the Company to redeem, purchase or repay
Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of a Holder thereof and the price or prices at
which and the period or periods within which and the terms and conditions
upon which Securities of the series shall be redeemed, purchased or repaid,
in whole or in part, pursuant to such obligation;
(8) if other than denominations of S1,000 and any integral multiple
thereof, the denominations in which Securities of the series shall be
issuable;
(9) if other than the principal amount at Stated Maturity thereof, the
portion of the principal amount of Securities of the series which shall be
payable upon declaration of acceleration of the maturity thereof pursuant
to Section 7.01 or provable in bankruptcy pursuant to Section 7.02 or used
to determine the relative voting rights of the Holders thereof pursuant to
Section 10.05 or the method by which such portion of the principal amount
shall be determined;
(10) any Events of Default with respect to the Securities of a particular
series, if not set forth herein;
<PAGE>
7
(11) if the rate or rate at which the Securities of the series shall bear
interest is to be fixed until Maturity, provisions, if any, for the
defeasance of Securities of the series;
(12) the extent to which any Securities will be issuable in temporary or
permanent global form, and the manner in which any payments on a temporary
or permanent global Security will be made;
(13) the form of Securities of such series; and
(14) any other terms of the series (which terms shall not be inconsistent
with the provisions of this Indenture).
All Securities of any series issued under this Indenture shall in all
respects be equally and ratably entitled to the benefits hereof with respect to
such series without preference, priority or distinction on account of actual
time or times of authentication and delivery or maturity of the Securities of
such series. All Securities of the same series shall be substantially identical
except as to denomination and except as may otherwise be provided in (i) an
indenture supplemental hereto, (ii) a resolution of the Board of Directors or
(iii) a certificate of an officer of the Company authorized pursuant to a
resolution of the Board of Directors.
SECTION 2.02. Form of Securities and of Trustee's Certificate of
Authentication. The Securities of each series, the appurtenant coupons, if any,
and the certificates of authentication thereon shall be in substantially the
form as shall be established as provided in Section 2.01 with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with any law or with any rules made pursuant thereto or with
any rules of any securities exchange or as may be determined consistently
herewith by the officers executing such Securities and coupons, if any, as
evidenced by their execution of the Securities and coupons, if any.
The definitive Securities and coupons, if any, shall be printed,
lithographed or engraved or produced by any combination of these methods on
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange, all as determined by the officers executing
such Securities and coupons, if any, as evidenced by their execution of such
Securities and coupons, if any.
The form of Trustee's certificate of authentication shall be as follows:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities issued under the within-mentioned Indenture.
Texas Commerce Bank National Association,
as Trustee
By
--------------------------------------
Authorized Signatory
SECTION 2.03. Denomination, Authentication and Dating of Securities. The
Securities of each series may be issued as Registered Securities or Unregistered
Securities, as provided in the terms of such Securities and shall be issuable in
the denominations of $1,000 and any integral multiple of $1,000, or such other
denominations as authorized as provided in Section 2.01. Each Security shall be
dated as of the date of its authentication.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication. Except as otherwise provided in this
Article Two, the Trustee shall thereupon authenticate and deliver said
Securities to or upon the written order of the Company, signed by the President
and Chief Executive Officer, the Executive Vice President
<PAGE>
8
and Chief Financial Officer or its Vice President and Treasurer. In
authenticating such Securities, and accepting the additional responsibilities
under this Indenture in relation to such Securities, the Trustee shall be
entitled to receive, and, subject to Section 8.01, shall be fully protected in
relying upon:
(a) A copy of the resolution or resolutions of the Board of Directors in or
pursuant to which the terms and form of the Securities were established,
certified by the Secretary or an Assistant Secretary of the Company to have been
duly adopted by the Board of Directors and to be in full force and effect as of
the date of such certificate, and if the terms and form of such Securities are
established by an Officers' Certificate pursuant to general authorization of the
Board of Directors, such Officers' Certificate;
(b) an executed supplemental indenture, if any,
(c) an Officers' Certificate delivered in accordance with Section 16.07;
and
(d) an Opinion of Counsel which shall state:
(1) that the form of such Securities has been established by a
supplemental indenture or by or pursuant to a resolution of the Board of
Directors in accordance with Sections 2.01 and 2.02 and in conformity with
the provisions of this Indenture;
(2) that the terms of such Securities have been established in
accordance with Section 2.01 and in conformity with the other provisions of
this Indenture;
(3) that such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid and
legally binding obligations of the Company, enforceable in accordance with
their terms, subject to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting the enforcement of
creditors' rights and to general equity principles; and
(4) that all laws and requirements in respect of the execution and
delivery by the Company of such Securities have been complied with.
The Trustee shall have the right to decline to authenticate and deliver any
Securities under this Section if the Trustee, being advised by counsel,
determines that such action may not lawfully be taken or if the Trustee in good
faith by its board of directors or trustees, executive committee, or a trust
committee of directors or trustees or vice presidents shall determine that such
action would expose the Trustee to personal liability to existing Holders.
SECTION 2.04. Execution of Securities. The Securities, and any coupons
appertaining thereto, shall be signed in the name and on behalf of the Company
manually or by facsimile by its President and Chief Executive Officer or its
Executive Vice President and Chief Financial Officer, and by its Vice President
and Treasurer, under its corporate seal (which may be printed, engraved or
otherwise reproduced thereon, by facsimile or otherwise). Only such Securities
as shall bear thereon a certificate of authentication substantially in the form
hereinbefore recited, executed manually by the Trustee, shall be entitled to the
benefits of this Indenture or be valid or obligatory for any purpose. Such
certificate by the Trustee upon any Security executed by the Company shall be
conclusive evidence that the Security so authenticated has been duly
authenticated and delivered hereunder and that the Holder is entitled to the
benefits of this Indenture.
In case any officer of the Company who shall have signed any of the
Securities shall cease to be such officer before the Securities so signed shall
have been authenticated and delivered by the Trustee, or disposed of by the
Company, such Securities nevertheless may be authenticated and delivered or
disposed of as though the person who signed such Securities had not ceased to be
such officer of the Company; and any Security or coupon may be signed on behalf
of the Company by such persons as, at the actual date of the execution of such
<PAGE>
9
Securities or coupons, shall be the proper officers of the Company, although at
the date of the execution of this Indenture any such person was not such an
officer.
SECTION 2.05 Registration, Registration of Transfer and Exchange. The
Company shall keep or cause to be kept a register (herein sometimes referred to
as the "registry books of the Company") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Registered Securities and the registration of transfers of Registered
Securities. Any such register shall be in written form or in any other form
capable of being converted into written form within a reasonable time. At all
reasonable times the information contained in such register or registers shall
be available for inspection by the Trustee at the office or agency to be
maintained by the Company as provided in Section 5.02.
Upon surrender of any Registered Security of any series for registration of
transfer at the office or agency of the Company to be maintained as provided in
Section 5.02, the Company shall execute, and the Trustee, upon the written
authorization or request of any officer of the Company, shall authenticate and
deliver, in the name of the designated transferee or transferees, at the expense
of the Company, one or more new Registered Securities of such series of any
authorized denominations and of a like aggregate principal amount and Stated
Maturity.
At the option of the Holder thereof, Securities of a series, whether
Registered or Unregistered, which by their terms are registrable as to principal
only or as to principal and interest, may be exchanged for Registered Coupon
Securities or Fully Registered Securities of such series, as may be issued by
the terms thereof. Securities so issued in exchange for other Securities shall
be of any authorized denomination and of like principal amount and Stated
Maturity and shall be issued upon surrender of the Securities for which they are
to be exchanged and, in the case of Coupon Securities, together with all
unmatured coupons and all, matured coupons in default appertaining thereto, at
the office of the Company provided for in Section 5.02 and upon payment, if the
Company shall require, of charges provided herein. Whenever any Securities are
so surrendered, the Company shall execute, and the Trustee shall authenticate
and deliver, the Securities which the Holder making such exchange is entitled to
receive.
Upon presentation for registration of any Unregistered Security of any
series which by its terms is registrable as to principal, at the office or
agency of the Company to be maintained as provided in Section 5.02, such
Security shall be registered as to principal in the name of the Holder thereof
and such registration shall be noted on such Security. Any Security so
registered shall be transferable on the registry books of the Company, upon
presentation of such Security at such office or agency for similar notation
thereon, but such Security may be discharged from registration by being in like
manner transferred to bearer, whereupon transferability by delivery shall be
restored. Unregistered Securities shall continue to be subject to successive
registrations and discharges from registration at the option of the Holders
thereof.
Unregistered Securities shall be transferable by delivery. Registration of
any Coupon Security shall not affect the transferability by delivery of the
coupons appertaining thereto which shall continue to be payable to bearer and
transferable by delivery.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Registered Security presented or surrendered for registration of
transfer or exchange shall (if so required by the Company or the Trustee) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company duly executed, by the Holder thereof or his attorney
duly authorized in writing.
Unless otherwise provided in the Securities to be transferred or exchanged,
no service charge shall be made for any registration of transfer or exchange of
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto.
<PAGE>
10
The Company shall not be required (i) to issue, register the transfer of or
exchange any securities of any series for a period of 15 days next preceding any
selection of Securities of such series to be redeemed, or (ii) to register the
transfer or exchange of any Securities so selected for redemption in whole or in
part except, in the case of any Security to be redeemed in part, the portion
thereof not to be so redeemed.
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Securities. In case any
temporary or definitive Security or any coupon appurtenant to a Coupon Security
shall become mutilated or be destroyed, lost or stolen, the Company in its
discretion may execute, and upon written authorization or request of any officer
of the Company, the Trustee shall authenticate and deliver, a new Security (in
the case of a Coupon Security, with coupons corresponding to the coupons
appertaining to the mutilated, destroyed, lost or stolen Security or the
Security with respect to which a coupon shall have become mutilated, destroyed
stolen or lost) of the same series and of like tenor and principal amount at
Stated Maturity bearing a number not contemporaneously outstanding. In every
case the applicant for a substituted Security shall furnish to each of the
Company and the Trustee such security or indemnity as may be required by either
of them, as the case may be, to save each of them harmless, and, in every case
of destruction, loss or theft, the applicant shall also furnish to the Company
and to the Trustee evidence to their satisfaction of the destruction, loss or
theft of such Security and of the ownership thereof. In every case of
mutilation, the applicant shall surrender to the Trustee, the mutilated Security
or the Security to which the mutilated coupon appertains, in the case of a
Coupon Security, with all coupons (including any mutilated coupons)
appertaining thereto.
Upon the issuance of any substituted Security, the Company may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses connected therewith.
In case any Security or coupon which has matured or is about to mature shall
become mutilated or be destroyed, lost or stolen, the Company may, instead of
issuing a substitute Security or coupon, pay or authorize the payment of the
same (without surrender thereof except in the case of a mutilated Security or
coupon) if the applicant for such payment shall furnish to each of the Company
and the Trustee such security or indemnity as may be required by either of them,
as the case may be, to save each of them harmless and, in case of destruction,
loss or theft, evidence satisfactory to the Company and the Trustee of the
destruction, loss or theft of such Security or coupon and of the ownership
thereof.
Every substituted Security, and in the case of Coupon Securities, its
appurtenant coupons, issued pursuant to the provisions of this Section 2.06 by
virtue of the fact that any Security or coupon of that series is destroyed, lost
or stolen shall constitute an additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Security or coupon of that series
shall be found at any time, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Securities and
coupons of that series duly issued hereunder. All Securities and coupons shall
be held and owned upon the express condition that, to the extent permitted by
law, the foregoing provisions are exclusive with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities and coupons and shall
preclude any and all other rights or remedies notwithstanding any law or statute
existing or hereafter enacted to the contrary with respect to the replacement or
payment of negotiable instruments or other securities without their surrender.
SECTION 2.07. Temporary Securities. Pending the preparation of definitive
Securities of any series the Company may execute and the Trustee, upon
satisfaction of the provisions of Section 2.03, shall authenticate and deliver
printed or lithographed temporary Securities. Temporary Securities shall be
issuable in any authorized denomination, and substantially in the form of the
definitive Securities of that series, but with such omissions, insertions and
variations as may be appropriate for temporary Securities, all as may be
determined by the Company. Every such temporary Security of any series shall be
authenticated by the Trustee upon the same conditions and in substantially the
same manner, and with the same effect, as the definitive Securities of that
series. Without unreasonable delay, the Company will execute and deliver to the
Trustee definitive Securities of that series and thereupon any or all temporary
Securities of that series may be surrendered in exchange therefor, at the office
or agency of the Company in the Place of Payment for such series, and the
Company shall execute and the Trustee shall authenticate and deliver in exchange
for such temporary Securities an equal aggregate principal amount at Stated
Maturity of definitive Securities. Such exchange shall be made by the Company at
its own expense and without any charge therefor except that the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto. Until
<PAGE>
11
so exchanged, the temporary Securities of any series shall in all respects be
entitled to the same benefits under this Indenture as definitive Securities of
that series authenticated and delivered hereunder.
SECTION 2.08. Cancellation of Securities Paid, etc. Securities of any
series surrendered for the purpose of payment, redemption, exchange or
registration of transfer and all coupons surrendered for payment, shall, if
surrendered to the Company or any paying agent, be surrendered to the Trustee
for cancellation, or, if surrendered to the Trustee, shall be cancelled by it,
and no Securities or coupons shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Indenture or of such series of
Securities. The Trustee shall destroy or otherwise dispose of, at its
discretion, cancelled Securities or coupons and, where applicable, deliver a
certificate of such destruction to the Company. If the Company shall acquire any
of the Securities or coupons, however, such acquisition shall not operate
as a redemption or satisfaction of the indebtedness represented by such
Securities or coupons unless and until the same are surrendered to the Trustee
for cancellation.
ARTICLE THREE
REDEMPTION OF SECURITIES
SECTION 3.01. Applicability of Article. The Company may reserve the right
to redeem and pay, prior to Stated Maturity, all or any part of the Securities
of any series, either by optional redemption, sinking fund or otherwise, by
provision therefor in the Security for such series established pursuant to
Sections 2.01 and 2.02. Redemption of Securities of any series shall be made in
accordance with the terms of such Securities and, to the extent that this
Article does not conflict with such terms, in accordance with this Article.
SECTION 3.02. Notice of Redemption; Selection of Securities. In case the
Company shall desire to exercise the right to redeem all or any part of the
Securities of a series in accordance with their terms, it shall fix a date for
redemption and shall mail a notice of such redemption at least 30 and not more
than 60 days prior to the date fixed for redemption to each Holder of a
Registered Security to be redeemed as a whole or in part at his address as the
same appear on the registry books of the Company and, if Unregistered Securities
are to be redeemed, shall publish a notice of redemption at least 30 and not
more than 60 days prior to the date fixed for redemption in an Authorized
Newspaper in the Place of Payment. If mailed in the manner herein provided, the
notice shall be conclusively presumed to have been duly given, whether or not
any such Holder receives such notice. Any defect in the notice to the Holder of
any Security of a series designated for redemption as a whole or in part shall
not affect the validity of the proceedings for the redemption of any other
Security of such series.
Each such notice of redemption shall specify the date fixed for redemption,
the redemption price, the place where such Securities are to be surrendered for
payment of the redemption price, which shall be the office or agency of the
Company in each Place of Payment, that payment will be made upon presentation
and surrender of such Securities and all coupons appertaining thereto, if any,
that accrued interest, if any, to the redemption date will be paid as specified
in said notice, and that on and after said date, interest thereon or on the
portions thereof to be redeemed will cease to accrue. In case the redemption is
on account of a sinking fund, said notice shall so specify. If less than all the
outstanding Securities of a series are to be redeemed, the notice of redemption
shall specify the numbers of the Securities of that series to be redeemed. In
case any Security of a series is to be redeemed in part only, the notice of
redemption shall state the portion of the principal amount thereof to be
redeemed and shall state that on and after the date fixed for redemption, upon
surrender of such Security, a new Security or Securities of that series in the
principal amount and Stated Maturity equal to the unredeemed portion thereof
will be issued.
If fewer than all the Securities of a series are to be redeemed, the
Company shall give the Trustee written notice not less than 60 days prior to the
redemption date as to the aggregate principal amount at Stated Maturity of
Securities to be redeemed, and the Trustee shall select from the Securities
outstanding in such manner as in its sole discretion it shall deem appropriate
and fair, the Securities of that series or portions thereof to be redeemed.
Securities of a series may be redeemed in part only in multiples of $1,000,
except as otherwise set forth in the form of Security to be redeemed.
<PAGE>
12
Any notice of redemption to be mailed by the Company pursuant to this
Section 3.02 may be mailed, at the Company's direction, by the Trustee in the
name and at the expense of the Company.
SECTION 3.03. Payment of Securities Called for Redemption. If notice of
redemption has been mailed or published, as the case may be as above provided,
the Securities of portions of Securities of a series with respect to which such
notice has been mailed or published shall become due and payable on the date and
at the place or places stated in such notice at the applicable redemption price,
together with accrued interest to the redemption date and on and after said date
(unless the Company shall default in the payment of such Securities at the
applicable redemption price, together with accrued interest, if any, to said
date) any interest on the Securities or portions of Securities of any series so
called for redemption shall cease to accrue, and such Securities and portions of
Securities of any series shall be deemed not to be outstanding hereunder and
shall not be entitled to any benefit under this Indenture except to receive
payment of the redemption price, together with accrued interest, if any, to the
date fixed for redemption. On or before the Business Day preceding the
redemption date specified in the notice of redemption, the Company shall deposit
with the Trustee or with one or more paying agents an amount of money, in
immediately available funds, sufficient to redeem on the redemption date all the
Securities so called for redemption at the applicable redemption price, together
with accrued interest, if any, to the date fixed for redemption. On presentation
and surrender of such Securities at the Place of Payment, the said Securities
or the specified portions thereof shall be paid and redeemed by the Company at
the applicable redemption price, together with accrued interest, if any, to the
date fixed for redemption.
Upon presentation of any Security redeemed in part only, the Company shall
execute and the Trustee shall authenticate and deliver to the Holder thereof, at
the expense of the Company, a new Security or Securities of such series, of
authorized denominations in aggregate principal amount and Stated Maturity equal
to the unredeemed portion of the Security so presented.
ARTICLE FOUR
SINKING FUNDS
SECTION 4.01. Applicability of Article. The provisions of this Article
shall be applicable to any sinking fund for the retirement of Securities of a
series except as otherwise specified as contemplated by Section 2.01 for
Securities of such series.
The minimum amount of any sinking fund payment provided for by the terms of
Securities of any series is herein referred to as a "mandatory sinking fund
payment," and any payment in excess of such minimum amount provided for by the
terms of Securities of any series is herein referred to as an "optional sinking
fund payment."
SECTION 4.02. Satisfaction of Mandatory Sinking Fund Payments with
Securities. In lieu of making all or any part of any mandatory sinking fund
payment with respect to any Securities of a series in cash, the Company may at
its option (a) deliver to the Trustee Securities of that series theretofore
purchased or otherwise acquired by the Company, or (b) receive credit for the
principal amount of Securities of that series which have been redeemed either at
the election of the Company pursuant to the terms of such Securities or through
the application of permitted optional sinking fund payments pursuant to the
terms of such Securities, provided that such Securities have not been previously
so credited. Such Securities shall be received and credited for such purpose by
the Trustee at the redemption price specified in such Securities for redemption
through operation of the sinking fund and the amount of such mandatory sinking
fund payment shall be reduced accordingly.
SECTION 4.03. Redemption of Securities for Sinking Fund. Not less than 60
days prior to each sinking fund payment date for any series of Securities, the
Company will deliver to the Trustee an Officers' Certificate specifying the
amount of the next ensuing sinking fund payment for that series pursuant to the
terms of that series, the portion thereof, if any, which is to be satisfied by
payment of cash and the portion thereof, if any, which is to be satisfied by
delivering and creating Securities of that series pursuant to Section 4.02,
which Securities will accompany such certificate, if not theretofore delivered,
and whether the Company intends to
<PAGE>
13
exercise its right to make a permitted optional sinking fund payment with
respect to such series. Such certificate shall also state that no Event of
Default with respect to such series has occurred and is continuing.
Any mandatory or optional sinking fund payment or payments made in cash
plus any unused balance of any preceding sinking fund payments made in cash
which shall equal or exceed $50,000 (or a lesser sum if the Company shall so
request) with respect to Securities of any particular series shall be applied by
the Trustee on the sinking fund payment date on which such payment is made (or,
if such payment is made prior to a sinking fund payment date, on the sinking
fund payment date following the date of such payment) to the redemption of such
Securities at the redemption price specified in such Securities for operation of
the sinking fund together with accrued interest to the date fixed for
redemption. Any sinking fund moneys not so applied or allocated by the Trustee
to the redemption of Securities shall be added to the next cash sinking fund
payment received by the Trustee for such series and, together with such payment,
shall be applied in accordance with the provisions of this Section 4.03. Any and
all sinking fund moneys with respect to the Securities of any particular series
held by the Trustee on the last sinking fund payment date with respect to such
Securities, and not held for the payment or redemption of particular Securities,
shall be applied by the Trustee, to the payment of the principal of the
Securities of that series at maturity.
The Trustee shall select the Securities to be redeemed upon such sinking
fund payment date in the manner specified in the penultimate paragraph of
Section 3.02 and the Company shall cause notice of the redemption thereof to be
given in the manner provided in Section 3.02. Such notice having been duly
given, the redemption of such Securities shall be made upon the terms and in the
manner stated in Section 3.03.
On each sinking fund payment date, the Company shall pay to the Trustee in
immediately available funds a sum equal to all accrued interest to the date
fixed for redemption on Securities to be redeemed on such sinking fund payment
date pursuant to this Section 4.03.
The Trustee shall not redeem any Securities of a series with sinking fund
moneys or mail or publish any notice of redemption of such Securities by
operation of the sinking fund for such series during the continuance of a
default in payment of interest on such Securities or of any Event of Default
(other than an Event of Default occurring as a consequence of this paragraph),
except that if the notice of redemption of any such Securities shall theretofore
have been mailed or published in accordance with the provisions hereof, the
Trustee shall redeem Securities if cash sufficient for that purpose shall be
deposited with the Trustee for that purpose in accordance with the terms of this
Article Four. Except as aforesaid, any moneys in the sinking fund for such
series at the time when any such default or Event of Default shall occur and
any moneys thereafter paid into such sinking fund shall, during the continuance
of such default or Event of Default, be held as security for the payment of all
Securities of such series; provided, however, that in case such default or Event
or Default shall have been cured or waived as provided herein, such moneys shall
thereafter be applied on the next sinking fund payment date for such Securities
on which such moneys may be applied pursuant to the provisions of this Section
4.03.
ARTICLE FIVE
PARTICULAR COVENANTS OF THE COMPANY
SECTION 5.01. Payment of Principal, Premium and Interest. The Company shall
duly and punctually pay or cause to be paid the principal of and premium, if
any, and interest, if any, on the Securities of each series in accordance with
the terms thereof and this Indenture and shall comply with all other forms,
agreements and conditions contained in or made in this Indenture for the benefit
of such Securities.
SECTION 5.02. Offices for Notices and Payments, etc. So long as any
Securities of a series remain outstanding, the Company shall maintain in each
Place of Payment for such series of Securities an office or agency where the
Securities of that series may be presented for payment, for registration of
transfer and for exchange as provided in this Indenture and where notices and
demands to or upon the Company in respect of the Securities of that series or of
this Indenture may be served. The Company shall give to the Trustee written
notice of the location of any such office or agency and of any change of
location thereof. In case the Company shall fail to maintain any such office or
agency or shall fail to give such notice of the location or of any change
<PAGE>
14
in the location thereof, presentations and demands may be made at the Principal
Office of the Trustee (or at any other address previously furnished in writing
to the Company by the Trustee) and notices may be served at the Principal Office
of the Trustee. Unless otherwise provided pursuant to Section 2.01, the Company
hereby initially designates as the Place of Payment for each series of
Securities, the office or agency of the Trustee in Houston, Texas and the
Borough of Manhattan, New York, New York, at which its corporate agency business
shall be conducted, and initially appoints the Trustee its agent for payment,
for registration of transfers, for exchange of the Securities and where notices
and demands may be served upon the Company. Notwithstanding any other provisions
to the contrary, the Company at its option may make payment of principal,
premium (if any) and interest with respect to Registered Securities by check
mailed to the address of the Person entitled thereto, as such address appears on
the registry books of the Company; provided, however, that in the case of a
Registered Security issued between a record date and the initial Interest
Payment Date relating to such record date, interest for the period beginning on
the Original Issue Date and ending on such initial Interest Payment Date shall
be paid on such initial Interest Payment Date to the person to whom such
Registered Security shall have been originally issued. Notwithstanding the
foregoing, a holder of $10,000,000 or more in aggregate principal amount of
Registered Securities shall be entitled to receive such payments by wire
transfer of immediately available funds, but only if appropriate wire transfer
instructions have been received in writing by the Trustee not less than 15 days
prior to the applicable Interest Payment Date.
SECTION 5.03. Limitation on Liens. Nothing in this Indenture or in the
Securities shall in any way restrict or prevent the Company or any Subsidiary
from incurring any indebtedness; provided, however, that neither the Company nor
any Restricted Subsidiary shall issue, assume or guarantee any notes, bonds,
debentures or other similar evidences of indebtedness for money borrowed (notes,
bonds, debentures or other similar evidences of indebtedness for money borrowed
being hereinafter in this Article Five called "Debt") secured by mortgage, lien,
pledge or other encumbrance (mortgages, liens, pledges or other encumbrances
being hereinafter in this Article Five called "Mortgages") upon any Restricted
Property, without effectively providing that the Securities of each series then
outstanding and thereafter created (together with, if the Company so determines,
any other indebtedness or obligation then existing and any other indebtedness or
obligation thereafter created ranking equally with the Securities then existing
or thereafter created which is not subordinated to the Securities of each
series) shall be secured equally and ratably with (or prior to) such Debt so
long as such Debt shall be so secured, except that the forgoing provisions shall
not apply to:
(a) Mortgages affecting property of a corporation existing at the time it
becomes a Subsidiary or at the time it is merged into or consolidated with the
Company or a Subsidiary,
(b) Mortgages on property existing at the time of acquisition thereof or
incurred to secure payment of all or part of the purchase price thereof or to
secure Debt incurred prior to, at the time of or within 24 months after
acquisition thereof for the purpose of financing all or part of the purchase
price thereof,
(c) Mortgages on property of the Company or a Subsidiary existing on the
date of this Indenture, including the encumbrances created by the two existing
capital lease financings for the olefins facilities;
(d) Mortgages on any property to secure all or part of the cost of
construction or improvements thereon or Debt incurred to provide funds for any
such purpose in a principal amount not exceeding the cost of such construction
or improvements;
(e) Mortgages which secure only an indebtedness owing by a Subsidiary to
the Company or a Subsidiary;
(f) Mortgages in favor of the United States or any state thereof, or any
department, agency, instrumentality, or political subdivision of any such
jurisdiction, to secure partial, progress, advance or other payments pursuant to
any contract or statute or to secure any indebtedness incurred for the purpose
of financing all or any part of the purchase price or cost of constructing or
improving the property subject thereto, including, without limitation, Mortgages
to secure Debt of the pollution control or industrial revenue bond type;
(g) Mortgages required by any contract or statute in order to permit the
Company or a Subsidiary to perform any contract or subcontract made by it with
or at the request of the United States of America, any state or any department,
agency or instrumentality or political subdivision of either; or
<PAGE>
15
(h) any extension, renewal or replacement (or successive extensions,
renewals or replacements), in whole or in part, of any Mortgage referred to in
the foregoing clauses (a) to (g) inclusive or of any Debt secured thereby,
provided that the principal amount of Debt secured thereby shall not exceed the
principal amount of Debt so secured at the time of such extension, renewal or
replacement, and that such extension, renewal or replacement Mortgage shall be
limited to all or part of substantially the same property which secured the
Mortgage extended, renewed or replaced (plus improvements on such property).
Notwithstanding the foregoing provisions of this Section 5.03, the Company
and any one or more Restricted Subsidiaries may issue, assume or guarantee Debt
secured by Mortgages which would otherwise be subject to the foregoing
restrictions in an aggregate principal amount which, together with the aggregate
outstanding principal amount of all other Debt of the Company and its Restricted
Subsidiaries which would otherwise be subject to the foregoing restrictions (not
including Debt permitted to be secured under clauses (a) to (h) inclusive above)
and the aggregate Value, as defined in Section 5.05, of the Sale and Lease-Back
Transactions, as defined in Section 5.04, in existence at such time (not
including Sale and Lease-Back Transactions as to which the Company has complied
with Section 5.04(b)), does not at any one time exceed the greater of $50
million or 10% of the Consolidated Net Tangible Assets of the Company and its
consolidated Subsidiaries.
SECTION 5.04. Limitation on Sale and Lease-Back. Neither the Company nor
any Restricted Subsidiary shall enter into any arrangement with any Person
(other than the Company or a Subsidiary), or to which any such Person is a
party, providing for the leasing to the Company or a Restricted Subsidiary for a
period of more than three years of any Restricted Property which has been or is
to be sold or transferred by the Company or such Restricted Subsidiary to such
Person or to any other Person (other than the Company or a Subsidiary), to which
funds have been or are to be advanced by such Person on the security of the
leased property (in this Article Five called "Sale and Lease-Back Transactions")
unless either:
(a) the Company or such Restricted Subsidiary would be entitled, pursuant
to the provisions of Section 5.03, to incur Debt in a principal amount equal to
or exceeding the Value of such Sale and Lease-Back Transaction, secured by a
Mortgage on the property to be leased, without equally and ratably securing the
Securities; or
(b) the Company (and in any such case the Company covenants and agrees that
it will do so) during or immediately after the expiration of four months after
the effective date of such Sale and Lease-Back Transaction (whether made by the
Company or a Restricted Subsidiary) applies to the voluntary retirement of
indebtedness of the Company (including Securities, provided that Securities may
only be redeemed at the redemption prices and in accordance with the other
provisions of the form thereof), maturing by the terms thereof more than one
year after the original creation thereof and ranking at least pari passu with
the Securities (hereinafter in this Section called "Funded Debt") an amount
equal to the Value of such Sale and Lease-Back Transaction, less the principal
amount of Securities delivered, within four months after the effective date of
such arrangement, to the Trustee for retirement and cancellation and the
principal amount of other Funded Debt voluntarily retired by the Company within
such four-month period, excluding retirements of Securities and other Funded
Debt as a result of conversions or pursuant to mandatory sinking fund or
prepayment provisions or by payment at maturity.
SECTION 5.05. Definition of "Value." For purposes of Sections 5.03 and
5.04, the term "Value" shall mean, with respect to a Sale and Lease-Back
Transaction, as of any particular time, the amount equal to the greater of (1)
the net proceeds of the sale or transfer of the property leased pursuant to such
Sale and Lease-Back Transaction or (2) the fair value, in the opinion of the
Board of Directors, of such property at the time of entering into such Sale and
Lease-Back Transaction, in either case divided first by the number of full years
of the term of the lease and then multiplied by the number of full years of such
term remaining at the time of determination, without regard to any renewal or
extension options contained in the lease.
SECTION 5.06. Appointments to Fill Vacancies in Trustee's Office. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee
for any one or more series of Securities, shall appoint a Trustee,
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16
in the manner provided in Section 8.10 so that there shall at all times be a
Trustee with respect to each series of Securities hereunder.
SECTION 5.07. Provision as to Paying Agent. (a) If the Company appoints a
paying agent other than the Trustee with respect to the Securities of any
series, it shall cause such paying agent to execute and deliver to the Trustee
an instrument in which such agent shall agree with the Trustee, subject to the
provisions of this Section 5.07:
(1) that it will hold all sums held by it as such agent for the payment of
the principal of and premium, if any, or interest, if any, on the Securities of
such series (whether such sums have been paid to it by the Company or by any
other obligor on the Securities of such series) in trust for the benefit of the
Holders of the Securities of such series; and
(2) that it will give the Trustee notice of any failure by the Company (or
by any other obligor on the Securities of such series) to make any payment of
the principal of and premium, if any, or interest, if any, on the Securities of
such series when the same shall be due and payable.
(b) If the Company acts as its own paying agent with respect to the
Securities of any series it shall, on or prior to each due date of the principal
of and premium, if any, or interest, if any, on any of the Securities of such
series, set aside, segregate and hold in trust for the benefit of the Holders of
such Securities or the coupons appertaining thereto, as the case may be, a sum
sufficient to pay such principal and premium, if any, or interest, if any, so
becoming due and will notify the Trustee of any failure to take such action and
of any failure by the Company (or by any other obligor under such Securities) to
make any payment of the principal of and premium, if any, or interest, if any,
on such Securities when the same shall become due and payable.
(c) Whenever the Company has one or more paying agents with respect to the
Securities of any series, it shall deposit with a paying agent (who shall make
any necessary funds available to any other paying agents), on the Business Day
next preceding each due date in funds available on the due date of the principal
of, premium, if any, and interest, if any, on such Securities, a sum in
immediately available funds sufficient to pay such principal, premium, if any,
and interest, if any, so becoming due, such sum to be held in trust for the
benefit of the Holders of such Securities or the coupons appertaining thereto,
as the case may be, entitled to any such principal, premium and interest, and
(unless such paying agent is the Trustee) the Company shall promptly notify the
Trustee of its action or failure so to act.
(d) Anything in this Section 5.07 to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust by it, or any paying agent hereunder, as
required by this Section 5.07, such sums to be held by the Trustee upon the
trusts herein contained.
(e) Anything in this Section 5.07 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 5.07 is subject to
Sections 13.03 and 13.04.
SECTION 5.08. Annual Certificate to Trustee. The Company shall deliver to
the Trustee within 120 days after the end of each fiscal year of the Company
ending after the date hereof so long as any Securities are outstanding hereunder
(beginning with respect to Securities of each series with the fiscal year next
following the issue date of any series of Securities) an Officers' Certificate
stating that in the course of the performance by the signers of their duties as
officers of the Company and based upon a review made under their supervision of
the activities of the Company they would normally have knowledge of any default
by the Company in the performance of any covenant contained in Sections 5.03,
5.04, 12.01 or 12.02, stating whether or not they have knowledge of any such
default and, if so, specifying each such default of which the signers have
knowledge and the nature thereof.
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17
ARTICLE SIX
HOLDERS LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
SECTION 6.01. Holders Lists. The Company shall furnish or cause to be
furnished to the Trustee, with respect to the Registered Securities of each
series (i) semi-annually, not later than each Interest Payment Date for such
series and on dates to be determined pursuant to Section 2.01 for non-interest
bearing Securities in each year, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders, as of the
respective record dates therefor, and on dates to be determined pursuant to
Section 2.01 for non-interest bearing Securities, and (ii) at such other times
as the Trustee may request in writing, within 30 days after receipt by the
Company of any such request, a list in such form as the Trustee may reasonably
require of the names and addresses of the Holders as of a date not more than 15
days prior to the time such information is furnished; provided, however, that so
long as the Trustee shall be the registrar of a series of Securities all of
which are Registered Securities, such list shall not be required to be furnished
in respect of that series.
SECTION 6.02. Preservation and Disclosure of Lists. (a) The Trustee shall
preserve, in as current a form as is reasonably practicable, all information as
to the names and addresses of the Holders of Registered Securities of any series
contained in the most recent list furnished to it as provided in Section 6.01 or
received by the Trustee in its capacity as Securities registrar. The Trustee may
destroy any list furnished to it as provided in Section 6.01 upon receipt of a
new list so furnished.
(b) In case three or more Holders of Securities of the same series
(hereinafter referred to as "applicants") apply in writing to the Trustee and
furnish to the Trustee reasonable proof that each such applicant has owned a
Security of such series for a period of at least six months preceding the date
of such application, and such application states that the applicants desire to
communicate with other Holders of Securities of such series or with Holders of
Securities of all series with respect to their rights under this Indenture or
under such Securities and is accompanied by a copy of the form of proxy or other
communication which such applicants propose to transmit for such purpose, then
the Trustee shall, within five Business Days after the receipt of such
application, at its election, either
(1) afford such applicant access to the information preserved at the time
by the Trustee in accordance with the provisions of subsection (a) of this
Section 6.02, or
(2) inform such applicants as to the approximate number of Holders of
Securities of such series or of all series, as the case may be, whose names and
addresses appear in the information preserved at the time by the Trustee in
accordance with the provisions of subsection (a) of this Section 6.02 and as to
the approximate cost of mailing to such Holders the form of proxy or other
communication, if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each Holder of a Security of such series or of all series, as the case
may be, whose name and address appears in the information preserved at the time
by the Trustee in accordance with the provisions of subsection (a) of this
Section 6.02, a copy of the form of proxy or other communication which is
specified in such request, with reasonable promptness after a tender to the
Trustee of the material to be mailed and of payment, or provision for the
payment, of the reasonable expenses of mailing, unless within five days after
such tender, the Trustee shall mail to such applicants and file with the
Securities and Exchange Commission, together with a copy of the material to be
mailed, a written statement to the effect that, in the opinion of the Trustee,
such mailing would be contrary to the best interests of the Holders of
Securities of such series or of all series, as the case may be, or would be in
violation of applicable law. Such written statement shall specify the basis of
such opinion. If said Commission, after opportunity for a hearing upon the
objections specified in the written statement so filed, shall enter an order
refusing to sustain any of such objections or if, after the entry of an order
sustaining one or more of such objections, said Commission shall find, after
notice and opportunity for hearing, that all the objections so sustained have
been met and shall enter an order so declaring, the Trustee shall mail copies of
such material to all such Holders with reasonable promptness after the entry of
such order and the renewal of such tender; otherwise, the Trustee shall be
relieved of any obligation or duty to such applicants respecting their
application.
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18
(c) Each Holder of any Security or coupon or both, by receiving and holding
the same, agrees with the Company and the Trustee that neither the Company nor
the Trustee nor any paying agent shall be held accountable by reason of the
disclosure of the name and address of such Holder in accordance with the
provisions of subsection (b) of this Section 6.02, regardless of the source from
which such information was derived, and that the Trustee shall not be held
accountable by reason of mailing any material pursuant to a request made under
said subsection (b).
SECTION 6.03. Reports by the Company. (a) The Company shall file with the
Trustee, within 15 days after the Company is required to file the same with the
Securities and Exchange Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as said Commission may from time to time by rules and regulations
prescribe) relating to the equity or debt securities of the Company which the
Company may be required to file with said Commission pursuant to section 13 or
15(d) of the Securities Exchange Act of 1934; or, if the Company is not
required to file information, documents or reports pursuant to any of such
sections, then to file with the Trustee and said Commission, in accordance with
rules and regulations prescribed from time to time by said Commission, such of
the supplementary and periodic information, documents and reports which may be
required pursuant to section 13 of the Securities Exchange Act of 1934 in
respect of a security listed and registered on a national securities exchange as
may be prescribed from time to time in such rules and regulations.
(b) The Company shall file with the Trustee and the Securities and Exchange
Commission, in accordance with the rules and regulations prescribed from time to
time by said Commission, such additional information, documents and reports with
respect to compliance by the Company with the conditions and covenants provided
for in this Indenture as may be required from time to time by such rules and
regulations.
(c) The Company shall transmit by mail to each Holder of Securities in the
manner and to the extent provided in Section 6.04, within 30 days after the
filing thereof with the Trustee, such summaries of any information, documents
and reports required to be filed by the Company pursuant to subsections (a) and
(b) of this Section 6.03 as may be required by rules and regulations prescribed
from time to time by the Securities and Exchange Commission.
SECTION 6.04. Reports by the Trustee. (a) Within 60 days after May 15 of
each year after the first series of Securities is issued hereunder, so long as
any Securities are outstanding hereunder, the Trustee shall transmit to the
Holders, as hereinafter in this Section 6.04 provided, a brief report dated as
of such May 15 with respect to:
(1) its eligibility under Section 8.09 and its qualification under Section
8.08 or in lieu thereof, if to the best of its knowledge it has continued to be
eligible and qualified under such Sections, a written statement to such effect;
(2) the character and amount of any advances (and if the Trustee elects so
to state, the circumstances surrounding the making thereof) made by the Trustee
(as such) which remain unpaid on the date of such report, and for the
reimbursement of which it claims or may claim a lien or charge, prior to that of
the Securities, on any property or funds held or collected by it as Trustee,
except that the Trustee shall not be required (but may elect) to state such
advances if such advances so remaining unpaid aggregate not more than 1/2 of 1%
of the principal amount at Stated Maturity of the Securities outstanding on the
date of such report;
(3) the amount, interest rate and maturity date of all other indebtedness
owing by the Company (or by any other obligor on the Securities) to the
Trustee in its individual capacity, on the date of such report, with a brief
description of any property held as collateral security therefor, except an
indebtedness based upon a creditor relationship arising in any manner described
in paragraphs (2), (3), (4) or (6) of subsection (b) of Section 8.13;
(4) the property and funds, if any, physically in the possession of the
Trustee, as such, on the date of such report;
(5) any additional issue of Securities which the Trustee has not previously
reported; and
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19
(6) any action taken by the Trustee in the performance of its duties under
this Indenture which it has not previously reported and which in its opinion
materially affects any of the Securities, except action in respect of a default,
notice of which has been or is to be withheld by it in accordance with the
Provisions of Section 7.08.
(b) The Trustee shall transmit to the Holders, as hereinafter provided, a
brief report with respect to the character and amount of any advances (and if
the Trustee elects so to state, the circumstances surrounding the making
thereof) made by the Trustee (as such), since the date of the last report
transmitted pursuant to the provisions of subsection (a) of this Section 6.04
(or, if no such report has yet been so transmitted, since the date of execution
of this Indenture), for the reimbursement of which it claims or may claim a lien
or charge prior to that of the Securities, on property or funds held or
collected by it as Trustee, and which it has not previously reported pursuant to
this subsection, except that the Trustee shall not be required (but may elect)
to report such advances if such advances remaining unpaid at any time aggregate
10% or less of the principal amount of Securities at Stated Maturity outstanding
at such time, such report to be transmitted within 90 days after such time.
(c) Reports pursuant to this Section shall be transmitted by mail:
(1) to all Registered Holders of Securities, as the names and addresses of
such Holders appear in the registry books of the Company;
(2) to such Holders of Securities as have, within the two years preceding
such transmission, filed their names and addresses with the Trustee for that
purpose; and
(3) except in the case of reports pursuant to subsection (b) of this
Section, to each Holder whose name and address is preserved at the time by the
Trustee, as provided in Section 6.02.
(d) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which the
Securities are listed and also with the Securities and Exchange Commission. The
Company shall notify the Trustee when any Securities are listed on any stock
exchange.
ARTICLE SEVEN
REMEDIES OF THE TRUSTEE AND HOLDERS ON EVENT OF DEFAULT
SECTION 7.01. Events of Default. "Event of Default," whenever used herein
with respect to Securities of any series means each one of the following events
unless it is either inapplicable to a particular series or it is specifically
deleted or modified in the supplemental indenture under which such series of
Securities is issued, if any, or in the form of Security for such series:
(a) default in the payment of any installment of interest upon any Security
of that series when the same becomes due and payable, and continuance of such
default for a period of 30 days; or
(b) default in the payment of the principal of or premium, if any, on any
Securities of that series as and when the same shall become due and payable
either at Maturity, upon redemption, by declaration or otherwise; or
(c) default in the payment of any sinking fund installment or analogous
obligation as and when the same shall become due and payable by the terms of
that series, and continuance of such default for a period of 30 days; or
(d) failure on the part of the Company duly to observe or perform any other
of the covenants or agreements on the part of the Company in the Securities of
such series or in this Indenture (other than a covenant or agreement in respect
of the Securities of such series a default in the performance of which or the
<PAGE>
20
breach of which is elsewhere in this Section 7.01 specifically provided for or
which has expressly been included in this Indenture solely for the benefit of
one or more series of Securities other than such series), and continuance of
such default or breach for a period of 90 days after the date on which written
notice specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder, shall have been
given to the Company by the Trustee, or to the Company and the Trustee by the
Holders of at least 25% in aggregate principal amount of the Securities of that
series at the time outstanding; or
(e) if there shall be entered a decree or order by a court having
jurisdiction for relief in respect of the Company under any applicable Federal
or State bankruptcy law or other similar law, or appointing a receiver, trustee
or liquidator, or other similar official of the Company or of any substantial
part of its property, or ordering the winding-up or liquidation of its affairs
and the continuance of any such decree or order unstayed and in effect for a
period of 90 consecutive days; or
(f) if the Company shall file a petition or an answer or consent seeking
relief under any applicable Federal or State bankruptcy law or other similar
law, or shall consent to the institution of proceedings thereunder or to the
filing of any such petition or to the appointment or taking possession by a
receiver, trustee, custodian or other similar official of the Company or of any
substantial part of its property, or the Company shall make an assignment for
the benefit of creditors generally or shall admit in writing to its inability to
pay its debts generally as they become due; or
(g) any other event specified as an Event of Default in the form of
Security for such series, or in the supplemental indenture, Officers'
Certificate or resolution of the Board of Directors under which such series of
Securities is issued, if any.
If an Event of Default described in clauses (a), (b), (c), (d) or (g) (if the
Event of Default under clause (d) or (g) is with respect to less than all series
of Securities then outstanding) occurs and is continuing, then and in each and
every such case, unless the principal of all the Securities of such series shall
have already become due and payable, either the Trustee or the Holders of not
less than 25% in aggregate principal amount at Stated Maturity of the Securities
of such series then outstanding hereunder (each such series acting as a separate
class), by notice in writing to the Company (and to the Trustee if given by
Holders), may declare the principal amount (in the case of Securities that are
Original Issue Discount Securities, such principal amount as may be determined
in accordance with the terms of that series) of all the Securities of such
series to be due and payable immediately, and upon any such declaration the same
shall become and shall be immediately due and payable, anything in this
Indenture or in the Securities of such series contained to the contrary
notwithstanding. If an Event of Default described in clauses (d) or (g) (if the
Event of Default under clause (d) or (g) is with respect to all series of
Securities then outstanding) or (e) or (f) occurs and is continuing, then and in
each and every such case, unless the principal of all the Securities shall have
already become due and payable, either the Trustee or the Holders of not less
than 25% in aggregate principal amount at Stated Maturity of all Securities then
outstanding hereunder (treated as one class), by notice in writing to the
Company (and to the Trustee if given by Holders), may declare the principal
amount (in the case of Original Issue Discount Securities, such portion of the
principal amount to be determined as provided in Section 2.01(9)) of all the
Securities to be due and payable immediately, and upon any such declaration the
same shall become and shall be immediately due and payable, anything in this
Indenture or in the Securities contained to the contrary notwithstanding. The
foregoing provisions are, however, subject to the condition that if, at any time
after the principal amount (in the case of Securities that are Original Issue
Discount Securities, such portion of the principal amount as may be determined
in accordance with the terms of that series) of the Securities of any series or
of all the Securities, as the case may be, shall have been so declared due and
payable, and before any judgment or decree for the payment of the moneys due
shall have been obtained or entered as hereinafter provided, the Company shall
pay or shall deposit with the Trustee a sum sufficient to pay all matured
installments of interest upon all the Securities of such series or of all of the
Securities, as the case may be, and the principal of and premium, if any, on all
Securities of such series or of all the Securities, as the case may be, which
shall have become due otherwise than by acceleration (with interest on overdue
installments of interest, to the extent that payment of such interest is
enforceable under applicable law, and on such principal and premium, if any, at
the rate of interest or yield to Maturity (in the case of Original Issue
Discount Securities) borne by the Securities of such series or at the rates of
interest or yields to Maturity of all the Securities, as the case may be, to the
date of such payment or deposit) and all sums paid or advanced
<PAGE>
21
by the Trustee hereunder, and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel and any and
all defaults under this Indenture, other than the nonpayment of principal of or
premium, if any, or accrued interest, if any, on Securities of such series or of
all of the Securities, as the case may be, which shall have become due by
acceleration, shall have been remedied--then and in every such case the Holders
of a majority in aggregate principal amount at Stated Maturity of the Securities
of such series or of all of the Securities, as the case may be, then
outstanding, by written notice to the Company and to the Trustee, may waive all
defaults with respect to that series or of all of the Securities, as the case
may be, and rescind and annul such declaration and its consequences; but no
waiver or rescission and annulment shall extend to or shall affect any
subsequent default, or shall impair any right consequent thereon.
In case the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned because
of such rescission or annulment or for any other reason or shall have been
determined adversely to the Trustee, then and in every such case the Company and
the Trustee shall be restored respectively to their several positions and rights
hereunder, and all rights, remedies and powers of the Company and the Trustee
shall continue as though no such proceeding had been taken.
SECTION 7.02. Payment of Securities on Default; Suit Therefor. In case (1)
default shall be made in the payment of any installment of interest upon any
Security of any series as and when the same shall become due and payable, and
such default shall have continued for a period of 30 days, or (2) default shall
be made in the payment of the principal of or premium, if any, on any Security
of any series as and when the same shall have become due and payable, whether at
Maturity of Securities of that series or otherwise, or (3) default is made in
the making or satisfaction of any sinking fund payment or analogous obligation
when the same becomes due by the terms of the Securities of any series and such
default shall continue for a period of 30 days -- then, upon demand of the
Trustee, the Company shall pay to the Trustee, for the benefit of the Holder of
any such Security, the whole amount that then shall have become due and payable
on any such Security for principal and premium, if any, or interest, if any, or
both, as the case may be, with interest on the overdue principal and premium, if
any, and (to the extent that payment of such interest is enforceable under
applicable law) on the overdue installments of interest at the rate of interest
or yield to Maturity (in the case of Original Issue Discount Securities) borne
by any such Security and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including reasonable
compensation to the Trustee, its agents, attorneys and counsel, and any expenses
or liabilities incurred by the Trustee hereunder other than through its
negligence or bad faith.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor upon such
Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property, wherever situated, of the Company or
any other obligor upon such Securities.
In case there shall be pending proceedings for the bankruptcy or for the
reorganization of the Company or any other obligor on the Securities of any
series under any Federal or State bankruptcy law or other similar law, or in
case a receiver or trustee shall have been appointed for the property of the
Company or such other obligor, or in the case of any other similar judicial
proceedings relative to the Company or other obligor on the Securities of any
series, or to the creditors or property of the Company or such other obligor,
the Trustee (irrespective of whether the principal of any Securities of any
series shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand
pursuant to the provisions of this Section 7.02) shall be entitled and
empowered, by intervention in such proceedings or otherwise, to file and prove a
claim or claims for the whole amount of principal and premium, if any, and
interest, if any, owing and unpaid in respect of the Securities of any series
(in the case of Securities that are Original Issue Discount Securities, such
principal amount as would be then due and payable upon declaration of
acceleration in accordance with the term of that series) and, in case of any
judicial proceedings, to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents or counsel) and of the Holders allowed
in such judicial proceedings relative to the Company or any other obligor on the
Securities of any series, its or their creditors, or its or their property,
<PAGE>
22
and to collect and receive any moneys or other property payable or deliverable
on any such claims, and to distribute the same after the deduction of its
charges and expenses; and any receiver, assignee, liquidator, sequestrator or
trustee in bankruptcy or reorganization is hereby authorized by each of the
Holders to make such payments to the Trustee, and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due it for compensation, expenses, disbursements and
advances of the Trustee, its agents or counsel, and any other amounts due to the
Trustee under Section 8.06 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to
approve, consent, accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment, or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
All rights of action and of asserting claim under this Indenture, or under
any of the Securities, may be enforced by the Trustee without the possession of
any of the Securities, or the production thereof at any trial or other
proceeding relative thereto, and any such suit or proceeding instituted by the
Trustee with respect to the Securities of any series shall be brought in its own
name as trustee of an express trust, and any recovery of judgment shall be for
the ratable benefit of the Holders of the Securities in respect of which such
action is taken.
SECTION 7.03. Application of Moneys Collected by Trustees. Any moneys
collected by the Trustee with respect to any series of Securities under this
Article Seven shall be applied in the order following, at the date or dates
fixed by the Trustee for the distribution of such moneys on account of
principal, premium, if any, or interest, if any, upon presentation of the
several Securities of such series or the coupons appertaining thereto, as the
case may be, and stamping thereon the payment, if only partially paid, and upon
surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
8.06 hereof;
SECOND: In case the principal of the outstanding Securities of that
series shall not have become due and be unpaid, to the payment of interest
on the Securities of that series, in the order of the maturity of the
installments of such interest with interest (to the extent that such
interest has been collected by the Trustee) upon the overdue installments
of interest at the rate of interest (or yield to maturity in the case of
Original Issue Discount Securities) borne by the Securities of that series,
such payments to be made ratably to the Persons entitled thereto;
THIRD: In case the principal of the outstanding Securities of a series
in respect of which such moneys have been collected shall have become due
and payable, by declaration or otherwise, to the payment of the whole
amount then owing and unpaid upon the Securities of that series for
principal and premium, if any, and interest, if any, with interest on the
overdue principal and premium, if any, and (to the extent that such
interest has been collected by the Trustee) upon any overdue installments
of interest at the rate of interest (or yield to Maturity in the case of
Original Issue Discount Securities) borne by the Securities of that series,
and in case such moneys shall be insufficient to pay in full the whole
amounts so due and unpaid upon the Securities of that series, then to the
payment of such principal and premium, if any, and interest, if any,
without preference or priority of principal and premium, if any, over
interest, or of interest over principal and premium, if any, or of any
installment of interest over any other installment of interest, or of any
Security of that series over any other Security of that series, ratably to
the aggregate of such principal and premium, if any, and any accrued and
unpaid interest.
FOURTH: Any surplus then remaining shall be paid to the Company or to
such other Person as shall be entitled to receive it.
SECTION 7.04. Proceedings by Holders. No Holder of any Security of any
series or of any coupon appertaining thereto shall have any right by virtue of
or by availing of any provision of this Indenture to institute any suit, action
or proceeding in equity or at law upon or under or with respect to this
Indenture or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless such Holder previously shall have given to the Trustee
written notice of default and of the continuance thereof, as hereinbefore
provided, and unless also the Holders of not less than 25% in aggregate
principal amount at Stated Maturity of the Securities
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23
of that series (or, in case of an Event of Default described in clause (d), (e)
or (f) of Section 7.01, 25% in aggregate principal amount of all Securities then
outstanding (in the case of Original Issue Discount Securities, such principal
amount to be determined as provided in Section 2.01(9))) shall have made written
request upon the Trustee to institute such action, suit or proceeding in its own
name as the Trustee hereunder and shall have offered to the Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee for 60 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding and no
direction inconsistent with such written request shall have been given to the
Trustee during such 60 day period by the Holders of a majority in principal
amount at Stated Maturity of the outstanding Securities of such series, it being
understood and intended, and being expressly covenanted by the Holder of every
Security of that series with every other Holder of every Security of that series
or coupons appertaining thereto and the Trustee, that no one or more Holders of
Securities of any series shall have any right in any manner whatever by virtue
of or by availing of any provision of this Indenture to affect, disturb or
prejudice the rights of any other Holder of Securities of that series or any
other series or coupons appertaining thereto, or to obtain or seek to obtain
priority over or preference to any other such Holder, or to enforce any right
under this Indenture, except in the manner herein provided and for the equal,
ratable and common benefit of all Holders of Securities.
Notwithstanding any other provisions in this Indenture, however, the right
of any Holder of any Security or coupon to receive payment of the principal of,
and premium, if any, and interest, if any, on such Security, on or after the
respective Stated Maturities expressed in such Security or, in the case of
redemption or repayment on or after the redemption date or repayment date, as
the case may be, and to institute suit for the enforcement of any such payment
on or after such respective date shall not be impaired or affected without the
consent of such Holder.
SECTION 7.05. Proceedings by Trustee. In case of an Event of Default
hereunder, the Trustee, in its discretion, may proceed to protect and enforce
the rights vested in it by this Indenture by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce any
of such rights, either by suit in equity or by action at law or by proceeding in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law.
SECTION 7.06. Remedies Cumulative and Continuing. All powers and remedies
given by this Article Seven to the Trustee or to the Holders of Securities or
coupons shall, to the extent permitted by law, be deemed cumulative and not
exclusive of any thereof or of any other powers and remedies available to the
Trustee or such Holders, by judicial proceedings or otherwise, to enforce the
performance or observance of the covenants and agreements contained in this
Indenture, and no delay or omission of the Trustee or of any Holder to exercise
any right or power accruing upon any default occurring and continuing as
aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or an acquiescence therein; and, subject to the
provisions of Section 7.04, every power and remedy given by this Article Seven
or by law to the Trustee or to the Holders may be exercised from time to time,
and as often as shall be deemed expedient, by the Trustee or by the Holders.
SECTION 7.07. Direction of Proceedings and Waiver of Defaults by Majority
of Holders. The Holders of a majority in aggregate principal amount of the
Securities of all series affected (voting as one class) (in the case of Original
Issue Discount Securities, such principal amount to be determined as provided in
Section 2.01(9)) at the time outstanding shall have the right to direct the
time, method, and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee,
provided, however, that such direction shall not conflict with any rule of law
or this Indenture, and provided further, that (subject to the provisions of
Section 8.01) the Trustee may take any action deemed proper by the Trustee which
is not inconsistent with such direction and the Trustee shall have the right to
decline to follow any such direction if the Trustee, being advised by counsel,
shall determine that the action or proceeding so directed may not lawfully be
taken or if the Trustee in good faith by its board of directors or trustees,
executive committee, or a trust committee of directors or trustees or
Responsible Officers shall determine that the action or Proceedings so directed
would involve the Trustee in personal liability. Prior to any declaration
accelerating the maturity of the Securities of a particular series (or all of
the Securities as the case may be), the Holders of
<PAGE>
24
a majority in aggregate principal amount at Stated Maturity of the Securities of
that series at the time outstanding may on behalf of the Holders of all the
Securities of that series waive any past default or Event of Default described
in clause (a), (b), (c) or (g) of Section 7.01 (or, in the case of an event
specified in clause (d), (e) or (f) of Section 7.01, the Holders of an aggregate
principal amount of all the Securities then outstanding (in the case of Original
Issue Discount Securities, such principal amount to be determined as provided in
Section 2.01(9))) may waive in writing such default or Event of Default as its
consequences except (1) a default in the payment of interest, if any, or
premium, if any, on, or the principal of, any of the Securities or in the
payment of any sinking fund installment or analogous obligation with respect to
Securities or (2) in respect of a covenant or provision hereof which under
Article Eleven cannot be modified or amended without the consent of the Holder
of each Security outstanding of the series affected. Upon any such waiver the
Company, the Trustee and the Holders of Securities of that series (or all of the
Securities, as the case may be) shall be restored to their former positions and
rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon. Whenever any default or Event of Default hereunder shall have been
waived as permitted by this Section 7.07, said default or Event of Default shall
for all purposes of the Securities and this Indenture be deemed to have been
cured and to be not continuing.
SECTION 7.08. Notice of Defaults. The Trustee shall, within 90 days after
the occurrence of any default hereunder with respect to Securities of any
series, mail to all Holders of Securities of that series in the manner and to
the extent provided in Section 6.04(c) notice of such default known to the
Trustee, unless such default shall have been cured prior to the giving of such
notice; provided, however, that, except in the case of default in the payment of
the principal of or premium, if any, or interest, if any, on any of the
Securities of that series or in the making of any sinking fund payment or
analogous obligation with respect to Securities of that series, the Trustee
shall be protected in withholding such notice if and so long as the board of
directors or trustees, the executive committee, or a trust committee of
directors or Responsible Officers of the Trustee in good faith determines that
the withholding of such notice is in the interests of the Holders of Securities
of such series; and provided, further, that in the case of any default of the
character specified in Section 7.01(d) with respect to Securities of such
series, no such notice to Holders of Securities of such series shall be given
until at least 90 days after the occurrence thereof. For the purpose of this
Section, the term "default," with respect to Securities of any series, means any
event which is, or after notice or lapse of time, or both, would become, an
Event of Default with respect to Securities of such series.
SECTION 7.09. Undertaking to Pay Costs. All parties to this Indenture
agree, and each Holder of any Security or coupon by his acceptance thereof shall
be deemed to have agreed, that any court may in its discretion require, in any
suit for the enforcement of any right or remedy under this Indenture, or in any
suit against the Trustee for any action taken or omitted by it as Trustee, the
filing by any party litigant in such suit of an undertaking to pay the costs of
such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section 7.09 shall not apply to
any suit instituted by the Trustee, to any suit instituted by any Holder or
group of Holders, holding in the aggregate more than 10% in principal amount at
Stated Maturity of the Securities outstanding of that series (or, in case of any
suit relating to or arising under clause (d), (e) or (f) of Section 7.01, 10% in
principal amount of all Securities outstanding (In the case of Original Issue
Discount Securities, such principal amount to be determined as provided in
Section 2.01(9))) or to any suit instituted by any Holder for the enforcement of
the payment of the principal of or premium, if any, or interest, if any, on any
Security on or after the respective Stated Maturities expressed in such
Securities (or in the case of redemption or repayment on or after the redemption
date or repayment date).
ARTICLE EIGHT
CONCERNING THE TRUSTEE
SECTION 8.01. Duties and Responsibilities of Trustee. With respect to the
Holders of any series of Securities issued hereunder, the Trustee, prior to the
occurrence of an Event of Default with respect to the Securities of that series
and after the curing of all Events of Default which may have occurred with
respect to the Securities of that series, undertakes to perform such duties and
only such duties as are specifically set forth
<PAGE>
25
in this Indenture and no implied covenants or obligations with respect to such
series shall be read into this Indenture against the Trustee. In case an Event
of Default with respect to the Securities of any series has occurred (which has
not been cured or waived), the Trustee shall exercise such of the rights and
powers vested in it by this Indenture with respect to that series and use the
same degree of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.
Prior to the occurrence of an Event of Default with respect to the
Securities of a series, and after the curing or waiving of all Events of Default
with respect to that series which may have occurred and in the absence of bad
faith on the part of the Trustee, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture; but, in the case of any such certificates or
opinions which by any provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this Indenture.
No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own willful misconduct, except that:
(a) the Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer or Officers of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts; and
(b) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
Holders pursuant to Section 7.07 of any series relating to the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if it has reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section
8.01.
SECTION 8.02. Reliance on Documents, Opinions, etc. Except as otherwise
provided in Section 8.01:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, bond, debenture or other paper or
document believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(b) any request, direction, order or demand of the Company mentioned herein
shall be sufficiently evidenced by a written statement signed in the name of the
Company by its President and Chief Executive Officer, its Executive Vice
President and Chief Financial Officer or its Vice President and Treasurer
(unless other evidence in respect thereof is herein specifically prescribed);
and any resolution of the Board of Directors shall be sufficiently evidenced to
the Trustee by a copy thereof certified by the Secretary or an Assistant
Secretary of the Company;
(c) whenever in the administration of the Indenture, the Trustee shall deem
it desirable that a matter be proved or established prior to taking, suffering
or omitting any action hereunder, the Trustee (unless other evidence be herein
specifically provided) may, in the absence of bad faith on its part, rely on an
Officers' Certificate;
(d) the Trustee may consult with its counsel or require an Opinion of
Counsel and any such advice or Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or omitted by it
hereunder in good faith and in accordance with such advice or Opinion of
Counsel;
<PAGE>
26
(e) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request, order or direction of
any of the Holders, pursuant to the provisions of this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred therein or
thereby;
(f) the Trustee shall not be liable for any action taken or omitted by it
in good faith and believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Indenture;
(g) prior to the occurrence of an Event of Default hereunder and after the
curing or waiving of all Events of Default, the Trustee shall not be bound to
make any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, approval, bond, debenture, coupon or other paper or document, unless
requested in writing to do so by the Holders of not less than a majority in
principal amount at Stated Maturity of the Securities then outstanding of any
series affected or of all the Securities, as the case way be; provided however,
that if the payment within a reasonable time to the Trustee of the costs,
expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to the
Trustee by the security afforded to it by the terms of this Indenture, the
Trustee may require reasonable indemnity against such expense or liability as a
condition to so proceeding; and
(h) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys, and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
SECTION 8.03. No Responsibility for Recitals, etc. The recitals contained
herein and in the Securities (except in the Trustee's certificate of
authentication) shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Indenture, of any of
the Securities or coupons or of any prospectus related to the Securities of any
series; provided, however, that the Trustee shall not be relieved of its duty to
authenticate Securities as authorized by this Indenture. The Trustee shall not
be accountable for the use or application by the Company of any Securities or
the proceeds of any Securities authenticated and delivered by the Trustee in
conformity with the provisions of this Indenture.
SECTION 8.04. Trustee, Paying Agent or Registrar May Own Securities. The
Trustee or any paying agent or Security registrar or any other agent of the
Company or the Trustee, in its individual or any other capacity, may become the
owner or pledgee of Securities or the coupons appertaining thereto with the same
rights it would have if it were not Trustee, paying agent or Security registrar.
SECTION 8.05. Moneys to be Held in Trust. Subject to the provisions of
Section 13.04, all moneys received by the Trustee or any paying agent shall,
until used or applied as herein provided, be held in trust for the purposes for
which they were received, but need not be segregated from other funds except to
the extent required by law. The Trustee and any paying agent shall be under no
liability for interest on any moneys received by it hereunder except such as it
may agree with the Company to pay thereon.
SECTION 8.06. Compensation and Expenses of Trustee. The Company shall pay
to the Trustee from time to time, and the Trustee shall be entitled to,
reasonable compensation (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust), and the Company
shall pay or reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any of the provisions of this Indenture (including the reasonable compensation
and the expenses and disbursements of its counsel and of all persons not
regularly in its employ) except any such expense, disbursement or advance as may
be attributable to its negligence or willful misconduct. The Company shall
indemnify the Trustee for, and shall hold it harmless against, any loss,
liability or expense incurred without negligence or willful misconduct on the
part of the Trustee and arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of defending
itself against any claim of liability arising in connection with its duties
under this Indenture. The obligations of the Company under this Section 8.06 to
compensate the Trustee and to pay or reimburse the Trustee for expenses,
<PAGE>
27
disbursements and advances shall constitute additional indebtedness hereunder.
Such additional indebtedness shall be secured by a lien prior to that of the
Securities upon all property and funds held or collected by the Trustee as such,
except funds held in trust for the benefit of the Holders of particular
Securities.
SECTION 8.07. Officers' Certificate as Evidence. Except as otherwise
provided in Section 8.01, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or omitting any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of negligence or willful misconduct on the part
of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee, and such certificate, in the
absence of negligence or willful misconduct on the part of the Trustee, shall be
full warrant to the Trustee for any action taken or omitted by it under the
provisions of this Indenture upon the faith thereof.
SECTION 8.08. Conflicting Interest of Trustee. (a) If the Trustee has or
shall acquire any conflicting interest, as defined in this Section 8.08, it
shall, within 90 days after ascertaining that it has such conflicting interest,
either eliminate such conflicting interest or resign in the manner and with the
effect specified in Section 8.10.
(b) In the event that the Trustee shall fail to comply with the provisions
of subsection (a) of this Section 8.08, the Trustee shall, within 10 days after
the expiration of such 90 day period, transmit notice of such failure to any
Holders of Securities, in the manner and to the extent provided in Section
6.04(c).
(c) For the purposes of this Section 8.08, the Trustee shall be deemed to
have a conflicting interest with respect to Securities of any series if:
(1) the Trustee is trustee under this Indenture with respect to the
outstanding Securities of any series other than that series or is trustee under
another indenture under which any other securities, or certificates of interest
or participation in any other securities, of the Company are outstanding unless
such other indenture is a collateral trust indenture under which the only
collateral consists of Securities issued under this Indenture; provided,
however, that there shall be excluded from the operation of this paragraph this
Indenture with respect to the Securities of any series other than that series or
any indenture or indentures under which other securities, or certificates of
interest or participation in other securities, of the Company are outstanding if
(A) this Indenture and such other indenture or indentures are wholly unsecured
and such other indenture or indentures are hereafter qualified under the Trust
Indenture Act of 1939, unless the Securities and Exchange Commission shall have
found and declared by order pursuant to subsection (b) of section 305 or
subsection (c) of section 307 of the Trust Indenture Act of 1939 that
differences exist between the provisions of this Indenture and the provisions of
such other indenture or indentures which are so likely to involve a material
conflict of interest as to make it necessary in the public interest or for the
protection of investors to disqualify the Trustee from acting as such under this
Indenture with respect to Securities of that series and any such other series
and such other indentures, or (B) the Company shall have sustained the burden of
proving, on application to the Securities and Exchange Commission and after
opportunity for hearing thereon, that the trusteeship under this Indenture with
respect to Securities of that series and such other series and such other
indenture is not so likely to involve a material conflict of interest as to make
it necessary in the public interest or for the protection of investors to
disqualify the Trustee from acting as such under this Indenture with respect to
Securities of that series or such other series or such indenture or indentures;
(2) the Trustee or any of its directors or executive officers is an obligor
upon the Securities of any series issued under this Indenture or an underwriter
for the Company;
(3) the Trustee directly or indirectly controls or is directly or
indirectly controlled by or is under direct or indirect common control with the
Company or an underwriter for the Company;
(4) the Trustee or any of its directors or executive officers is a
director, officer, partner, employee, appointee, or representative of the
Company, or of an underwriter (other than the Trustee itself) for the Company
who is currently engaged in the business of underwriting, except that (A) one
individual may be a director or an executive officer of the Trustee and a
director or an executive officer of the Company, but may
<PAGE>
28
not be at the same time an executive officer of both the Trustee and the
Company; (B) if and so long as the number of directors of the Trustee in office
is more than nine, one additional individual may be a director or an executive
officer of the Trustee and a director of the Company; and (C) the Trustee may be
designated by the Company or by an underwriter for the Company to act in the
capacity of transfer agent, registrar, custodian, paying agent, fiscal agent,
escrow agent, or depositary, or in any other similar capacity, or, subject to
the provisions of paragraph (1) of this subsection (c), to act as trustee
whether under an indenture or otherwise;
(5) 10% or more of the voting securities of the Trustee is beneficially
owned either by the Company or by any director, partner, or executive officer
thereof, or 20% or more of such voting securities is beneficially owned,
collectively, by any two or more of such persons; or 10% or more of the voting
securities of the Trustee is beneficially owned either by an underwriter for the
Company or by any director, partner, or executive officer thereof, or is
beneficially owned, collectively, by any two or more such persons;
(6) the Trustee is the beneficial owner of, or holds as collateral security
for an obligation which is in default, (A) 5% or more of the voting securities,
or 10% or more of any other class of security, of the Company, not including the
Securities issued under this Indenture and securities issued under any other
indenture under which the Trustee is also trustee, or (B) 10% or more of any
class of security of an underwriter for the Company;
(7) the Trustee is the beneficial owner of, or holds as collateral security
for an obligation which is in default, 5% or more of the voting securities of
any person who, to the knowledge of the Trustee, owns 10% or more of the voting
securities of, or controls directly or indirectly or is under direct or indirect
common control with, the Company;
(8) the Trustee is the beneficial owner of, or holds as collateral security
for an obligation which is in default, 10% or more of any class of security of
any person who, to the knowledge of the Trustee, owns 50% or more of the voting
securities of the Company, or
(9) the Trustee owns on May 15 in any calendar year, in the capacity of
executor, administrator, testamentary or inter vivos trustee, guardian,
committee or conservator, or in any other similar capacity, an aggregate of 25%
or more of the voting securities, or of any class of security, of any person,
the beneficial ownership of a specified percentage of which would have
constituted a conflicting interest under paragraph (6), (7) or (8) of this
subsection (c). As to any such securities of which the Trustee acquired
ownership through becoming executor, administrator or testamentary trustee of an
estate which included them, the provisions of the preceding sentence shall not
apply, for a period of two years from the date of such acquisition to the extent
that such securities included in such estate do not exceed 25% of such voting
securities or 25% of any such class of security. Promptly after May 15 in each
calendar year, the Trustee shall make a check of its holdings of such securities
in any of the above-mentioned capacities as of such May 15. If the Company fails
to make payment in full of principal of or interest on any of the Securities
when and as the same becomes due and payable, and such failure continues for 30
days thereafter, the Trustee shall make a prompt check of its holdings of such
securities in any of the above-mentioned capacities as of the date of the
expiration of such 30-day period and, after such date, notwithstanding the
foregoing provisions of this paragraph (9), all such securities so held by the
Trustee, with sole or joint control over such securities vested in it, shall,
but only so long as such failure shall continue, be considered as though
beneficially owned by the Trustee for the purposes of paragraphs (6), (7) and
(8) of this subsection (c).
The specifications of percentages in paragraphs (5) to (9), inclusive, of
this subsection (c) shall not be construed as indicating that the ownership of
such percentages of the securities of a person is or is not necessary or
sufficient to constitute direct or indirect control for the purposes of
paragraph (3) or (7) of this subsection (c).
For the purposes of paragraphs (6), (7), (8) and (9) of this subsection (c)
only, (A) the terms "security" and "securities" shall include only such
securities as are generally known as corporate securities, but shall not include
any note or other evidence of indebtedness issued to evidence an obligation to
repay moneys lent to a person by one or more banks, trust companies or banking
firms, or any certificate of interest or participation in any such note or
evidence of indebtedness; (B) an obligation shall be deemed to be in default
when a default in payment of principal shall have continued for 30 days or more
and shall not have been cured; and (C) the
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Trustee shall not be deemed to be the owner or holder of (i) any security which
it holds as collateral security (as trustee or otherwise) for an obligation
which is not in default as defined in clause (B) above, or (ii) any security
which it holds as collateral security under this Indenture, irrespective of any
default hereunder, or (iii) any security which it holds as agent for collection,
or as custodian, escrow agent or depositary, or in any similar representative
capacity.
Except as provided in the next preceding paragraph hereof, the words
"security" or "securities" as used in this Indenture shall mean any note, stock,
treasury stock, bond, debenture, evidence of indebtedness, certificate of
interest or participation in any profit-sharing agreement, collateral-trust
certificate, pre-organization certificate or subscription, transferable share,
investment contract, voting-trust certificate, certificate of deposit for a
security, fractional undivided interest in oil, gas or other mineral rights,
or, in general, any interest or instrument commonly known as a "security" or any
certificate of interest or participation in, temporary or interim certificate
for, receipt for, guarantee of, or warrant or right to subscribe to or purchase,
any of the foregoing.
(d) For the purposes of this Section 8.08:
(1) The term "underwriter" when used with reference to the Company shall
mean every person who, within three years prior to the time as of which the
determination is made, has purchased from the Company with a view to, or has
offered or sold for the Company in connection with, the distribution of any
security of the Company outstanding at such time, or has participated or has had
a direct or indirect participation in any such undertaking, or has participated
or has had a participation in the direct or indirect underwriting of any such
undertaking, but such term shall not include a person whose interest was limited
to a commission from an underwriter or dealer not in excess of the usual and
customary distributors' or sellers' commission.
(2) The term "director" shall mean any director of a corporation or any
individual performing similar functions with respect to any organization whether
incorporated or unincorporated.
(3) The term "person" shall mean an individual, a corporation, a
partnership, an association, a joint-stock company, a trust, an unincorporated
organization, or a government or political subdivision thereof. As used in this
paragraph, the term "trust" shall include only a trust where the interest or
interests of the beneficiary or beneficiaries are evidenced by a security.
(4) The term "voting security" shall mean any security presently entitling
the owner or holder thereof to vote in the direction or management of the
affairs of a person, or any security issued under or pursuant to any trust,
agreement or arrangement whereby a trustee or trustees or agent or agents for
the owner or holder of such security are presently entitled to vote in the
direction or management of the affairs of a person.
(5) The term "Company" shall mean any obligor upon the Securities.
(6) The term "executive officer" shall mean the president, every vice
president, every trust officer, the cashier, the secretary, and the treasurer of
a corporation, and any individual customarily performing similar functions with
respect to any organization whether incorporated or unincorporated, but shall
not include the chairman of the board of directors.
The percentages of voting securities and other securities specified in this
Section 8.08 shall be calculated in accordance with the following provisions:
(A) A specified percentage of the voting securities of the Trustee, the
Company or any other person referred to in this Section 8.08 (each of whom is
referred to as a "person" in this paragraph) means such amount of the
outstanding voting securities of such person as entitles the holder or holders
thereof to cast such specified percentage of the aggregate votes which the
holders of all the outstanding voting securities of such person are entitled to
cast in the direction or management of the affairs of such person.
(B) A specified percentage of a class of securities of a person means such
percentage of the aggregate amount of securities of the class outstanding.
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(C) The term "amount," when used in regard to securities, means the
principal amount if relating to evidences of indebtedness, the number of shares
if relating to capital shares, and the number of units if relating to any other
kind of security.
(D) The term "outstanding" means issued and not held by or for the account
of the issuer. The following securities shall not be deemed outstanding within
the meaning of this definition:
(i) securities of an issuer held in a sinking fund relating to securities
of the issuer of the same class;
(ii) securities of an issuer held in a sinking fund relating to another
class of securities of the issuer, if the obligation evidenced by such other
class of securities is not in default as to principal or interest or otherwise;
(iii) securities pledged by the issuer thereof as security for an
obligation of the issuer not in default as to principal or interest or
otherwise;
(iv) securities held in escrow if placed in escrow by the issuer thereof;
provided, however, that any voting securities of an issuer shall be deemed
outstanding if any person other than the issuer is entitled to exercise the
voting rights thereof.
(E) A security shall be deemed to be of the same class as another security
if both securities confer upon the holder or holders thereof substantially the
same rights and privileges; provided, however, that in the case of secured
evidences of indebtedness, all of which are issued under a single indenture,
differences in the interest rates or maturity dates of various series thereof
shall not be deemed sufficient to constitute such series different classes, and
provided, further, that, in the case of unsecured evidence of indebtedness,
differences in the interest rates or maturity dates thereof shall not be deemed
sufficient to constitute them securities of different classes, whether or not
they are issued under a single indenture.
SECTION 8.09. Eligibility of Trustee. The Trustee with respect to each
series of Securities hereunder shall at all times be a corporation organized
and doing business under the laws of the United States or any State or Territory
thereof or of the District of Columbia authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
$10,000,000 and subject to supervision or examination by Federal, State,
Territorial, or District of Columbia authority. If such corporation publishes
reports of condition at least annually, pursuant to law or the requirements of
the aforesaid supervising or examining authority, then for the purposes of this
Section 8.09, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Trustee with respect
to each series of Securities shall cease to be eligible in accordance with the
provisions of this Section 8.09, the Trustee shall resign immediately in the
manner and with the effect specified in Section 8.10.
SECTION 8.10. Resignation or Removal of Trustee. (a) The Trustee may resign
with respect to any series of Securities at any time by giving written notice of
such resignation to the Company and by giving notice thereof to the Holders of
the applicable series of Securities in manner and to the extent provided in
Section 6.04(c). Upon receiving such notice of resignation with respect to the
applicable series of Securities, the Company shall promptly appoint a successor
trustee with respect to that series by written instrument, in duplicate,
executed by or pursuant to a resolution of the Board of Directors, one copy of
which instrument shall be delivered to the resigning Trustee and one copy to the
successor trustee. If a successor trustee shall not have been so appointed with
respect to any series of Securities, or shall not have accepted appointment
within 30 days after the giving of such notice of resignation to the Holders of
such series, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee, or any Holder who has
been a bona fide holder of a Security or Securities of the applicable series for
at least six months may, subject to the provisions of Section 7.09, on behalf of
such Holder and all others similarly situated, petition any such court for the
appointment of a successor trustee with respect to that series.
(b) In case at any time any of the following shall occur--
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(1) the Trustee shall fail to comply with the provisions of subsection (a)
of Section 8.08 after written request therefor by the Company or by any Holder
who has been a bona fide holder of a Security or Securities of the applicable
series for at least six months, or
(2) the Trustee shall cease to be eligible in accordance with the
provisions of Section 8.09 and shall fail to resign after written request
therefor by the Company or by any such Holder, or
(3) the Trustee shall become incapable of acting, with respect to any
series of Securities or shall be adjudged a bankrupt or insolvent, or a receiver
of the Trustee or of its property shall be appointed, or any public officer
shall take charge or control of the Trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation--
then, in any such case, the Company may remove the Trustee with respect to any
one or more of such series of Securities and appoint a successor trustee of that
series by written instrument, in duplicate, executed by or pursuant to a
resolution of the Board of Directors, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee, or
subject to the provisions of Section 7.09, any Holder who has been a bona fide
Holder of a Security or Securities of that series for at least six months may,
on behalf of such Holder and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee and the appointment of
a successor trustee with respect to that series.
(c) The Holders of a majority in aggregate principal amount at Stated
Maturity of the Securities of any series at the time outstanding may at any time
remove the Trustee with respect to such series and nominate with respect to such
series a successor trustee which shall be deemed appointed as successor trustee
with respect to such series unless within 10 days after such nomination the
Company objects thereto, in which case the Trustee so removed or any Holder of
Securities of the series may petition any court of competent jurisdiction for
appointment of a successor trustee with respect to such series upon the terms
and conditions and otherwise as provided in subsection (a) of this Section 8.10.
(d) Any resignation or removal of the Trustee and any appointment of a
successor trustee with respect to an applicable series of Securities pursuant to
any of the provisions of this Section 8.10 shall become effective upon
acceptance of appointment by the successor trustee for that series as provided
in Section 8.11.
(e) The Company shall give notice as provided in Section 16.05 of each
resignation or removal of the Trustee with respect to any series of Securities.
Each notice shall include the name of such successor trustee and the address of
its Principal Office and shall be given within 60 days of such event.
SECTION 8.11. Acceptance by Successor Trustee. Any successor trustee
appointed as provided in Section 8.10 shall execute, acknowledge and deliver to
the Company and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee with respect to all or any applicable series shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts, duties and
obligations with respect to such series as its predecessor hereunder, with like
effect as if originally named as trustee herein; but, nevertheless, on the
written request of the Company or of the successor trustee, the trustee ceasing
to act shall, upon payment of any amounts then due it pursuant to the provisions
of Section 8.06, execute and deliver an instrument transferring to such
successor trustee all the rights and powers and trusts with respect to any
series of Securities of the trustee so ceasing to act. Upon request of any
successor trustee, the Company shall execute any and all instruments in writing
in order more fully and certainly to vest in and confirm to such successor
trustee all such rights and powers. Any trustee ceasing to act shall,
nevertheless, retain a lien upon all property or funds held or collected by such
trustee to secure any amounts then due it pursuant to the provisions of Section
8.06.
In case of the appointment hereunder of a successor trustee with respect to
the Securities of any one or more (but not all) series, the Company, the
predecessor trustee and each successor trustee with respect to the Securities of
any applicable series shall execute and deliver an indenture supplemental hereto
wherein each successor trustee shall accept such appointment and which shall
contain (1) such provisions as shall be necessary or desirable to transfer and
confirm to, and vest in each successor trustee all of the rights, powers and
duties of
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the predecessor trustee with respect to the Securities of that or those series
to which the appointment of such successor trustee relates, (2) if the retiring
trustee is not retiring with respect to all Securities, it shall contain such
provisions as shall be deemed necessary or desirable to confirm that all the
rights, powers, trusts and duties of the predecessor trustee with respect to the
Securities of any series as to which the predecessor trustee is not retiring
shall continue to be vested in the predecessor trustee and (3) shall add to or
change any of the provisions of this Indenture as shall be necessary to provide
for or facilitate the administration of the trusts hereunder by more than one
trustee, it being understood that nothing herein or in such supplemental
indenture shall constitute such trustees co-trustees of the same trust and that
each such trustee shall be trustee of a trust or trusts hereunder separate and
apart from any trust or trusts hereunder administered by any other such trustee.
No successor trustee shall accept appointment as provided in this Section
8.11 unless at the time of such acceptance such successor trustee shall be
qualified under the provisions of Section 8.08 and eligible under the provisions
of Section 8.09.
Upon acceptance of appointment by a successor trustee as provided in this
Section 8.11, the Company shall mail notice of the succession of such trustee
hereunder to all the Registered Holders of such series as the names and
addresses of such Holders shall appear on the registry books of the Company and
shall publish notice of such event once in an Authorized Newspaper in the Place
of Payment. If the Company fails to mail such notice in the prescribed manner
within 10 days after the acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be mailed at the expense of the
Company.
SECTION 8.12. Succession by Merger, etc. Any corporation into which the
Trustee may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding to the business of the
Trustee, shall be the successor of the Trustee hereunder provided such
corporation shall be qualified under the provisions of Section 8.08 and eligible
under the provisions of Section 8.09 without the execution or filing of any
paper or any further act on the part of any of the parties hereto.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any Securities of any series shall have been
authenticated but not delivered, any such successor to the Trustee by merger,
conversion or consolidation to such authenticating Trustee may adopt such
certificate of authentication and deliver such Securities of any series so
authenticated with the same effect as if such successor to the Trustee had
itself authenticated such Securities.
SECTION 8.13. Limitation on Rights of Trustee as a Creditor. (a) Subject to
the provision of subsection (b) of this Section 8.13, if the Trustee shall be or
shall become a creditor, directly or indirectly, secured or unsecured, of the
Company or of any other obligor on the Securities of any series within four
months prior to a default, as defined in subsection (c) of this Section 8.13, or
subsequent to such a default, then, unless and until such default shall be
cured, the Trustee shall set apart and hold in special account for the benefit
of the Trustee individually, the Holders of the Securities of any series, and
the holders of other indenture securities (as defined in paragraph (2) of
subsection (c) of this Section 8.13):
(1) an amount equal to any and all reductions in the amount due and owing
upon any claim as such creditor in respect of principal or interest, effected
after the beginning of such four-month period and valid as against the Company
and its other creditors, except any such reduction resulting from the receipt or
disposition of any property described in paragraph (2) of this subsection, or
from the exercise of any right of set-off which the Trustee could have exercised
if a petition in bankruptcy had been filed by or against the Company upon the
date of such default; and
(2) all property received by the Trustee in respect of any claim as such
creditor, either as security therefor, or in satisfaction or composition
thereof, or otherwise, after the beginning of such four-month period, or an
amount equal to the proceeds of any such property, if disposed of, subject
however, to the rights, if any, of the Company and its other creditors in such
property or such proceeds.
Nothing herein contained, however, shall affect the right of the Trustee:
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(A) to retain for its own account (i) payments made on account of any such
claim by any person (other than the Company) who is liable thereon, and (ii) the
proceeds of the bona fide sale of any such claim by the Trustee to a third
person, and (iii) distributions made in cash, securities, or other property in
respect of claims filed against the Company in bankruptcy or receivership or in
proceedings for reorganization pursuant to Federal or State bankruptcy laws or
other similar laws;
(B) to realize, for its own account, upon any property held by it as
security for any such claim, if such property was so held prior to the beginning
of such four-month period;
(C) to realize, for its own account, but only to the extent of the claim
hereinafter mentioned, upon any property held by it as security for any such
claim, if such claim was created after the beginning of such four-month period
and such property was received as security therefor simultaneously with the
creation thereof, and if the Trustee shall sustain the burden of proving that at
the time such property was so received the Trustee had no reasonable cause to
believe that a default, as defined in subsection (c) of this Section 8.13, would
occur within four months; or
(D) to receive payment on any claim referred to in paragraph (B) or (C),
against the release of any property held as security for such claim as provided
in such paragraph (B) or (C), as the case may be, to the extent of the fair
value of such property.
For the purposes of paragraphs (B), (C) and (D), property substituted after
the beginning of such four-month period for property held as security at the
time of such substitution shall, to the extent of the fair value of the property
released, have the same status as the property released, and, to the extent that
any claim referred to in any of such paragraphs is created in renewal of or in
substitution for or for the purpose of repaying or refunding any pre-existing
claim of the Trustee as such creditor, such claim shall have the same status as
such pre-existing claim.
If the Trustee shall be required to account, the funds and property held in
such special account and the proceeds thereof shall be apportioned between the
Trustee, the Holders of Securities of a series as to which such Trustee is
acting as Trustee hereunder and the holders of other indenture securities in
such manner that the Trustee, the Holders and the holders of other indenture
securities realize, as a result of payments from such special account and
payments of dividends on claims filed against the Company in bankruptcy or
receivership or in proceedings for reorganization pursuant to the Federal or
State bankruptcy laws or other similar laws, the same percentage of the
irrespective claims, figured before crediting to the claim of the Trustee
anything on account of the receipt by it from the Company of the funds and
property in such special account and before crediting to the respective claims
of the Trustee, the Holders and the holders of other indenture securities
dividends on claims filed against the Company in bankruptcy or receivership or
in proceedings for reorganization pursuant to the Federal or State bankruptcy
laws or other similar laws, but after crediting thereon receipts on account of
the indebtedness represented by their respective claims from all sources other
than from such dividends and from the funds and property so held in such special
account. As used in this paragraph, with respect to any claim, the term
"dividends" shall include any distribution with respect to such claim, in
bankruptcy or receivership or in proceedings for reorganization pursuant to the
Federal or State bankruptcy laws or other similar laws, whether such
distribution is made in cash, securities or other property, but shall not
include any such distribution with respect to the secured portion, if any, of
such claim. The court in which such bankruptcy, receivership or proceeding for
reorganization is pending shall have jurisdiction (i) to apportion between the
Trustee, the Holders and the holders of other indenture securities, in
accordance with the provisions of this paragraph, the funds and property held in
such special account and the proceeds thereof, or (ii) in lieu of such
apportionment, in whole or in part, to give to the provisions of this paragraph
due consideration in determining the fairness of the distributions to be made to
the Trustee, the Holders and the holders of other indenture securities with
respect to their respective claims, in which event it shall not be necessary to
liquidate or to appraise the value of any securities or other property held in
such special account or as security for any such claim, or to make a specific
allocation of such distributions as between the secured and unsecured portions
of such claims, or otherwise to apply the provisions of this paragraph as a
mathematical formula.
Any Trustee who has resigned or been removed after the beginning of such
four-month period shall be subject to the provisions of this subsection (a) as
though such resignation or removal had not occurred. If any
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Trustee has resigned or been removed prior to the beginning of such four-mouth
period, it shall be subject to the provisions of this subsection (a) if and only
if the following conditions exist:
(i) the receipt of property or reduction of claim which would have given
rise to the obligation to account, if such Trustee had continued as trustee,
occurred after the beginning of such four-month period; and
(ii) such receipt of property or reduction of claim occurred within four
months after such resignation or removal.
(b) There shall be excluded from the operation of subsection (a) of this
Section 8.13 a creditor relationship arising from:
(1) the ownership or acquisition of securities issued under any indenture,
or any security or securities having a maturity of one year or more at the time
of acquisition by the Trustee;
(2) advances authorized by a receivership or bankruptcy court of competent
jurisdiction, or by this Indenture, for the purpose of preserving any property
which shall at any time be subject to the lien of this Indenture or of
discharging tax liens or other prior liens or encumbrances thereon, if notice of
such advance and of the circumstances surrounding the making thereof is given to
the Holders at the time and in the manner provided in Section 6.04 with respect
to reports pursuant to subsections (a) and (b) thereof, respectively;
(3) disbursements made in the ordinary course of business in the capacity
of trustee under an indenture, transfer agent, registrar, custodian, paying
agent, fiscal agent or depositary, or other similar capacity;
(4) an indebtedness created as a result of services rendered or premises
rented; or an indebtedness created as a result of goods or securities sold in a
cash transaction as defined in subsection (c) of this Section 8.13;
(5) the ownership of stock or of other securities of a corporation
organized under the provisions of section 25(a) of the Federal Reserve Act, as
amended, which is directly or indirectly a creditor of the Company; or
(6) the acquisition, ownership, acceptance or negotiation of any drafts,
bills of exchange, acceptances or obligations which fall within the
classification of self-liquidating paper as defined in subsection (c) of this
Section 8.13.
(c) For the purposes of this Section 8.13:
(1) The term "default" shall mean any failure to make payment in full of
the principal of or interest upon one of the Securities of any series or upon
the other indenture securities when and as such principal or interest becomes
due and payable.
(2) The term "other indenture securities" shall mean securities upon which
the Company is an obligor (as defined in the Trust Indenture Act of 1939)
outstanding under any other indenture (A) under which the Trustee is also a
trustee, (B) which contains provisions substantially similar to the provisions
of subsection (a) of this Section 8.13, and (C) under which a default exists at
the time of the apportionment of the funds and property held in said special
account.
(3) The term "cash transaction" shall mean any transaction in which full
payment for goods or securities sold is made within seven days after delivery of
the goods or securities in currency or in checks or other orders drawn upon
banks or bankers and payable upon demand.
(4) The term "self-liquidating paper" shall mean any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or incurred
by the Company for the purpose of financing the purchase, processing,
manufacture, shipment, storage or sale of goods, wares or merchandise and which
is secured by documents evidencing title to, possession of, or a lien upon, the
goods, wares or merchandise or the receivables
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35
or proceeds arising from the sale of the goods, wares or merchandise previously
constituting the security; provided that the security is received by the Trustee
simultaneously with the creation of the creditor relationship with the Company
arising from the making, drawing, negotiating or incurring of the draft, bill of
exchange, acceptance or obligation.
(5) The term "Company" shall mean any obligor upon the Securities.
ARTICLE NINE
CONCERNING THE HOLDERS
SECTION 9.01. Action by Holders. (a) Whenever in this Indenture it is
provided that the Holders of a specified percentage in aggregate principal
amount at Stated Maturity of the Securities of any or all series may take any
action (including the making of any demand or request, the giving of any notice,
consent or waiver or the taking of any other action) the fact that at the time
of taking any such action the Holders of such specified percentage have joined
therein may be evidenced (A) by any instrument or any number of instruments of
similar tenor executed by Holders in person or by agent or proxy appointed in
writing, or (B) by the record of the Holders of Securities voting in favor
thereof at any meeting of Holders duly called and held in accordance with the
provisions of Article Ten or (C) by a combination of such instrument or
instruments and any such record of such meeting of such Holders.
(b) If the Company or Trustee shall solicit from the Holders of any or all
series any request, demand, authorization, direction, notice, consent, waiver or
other act, the Company or Trustee, as the case may be, may, at its option, by or
pursuant to resolution of the Board of Directors fix in advance a record date
for the determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other act, but the Company
or Trustee, as the case may be, shall have no obligation to do so. If such a
record date is fixed, such request, demand, authorization, direction, notice,
consent, waiver or other act may be given before or after the record date, but
only the Holders of record at the close of business on the record date shall be
deemed to be Holders for the purposes of determining whether Holders of the
requisite proportion of Securities have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or other
act, and for that purpose the Securities deemed to be outstanding shall be
computed as of the record date; provided, however, that no such authorization,
agreement or consent by the Holders on the record date shall be deemed effective
unless it shall become effective pursuant to the provisions of this Indenture
not later than six months after the record date.
SECTION 9.02. Proof of Execution by Holders. Subject to the provisions of
Sections 8.01, 8.02 and 10.05, proof of the execution of any instrument by a
Holder, his agent or proxy shall be sufficient if made in accordance with such
reasonable rules and regulations as may be prescribed by the Trustee or in such
manner as shall be satisfactory to the Trustee. The ownership of Securities of
any series shall be proved by the registry books of the Company or by a
certificate of the registrar of the Securities of any series.
The record of any meeting of Holders of Securities may be proved in the
manner provided in Section 10.06.
SECTION 9.03. Who Deemed Absolute Owners. The Company, the Trustee, any
paying agent, any transfer agent and any Security registrar may treat the Holder
of any Unregistered Security and the Holder of any coupon, except with respect
to a Fully Registered Security, whether or not the Security to which it
appertained be registered, as the absolute owner of such Security or coupon for
the purpose of receiving payment thereof or on account thereof and for all other
purposes (whether or not such Security or coupon shall be overdue) and neither
the Company, the Trustee, any paying agent, any transfer agent nor any Security
registrar shall be affected by any notice to the contrary. The Company, the
Trustee, any paying agent, any transfer agent and any Security registrar may
treat the person in whose name a Registered Security shall be registered upon
the registry books of the Company as the absolute owner of such Security
(whether or not such Security shall be overdue) for the purpose of receiving
payment of principal of, premium, if any, on and, if such Registered
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Security is a Fully Registered Security, interest, if any, on, such Registered
Security and for all other purposes; and neither the Company nor the Trustee nor
any paying agent nor any transfer agent nor any Security registrar shall be
affected by any notice to the contrary. All such payments so made to any Holder
for the time being or upon his order shall be valid, and, to the extent of the
sum or sums so paid, effectual to satisfy and discharge the liability for moneys
payable upon such Security.
The amount of Unregistered Securities held by any Person executing any
instrument or writing as a Holder, and the numbers of such Unregistered
Securities, and the date of his holding the same, may be proved by the
production of such Securities or by a certificate executed by any trust company,
bank, banker or member of a national securities exchange (wherever situated), as
depositary, if such certificate is in form satisfactory to the Trustee, showing
that at the date therein mentioned such Person had on deposit with such
depositary, or exhibited to it, the Unregistered Securities therein described;
or such facts may be proved by the certificate or affidavit of the Person
executing such instrument or writing as a Holder, if such certificate or
affidavit is in form satisfactory to the Trustee. The Trustee and the Company
may assume that such ownership of any Unregistered Security continues until (i)
another certificate bearing a later date issued in respect of the same
Unregistered Security is produced, or (ii) such Unregistered Security is
produced by some other Person, or (iii) such Unregistered Security is registered
as to principal or is surrendered in exchange for a Fully Registered Security,
or (iv) such Unregistered Security has been cancelled in accordance with Section
2.08.
SECTION 9.04. Company-Owned Securities Disregarded. In determining whether
the Holders of the requisite aggregate principal amount at Stated Maturity of
Securities have concurred in any direction, consent or waiver under this
Indenture, Securities which are owned by the Company or any other obligor on
such Securities or by any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or any
other obligor on the Securities shall be disregarded and deemed not to be
outstanding for the purpose of any such determination; provided that for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction or consent only Securities which the Trustee knows are so owned
shall be so disregarded. Securities so owned which have been pledged in good
faith may be regarded as outstanding for the purposes of this Section 9.04 if
the pledgee shall establish to the satisfaction of the Trustee the pledgee's
right to vote such Securities and that the pledgee is not a person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company or any such other obligor. In the case of a dispute as
to such right, any decision by the Trustee taken upon the advice of counsel
shall be full protection to the Trustee.
SECTION 9.05. Revocation of Consents, Future Holders Bound. (a) At any
time prior to but not after, the evidencing to the Trustee, as provided in
Section 9.01, of the taking of any action by the Holders of the percentage in
aggregate principal amount at Stated Maturity of the Securities of any or all
series, as the case may be, specified in this Indenture in connection with such
action, any Holder of a Security the number, letter or other distinguishing
symbol of which is shown by the evidence to be included in the Securities the
Holders of which have consented to such action may, by filing written notice
with the Trustee at the Principal Office of the Trustee and upon proof of
holding as provided in Section 9.02, revoke such action so far as concerns such
Holder and all future Holders and owners of such Security and any Securities
which may be issued in exchange or substitution therefor, irrespective of
whether or not any notation in regard thereto is made upon such Security or such
other Security issued in exchange or substitution therefor.
(b) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Security shall bind every future Holder of
the same Security and the Holder of every Security issued upon the registration
of transfer thereof or in exchange therefor or in lieu thereof, in respect of
any action taken, suffered or omitted by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such Security.
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ARTICLE TEN
HOLDERS' MEETINGS
SECTION 10.01. Purposes of Meeting. A meeting of the Holders of Securities
of any or all series may be called at any time and from time to time pursuant to
the provisions of this Article Ten for any of the following purposes:
(a) to give any notice to the Company or to the Trustee, or to give any
directions to the Trustee, or to consent to the waiving of any default hereunder
and its consequences, or to take any other action authorized to be taken by
Holders pursuant to any of the provisions of Article Seven;
(b) to remove the Trustee and nominate a successor trustee pursuant to the
provisions of Article Eight;
(c) to consent to the execution of an indenture or indentures supplemental
hereto pursuant to the provisions of Section 11.02; or
(d) to take any other action authorized to be taken by or on behalf of the
Holders of any specified aggregate principal amount at Stated Maturity of the
Securities of any or all series, as the case may be, under any other provisions
of this Indenture or under applicable law.
SECTION 10.02. Call of Meetings by Trustee. The Trustee may at any time
call a meeting of Holders of Securities of any or all series to take any action
specified in Section 10.01, to be held at such time and at such place in
Houston, Texas, or New York, New York, as the Trustee shall determine. Notice of
every meeting of the Holders of Securities of any or all series, setting forth
the time and the place of such meeting and in general terms the action proposed
to be taken at such meeting, shall be mailed to Holders of Registered Securities
of each series affected, at their addresses as they appear on the registry books
of the Company, and notice to Holders of Unregistered Securities of each series
affected shall be published in an Authorized Newspaper in the Place of Payment.
Such notice shall be mailed or published, as the case may be, not less than 20
nor more than 90 days prior to the date fixed for the meeting. However, if all
Securities of any series with respect to which the meeting is to be held are
Registered Securities no notice need be given except notice by mail as
hereinabove provided.
Failure to receive such notice or any defect therein shall in no case
affect the validity of any action taken at such meeting. Any meeting of Holders
of Securities of any or all series, as the case may be, shall be valid without
notice if the Holders of all such Securities outstanding, the Company and the
Trustee are present in person or by proxy or shall have waived notice thereof
before or after the meeting.
SECTION 10.03. Call of Meetings by Company or Holders. In case at any time
the Company, pursuant to a resolution of its Board of Directors, or the Holders
of at least 10% in aggregate principal amount at Stated Maturity of the
Securities then outstanding of any or all series, as the case may be, that may
be affected by the action proposed to be taken at the meeting, shall have
requested the Trustee to call a meeting of Holders of Securities of any or all
series, as the case may be, that may be so affected by written request setting
forth in a reasonable detail the action proposed to be taken at the meeting, and
the Trustee shall not have mailed the notice of such meeting within 20 days
after receipt of such request, then the Company or such Holders, in the amount
specified, may determine the time and the place in a location designated in
Section 10.02 for such meeting and may call such meeting to take any action
authorized in Section 10.01, by mailing notice thereof as provided in Section
10.02.
SECTION 10.04. Qualification for Voting. To be entitled to vote at any
meeting of Holders of Securities, a Person shall (a) be a Holder of one or more
Securities with respect to which such meeting is being held or (b) be a Person
appointed by an instrument in writing as proxy by such a Holder. The only
Persons who shall be entitled to be present or to speak at any meeting of
Holders of Securities of any or all series, as the case may be, shall be the
Persons entitled to vote at such meeting and their counsel and any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.
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SECTION 10.05. Regulations. Notwithstanding any other provisions of this
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Holders of Securities, in regard to proof of the
holding of Securities and of the appointment of proxies, and in regard to the
appointment and duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it shall deem fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Holders of Securities as provided in Section 10.03, in which case
the Company or the Holders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by vote of the Holders of a majority
in principal amount at Stated Maturity of the Securities represented at the
meeting.
Subject to the provisions of Section 9.04, at any meeting each Holder of
Securities with respect to which such meeting is being held, or proxy therefor,
shall be entitled to one vote for each $1,000 in principal amount (in the case
of Original Issue Discount Securities, such principal amount to be determined as
provided in Section 2.01(9)) of such Securities held or represented by him;
provided, however, that no vote shall be cast or counted at any meeting in
respect of any such Security challenged as not outstanding and ruled by the
chairman of the meeting to be not outstanding. The chairman of the meeting shall
have no right to vote other than as a Holder of Securities or proxy therefor. At
any meeting of Holders of Securities, the presence of Persons holding or
representing the Securities with respect to which such meeting is being held in
such aggregate principal amount sufficient to take action on the business for
the transaction of which such meeting was called shall constitute a quorum, but,
if less than a quorum is present, the Persons holding or representing a majority
in such aggregate principal amount of such Securities represented at the meeting
may adjourn such meeting with the same effect, for all intents and purposes, as
though a quorum had been present. Any meeting of Holders of Securities with
respect to which such meeting is being held duly called pursuant to the
provisions of Section 10.02 or 10.03 may be adjourned to another specified time
and place from time to time by vote of the Holders of a majority in such
aggregate principal amount of the Securities represented at the meeting and
entitled to vote, and the meeting may be held as so adjourned without further
notice.
SECTION 10.06. Voting. The vote upon any resolution submitted to any
meeting of Holders of Securities with respect to which such meeting is being
held shall be by written ballots on which shall be inscribed the signatures of
the Holders or of their representatives by proxy and the serial number or
numbers of the Securities held or represented by them. The permanent chairman of
the meeting shall appoint two inspectors of votes who shall count all votes cast
at the meeting for or against any resolution and who shall make and file with
the secretary of the meeting their verified written reports in duplicate of all
votes cast at the meeting. A record in duplicate of the proceedings of each
meeting of Holders shall be prepared by the secretary of the meeting and there
shall be attached to said record the original reports of the inspectors of votes
on any vote by ballot taken thereat and affidavits by one or more persons having
knowledge of the facts setting forth a copy of the notice of the meeting and
showing that said notice was mailed as provided in Section 10.02. The record
shall show the serial numbers of the Securities voting in favor of or against
any resolution. The record shall be signed and verified by the affidavits of the
permanent chairman and secretary of the meeting and one of the duplicates shall
be delivered to the Company and the other to the Trustee to be preserved by the
Trustee. Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
SECTION 10.07. No Delay of Rights by Meeting. Nothing contained in this
Article Ten shall be deemed or construed to authorize or permit, by reason of
any call of a meeting of Holders of Securities or any rights expressly or
impliedly conferred hereunder to make such call, any hindrance or delay in the
exercise of any right or rights conferred upon or reserved to the Trustee or to
the Holders of Securities under any of the provisions of this Indenture or of
the Securities.
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ARTICLE ELEVEN
SUPPLEMENTAL INDENTURES
SECTION 11.01. Supplemental Indentures without Consent of Holders. Without
the consent of any Holders of any series of Securities, the Company, when
authorized by or pursuant to a resolution of the Board of Directors, and the
Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto for one or more of the following purposes:
(a) to evidence the succession of another corporation to the Company, or
successive successions, and the assumption by the successor corporation,
pursuant to Article Twelve hereof, of the covenants, agreements and obligations
of the Company herein and in the Securities contained;
(b) to add to the covenants of the Company such further covenants,
restrictions or conditions for the protection of the Holders of any series of
Securities as the Board of Directors and the Trustee shall consider to be for
the protection of the Holders of such Securities, and to make the occurrence, or
the occurrence and continuance, of a default in any of such additional
covenants, restrictions or conditions a default or an Event of Default
permitting the enforcement of all or any of the several remedies provided in
this Indenture as herein set forth; provided, however, that in respect of any
such additional covenant, restriction or condition such supplemental indenture
may provide for a particular period of grace after default (which period may be
shorter or longer than that allowed in the case of other defaults) or may
provide for an immediate enforcement upon such default or may limit the remedies
available to the Trustee upon such default and shall not adversely affect the
interests of the Holders of Securities of any series;
(c) to convey, transfer, assign, mortgage or pledge to the Trustee as
security for the Securities of any series, any property or assets which the
Company may desire or may be required to convey, transfer, assign, mortgage or
pledge in accordance with the provisions of Section 5.03 or Section 12.02;
(d) to establish the form or terms of Securities of any series as permitted
by Section 2.01;
(e) to cure any ambiguity, to correct or supplement any provision contained
herein or in any supplemental indenture which may be defective or inconsistent
with any other provision contained herein or in any supplemental indenture, or
to make such other provisions in regard to matters or questions arising under
this Indenture which shall not be inconsistent with the provisions of this
Indenture; provided, however, that such action shall not adversely affect the
interests of the Holders of Securities of any series;
(f) to evidence and provide for the acceptance of appointment hereunder by
a successor trustee with respect to the Securities of one or more series and to
add to or change any of the provisions of this Indenture as shall be necessary
to provide for or facilitate the administration of the trusts hereunder by more
than one Trustee, pursuant to the requirements of Section 8.11;
(g) to provide for the documentation necessary for the issuance of
Securities outside the United States of America; or
(h) to conform the Indenture to the provisions of the Trust Indenture Act
of 1939, as then in effect.
The Trustee is hereby authorized to join with the Company in the execution
of any such supplemental indenture, to make any further appropriate agreements
and stipulations which may be therein contained and to accept the conveyance,
transfer and assignment of any property thereunder, but the Trustee shall not be
obligated to, but may in its discretion, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section
11.01 may be executed by the Company and the Trustee without the consent of the
Holders of any of the Securities at the time outstanding, notwithstanding any
of the provisions of Section 11.02.
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SECTION 11.02. Supplemental Indentures with Consent of Holders of a Series.
With the consent (evidenced as provided in Section 9.01) of the Holders of not
less than 50% in aggregate principal amount at Stated Maturity of the Securities
at the time outstanding of each series affected by such supplemental indenture
or indentures, the Company, when authorized by or pursuant to a resolution of
the Board of Directors, and the Trustee may from time to time and at any time
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of any supplemental indenture or of modifying in
any manner the rights of the Holders of the Securities of each such series under
this Indenture; provided, however, that no such supplemental indenture shall
without the consent of the Holder of each outstanding Security affected thereby
(i) extend the fixed Maturity of any Security, or reduce the rate of interest or
extend the time of payment of interest, if any, thereon or reduce the principal
thereof or the time during which premium is payable thereon, or make the
principal thereof or any premium or interest thereon payable in any coin or
currency other than that provided in the securities or reduce the amount of the
principal of in Original Issue Discount Security that would be due and payable
upon an acceleration of the maturity thereof pursuant to Section 7.01 or the
amount thereof provable in bankruptcy pursuant to Section 7.02 without the
consent of the Holder of each Security so affected, or (ii) reduce the
percentage in principal amount at Stated Maturity of the outstanding Securities,
the consent of whose Holders is required for any such supplemental indenture, or
the consent of whose Holders is required for any waiver of compliance with
certain provisions hereof or of certain defaults hereunder and their
consequences provided for in this Indenture, or (iii) modify any provision of
this Section 11.02 or Section 7.07 hereof except to increase any such percentage
or to provide certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Security affected thereby. A
supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
Upon the request of the Company, accompanied by a copy of a resolution of
the Board of Directors certified by its Secretary or Assistant Secretary
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence of the consent of Holders of such series as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.
It shall not be necessary for the consent of the Holders under this Section
11.02 to approve the particular form of any proposed supplemental indenture, but
it shall be sufficient if such consent shall approve the substance thereof.
SECTION 11.03. Compliance with Trust Indenture Act; Effect of Supplemental
Indentures. Any supplemental indenture executed pursuant to the provisions of
this Article Eleven shall comply with the Trust Indenture Act of 1939, as then
in effect. Upon the execution of any supplemental indenture pursuant to the
provisions of this Article Eleven, this Indenture shall be and be deemed to be
modified and amended in accordance therewith and the respective rights,
limitation of rights, obligations, duties and immunities under this Indenture of
the Trustee, the Company and the Holders of the series of Securities affected
shall thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
SECTION 11.04. Notation on Securities. Securities authenticated and
delivered after the execution of any supplemental indenture pursuant to the
provisions of this Article Eleven may bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture. If the
Company or the Trustee shall so determine, new Securities of any series so
modified as to conform, in the opinion of the Trustee and the Board of
Directors, to any modification of this indenture contained in any such
supplemental indenture may be prepared and executed by the Company,
authenticated by the Trustee and delivered in exchange for the Securities of
such series then outstanding.
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41
SECTION 11.05. Evidence Of Compliance of Supplemental Indenture to be
Furnished Trustee. The Trustee, subject to the provisions of Sections 8.01 and
8.02, shall be entitled to receive and shall be fully protected in relying upon,
an Officers' Certificate and an Opinion of Counsel as conclusive evidence that
any supplemental indenture executed pursuant hereto is authorized and permitted
by this Indenture and complies with the requirements of this Article Eleven.
ARTICLE TWELVE
CONSOLIDATION, MERGER AND SALE
SECTION 12.01. Company may Consolidate, etc., on Certain Terms. Subject to
any modification contained in any indenture supplemental hereto under which any
series of Securities is issued and subject to the provisions of Section 12.02,
nothing contained in this Indenture or in any of the Securities shall prevent
any consolidation or merger of the Company with or into any other corporation or
corporations (whether or not affiliated with the Company), or successive
consolidations or mergers in which the Company or its successor or successors
shall be a party or parties, or shall prevent any sale or conveyance of all or
substantially all the property of the Company, to any other corporation (whether
or not affiliated with the Company) authorized to acquire and operate the same;
provided, however, that upon any such consolidation, merger, sale or conveyance,
other than a consolidation or merger in which the Company is the continuing
corporation, the due and punctual payment of the principal of and premium, if
any, and interest, if any, on all of the Securities, according to their tenor,
and the due and punctual performance and observance of all of the covenants and
conditions of this Indenture and in such series to be performed by the Company,
shall be expressly assumed, by supplemental indenture satisfactory in form to
the Trustee, executed and delivered to the Trustee by the corporation (if other
than the Company) formed by such consolidation, or into which the Company shall
have been merged, or by the corporation which shall have acquired such property;
and provided further that the Company or such successor corporation, as the case
may be, shall not immediately after such merger or consolidation, or such sale
or conveyance, be in default in the performance of any such covenant or
condition.
SECTION 12.02. Securities to be Secured in Certain Events. If, upon any
consolidation or merger of the Company with or into any other corporation, or
upon any sale or conveyance of all or substantially all the property of the
Company to any other corporation, any of the property of the Company or of any
Restricted Subsidiary would thereupon become subject to any mortgage, lien or
pledge, the Company, prior to or simultaneously with such consolidation, merger,
sale or conveyance, will secure the Securities of each series outstanding
hereunder, equally and ratably with any other obligations of the Company or any
Restricted Subsidiary then entitled thereto, by a direct lien on all such
property prior to all liens other than any theretofore existing thereon.
SECTION 12.03. Successor Corporation to be Substituted. In case of any such
consolidation, merger, sale or conveyance and upon the assumption by the
successor corporation, by supplemental indenture, executed and delivered to the
Trustee and satisfactory in form to the Trustee, of the due and punctual payment
of the principal of and premium, if any, and interest, if any, on all of the
Securities of each series and the due and punctual performance of all of the
covenants and conditions of this Indenture and in such series to be performed by
the Company, such successor corporation shall succeed to and be substituted for
the Company, with the same effect as if it had been named herein and, if the
Company is to be voluntarily dissolved, the Company shall thereupon be released
from all obligations hereunder and under the Securities of each series. Such
successor corporation thereupon may cause to be signed, and may issue either in
its own name or in the name of Lyondell Petrochemical Company any or all of the
Securities of each series issuable hereunder which theretofore shall not have
been signed by the Company and delivered to the Trustee; and, upon the order of
such successor corporation instead of the Company and subject to all the terms,
conditions and limitations in this Indenture prescribed, the Trustee shall
authenticate and shall deliver any Securities which previously shall have been
signed and delivered by the officers of the Company to the Trustee for
authentication, and any Securities which such successor corporation thereafter
shall cause to be signed and delivered to the Trustee for that purpose. All the
Securities so issued shall in all respects have the same legal rank and benefit
under this Indenture as the other
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42
Securities of such series theretofore or thereafter issued in accordance with
the terms of this Indenture as though all of such Securities had been issued at
the date of the execution hereof.
SECTION 12.04. Opinion of Counsel to be Given Trustee. Before the Trustee
shall execute any supplemental indenture required pursuant to this Article
Twelve, the Trustee, subject to Sections 8.01 and 8.02, shall receive and shall
be fully protected in relying upon, an Officers' Certificate and an Opinion of
Counsel as conclusive evidence that any such consolidation, merger, sale or
conveyance and any such assumption complies with the provisions of this Article.
ARTICLE THIRTEEN
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 13.01. Discharge of Indenture. When (a) the Company shall deliver
to the Trustee for cancellation all Securities of any series theretofore
authenticated (other than any Securities of such series which shall have been
destroyed, lost or stolen or in lieu of or in substitution for which other
Securities shall have been authenticated and delivered) and not theretofore
cancelled, or (b) all the Securities of any series not theretofore cancelled or
delivered to the Trustee for cancellation shall have become due and payable, or
are by their terms to become due and payable within one year or are to be called
for redemption within one year under arrangements satisfactory to the Trustee
for the giving of notice of redemption, and the Company shall deposit with the
Trustee, in trust, funds (other than funds repaid by the Trustee to the Company
in accordance with Section 13.04) sufficient to pay at maturity or upon
redemption all of the Securities of such series (other than any Securities of
such series which shall have been mutilated, destroyed, lost or stolen and in
lieu of or in substitution for which other Securities shall have been
authenticated and delivered or which shall have been paid) not theretofore
cancelled or delivered to the Trustee for cancellation, including principal and
premium, if any, and interest, if any, due or to become due to such date of
maturity or redemption date, as the case may be, and if in either case the
Company shall also pay or cause to be paid all other sums payable hereunder by
the Company, then this Indenture shall cease to be of further effect with
respect to Securities of such series, and the Trustee, on demand of the Company
accompanied by an Officers' Certificate and an Opinion of Counsel as required by
Section 16.07 and at the cost and expense of the Company, shall execute proper
instruments acknowledging satisfaction of and discharging this Indenture with
respect to Securities of such series, the Company, however, hereby agreeing to
reimburse the Trustee for any costs or expenses thereafter reasonably and
properly incurred and to compensate the Trustee for any services reasonably and
properly rendered by the Trustee in connection with this Indenture or the
Securities.
SECTION 13.02. Deposited Moneys to be Held in Trust by Trustee. All moneys
deposited with the Trustee pursuant to Section 13.01 shall be held in trust and
applied by it to the payment, either directly or through any paying agent
(including the Company if acting as its own paying agent), to the Holders of the
particular Securities for the payment or redemption of which such moneys have
been deposited with the Trustee, of all sums due and to become due thereon for
principal and interest and premium, if any.
SECTION 13.03. Paying Agent to Repay Moneys Held. Upon the satisfaction and
discharge of this Indenture, all moneys then held by any paying agent of the
Securities (other than the Trustee) shall, upon demand of the Company, be repaid
to it or paid to the Trustee, and thereupon such paying agent shall be released
from all further liability with respect to such moneys.
SECTION 13.04. Return of Unclaimed Moneys. Any moneys deposited with or
paid to the Trustee for payment of the principal of (and premium, if any) or
interest, if any, on Securities of any series and not applied but remaining
unclaimed by the Holders of Securities of that series for three years after the
date upon which the principal of, and premium, if any, or interest, if any, on
such Securities, as the case may be, shall have become due and payable, shall,
upon written demand, be repaid to the Company by the Trustee; and the Holder of
any of such Securities shall thereafter look only to the Company for any payment
which such Holder may be entitled to collect, provided, however, that, before
being required to make any such repayment, the Trustee may (at the cost of the
Company) mail to such Holders at their last known address or cause to be
published once a week for two successive weeks, in each case on any day of the
week, in an Authorized Newspaper in the Place of
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43
Payment, a notice (in such form as may be deemed appropriate by the Trustee)
that said moneys remain unclaimed and that, after a date named therein, any
unclaimed balance of said moneys then remaining will be returned to the Company
(except that with respect to presentation of Securities for payment and
transfer, such term shall mean the office or agency of the Trustee in said city
at which at any particular time its corporate agency business shall be
conducted).
ARTICLE FOURTEEN
DEFEASANCE
SECTION 14.01. Applicability of Article. If pursuant to Section 2.01
provision is made for the defeasance of Securities of a series, then the
provisions of this Article shall be applicable except as otherwise specified as
contemplated by Section 2.01 for Securities of such series.
SECTION 14.02. Defeasance upon Deposit of Moneys or U.S. Government
Obligations. At the Company's option, either (i) the Company shall be deemed to
have been Discharged (as defined below) from its obligations with respect to
Securities of any series on the 121st day after the applicable conditions set
forth below have been satisfied, or (ii) the Company shall cease to be under any
obligation to comply with any term, provision or condition set forth in Sections
5.03, 5.04, 5.08, 12.01 and 12.02 with respect to Securities of any series at
any time after the applicable conditions set forth below have been satisfied:
(a) the Company shall have deposited or caused to be deposited irrevocably
with the Trustee as trust funds in trust, specifically pledged as security for,
and dedicated solely to, the benefit of the Holders of the Securities of such
series, (i) money in an amount, or (ii) U.S. Government Obligations (as defined
below), which through the payment of interest, principal and premium, if any, in
respect thereof in accordance with their terms will provide (without any
reinvestment of such interest, principal or premium), not later than one day
before the due date of any payment, money in an amount, or (iii) a combination
of (i) and (ii), sufficient, in the opinion (with respect to (ii) and (iii)) of
a nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee at or prior to the time
of such deposit, to pay and discharge each installment of principal (including
any mandatory sinking fund payments) of, premium, if any, and interest on, the
outstanding Securities of such series on the dates such installments of
interest, principal or premium are due or the outstanding Securities of such
series are redeemable, if applicable, pursuant to Section 14.02(b) below;
(b) in case any of the Securities of such series are to be redeemed on any
date prior to their Stated Maturity, the Company shall have given to the Trustee
an irrevocable notice pursuant to Section 3.02 of this Indenture requiring
redemption of such Securities on such date and the Company shall have given to
the Trustee in form satisfactory to the Trustee irrevocable instructions to
publish notice of redemption of such Securities prior to said date as provided
in Section 3.02 of this Indenture; and in the event such Securities are not to
be redeemed within the 60 days next succeeding the date of such deposit with the
Trustee, the Company shall have given the Trustee in form satisfactory to it
irrevocable instructions to publish, as soon as practicable, once in each of two
successive calendar weeks in an Authorized Newspaper, a notice to the Holders of
such Securities that the deposit required by Section 14.02(a) has been made
with the Trustee and stating such Maturity or redemption date or dates upon
which moneys are to be available for the payment of the principal of, premium,
if any, and interest on such Securities;
(c) the Company shall have delivered to the Trustee an Officers'
Certificate certifying as to whether the Securities of such series are then
listed on the New York Stock Exchange;
(d) if the Securities of such Series are listed on the New York Stock
Exchange, the Company shall have delivered to the Trustee an Opinion of Counsel
to the effect that the Company's exercise of its option under this Section would
not cause the Securities to be delisted;
(e) no Event of Default or event (including such deposit) which, with
notice or lapse of time, or both, would become an Event of Default with respect
to the Securities of such series shall have occurred and be
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44
continuing on the date of such deposit as evidenced to the Trustee in an
Officers' Certificate delivered to the Trustee concurrently with such deposit;
and
(f) the Company shall have paid or duly provided for payment of all amounts
then due to the Trustee pursuant to Section 8.06.
"Discharged" means that the Company shall be deemed to have paid and discharged
the entire indebtedness represented by, and obligations under, the Securities of
such series and to have satisfied all the obligations under this Indenture
relating to the Securities of such series (and the Trustee, at the expense of
the Company, shall execute proper instruments acknowledging the same), except
(A) the rights of Holders of Securities of such series to receive, from the
trust fund described in clause (a) above, payment of the principal of, and
premium, if any, and the interest on such Securities when such payments are due,
(B) the Company's obligations with respect to the Securities of such series
under Sections 2.05, 2.06, 5.02 and 14.03 and (C) the rights, powers, trusts,
duties and immunities of the Trustee hereunder, including without limitation,
the provisions of Section 8.06.
"U.S. Government Obligations" means securities that are (i) direct obligations
of the United States of America for the payment of which its full faith and
credit is pledged or (ii) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the United States of America the
payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case under clauses
(i) or (ii) are not callable or redeemable at the option of the issuer thereof.
SECTION 14.03. Deposited Moneys and U.S. Government Obligations to be held
in Trust. All moneys and U.S. Government Obligations deposited with the Trustee
pursuant to Section 14.02 in respect of Securities of a series shall be held in
trust and applied by it, in accordance with the provisions of such Securities
and this Indenture, to the payment, either directly or through any paying agent
(including the Company acting as its own paying agent) as the Trustee may
determine, to the Holders of such Securities, of all sums due and to become due
thereon for principal, premium, if any, and interest, if any, but such money
need not be segregated from other funds except to the extent required by law.
SECTION 14.04. Repayment to Company. After the Maturity and payment of the
principal of, premium, if any, and interest on the Securities of any series for
which money or U.S. Government Obligations have been deposited pursuant to
Section 14.02, the Trustee and any paying agent shall promptly pay or return to
the Company upon request any money and US. Government Obligations held by them
that are not required for the payment of the principal of, premium, if any, and
interest on the Securities of such series. The provisions of Section 13.04 shall
apply to any money held by the Trustee or any paying agent under this Article
that remains unclaimed for two years after the Maturity of any series of
Securities for which money or U.S. Government Obligations have been deposited
pursuant to Section 14.02.
SECTION 14.05. Reinstatement. If the Trustee is unable to apply any money
or U.S. Government Obligations in accordance with Section 14.02 by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Securities
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 14.02 until such time as the Trustee is permitted to apply all such
money or U.S. Government Obligations in accordance with Section 14.02.
ARTICLE FIFTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 15.01. Indenture and Securities Solely Corporate Obligations. No
recourse for the payment of the principal of or premium, if any, or interest, if
any, on any Security, or for any claim based thereon or otherwise in respect
thereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in this Indenture or in any supplemental indenture, or in any
Security, or because of the creation of
<PAGE>
45
any indebtedness represented thereby, shall be had against any incorporator,
stockholder, officer or director, as such, past, present or future, of the
Company or of any successor corporation, either directly or through the Company
or any successor corporation, whether by virtue of any constitution, statute or
rule of law, or by the enforcement of any assessment or penalty or otherwise; it
being expressly understood that all such liability is hereby expressly waived
and released as a condition of, and as a consideration for, the execution of
this Indenture and the issue of the Securities.
ARTICLE SIXTEEN
MISCELLANEOUS PROVISIONS
SECTION 16.01. Provisions Binding on Company's Successors. All the
covenants, stipulations, promises and agreements by the Company contained in the
Indenture shall bind its successors and assigns whether so expressed or not.
SECTION 16.02. Benefits of Indenture Restricted to Parties and Holders.
Nothing in this Indenture or in the Securities, expressed or implied, shall give
or be construed to give to any person, firm or corporation, other than the
parties hereto and their successors and assigns and the Holders, any legal or
equitable right, remedy or claim under or in respect of this Indenture, or under
any covenant, condition or provision herein contained; and, subject to the
provisions of Articles Nine and Fifteen, all of such covenants, conditions and
provisions shall be for the sole benefit of the parties hereto and the Holders.
SECTION 16.03. Official Acts by Successor Corporation. Any act or
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any corporation that shall at the time be the lawful sole successor
of the Company.
SECTION 16.04. Addresses for Notices, etc. Any notice or demand which by
any provision of this Indenture is required or permitted to be given or served
by the Trustee or by the Holders of Securities on the Company shall be deemed to
have been sufficiently given or served, for all purposes, if given or served at
the office of the Vice President and Treasurer at the principal office of the
Company at One Houston Center, 1221 McKinney Street, Suite 1600, Houston, Texas
77010 (until another address is filed by the Company with the Trustee). Any
notice, direction, request of demand by any Holder to or upon the Trustee shall
be deemed to have been sufficiently given or made, for all purposes, if given or
made in writing at 600 Travis Street, Houston, Texas 77002, addressed to the
attention of its Corporate Trust Department.
SECTION 16.05. Notices to Holders; Waiver. Where this Indenture or any
Security provides for notice to Holders of any event, (a) if any of the
Securities affected by such event are Registered Securities, such notice shall
be sufficiently given (unless otherwise herein or in such Securities expressly
provided) if in writing and mailed, first-class, postage prepaid, to each
Registered Holder of such Securities, at his address as it appears on the
registry books of the Company, not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such notice, and (b) if any
of the Securities affected by such event are Unregistered Securities, such
notice shall be sufficiently given (unless otherwise herein or in such
Securities expressly provided) if published once in an Authorized Newspaper in
the Place of Payment not later than the latest date, and not earlier than the
earliest date, prescribed for the giving of such notice. In any case where
notice to Holders is given by mail, neither the failure to mail such notice, nor
any defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver. The
Trustee shall deliver to the Company a copy of any notice delivered by the
Trustee to the Holders hereunder concurrently with the delivery of such notice
to the Holders.
<PAGE>
46
In case, by reason of the suspension of publication of any Authorized
Newspaper, or by reason of any other cause, it shall be impossible to make
publication of any notice in one or more Authorized Newspapers as required by
any Security or this Indenture, then such method of publication or notification
as shall be made with the approval of the Trustee shall constitute a sufficient
publication of such notice.
In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or otherwise, it shall be impractical to mail notice of
any event to the Holders of Securities when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee and the Company shall be deemed
to be a sufficient giving of such notice.
SECTION 16.06. GOVERNING LAW. THIS INDENTURE AND EACH SECURITY SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 16.07. Evidence of Compliance with Conditions Precedent. Upon any
application or demand by the Company to the Trustee to take any action under any
of the provisions of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and an Opinion of Counsel stating that, in the opinion of such counsel all such
conditions precedent have been complied with.
Each certificate or opinion provided for in this Indenture and delivered to
the Trustee with respect to compliance with a condition or covenant provided for
in this Indenture shall include (a) a statement that the person making such
certificate or opinion has read such covenant or condition; (b) a brief
statement as to the nature and scope of the examination or investigation upon
which the statements or opinion contained in such certificate or opinion are
based; (c) a statement that, in the opinion of such person, he or she has made
such examination or investigation as is necessary to enable him or her to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and (d) a statement as to whether or not, in the opinion of
such person, such condition or covenant has been complied with.
SECTION 16.08. Legal Holidays. In any case where the date of maturity of
interest on or principal of the Securities or the date fixed for redemption of
any Security will not be a Business Day at the applicable Place of Payment, then
payment of such interest and premium, if any, on or principal of the Securities
need not be made at such Place of Payment on such date but may be made on the
next Business Day at such Place of Payment with the same force and effect as if
made on the date of maturity or the date fixed for redemption and no interest
shall accrue for the period from and after such date.
SECTION 16.09. Trust Indenture Act to Control. If and to the extent that
any provision of this Indenture limits, qualifies or conflicts with another
provision included in this Indenture which is required to be included in this
Indenture by any of sections 310 to 317, inclusive, of the Trust Indenture Act
of 1939, such required provision shall control.
SECTION 16.10. No Security Interest Created. Nothing in this Indenture or
in the Securities, expressed or implied, shall be construed to create or
constitute a security interest under the Uniform Commercial Code or similar
legislation, as now or hereafter enacted and in effect, in any jurisdiction
where property of the Company or its Subsidiaries is located.
SECTION 16.11. Table of Contents, Headings, etc. The table of contents and
the titles and headings of the Articles and Sections of this Indenture have been
inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
SECTION 16.12. Execution in Counterparts. This Indenture may be executed
in any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
SECTION 16.13. Acceptance of Trust. The Trustee hereby accepts the trusts
declared and provided in this Indenture, upon the terms and conditions herein
above set forth.
<PAGE>
47
IN WITNESS WHEREOF, LYONDELL PETROCHEMICAL COMPANY has caused this
Indenture to be signed and acknowledged by its Vice President and Treasurer, and
its corporate seal to be affixed hereunto, and the same to be attested by its
Secretary or an Assistant Secretary, and TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, as Trustee, has caused this Indenture to be signed by one of its
Vice Presidents or Assistant Vice Presidents as of the day and year first
written above.
LYONDELL PETROCHEMICAL COMPANY
(SEAL) /s/ Russell S. Young
-------------------------------------------
By: Russell S. Young
Its: Vice President and Treasurer
Attest:
[Signature appears here]
- -------------------------
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
as Trustee
/s/ R. H. Trice, Jr.
------------------------------------------
By: Roy H. Trice, Jr.
Its: Vice President and Trust Officer
STATE OF TEXAS )
) SS.:
COUNTY OF HARRIS)
Before me, Beverly J. Dally, the undersigned officer, on this day
personally appeared Russell S. Young, known to me to be the person whose name is
subscribed to the foregoing instrument, and known to me to be the Vice President
and Treasurer of Lyondell Petrochemical Company, a Delaware corporation, and
acknowledged to me that he executed said instrument for the purpose and
consideration therein expressed, and as the act of said corporation.
Given under my hand and seal of office this 31st day of May, 1989.
(SEAL) /s/ Beverly J. Dally
-------------------------------------
Notary Public
<PAGE>
48
STATE OF TEXAS )
) SS.:
COUNTY OF HARRIS)
Before me, Beverly J. Dally, the undersigned officer, on this day
personally appeared Roy H. Trice, Jr., known to me to be the person whose name
is subscribed to the foregoing instrument, and known to me to be a Vice
President of Texas Commerce Bank National Association, a national banking
association, and acknowledged to me that he executed said instrument for the
purpose and consideration therein expressed, and as the act of said bank.
Given under my hand and seal of office this 31st day of May, 1989.
(SEAL) /s/ Beverly J. Dally
-------------------------------------
Notary Public
<PAGE>
EXHIBIT 4.4(a)
LYONDELL PETROCHEMICAL COMPANY
AND
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
Trustee
FIRST SUPPLEMENTAL INDENTURE
Dated as of May 31, 1989
to the
INDENTURE
Dated as of May 31, 1989
--------------------
9.95% Notes Due 1996
10.00% Notes Due 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Recitals of the Company............................. 1
Section 1. Terms Defined in the Indenture...................... 1
Section 2. Certain Defined Terms............................... 1
Section 3. Designation......................................... 5
Section 4. Dating of the Notes................................. 5
Section 5. Maximum Aggregate Outstanding Amount................ 5
Section 6. Stated Maturity..................................... 6
Section 7. Denomination of Notes............................... 6
Section 8. Payments of Principal and Interest, Record Dates.... 6
Section 9. Place of Payment.................................... 7
Section 10. Form of Notes....................................... 7
Section 11. Ranking............................................. 7
Section 12. Defeasance.......................................... 7
Section 13. Limitation on Liens................................. 8
Section 14. Put Right of Note Holders........................... 8
Section 15. Definition of Restricted Property and Subsidiary;
Limitation on Olefins Subsidiary.................... 9
Section 16. Concerning the Trustee.............................. 10
Section 17. Events of Default................................... 11
Section 18. Governing Law....................................... 11
Section 19. Counterparts........................................ 11
Section 20. Miscellaneous....................................... 11
</TABLE>
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of May 31, 1989 (the "Supplement"),
between LYONDELL PETROCHEMICAL COMPANY, a Delaware corporation (the "Company"),
and Texas Commerce Bank National Association, a national banking association
(the "Trustee"), as Trustee under an Indenture, dated as of May 31, 1989 (the
"Indenture").
RECITALS OF THE COMPANY
The Company has previously executed and delivered to the Trustee the
Indenture. Section 2.01 and 11.01 of the Indenture provide, among other things,
that the Company, when authorized by its Board of Directors, and the Trustee may
at any time and from time to time enter into an indenture supplemental to the
Indenture for the purpose of authorizing a series of Securities and specifying
the terms and form of each series of Securities. The Board of Directors of
the Company has duly authorized the creation, issuance, execution and delivery
of two series of notes consisting of the 9.95% Notes Due 1996 (the "1996 Notes")
and the 10.00% Notes Due 1999 (the "1999 Notes") in the maximum aggregate
principal amount of $300,000,000. The Company and the Trustee are executing and
delivering this Supplement in order to provide for the 1996 Notes and the 1999
Notes (collectively the "Notes").
All things necessary to make this Supplement a valid and legally binding
agreement of the Company have been done.
SECTION 1. Terms Defined in the Indenture.
All capitalized terms used in this Supplement that are defined in the
Indenture have the meanings assigned to them in the Indenture, except to the
extent that such terms are otherwise defined in this Supplement.
SECTION 2. Certain Defined Terms.
(A) Definitions.
"Applicable Percentage" means (1) in the case of each distribution referred
to in clause (5) of the definition of Designated Event, the percentage
determined, as of the Calculation Date corresponding with each such
distribution, by dividing the aggregate fair market value of such distribution
(as determined in good faith by the Board of Directors, whose determination
shall be conclusive), by the fair market value (based on the Current Market
Price) of all shares of all classes of the Company's capital stock outstanding
on the day immediately prior to each such Calculation Date, and (2) in the case
of each purchase or acquisition referred to in clause (5) of the definition of
Designated Event, the percentage determined, as of the Calculation Date
corresponding with each purchase or acquisition, by dividing all amounts
expended by the Company and its Subsidiaries or majority owned affiliates (the
amount expended, if other than cash, shall be determined in good faith by the
1
<PAGE>
Board of Directors, whose determination shall be conclusive) in connection with
the purchase or acquisition of any shares of any class of Voting Stock of the
Company, by the fair market value (based on the Current Market Price) of all
shares of all classes of the Company's capital stock outstanding on the day
immediately prior to each such Calculation Date.
"Capital Expenditures" shall mean all expenditures for the maintenance,
repair or upgrade of the Restricted Properties existing as of the date of this
Supplement which expenditures are capitalized under generally accepted
accounting principles.
"Current Market Price" means the closing price (or, if none, the average of
the last daily bid and asked prices) of the applicable class of capital stock as
quoted by the primary securities exchange on which the stock is traded, or, if
none, the primary inter-dealer quotation system, which reports quotations for
the class of capital stock, for the last trading day immediately prior to the
Calculation Date.
"Designated Event" means any one or more of the following events which
occurs subsequent to the date of issuance of the Notes:
(1) a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (with the exception of the Company, Atlantic Richfield Company, or any of
their respective majority owned subsidiaries or affiliates) becomes the
"beneficial owner" (as defined in Rule 13d-3 of the Exchange Act) of more than
20% of the then outstanding Voting Stock of the Company; provided that such 20%
shall be 30% with respect to any "employee benefit plan" (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended)
maintained by the Company or any Subsidiary, or any trust or funding vehicle
maintained thereunder;
(2) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Company's Board of Directors (together
with any new Director whose election by the Company's Board of Directors or
whose nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds of the Directors then still in office who either
were Directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Directors then in office;
(3) (i) the Company shall consolidate with or merge into any other
corporation or convey, transfer or lease all or substantially all of its assets
to any person or (ii) any corporation shall consolidate with or merge into the
Company, in either event pursuant to a transaction in which any shares of Voting
Stock of the Company outstanding immediately prior to the effectiveness thereof
are changed into or exchanged for cash, securities or other property; provided
that any merger,
2
<PAGE>
consolidation, conveyance, transfer or lease between the Company and its
Subsidiaries or between Subsidiaries shall be excluded from the operation of
this clause (3);
(4) the Company or any Subsidiary or majority owned affiliate shall
purchase or otherwise acquire, directly or indirectly, beneficial ownership of
Voting Stock of the Company if, after giving effect to such purchase or
acquisition, the Company (together with all Subsidiaries or majority owned
affiliates) shall have acquired, during any period of 12 consecutive months,
beneficial ownership of an aggregate of 30% or more of the Voting Stock of the
Company outstanding on the date immediately prior to the first such purchase or
acquisition during such period;
(5) on any date (a "Calculation Date") (i) the Company shall make any
distribution or distributions of cash, securities or other properties (other
than (a) regular cash dividends, or (b) capital stock or rights to acquire
capital stock substantially equivalent to capital stock of the Company) to
holders of Voting Stock, whether by means of dividend, reclassification,
recapitalization or otherwise, or (ii) the Company or any Subsidiary shall
purchase or otherwise acquire, directly or indirectly, beneficial ownership of
Voting Stock of the Company, and the sum of the Applicable Percentages
corresponding with all such distributions, purchases and acquisitions covered by
this clause (5), which are being made currently or have occurred during the 12
consecutive months immediately preceding the Calculation Date shall be at least
30%. The $500 million special distribution paid on January 17, 1989 to the
Company's sole stockholder at that time, Atlantic Richfield Company, shall not
be deemed to be a distribution subject to this clause (5); or
(6) during any fiscal year (i) the Company or any Subsidiary shall make any
distribution or distributions of cash, securities or other properties (other
than (a) regular cash dividends, and (b) capital stock or rights to acquire
capital stock substantially equivalent to capital stock of the Company) to
holders of Voting Stock, whether by means of dividend, reclassification,
recapitalization or otherwise, or (ii) the Company or any Subsidiary shall
purchase or otherwise acquire, directly or indirectly, beneficial ownership of
Voting Stock of the Company (other than Voting Stock purchased or acquired in
connection with employee benefit plans or in connection with other employee
compensation programs, having an aggregate purchase price or acquisition cost
not greater than $25 million), and the sum of the fair market value (as
determined in good faith by the Board of Directors, whose determination shall be
conclusive) of all such distributions, acquisitions or purchases during such
fiscal year shall exceed an amount equal to the Company's Net Cash Flow for the
prior fiscal year less the aggregate amount of regular quarterly dividends paid
during the same prior fiscal year. The $500 million special distribution paid on
January 17, 1989 to the Company's sole stockholder at that time, Atlantic
Richfield Company, shall not be deemed to be a distribution subject to this
clause (6).
3
<PAGE>
For purposes of clauses (5) and (6), regular dividends shall be deemed to be
those quarterly cash dividends, including increases in such dividends, paid from
time to time by the Company; provided, however, that, in the good faith judgment
of the Company's Board of Directors, whose determination shall be conclusive,
(i) the amount of the dividends is appropriate in light of the Company's results
of operations, and (ii) the Company is capable of sustaining the rate at which
the dividends are being paid.
"Full Rating Category" means (1) with respect to S&P, any of the following
categories in descending order: AAA, AA, A, BBB, BB, B, CCC, CC and C, (2) with
respect to Moody's, any of the following categories in descending order: Aaa,
Aa, A, Baa, Ba, B, Caa, Ca and C and (3) with respect to any other rating
agency, the equivalent of any category of S&P or Moody's used by the other
rating agency. In determining whether the rating of the Notes has decreased by
the equivalent of one Full Rating Category, gradation within Full Rating
Categories (+ and - for S&P; 1, 2, and 3 for Moody's; or the equivalent
gradation for another rating agency) shall be taken into account (e.g., with
respect to S&P, a decline in rating from BB- to B- will constitute a decrease of
one Full Rating Category, and a decline in rating from BB- to B will constitute
a decrease of less than one Full Rating Category).
"Investment Grade" means a rating of not less than Baa3, in the case of a
rating by Moody's, or a rating of not less than BBB-, in the case of a rating by
S&P, or the equivalent of such ratings by S&P or Moody's or by any other rating
agency.
"Net Cash Flow" shall mean net income plus the following: (1) depreciation;
(2) amortization of goodwill and other intangible assets; (3) the deferred
portion of the Company's income tax provision; (4) the proceeds from the sale of
capital stock; and (5) the net change in accounts receivable, inventories,
accounts payable and other working capital accounts as shown on the Company's
Consolidated Statement of Cash Flows; reduced by the following: (1) the amount
of any after-tax gains on asset sales included in net income; (2) principal
repayments of Debt and payments of the principal portion of capital leases (to
the extent such repayments and payments have not been refinanced through the
issuance of new Debt or capital leases at any time after the beginning of the
fiscal year for which the calculation is made and ending on the date of any
distribution, acquisition or purchase referred to in clause (6) of the
definition of Designated Event); and (3) Capital Expenditures.
"Public Notice" shall, without limitation, include any filing or report
made in accordance with the requirements of the Securities and Exchange
Commission or any press release or public announcement made by the Company.
"Rating Agency" shall mean Standard & Poor's Corporation and its successors
("S&P"), and Moody's Investors Service, Inc. and its successors ("Moody's"), or,
if S&P or Moody's or both shall not make a rating on the Notes publicly
available, a nationally recognized securities rating agency or agencies, as the
case may be, selected by the
4
<PAGE>
Company which shall be substituted for S&P or Moody's or both, as the case may
be.
"Rating Date" shall mean the date that is 121 days prior to Public Notice
of the occurrence of a Designated Event.
"Rating Decline" shall be deemed to occur if on any date within the 90-day
period following Public Notice of the occurrence of a Designated Event (which
period shall be extended so long as the rating of the Notes is under publicly
announced consideration for possible downgrade by a Rating Agency) (1) in the
event the Notes are rated by one or both Rating Agencies on the Rating Date as
Investment Grade, the rating on the Notes by both Rating Agencies shall be below
Investment Grade, or (2) in the event the Notes are rated by both Rating
Agencies on the Rating Date below Investment Grade, the rating on the Notes by
each Rating Agency shall be at least one Full Rating Category below the rating
of the Notes by such Rating Agency on the Rating Date.
"Voting Stock" means the capital stock of the Company normally entitled to
vote in the election of directors.
(B) Other Definitions.
Defined in
Term Section
---- -------
Indenture Recital of the Company
Moody's Definition of Full Rating Category
1996 Notes Preliminary Statement
1999 Notes Preliminary Statement
S&P Definition of Full Rating Category
Record Date 8
Repurchase Date 14
SECTION 3. Designation.
The Notes are hereby created and shall be issuable in two series, the 1996
Notes shall be designated as the "9.95% Notes Due 1996" and the 1999 Notes shall
be designated as the "10.00% Notes Due 1999."
SECTION 4. Dating of the Notes.
All Notes shall be dated the date of authentication.
SECTION 5. Maximum Aggregate Outstanding Amount.
The maximum aggregate principal amount of the 1996 Notes and 1999 Notes
that may be authenticated and delivered under this Supplement is limited to
$150,000,000 and
5
<PAGE>
$150,000,000, respectively, except for Notes authenticated and delivered upon
transfer of, or in exchange for, or in lieu of, other Notes pursuant to Sections
2.05, 2.06, 2.07, 3.03 or 11.04 of the Indenture.
SECTION 6. Stated Maturity.
The principal amount of the 1996 Notes shall be due and payable on June 1,
1996. The principal amount of the 1999 Notes shall be due and payable on June 1,
1999.
SECTION 7. Denomination of Notes.
The Notes shall be issued only in fully registered certificated form,
without coupon, in minimum denominations of $1,000 and any amount in excess
thereof that is an integral multiple of S1,000.
SECTION 8. Payments of Principal and Interest, Record Dates.
Each Note shall bear interest on its outstanding principal balance from
June 1, 1989 at the following interest rates, until payment of the principal
thereof has been made or duly provided for: the 1996 Notes, 9.95%; and the 1999
Notes, 10.00%. Interest on the Notes shall be paid semi-annually on June 1 and
December 1, commencing on December 1, 1989. Interest on the Notes of each series
shall be computed on the basis of a 360-day year of twelve 30-day months, from
the later of: (1) June 1, 1989, or (2) the most recent Interest Payment Date to
which interest has been paid or duly provided for. Interest on the Notes shall
be payable in lawful money of the United States of America.
The principal of each Note shall be payable on the date due upon delivery
and surrender of such Note to the Trustee at the Place of Payment in lawful
money of the United States of America in next-day funds by check as provided in
Section 5.02 of the Indenture.
The record date ("Record Date") for each Interest Payment Date shall be the
close of business on the May 15 and November 15 next preceding each Interest
Payment Date, whether or not such date shall be a Business Day.
Any interest not paid on the Interest Payment Date therefor ("Defaulted
Interest") may be paid to the person in whose name this Note is registered at
the close of business on a special record date for the payment of such Defaulted
Interest, notice of which shall be given by the Company to Holders of Notes not
less than fifteen days prior to such special record date, or may be paid in any
other lawful manner.
Payment of interest on each Note shall be made on each Interest Payment
Date to the Holder of each Note at the close of business on the Record Date for
each Interest Payment Date by check mailed to the Holder at its address as it
appears on the registration
6
<PAGE>
books maintained by the Company pursuant to Section 2.05 of the Indenture or at
any other address that is furnished to the Trustee in writing by the Holder at
least 15 Business Days prior to the Interest Payment Date.
Any payment of principal or interest required to be made on an Interest
Payment Date or at Maturity of a Note that is not a Business Day need not be
made on that day, but may be made on the next succeeding Business Day with the
same force and effect as if made on the Interest Payment Date or at Maturity, as
the case may be, and no additional interest shall accrue as a result of such
delayed payment. The Company shall pay any administrative costs imposed by banks
in connection with making payments by wire transfer in accordance with the
requirements of this Section 8, but any tax, assessment or governmental charge
imposed upon or required to be withheld from payments shall be borne by the
Holders of the Notes in respect to which payments are made.
SECTION 9. Place of Payment.
The Place of Payment of the Notes shall be at the offices or agencies of
the Trustee in Houston, Texas, or, at the option of the Holder, in the Borough
of Manhattan, the City of New York, New York, which shall be maintained for such
purpose in accordance with Section 5.02 of the Indenture.
SECTION 10. Form of Notes.
The front of the 1996 Notes, the front of the 1999 Notes, and the back of
the Notes are attached hereto as Exhibits A-I, A-II and A-III, respectively.
Each of the 1996 Notes shall be numbered consecutively from A-1000 upward. Each
of the 1999 Notes shall be numbered consecutively from B-1000 upward. The Notes
shall bear CUSIP numbers, but any failure to indicate or any error in such CUSIP
numbers shall not in any way affect the validity of the Notes.
SECTION 11. Ranking.
The Notes shall constitute unsecured and unsubordinated indebtedness of the
Company and shall rank pari passu with any other unsecured and unsubordinated
indebtedness of the Company.
SECTION 12. Defeasance.
The Notes shall be subject to defeasance as provided in Article Fourteen of
the Indenture. Upon any defeasance of the 1996 Notes or 1999 Notes, the Company
shall cease to be under any obligation to comply with any term, provision or
condition of Sections 13, 14, 15, 16 and 17 of this Supplement.
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SECTION 13. Limitation on Liens.
Clause (h) of Section 5.03 of the Indenture shall be amended to provide
that the Company may not extend, renew or replace any Restricted Subsidiary's
obligations under the two 20-year capital leases existing on the date hereof on
the Company's two Channelview olefins plants (the "Olefins Plants"), which
leases were entered into in 1976 and 1977, by issuing Debt after the date hereof
that is secured by a Mortgage on the Olefins Plants which matures after the
stated maturity of the existing capital lease obligations. Except for the
limitation set forth in the preceding sentence, Section 5.03 shall remain
unchanged. This amendment shall not affect any Security of any series created
after the date of this Supplement.
SECTION 14. Put Right of Note Holders.
(A) In the event that there shall occur both (1) a Designated Event and (2)
a Rating Decline, each registered Holder of Notes shall have the right, at the
Holder's option, to require the Company to purchase, and upon the exercise of
such right the Company shall purchase, all or any part of the Holder's Notes on
the date (the "Repurchase Date") that is 100 days after the last to occur of (1)
Public Notice of the Designated Event and (2) the Rating Decline, at a purchase
price of 100% of the principal amount thereof, plus accrued interest to the
Repurchase Date.
(B) On or before the 28th day following the last to occur of (1) Public
Notice of such Designated Event and (2) the Rating Decline, the Company shall
notify the Trustee in writing of the Designated Event and Rating Decline and of
the repurchase right set forth herein arising as a result thereof. Promptly
following notification of the Trustee, the Company (or, at the request of the
Company, the Trustee) shall give notice by registered or certified mail, to each
Holder of Notes at the Holder's address appearing in the Note register. The
Company shall also cause a copy of the notice of a repurchase right to be
published in an Authorized Newspaper. The Company will not be obligated to
purchase the Notes or to give notice to Holders of Notes with respect to more
than one Designated Event and Rating Decline.
Each notice of a repurchase right shall include the following:
(1) the Repurchase Date;
(2) the date by which the repurchase right must be exercised;
(3) the price at which the repurchase is to be made, if the repurchase
right is exercised;
(4) a description of the procedure which a Holder of Notes must follow to
exercise a repurchase right; and
(5) a statement that the Company will not be obligated to purchase the
Notes or to give notice to any Holder of any subsequent Designated
Event and Rating Decline.
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<PAGE>
No failure of the Company to give the forgoing notice shall limit any
Holder's right to exercise a repurchase right.
(C) To exercise a repurchase right, a Holder of Notes shall deliver to the
Company (or an agent designated by the Company for such purchase in the notice
referred to in (B) above) at least ten days prior to the Repurchase Date (1)
written notice of the Holder's exercise of such right, which notice shall set
forth the name of the Holder, the principal amount of the Note or Notes (or
portion thereof) to be repurchased, and a statement that the option to exercise
the repurchase right is being made thereby and (2) the Note with respect to
which the repurchase right is being exercised, duly endorsed for transfer to the
Company. Such written notice shall be irrevocable and interest on the Note or
Notes (or portion thereof) presented and surrendered for purchase shall cease to
accrue from and after the Repurchase Date. The right of the Holder to sell any
Notes (or portion of a Note) to the Company will terminate as of the close of
business on the 10th day preceding the Repurchase Date, and the Company will not
be obligated to purchase any Note presented or surrendered from and after such
termination date.
(D) In the event a repurchase right shall be exercised in accordance with
the terms of this Section 14, on the Repurchase Date the Company shall pay or
cause to be paid the price payable with respect to the Note or Notes (or portion
thereof), as to which the repurchase right has been exercised, in cash or
immediately available funds to the Holder of such Note or Notes. In the event
that a repurchase right is exercised with respect to less than the entire
principal amount of a surrendered Note, the Company shall execute and deliver to
the Trustee, and the Trustee shall authenticate for issuance in the name of the
Holder, a new Note or Notes in the aggregate principal amount of that portion of
such surrendered Note not repurchased.
SECTION 15. Definition of Restricted Property and Subsidiary; Limitation on
Olefins Subsidiary Debt.
The definition of Restricted Property in the Indenture shall be amended to
include any plant for the refining of petroleum or the production of
petrochemicals that as of the date hereof is leased by the Company or its
Subsidiary. The definition of Restricted Subsidiary in the Indenture shall be
amended to include any Subsidiary that as of the date hereof leases Restricted
Property. Except for the inclusion of such leased property, the definitions
shall remain unchanged.
During any period that title to the Olefins Plants is owned by one or more
Subsidiaries (for purposes of this Section 15 hereinafter referred to
collectively as the "Olefins Subsidiary"), the Company shall not permit any
Olefins Subsidiary to issue, guarantee, assume, incur or have outstanding
directly or indirectly, any Debt (as defined in Section 5.03 of the Indenture),
except that this limitation shall not apply to Debt secured by Mortgages
permissible under clauses (a) through (h) of Section 5.03 of the Indenture.
Notwithstanding the foregoing, the Olefins Subsidiary may issue, assume,
guarantee or
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<PAGE>
have outstanding Debt which would otherwise be subject to the foregoing
restriction in an aggregate principal amount which, together with the
outstanding principal amount of (A) any Debt permitted under the last paragraph
of Section 5.03 of the Indenture and (B) all other Debt of the Olefins
Subsidiary subject to the foregoing restriction, does not at any one time exceed
the greater of $50 million or 10% of the Consolidated Net Tangible Assets of the
Company and its consolidated Subsidiaries.
This provision shall not affect any Security of any series created after
the date of this Supplement.
SECTION 16. Concerning the Trustee.
(A) Section 8.02 of the Indenture shall be amended to add the following
clause as Clause (i):
"(i) the Trustee shall not be required to take notice of or be deemed to
have notice of any Event of Default under the Indenture, except for Events
of Default specified in Subsection (a), (b) or (c) of Section 7.01 of the
Indenture, unless the Trustee shall be specifically notified in writing of
such Event of Default by the Company or any Holder of the Notes, and all
notices in order to be effective must be delivered to the Principal Office
of the Trustee, and in the absence of such notice so delivered, the Trustee
may conclusively assume there is no Event of Default except as
aforementioned."
(B) Section 9.04 of the Indenture shall be amended to add at the end of
Section 9.04 the following paragraph:
"Upon request of the Trustee, the Company shall furnish the Trustee
promptly an Officer's Certificate listing and identifying all Notes if any,
known by the Company to be owned or held by or for the account of any of
the above described persons; and subject to Sec. 8.01, the Trustee shall be
authorized to accept such Officer's Certificate as conclusive evidence of
the facts therein set forth and the fact that all Notes not listed therein
are outstanding for the purpose of any such determination."
(C) Except as amended above, Sections 8.02 and 9.04 shall remain unchanged.
These amendments shall not affect any Security of any series created after the
date of this Supplement.
10
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SECTION 17. Events of Default.
In addition to the Events of Default specified in Section 7.01 of the
Indenture, an Event of Default with respect to the Notes shall include the
following:
(a) the failure on the part of the Company to observe or perform any
covenant or agreement under Sections 13 and 15 hereof and the continuance of
such default or breach for a period of 90 days after the date on which written
notice specifying such default or breach and requiring it to be remedied and
stating that such a notice is a "Notice of Default" shall have been given to the
Company by the Trustee, or to the Company by the Holders of at least 25% in
aggregate principal amount of the Notes at the time outstanding; or
(b) default by the Company in the payment of the principal amount due for
repurchase of the Notes pursuant to Section 14 hereof.
SECTION 18. GOVERNING LAW.
THIS SUPPLEMENT AND EACH NOTE ISSUED HEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED THEREIN.
SECTION 19. Counterparts.
This Supplement may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but both of which shall
together constitute but one and the same instrument.
SECTION 20. Miscellaneous.
(a) Except as expressly amended and supplemented by this Supplement, the
Indenture shall remain in full force and effect.
(b) This Supplement shall be construed as supplemental to the Indenture and
shall form a part thereof.
11
<PAGE>
IN WITNESS, WHEREOF, the Company and the Trustee have caused this
Supplement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
LYONDELL PETROCHEMICAL
COMPANY
By: /s/ Russell S. Young
--------------------------------------
Name: Russell S. Young
Title: Vice President and Treasurer
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By: /s/ Roy H. Trice, Jr.
---------------------------------------
Name: Roy H. Trice, Jr.
Title: Vice President and Trust Officer
12
<PAGE>
EXHIBIT A-1
No. A- $
LYONDELL PETROCHEMICAL COMPANY
9.95% NOTE DUE 1996
LYONDELL PETROCHEMICAL COMPANY, a corporation duty organized and existing
under the laws of the State of Delaware (herein called the "Company), for value
received, hereby promises to pay to ____________________ or registered assigns,
the principal sum of __________________ Dollars on June 1, 1996, and to pay
interest thereon from June 1, 1989 or from the most recent June 1 or December 1
to which interest has been paid or duly provided for, semiannually on June 1 and
December 1 in each year (each an "Interest Payment Date"), commencing
December 1, 1989, at the rate per annum specified in the title hereof, until the
principal hereof is paid or duly provided for. The interest so payable on any
Interest Payment Date will be paid, except as provided in the Indenture, to the
person in whose name this Note is registered at the close of business on the
Record Date for such interest, which shall be the May 15 or November 15 (whether
or not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any interest not paid on the Interest Payment Date therefor ("Defaulted
Interest") may be paid to the person in whose name this Note is registered at
the close of business on a special record date for the payment of such Defaulted
Interest, notice of which shall be given by the Company to Holders of Notes not
less than fifteen days prior to such special record date, or may be paid in any
other lawful manner. For purposes of this Note, "Business Day" means any day,
other than a Saturday or Sunday, that is not a day on which banking institutions
are authorized or required by law or regulation to be closed in The City of New
York or The City of Houston.
Payment of the principal and interest on this Note will be payable (in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts) at the office or agency of
the Trustee maintained for that purpose in the City of Houston, Texas, or, at
the option of the Holder, in the Borough of Manhattan, The City of New York, New
York; provided, however, that at the option of the Company payment of interest
may be made by check mailed to the address of the person entitled thereto as
such address shall appear in the register for the Notes.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
1
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Reference is made to the further provisions of this Note set forth on the
reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place.
This Note shall not be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been signed by the Trustee under
the Indenture referred to on the reverse hereof.
IN WITNESS WHEREOF, LYONDELL PETROCHEMICAL COMPANY has caused this
instrument to be signed, manually or by facsimile, by its duly authorized
officers and its corporate seal to be printed, engraved or otherwise reproduced
hereon, by facsimile or otherwise.
LYONDELL PETROCHEMICAL COMPANY
By By
---------------------------- -------------------------------------
Vice President and Treasurer President and Chief Executive Officer
Dated:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
THIS IS ONE OF THE SECURITIES ISSUED UNDER THE WITHIN-MENTIONED INDENTURE.
Texas Commerce Bank National Association, as Trustee
By.................................
Authorized Officer
2
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EXHIBIT A-II
No. B- $
LYONDELL PETROCHEMICAL COMPANY
10.00% NOTE DUE 1999
LYONDELL PETROCHEMICAL COMPANY, a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company"), for value
received, hereby promises to pay to _______________________ or registered
assigns, the principal sum of ___________________ Dollars on June 1, 1999, and
to pay interest thereon from June 1, 1989 or from the most recent June 1 or
December 1 to which interest has been paid or duly provided for, semiannually on
June 1 and December 1 in each year (each an "Interest Payment Date"), commencing
December 1, 1989, at the rate per annum specified in the title hereof, until the
principal hereof is paid or duly provided for. The interest so payable on any
Interest Payment Date will be paid, except as provided in the Indenture, to the
person in whose name this Note is registered at the close of business on the
Record Date for such interest, which shall be the May 15 or November 15 (whether
or not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any interest not paid on the Interest Payment Date therefor ("Defaulted
Interest") may be paid to the person in whose name this Note is registered at
the close of business on a special record date for the payment of such Defaulted
Interest, notice of which shall be given by the Company to Holders of Notes not
less than fifteen days prior to such special record date, or may be paid in any
other lawful manner. For purposes of this Note, "Business Day" means any day,
other than a Saturday or Sunday, that is not a day on which banking institutions
are authorized or required by law or regulation to be closed in The City of New
York or The City of Houston.
Payment of the principal and interest on this Note will be payable (in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts) at the office or agency of
the Trustee maintained for that purpose in the City of Houston, Texas, or, at
the option of the Holder, in the Borough of Manhattan, The City of New York, New
York; provided, however, that at the option of the Company payment of interest
may be made by check mailed to the address of the person entitled thereto as
such address shall appear in the register for the Notes.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
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Reference is made to the further provisions of this Note set forth on the
reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place.
This Note shall not be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been signed by the Trustee under
the Indenture referred to on the reverse hereof.
IN WITNESS WHEREOF, LYONDELL PETROCHEMICAL COMPANY has caused this
instrument to be signed, manually or by facsimile, by its duly authorized
officers, and its corporate seal to be printed, engraved or otherwise reproduced
hereon, by facsimile or otherwise.
LYONDELL PETROCHEMICAL COMPANY
By By
-------------------------------- -------------------------------------
Vice President and Treasurer President and Chief Executive Officer
Dated:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
THIS IS ONE OF THE SECURITIES ISSUED UNDER THE WITHIN-MENTION INDENTURE.
Texas Commerce Bank National Association, as Trustee
By............................
Authorized Officer
2
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EXHIBIT A-III
LYONDELL PETROCHEMICAL COMPANY
___% NOTE DUE [1996] [1999]
This Note is one of a duly authorized issue of debentures, notes or other
evidences of indebtedness of the Company (herein called the "Securities"), of
the series hereinafter specified, all issued or to be issued under and pursuant
to an Indenture dated as of May 31, 1989 (herein called the "Indenture"), duly
executed and delivered by the Company to Texas Commerce Bank National
Association, Trustee (hereinafter called the "Trustee"), to which Indenture, and
all indentures supplemental thereto, if any, reference is hereby made for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the Holders of the
Securities. In the event of any inconsistency between the provisions of this
Note and the provisions of the Indenture, and any indentures supplemental
thereto, the terms of the Indenture and any indentures supplemental thereto
shall control.
This Note is one of a series of Securities of the Company issued pursuant
to the First Supplemental Indenture dated as of May 31, 1989 (herein called
the "Supplement"), and the Indenture (as used herein the "Indenture" refers to
the Indenture as supplemented by the Supplement) designated as the ___% Notes
Due [1996][1999] (herein called the "Notes") limited in aggregate principal
amount to $________________.
In the event that there occurs (a) a Designated Event (as defined in the
Supplement) with respect to the Company and (b) a Rating Decline (as defined in
the Supplement), Holders of the Notes shall have the right, at the Holders'
option, to require the Company to purchase all or any part of such Holders'
Notes at 100% of the principal amount thereof, plus interest accrued through the
Repurchase Date (as defined in the Supplement). The Company is obligated to
provide notice to each Holder that a Designated Event and a Rating Decline has
occurred and of the Repurchase Date. The Company is not obligated to provide
notice or repurchase the Notes with respect to more than one Designated Event
and Rating Decline.
In case an Event of Default shall occur and be continuing, the principal
hereof may be declared, and upon such declaration shall become, due and payable,
in the manner, with the effect and subject to the conditions provided in the
Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the Holders of not less than 50% in aggregate principal
amount at Stated Maturity of the Securities at the time outstanding of each
series affected by such
1
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supplemental indenture or indentures, evidenced as provided in the Indenture, to
execute supplemental indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture, or of any
supplemental indenture or indentures, as such provisions apply to such
Securities, or modifying in any manner the rights of the Holders of the
Securities; provided, however, that no such supplemental indenture shall (i)
extend the fixed maturity of any Security or reduce the rate, or extend the time
of payment of interest thereon or reduce the principal thereof or the time
during which interest is payable thereon or change the method of computing the
amount of principal thereof or make the principal thereof or interest thereon
payable in any coin or currency other than that provided in the Securities
without the consent of the Holder thereof, or (ii) reduce the percentage in
principal amount at Stated Maturity of the outstanding Securities, the consent
of whose Holders is required for any such supplemental indenture, or the consent
of whose Holders is required for any waiver of compliance with certain
provisions of the Indenture or of certain defaults under, and their consequences
provided for in, the Indenture, without the consent of the Holders of each
Security of such series so affected. Any such consent or waiver by the Holder
of this Note (unless revoked as provided in the Indenture) shall be conclusive
and binding upon such Holder and upon all future Holders and owners of this Note
and any Notes which may be issued in exchange or substitution herefor,
irrespective of whether any notation thereof is made upon this Note or such
other Notes.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this Note
at the place, at the respective times, at the rate, and in the coin or currency
herein prescribed.
The Notes are issuable in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000 in excess of that amount. Notes may be
exchanged for a like aggregate principal amount of Notes of other authorized
denominations, without charge except for any tax or other governmental charge
imposed in relation thereto, at the office or agency of the Trustee, and in the
manner and subject to the limitations provided in the Indenture.
The Notes are unsecured obligations of the Company ranking pari passu
without any preference among themselves and equally with all other unsecured
indebtedness (other than subordinated indebtedness) of the Company from time to
time outstanding.
Upon due presentment for registration of transfer of this Note at the
office or agency of the Trustee, a new Note or Notes of authorized denominations
for an equal aggregate principal amount at Stated Maturity will be issued to the
transferee in exchange therefor, in the manner and subject to the limitations
provided in the Indenture, without charge except for any tax or other
governmental charge imposed in relation thereto.
Prior to due presentment for registration of transfer of this Note, the
Company, the Trustee, any paying agent and any registrar for the Notes may deem
and treat the
2
<PAGE>
registered Holder hereof as the absolute owner of this Note (whether or not this
Note shall be overdue and notwithstanding any notation of ownership or other
writing hereon by anyone other than the Company, any registrar for the Notes or
the Trustee), for the purpose of receiving payment hereof or on account hereof,
and for all other purposes (subject to the provisions appearing on the face
hereof), and neither the Company nor the Trustee nor any paying agent nor any
registrar for the Notes shall be affected by any notice to the contrary.
No recourse for the payment of principal or interest on this Note, or for
any claim based hereon or otherwise in respect hereof, and no recourse under or
upon any obligation, covenant or agreement of the Company in the Indenture, or
any indenture supplemental thereto, or in any Note, or because of the creation
of any indebtedness represented thereby, shall be had against any incorporator,
stockholder, officer or director, as such, past, present or future, of the
Company or of any successor corporation, either directly or through the Company
or any successor corporation, whether by virtue of any constitution, statute or
rule of law or by the enforcement of any assessment or penalty or otherwise, all
such liability being, by the acceptance hereof and as a condition of and as part
of the consideration for the issue hereof, expressly waived and released.
Terms used herein which are defined in the Supplement or Indenture shall
have the meanings assigned to them in the Supplement or Indenture.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF
THE STATE OF NEW YORK.
3
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EXHIBIT 4.4(b)
CONFORMED COPY
LYONDELL PETROCHEMICAL COMPANY,
EQUISTAR CHEMICALS, LP
AND
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
TRUSTEE
SECOND SUPPLEMENTAL INDENTURE
DATED AS OF
DECEMBER 1, 1997
TO
INDENTURE
DATED AS OF
MAY 31, 1989
(AS SUPPLEMENTED BY THE FIRST SUPPLEMENTAL INDENTURE
DATED AS OF MAY 31, 1989)
<PAGE>
THIS SECOND SUPPLEMENTAL INDENTURE (this "Supplement"), dated as of
December 1, 1997, between Lyondell Petrochemical Company, a Delaware corporation
("Lyondell"), Equistar Chemicals, LP, a Delaware limited partnership
("Equistar") and Texas Commerce Bank National Association, as Trustee (the
"Trustee"), supplements the Indenture dated as of May 31, 1989 (the
"Indenture"), between Lyondell and the Trustee, as supplemented by the First
Supplemental Indenture dated as of May 31, 1989 (the "First Supplemental
Indenture"), pursuant to which the Company's 10.00% Notes Due 1999 (the "Notes")
were issued and are outstanding.
RECITALS
WHEREAS, Lyondell has executed and delivered to the Trustee the
Indenture, providing for the issuance from time to time of Lyondell's unsecured
debentures, notes or other evidences of indebtedness, issuable in one or more
series (the "Securities"), and Lyondell has executed and delivered to the
Trustee the First Supplemental Indenture, providing for the issuance of the
Notes, which are Securities under the Indenture;
WHEREAS, Lyondell and Millennium Chemicals Inc., a Delaware
corporation ("Millennium"), have entered into a Master Transaction Agreement
dated July 25, 1997, as amended (the "Master Transaction Agreement"), which
provides that, on the Closing Date (as defined in the Master Transaction
Agreement) each of Lyondell and Millennium will contribute or cause to be
contributed certain assets to a joint venture partnership and that such joint
venture partnership will assume certain liabilities of each of Lyondell and
Millennium;
WHEREAS, Lyondell has caused two of its wholly-owned subsidiaries,
Lyondell Petrochemical L.P. Inc. ("Lyondell LP") and Lyondell Petrochemical G.P.
Inc., each a Delaware corporation, and Millennium has caused two of its wholly-
owned subsidiaries, to execute and deliver the Limited Partnership Agreement of
Equistar dated as of October 10, 1997, and Equistar has been organized by the
partners thereof to serve as the joint venture partnership contemplated by the
Master Transaction Agreement;
WHEREAS, the Master Transaction Agreement provides that Lyondell will
contribute certain specified assets (the "Assets") to Equistar and that Equistar
will assume certain specified liabilities of Lyondell, including the Notes,
pursuant to an Asset Contribution Agreement to be entered into on the Closing
Date between Lyondell, Lyondell LP and Equistar (the "Asset Contribution
Agreement"), the form of which is attached as an exhibit to the Master
Transaction Agreement;
WHEREAS, pursuant to the Asset Contribution Agreement, on the Closing
Date, Lyondell will contribute the Assets to Equistar and Equistar will assume
the Notes;
<PAGE>
WHEREAS, Section 12.01 of the Indenture provides that nothing
contained in the Indenture or in any of the Securities shall prevent any sale or
conveyance of all or substantially all the property of Lyondell to any other
corporation, provided that upon any such sale or conveyance the due and punctual
payment of the principal of and premium, if any, and interest, if any, on all of
the Securities, according to their tenor, and the due and punctual performance
and observance of all of the covenants and conditions of the Indenture and in
such series to be performed by Lyondell shall be expressly assumed, by
supplemental indenture, by the corporation which shall have acquired such
property;
WHEREAS, for purposes of Section 12.01 of the Indenture, the Assets
constitute substantially all of the assets of Lyondell;
WHEREAS, pursuant to Section 12.03 of the Indenture, upon such
assumption by supplemental indenture as specified in the foregoing paragraph,
the transferee shall succeed to and be substituted for Lyondell, with the same
effect as if it had been named in the Indenture;
WHEREAS, Section 11.01 of the Indenture provides that under certain
conditions, Lyondell and the Trustee may, from time to time and at any time
enter into an indenture or indentures supplemental to the Indenture, inter alia,
to evidence the succession of another corporation to the Company and the
assumption by any such successor, pursuant to Article 12 of the Indenture of the
covenants, agreements and obligations of Lyondell contained in the Indenture and
the Securities; and
WHEREAS, in connection with the contribution of the Assets to Equistar
by Lyondell and the assumption of the Notes by Equistar, Lyondell and Equistar
have duly determined to make, execute and deliver to the Trustee this Supplement
pursuant to the Indenture;
NOW, THEREFORE, THIS SUPPLEMENT WITNESSETH:
In consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
to comply with Sections 12.01 and 12.03 of the Indenture, the parties hereto
hereby agree, for the equal and proportionate benefit of the respective Holders
from time to time of the Securities, as follows:
SECTION ONE
DEFINITIONS
Capitalized terms used and not otherwise defined herein have the
respective meanings assigned to such terms in the Indenture.
-3-
<PAGE>
SECTION TWO
SUCCESSION BY TRANSFER OF ASSETS
On the Closing Date, the Assets will be transferred to Equistar, and
effective upon such transfer, (a) Equistar hereby expressly assumes the due and
punctual payment of the principal of and premium, if any, and interest, if any,
on all of the Securities of each series and the due and punctual performance of
all of the covenants and conditions of the Indenture, as supplemented by the
First Supplemental Indenture and this Supplement, and in such series to be
performed by Lyondell; and (b) Equistar will succeed to and be substituted for
Lyondell as the "Company" for purposes of the Indenture, with the same effect as
if Equistar had been named as the "Company" in the Indenture, as supplemented;
provided, however, that Lyondell shall not be released from any of its
obligations under the Indenture and under the Securities of each series,
including the obligation to pay the principal of and premium, if any, and
interest, if any, on the Securities.
After the Closing Date, for purposes of the Indenture, the term
"Company" shall mean and include both Equistar and Lyondell, and Equistar shall
not be a "Subsidiary" of Lyondell.
SECTION THREE
RATIFICATION
Except as expressly amended and supplemented on this Supplement, the
Indenture shall remain unchanged and in full force and effect. This Supplement
shall be construed as supplemental to the Indenture and shall form a part
thereof.
SECTION FOUR
GOVERNING LAW
This Supplement shall be governed by and construed in accordance with
the laws of the State of New York applicable to agreements made and to be
performed therein.
SECTION FIVE
COUNTERPARTS
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
-4-
<PAGE>
IN WITNESS WHEREOF, each of Lyondell Petrochemical Company and
Equistar Chemicals, LP have caused this Second Supplemental Indenture to be duly
executed and its seal to be affixed hereunto and the same to be attested by its
Secretary or an Assistant Secretary, and Texas Commerce Bank National
Association as Trustee, has caused this Second Supplemental Indenture to be
signed by one of its Vice Presidents or Assistant Vice Presidents as of the day
and year first above written.
LYONDELL PETROCHEMICAL COMPANY
[SEAL] By /s/ Russell S. Young
---------------------------------------
Name: Russell S. Young
Title: Senior Vice President, Chief
Financial Officer and Treasurer
Attest:
/s/ Kerry A. Galvin
- -------------------------------
Name: Kerry A. Galvin
Title: Assistant Secretary
EQUISTAR CHEMICALS, LP
[SEAL] By /s/ Joseph M. Putz
---------------------------------------
Name: Joseph M. Putz
Title: Senior Vice President, Finance
and Administration
Attest:
/s/ Gerald A. O'Brien
- -------------------------------
Name: Gerald A. O'Brien
Title: Vice President and Secretary
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, Trustee
By /s/ Mauri J. Cowen
---------------------------------------
Name: Mauri J. Cowen
Title: Vice President and Trust Officer
-5-
<PAGE>
EXHIBIT 4.5
-------------------------
LYONDELL PETROCHEMICAL COMPANY
AND
CONTINENTAL BANK, NATIONAL ASSOCIATION, Trustee
---------------
INDENTURE
Dated as of March 10, 1992
---------------
-------------------------
<PAGE>
TIE-SHEET
showing the location in the Indenture dated as of March 10, 1992, between
Lyondell Petrochemical Company and Continental Bank, National Association, as
Trustee of certain provisions of the Trust Indenture Act of 1939 (including
cross-references to the provisions of Sections 310 to 318(a) which, pursuant to
Section 318(c) of the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990, are part of and govern such Indenture Provisions
whether or not physically contained therein):
Section of
Section of Act Indenture Provision
- -------------- -------------------
310 (a) (1), (2) and (5).................................... 8.09
310 (a) (3) and (4)......................................... Not applicable
310 (b)..................................................... 8.08 and 8.10 (b)
310 (c)..................................................... Not applicable
311 (a) and (b)............................................. 8.13
311 (c)..................................................... Not applicable
312 (a)..................................................... 6.01 and 6.02 (a)
312 (b) and (c)............................................. 6.02 (b) and (c)
313 (a)..................................................... 6.04 (a)
313 (b) (1)................................................. Not applicable
313 (b) (2)................................................. 6.04 (b)
313 (c)..................................................... 6.04 (c)
313 (d)..................................................... 6.04 (d)
314 (a) (1) (2) and (3)..................................... 6.03
314 (a) (4)................................................. 5.08
314 (b)..................................................... Not applicable
314 (c) (1) and (2)......................................... 16.07
314 (c) (3)................................................. Not applicable
314 (d)..................................................... Not applicable
314 (e)..................................................... 16.07
315 (a) (c) and (d)......................................... 8.01
315 (b)..................................................... 7.08
315 (e)..................................................... 7.09
316 (a) (1)................................................. 7.01 and 7.07
316 (a) (2)................................................. Omitted
316 (a) last sentence....................................... 9.04
316 (b)..................................................... 7.04
317 (a)..................................................... 7.02
317 (b)..................................................... 5.07
318 (a) ................................................... 16.09
- ---------------
This tie-sheet is not part of the Indenture as executed
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
PARTIES ................................................................... 1
RECITALS .................................................................. 1
ARTICLE ONE
DEFINITIONS
SECTION 1.01 Definitions .................................................. 1
Authorized Newspaper ......................................... 1
Board of Directors ........................................... 1
Business Day ................................................. 1
Company ...................................................... 2
Consolidated Net Tangible Assets ............................. 2
Coupon Security .............................................. 2
Dollar ....................................................... 2
Event of Default.............................................. 2
Fully Registered Security..................................... 2
Holder........................................................ 2
Indenture..................................................... 2
Interest...................................................... 3
Interest Payment Date......................................... 3
Maturity...................................................... 3
Officers' Certificate......................................... 3
Opinion of Counsel............................................ 3
Original Issue Date........................................... 3
Original Issue Discount Security.............................. 3
Person........................................................ 4
Place of Payment.............................................. 4
Principal Office.............................................. 4
Registered Coupon Security.................................... 4
Registered Holder............................................. 4
Registered Security........................................... 4
Responsible Officer........................................... 4
Restricted Property........................................... 4
Restricted Subsidiary......................................... 5
Securities and Exchange Commission............................ 5
Security or Securities Outstanding............................ 5
Stated Maturity............................................... 5
Subsidiary ................................................... 6
Trustee....................................................... 6
Trust Indenture Act of 1939................................... 6
Unregistered Security ........................................ 6
<PAGE>
ii
ARTICLE TWO
THE SECURITIES AND SECURITY FORMS
PAGE
----
SECTION 2.01 Amount Unlimited; Issuable in Series.......................... 6
SECTION 2.02 Form of Securities and of Trustee's
Certificate of Authentication........................... 7
SECTION 2.03 Denomination, Authentication and
Dating of Securities.................................... 8
SECTION 2.04 Execution of Securities....................................... 9
SECTION 2.05 Registration, Registration of Transfer
and Exchange............................................ 9
SECTION 2.06 Mutilated, Destroyed, Lost or Stolen
Securities..............................................10
SECTION 2.07 Temporary Securities..........................................11
SECTION 2.08 Cancellation of Securities Paid, etc..........................11
ARTICLE THREE
REDEMPTION OF SECURITIES
SECTION 3.01 Applicability of Article......................................12
SECTION 3.02 Notice of Redemption; Selection of
Securities..............................................12
SECTION 3.03 Payment of Securities Called for
Redemption..............................................13
ARTICLE FOUR
SINKING FUNDS
SECTION 4.01 Applicability of Article......................................13
SECTION 4.02 Satisfaction of Mandatory Sinking Fund
Payments with Securities................................13
SECTION 4.03 Redemption of Securities for Sinking
Fund ...................................................13
<PAGE>
iii
ARTICLE FIVE
PARTICULAR COVENANTS OF THE COMPANY
PAGE
----
SECTION 5.01 Payment of Principal, Premium and
Interest................................................14
SECTION 5.02 Offices for Notices and Payments, etc.........................14
SECTION 5.03 Limitation on Liens...........................................15
SECTION 5.04 Limitation on Sale and Lease Back.............................16
SECTION 5.05 Definition of "Value".........................................17
SECTION 5.06 Appointments to Fill Vacancies in
Trustee's Office........................................17
SECTION 5.07 Provision as to Paying Agent..................................17
SECTION 5.08 Annual Certificate to Trustee.................................18
ARTICLE SIX
HOLDERS LISTS AND REPORTS BY THE COMPANY
AND THE TRUSTEE
SECTION 6.01 Holders Lists.................................................18
SECTION 6.02 Preservation and Disclosure of Lists..........................18
SECTION 6.03 Reports by the Company........................................19
SECTION 6.04 Reports by the Trustee........................................19
ARTICLE SEVEN
REMEDIES OF THE TRUSTEE AND HOLDERS
ON EVENT OF DEFAULT
SECTION 7.01 Events of Default.............................................21
SECTION 7.02 Payment of Securities on Default; Suit Therefor...............22
SECTION 7.03 Application of Moneys Collected by Trustee....................24
SECTION 7.04 Proceedings by Holders........................................24
SECTION 7.05 Proceedings by Trustee........................................25
SECTION 7.06 Remedies Cumulative and Continuing............................25
SECTION 7.07 Direction of Proceedings and Waiver of
Defaults by Majority of Holders.........................25
SECTION 7.08 Notice of Defaults............................................26
SECTION 7.09 Undertaking to Pay Costs......................................26
<PAGE>
iv
ARTICLE EIGHT
CONCERNING THE TRUSTEE
PAGE
----
SECTION 8.01 Duties and Responsibilities of Trustee........................26
SECTION 8.02 Reliance on Documents, Opinions, etc..........................27
SECTION 8.03 No Responsibility for Recitals, etc...........................28
SECTION 8.04 Trustee, Paying Agent or Registrar May
Own Securities..........................................28
SECTION 8.05 Moneys to be Held in Trust....................................28
SECTION 8.06 Compensation and Expenses of Trustee..........................29
SECTION 8.07 Officers' Certificate as Evidence.............................29
SECTION 8.08 Qualification of Trustee; Conflicting Interests...............29
SECTION 8.09 Eligibility of Trustee........................................29
SECTION 8.10 Resignation or Removal of Trustee.............................29
SECTION 8.11 Acceptance by Successor Trustee...............................30
SECTION 8.12 Succession by Merger, etc.....................................31
SECTION 8.13 Limitation on Rights of Trustee as a
Creditor................................................31
ARTICLE NINE
CONCERNING THE HOLDERS
SECTION 9.01 Action By Holders.............................................34
SECTION 9.02 Proof of Execution by Holders.................................35
SECTION 9.03 Who Deemed Absolute Owners....................................35
SECTION 9.04 Company-Owned Securities Disregarded..........................35
SECTION 9.05 Revocation of Consents; Future Holders
Bound...................................................36
ARTICLE TEN
HOLDERS' MEETINGS
SECTION 10.01 Purposes of Meetings.........................................36
SECTION 10.02 Call of Meetings by Trustee..................................36
SECTION 10.03 Call of Meetings by Company or Holders.......................37
SECTION 10.04 Qualification for Voting.....................................37
SECTION 10.05 Regulations..................................................37
SECTION 10.06 Voting.......................................................38
SECTION 10.07 No Delay of Rights by Meeting................................38
<PAGE>
v
ARTICLE ELEVEN
SUPPLEMENTAL INDENTURES
PAGE
----
SECTION 11.01 Supplemental Indentures without Consent
of Holders..............................................38
SECTION 11.02 Supplemental Indentures with Consent or
Holders of a Series.....................................39
SECTION 11.03 Compliance with Trust Indenture Act;
Effect of Supplemental Indentures.......................40
SECTION 11.04 Notation on Securities.......................................40
SECTION 11.05 Evidence of Compliance of Supplemental
Indenture to be Furnished Trustee;......................40
ARTICLE TWELVE
CONSOLIDATION, MERGER AND SALE
SECTION 12.01 Company May Consolidate, etc, on Certain
Terms...................................................40
SECTION 12.02 Securities to be Secured in Certain
Events..................................................40
SECTION 12.03 Successor Corporation to be Substituted......................40
SECTION 12.04 Opinion of Counsel to be Given Trustee.......................40
ARTICLE THIRTEEN
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 13.01 Discharge of Indenture.......................................42
SECTION 13.02 Deposited Moneys to be Held in Trust by
Trustee.................................................42
SECTION 13.03 Paying Agent to Repay Moneys Held............................42
SECTION 13.04 Return of Unclaimed Moneys...................................42
<PAGE>
vi
ARTICLE FOURTEEN
DEFEASANCE
PAGE
----
SECTION 14.01 Applicability of Article.....................................43
SECTION 14.02 Defeasance Upon Deposit of Moneys or
U.S. Government Obligations.............................43
SECTION 14.03 Deposited Moneys and US. Government
Obligations to be held in Trust.........................44
SECTION 14.04 Repayment to Company.........................................44
SECTION 14.05 Reinstatement................................................44
ARTICLE FIFTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 15.01 Indenture and Securities Solely
Corporate Obligations...................................44
ARTICLE SIXTEEN
MISCELLANEOUS PROVISIONS
SECTION 16.01 Provisions Binding on Company's
Successors..............................................45
SECTION 16.02 Benefits of Indenture Restricted to
Parties and Holders.....................................45
SECTION 16.03 Official Acts by Successor Corporation.......................45
SECTION 16.04 Addresses for Notices, etc...................................45
SECTION 16.05 Notices to Holders; Waiver...................................45
SECTION 16.06 Governing Law................................................46
SECTION 16.07 Evidence of Compliance with Conditions
Precedent...............................................46
SECTION 16.08 Legal Holidays...............................................46
SECTION 16.09 Trust Indenture Act to Control...............................46
SECTION 16.10 No Security Interest Created.................................46
SECTION 16.11 Table of Contents, Headings, etc.............................46
SECTION 16.12 Execution in Counterparts....................................47
SECTION 16.13 Acceptance of Trust..........................................47
<PAGE>
INDENTURE, dated as of March 10, 1992 between LYONDELL PETROCHEMICAL
COMPANY, a corporation duly organized and existing under the laws of the State
of Delaware (the "Company"), and CONTINENTAL BANK, NATIONAL ASSOCIATION, a
national banking association, as trustee (the "Trustee").
RECITAL OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness to be issued in one or more
series (the "Securities") as provided herein.
AGREEMENT
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.01. Definitions. The terms defined in this Section 1.01 (except
as herein otherwise expressly provided or unless the context otherwise requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section 1.O1. All other
terms used in this Indenture which are defined in the Trust Indenture Act of
1939 or which are by reference therein defined in the Securities Act of 1933, as
amended, or by Securities and Exchange Commission rule under the Trust Indenture
Act of 1939 (except as herein otherwise expressly provided or unless the context
otherwise requires) shall have the meanings assigned to such terms in said Trust
Indenture Act, rule thereunder or in said Securities Act as in force at the date
of the execution of this Indenture.
Authorized Newspaper:
The term "Authorized Newspaper" shall mean The Wall Street Journal or other
newspaper of general circulation in The City of New York (and, if any Place of
Payment is not in The City of New York, in each such Place of Payment) printed
in the English language and customarily published on each Business Day, whether
or not published on Saturdays, Sundays or holidays. Whenever successive weekly
publications in an Authorized Newspaper are authorized hereunder, they may be
made (unless otherwise expressly provided herein) on the same or different days
of the week and in the same or different Authorized Newspapers.
Board of Directors:
The term "Board of Directors" shall mean the Board of Directors of the
Company or any committee of such Board duly authorized to act for such Board.
Business Day:
The term "Business Day" means any day, other than a Saturday or Sunday,
that is (a) not a day on which banking institutions are authorized or required
by law or regulation to be closed in The City of New York or The City of
Chicago or The City of Houston, and (b) if a Security has an interest rate
determined with reference to the London interbank offered rate for deposits in a
particular currency, any day on which dealings in deposits in such currency are
transacted in the London interbank market.
<PAGE>
2
Company:
The term "Company" shall mean Lyondell Petrochemical Company, a Delaware
corporation, and subject to the provisions of Article Twelve shall include its
successors and assigns.
Consolidated Net Tangible Assets:
The term "Consolidated Net Tangible Assets" shall mean the total amount of
assets (less applicable reserves and other properly deductible items) after
deducting therefrom (a) all current liabilities (excluding any thereof which are
by their terms extendible or renewable at the option of the obligor thereon to a
time more than 12 months after the time as of which the amount thereof is being
computed), and (b) all goodwill, trade names, trademarks, patents, purchased
technology, unamortized debt discount and other like intangible assets, all as
set forth on the most recent quarterly balance sheet of the Company and its
consolidated Subsidiaries and computed in accordance with generally accepted
accounting principles.
Coupon Security:
The term "Coupon Security" shall mean any Security authenticated and
delivered with one or more interest coupons appertaining thereto.
Dollar:
The term "Dollar" or "$" means the coin or currency of the United States of
America as at the time of payment is legal tender for the payment of public and
private debts.
Event of Default:
The term "Event of Default" shall mean any event specified in Section 7.01,
continued for the period of time, if any, and after the giving of the notice, if
any, therein designated.
Fully Registered Security:
The term "Fully Registered Security" shall mean any Security registered as
to principal and interest, if any.
Holder:
The term "Holder," "Holder of Securities," or other similar terms, when
used with respect to any Security shall mean a bearer of an Unregistered
Security or a Registered Holder of a Registered Security and when used with
respect to any coupon, means the bearer thereof.
Indenture:
The term "Indenture" shall mean this instrument as originally executed or,
if amended or supplemented as herein provided, as so amended or supplemented,
and shall include the form and terms of particular series of Securities
established as contemplated hereunder; provided, however, that if at any time
more than one Person is acting as Trustee under this instrument, "Indenture"
shall mean with respect to any one or more series of Securities for which such
Person is Trustee, this instrument as originally executed or as it may from time
to time be supplemented or amended by one or more indentures supplemental hereto
entered into pursuant to the applicable provisions hereof and shall include the
terms of a particular series of Securities established as contemplated by
Section 2.01, exclusive however, of any provisions or terms which relate solely
to one or more series of Securities for which such Person is not Trustee,
regardless of when such terms or provisions were
<PAGE>
3
adopted, and exclusive of any provisions or terms adopted by means of one or
more indentures supplemental hereto executed and delivered after such Person had
become such Trustee but to which such Person, as such Trustee, was not a party.
Interest:
The term "interest" when used with respect to any series of non-interest
bearing Securities, shall mean interest payable after Maturity.
Interest Payment Date:
The term "Interest Payment Date," with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.
Maturity:
The term "Maturity," when used with respect to any Security, means the date
on which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption, repayment at the option of the Holder or
otherwise.
Officers' Certificate:
The term "Officers' Certificate" shall mean a certificate signed by the
President and Chief Executive Officer, the Executive Vice President and Chief
Financial Officer, or its Vice President and Treasurer, and by one of its
Assistant Treasurers, and delivered to the Trustee. If applicable, each
certificate shall include the statements provided for in Section 16.07 if and to
the extent required by the provisions of such Section.
Opinion of Counsel:
The term "Opinion of Counsel" shall mean an opinion in writing signed by
legal counsel, who may be an employee of, or of counsel to the Company, or may
be other counsel reasonably acceptable to Trustee. Each such opinion shall
include the statements provided for in Section 16.07 if and to the extent
required by the provisions of such Section.
Original Issue Date:
The term "original issue date" of any Security (or portion thereof shall
mean the earlier of (a) the date of such Security or (b) the date of any
Security (or portion thereof) for which such Security was issued (directly or
indirectly) on registration of transfer, exchange or substitution.
Original Issue Discount Security:
The term "Original Issue Discount Security" shall mean (a) a Security which
has been issued at an issue price lower than the principal amount thereof and
which provides that upon redemption or acceleration of the maturity thereof an
amount less than the principal amount thereof shall become due and payable and
(b) any other Security which for United States federal income tax purposes would
be considered an original issue discount security.
<PAGE>
4
Person:
The term "Person" shall mean any individual, corporation, partnership,
joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
Place of Payment:
The term "Place of Payment" for a series of Securities shall mean the
Place or Places of Payment designated for each series pursuant to
Sections 2.01(5) and 5.02.
Principal Office:
The term "Principal Office" shall mean the principal corporate trust
office of the Trustee in Chicago, Illinois, at which at any particular time its
corporate trust business shall be administered and which on the date hereof is
at 231 South LaSalle Street, Chicago Illinois 60697, Attention: Corporate Trust
Department, (except that with respect to presentation of Securities for payment
and transfer, such term shall mean the office or agency of the Trustee in the
Borough of Manhattan, The City of New York, New York at which at any particular
time its corporate agency business shall be conducted, which on the date hereof
is at Mellon Securities Transfer Services, Inc, 120 Broadway, 33rd Floor, New
York, New York 10271, Attention: Corporate Trust Operations).
Registered Coupon Security:
The term "Registered Coupon Security" shall mean any Coupon Security
registered as to principal only.
Registered Holder:
The term "Registered Holder," when used with respect to a Registered
Security, shall mean the person in whose name such Security is registered on the
books of the Company kept for that purpose in accordance with the terms hereof.
Registered Security:
The term "Registered Security" shall mean any Security registered on the
books of the Company.
Responsible Officer:
The term "Responsible Officer" shall mean any officer to whom any corporate
trust matter is referred because of his knowledge of and familiarity with the
particular subject.
Restricted Property:
The term "Restricted Property" shall mean:
(a) any plant for the refining of petroleum or the production of
petrochemicals owned by the Company or a Subsidiary, except (1) related
facilities which in the opinion of the Board of Directors are transportation or
marketing facilities, and (2) any plant for the refining of petroleum or the
production of petrochemicals which in the opinion of the Board of Directors is
not a principal plant of the Company and its Subsidiaries; and
(b) any shares of capital stock or indebtedness of a Restricted Subsidiary
owned by the Company or a Subsidiary.
<PAGE>
5
Restricted Subsidiary:
The term "Restricted Subsidiary" shall mean any Subsidiary which owns any
Restricted Property.
Securities and Exchange Commission:
The term "Securities and Exchange Commission" shall mean the Securities and
Exchange Commission, as from time to time constituted, created under the
Securities Exchange Act of 1934, or if at any time after the execution and
delivery of this Indenture the Securities and Exchange Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act of 1939, then the body performing such duties at such time.
Security or Securities Outstanding:
The terms "Security" or "Securities" shall have the meaning stated in the
recital of this Indenture and shall mean any Security or Securities, as the case
may be, authenticated and delivered pursuant to this Indenture (including,
without limitation, the Securities of any series issued in temporary or
permanent global form pursuant to Section 2.01(12)); provided, however, that if
at any time there is more than one Person acting as Trustee under this
instrument, "Securities" with respect to the Indenture as to which such Person
is Trustee shall have the meaning stated in the recital and shall more
particularly mean Securities authenticated and delivered pursuant to this
instrument, exclusive of Securities of any series as to which such Person is not
Trustee.
The term "outstanding" when used with reference to Securities or Securities
of any series shall, subject to the provisions of Section 9.04, mean, as of any
particular time, all such Securities authenticated and delivered by the Trustee
pursuant to this Indenture, except:
(a) such Securities theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(b) such Securities, or portions thereof, for the payment or redemption of
which moneys (or U.S. Government Obligations as provided in Article Fourteen) in
the necessary amount shall have been deposited in trust with the Trustee or with
any paying agent (other than the Company) or shall have been set aside and
segregated in trust by the Company (if the Company shall act as its own paying
agent), provided that if such Securities are to be redeemed prior to the
maturity thereof, notice of such redemption shall have been mailed as provided
in Article Three, or provision satisfactory to the Trustee shall have been made
for mailing such notice; and
(c) Securities in lieu of or in substitution for which other Securities
shall have been authenticated and delivered pursuant to the terms of
Section 2.06 except to the extent that a bona ride holder in due course of any
such Securities shall have presented proof satisfactory to the Trustee that such
holder is a bona ride holder in due course of any such Securities.
In determining whether the Holders of the requisite principal amount of
outstanding Securities of a series have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, the principal
amount of an Original Issue Discount Security that shall be deemed to be
outstanding for such purposes shall be the amount of the principal thereof that
would be due and payable as of the date of such determination upon a declaration
of acceleration of the Maturity thereof determined in accordance with
Section 7.01.
Stated Maturity:
The term "Stated Maturity" when used with respect to any Security or any
installment of interest thereon shall mean the date specified in such Security
as the fixed date on which the principal of such Security or such installment of
interest is due and payable.
<PAGE>
6
Subsidiary:
The term "Subsidiary" shall mean any corporation at least a majority of the
outstanding securities of which having ordinary voting power to elect a majority
of the board of directors of such corporation (whether or not any other class of
securities has or might have voting power by reason of the happening of a
contingency) is at the time owned or controlled directly or indirectly by the
Company or one or more Subsidiaries or by the Company and one or more
Subsidiaries.
Trustee:
The term "Trustee" shall mean Continental Bank, National Association until
another or a successor trustee shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter shall mean and include each Person
who is then a Trustee hereunder; provided, however, that if at any time there is
more than one such Person, "Trustee" as used with respect to the Securities of
any series shall mean only the Trustee with respect to the Securities of that
series.
Trust Indenture Act of 1939:
The term "Trust Indenture Act of 1939" shall mean the Trust Indenture
Act of 1939, as amended by the Trust Indenture Reform Act of 1990, as it
was in force at the date of execution of this Indenture, except as provided in
Section 11.03.
Unregistered Security:
The term "Unregistered Security" shall mean any Security or temporary
bearer Security not registered as to principal.
ARTICLE TWO
THE SECURITIES AND SECURITY FORMS
SECTION 2.01. Amount Unlimited; Issuable in Series. The aggregate principal
amount of Securities which may be authenticated and delivered under this
Indenture is unlimited. Securities may be issued in one or more series.
The terms and conditions listed below, as applicable, of any series of
Securities shall be established (i) in an indenture supplemental hereto, (ii) in
a resolution of the Board of Directors or (iii) by the certificate of an officer
of the Company authorized pursuant to a resolution of the Board of Directors:
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from Securities of all other
series);
(2) any limit upon the aggregate principal amount of the Securities
of the series which may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Sections 2.05, 2.06, 2.07, 3.03 or 11.04);
(3) the date or dates on which the principal and premium, if any, of
the Securities of the series are payable;
<PAGE>
7
(4) the rate or rates at which the Securities of the series shall
bear interest, if any, or the formula by which interest shall be
calculated, the date or dates from which such interest shall accrue, the
interest payment dates on which such interest shall be payable and the
record dates for the determination of Holders thereof to whom interest is
payable;
(5) the place or places where the principal of, and premium, if any,
and any interest on Securities of the series shall be payable (herein
called the "Place of Payment"); provided, however, that payment of
principal, premium, if any, and interest with respect to Registered
Securities may be made as provided in Section 5.02;
(6) the price or prices at which, the period or periods within which
and the terms and conditions upon which Securities of the series may be
redeemed, in whole or in part, at the option of the Company, pursuant to
any sinking fund or otherwise;
(7) the obligation, if any, of the Company to redeem, purchase or
repay Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of a Holder thereof and the price or prices at
which and the period or periods within which and the terms and conditions
upon which Securities of the series shall be redeemed, purchased or repaid,
in whole or in part, pursuant to such obligation;
(8) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which Securities of the series shall be
issuable;
(9) if other than the principal amount at Stated Maturity thereof,
the portion of the principal amount of Securities of the series which shall
be payable upon declaration of acceleration of the maturity thereof
pursuant to Section 7.01 or provable in bankruptcy pursuant to Section 7.02
or used to determine the relative voting rights of the Holders thereof
pursuant to Section 10.05 or the method by which such portion of the
principal amount shall be determined;
(10) any Events of Default with respect to the Securities of a
particular series, if not set forth herein;
(11) if the rate or rate at which the Securities of the series shall
bear interest is to be fixed until Maturity, provisions, if any, for the
defeasance of Securities of the series;
(12) the extent to which any Securities will be issuable in temporary
or permanent global form, and the manner in which any payments on a
temporary or permanent global Security will be made;
(13) the form of Securities of such series; and
(14) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture).
All Securities of any series issued under this Indenture shall in all
respects be equally and ratably entitled to the benefits hereof with respect to
such series without preference, priority or distinction on account of actual
time or times of authentication and delivery or maturity of the Securities of
such series. All Securities of the same series shall be substantially identical
except as to denomination and except as may otherwise be provided in (i) an
indenture supplemental hereto, (ii) a resolution of the Board of Directors or
(iii) a certificate of an officer of the Company authorized pursuant to a
resolution of the Board of Directors.
SECTION 2.02. Form of Securities and of Trustee's Certificate of
Authentication. The Securities of each series, the appurtenant coupons, if any,
and the certificates of authentication thereon shall be in substantially the
form as shall be established as provided in Section 2.01 with such appropriate
insertions, omissions, substitutions
<PAGE>
8
and other variations as are required or permitted by this Indenture, and may
have such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with any law or with
any rules made pursuant thereto or with any rules of any securities exchange or
as may be determined consistently herewith by the officers executing such
Securities and coupons, if any, as evidenced by their execution of the
Securities and coupons, if any.
The definitive Securities and coupons, if any, shall be printed,
lithographed or engraved or produced by any combination of these methods on
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange, all as determined by the officers executing
such Securities and coupons, if any, as evidenced by their execution of such
Securities and coupons, if any.
The form of Trustee's certificate of authentication shall be as follows:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities issued under the within-mentioned Indenture.
Continental Bank, National Association,
as Trustee
By
------------------------------------------
Authorized Signatory
SECTION 2.03. Denomination, Authentication and Dating of Securities. The
Securities of each series may be issued as Registered Securities or Unregistered
Securities, as provided in the terms of such Securities and shall be issuable in
the denominations of $1,000 and any integral multiple of $1,000, or such other
denominations as authorized as provided in Section 2.01. Each Security shall be
dated as of the date of its authentication.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication. Except as otherwise provided in this
Article Two, the Trustee shall thereupon authenticate and deliver said
Securities to or upon the written order of the Company, signed by the President
and Chief Executive Officer, the Executive Vice President and Chief Financial
Officer or its Vice President and Treasurer. In authenticating such Securities,
and accepting the additional a responsibilities under this Indenture in relation
to such Securities, the Trustee shall be entitled to receive, and, subject to
Section 8.01, shall be fully protected in relying upon:
(a) A copy of the resolution or resolutions of the Board of Directors
in or pursuant to which the terms and form of the Securities were
established, certified by the Secretary or an Assistant Secretary of the
Company to have been duly adopted by the Board of Directors and to be in
full force and effect as of the date of such certificate, and if the terms
and form of such Securities are established by an Officers' Certificate
pursuant to general authorization of the Board of Directors, such Officers'
Certificate;
(b) an executed supplemental indenture, if any;
(c) an Officers' Certificate delivered in accordance with
Section 16.07; and
<PAGE>
9
(d) an Opinion of Counsel which shall state:
(1) that the form of such Securities has been established by a
supplemental indenture or by or pursuant to a resolution of the Board
of Directors in accordance with Sections 2.01 and 2.02 and in
conformity with the provisions of this Indenture;
(2) that the terms of such Securities have been established in
accordance with Section 2.01 and in conformity with the other
provisions of this Indenture;
(3) that such Securities, when authenticated and delivered by
the Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid
and legally binding obligations of the Company, enforceable in
accordance with their terms, subject to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting the enforcement of creditors' rights and to general equity
principles; and
(4) that all laws and requirements in respect of the execution
and delivery by the Company of such Securities have been complied
with.
The Trustee shall have the right to decline to authenticate and deliver any
Securities under this Section if the Trustee, being advised by counsel,
determines that such action may not lawfully be taken or if the Trustee in good
faith by its board of directors or trustees, executive committee, or a trust
committee of directors or trustees or vice presidents shall determine that such
action would expose the Trustee to personal liability to existing Holders.
SECTION 2.04. Execution of Securities. The Securities, and any coupons
appertaining thereto, shall be signed in the name and on behalf of the Company
manually or by facsimile by its President and Chief Executive Officer or its
Executive Vice President and Chief Financial Officer, and by its Vice President
and Treasurer, under its corporate seal (which may be printed, engraved or
otherwise reproduced thereon, by facsimile or otherwise). Only such Securities
as shall bear thereon a certificate of authentication substantially in the form
hereinbefore recited, executed manually by the Trustee, shall be entitled to the
benefits of this Indenture or be valid or obligatory for any purpose. Such
certificate by the Trustee upon any Security executed by the Company shall be
conclusive evidence that the Security so authenticated has been duly
authenticated and delivered hereunder and that the Holder is entitled to the
benefits of this Indenture.
In case any officer of the Company who shall have signed any of the
Securities shall cease to be such officer before the Securities so signed shall
have been authenticated and delivered by the Trustee, or disposed of by the
Company, such Securities nevertheless may be authenticated and delivered or
disposed of as though the person who signed such Securities had not ceased to be
such officer of the Company; and any Security or coupon may be signed on behalf
of the Company by such persons as, at the actual date of the execution of such
Securities or coupons, shall be the proper officers of the Company, although at
the date of the execution of this Indenture any such person was not such an
officer.
SECTION 2.05. Registration, Registration of Transfer and Exchange. The
Company shall keep or cause to be kept a register (herein sometimes referred to
as the "registry books of the Company") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Registered Securities and the registration of transfers of Registered
Securities. Any such register shall be in written form or in any other form
capable of being converted into written form within a reasonable time. At all
reasonable times the information contained in such register or registers shall
be available for inspection by the Trustee at the office or agency to be
maintained by the Company as provided in Section 5.02.
<PAGE>
10
Upon surrender of any Registered Security of any series for registration of
transfer at the office or agency of the Company to be maintained as provided in
Section 5.02, the Company shall execute, and the Trustee, upon the written
authorization or request of any officer of the Company, shall authenticate and
deliver, in the name of the designated transferee or transferees, at the expense
of the Company, one or more new Registered Securities of such series of any
authorized denominations and of a like aggregate principal amount and Stated
Maturity.
At the option of the Holder thereof, Securities of a series, whether
Registered or Unregistered, which by their terms are registrable as to principal
only or as to principal and interest, may be exchanged for Registered Coupon
Securities or Fully Registered Securities of such series, as may be issued by
the terms thereof. Securities so issued in exchange for other Securities shall
be of any authorized denomination and of like principal amount and Stated
Maturity and shall be issued upon surrender of the Securities for which they are
to be exchanged and, in the case of Coupon Securities, together with all
unmatured coupons and all matured coupons in default appertaining thereto, at
the office of the Company provided for in Section 5.02 and upon payment, if the
Company shall require, of charges provided herein. Whenever any Securities are
so surrendered, the Company shall execute, and the Trustee shall authenticate
and deliver, the Securities which the Holder making such exchange is entitled to
receive.
Upon presentation for registration of any Unregistered Security of any
series which by its terms is registrable as to principal, at the office or
agency of the Company to be maintained as provided in Section 5.02, such
Security shall be registered as to principal in the name of the Holder thereof
and such registration shall be noted on such Security. Any Security so
registered shall be transferable on the registry books of the Company, upon
presentation of such Security at such office or agency for similar notation
thereon, but such Security may be discharged from registration by being in like
manner transferred to bearer, whereupon transferability by delivery shall be
restored. Unregistered Securities shall continue to be subject to successive
registrations and discharges from registration at the option of the Holders
thereof.
Unregistered Securities shall be transferable by delivery. Registration of
any Coupon Security shall not affect the transferability by delivery of the
coupons appertaining thereto which shall continue to be payable to bearer and
transferable by delivery.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Registered Security presented or surrendered for registration of
transfer or exchange shall (if so required by the Company or the Trustee) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company duly executed, by the Holder thereof or his attorney
duly authorized in writing.
Unless otherwise provided in the Securities to, be transferred or
exchanged, no service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in relation
thereto.
The Company shall not be required (i) to issue, register the transfer of or
exchange any Securities of any series for a period of 15 days next preceding any
selection of Securities of such series to be redeemed, or (ii) to register the
transfer or exchange of any Securities so selected for redemption in whole or in
part except, in the case of any Security to be redeemed in part, the portion
thereof not to be so redeemed.
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Securities. In case any
temporary or definitive Security or any coupon appurtenant to a Coupon Security
shall become mutilated or be destroyed, lost or stolen, the Company in its
discretion may execute, and upon written authorization or request of any officer
of the Company, the Trustee shall authenticate and deliver, a new Security (in
the case of a Coupon Security, with
<PAGE>
11
coupons corresponding to the coupons appertaining to the mutilated, destroyed,
lost or stolen Security or the Security with respect to which a coupon shall
have become mutilated, destroyed, stolen or lost) of the same series and of like
tenor and principal amount at Stated Maturity bearing a number not
contemporaneously outstanding. In every case the applicant for a substituted
Security shall furnish to each of the Company and the Trustee such security or
indemnity as may be required by either of them, as the case may be, to save each
of them harmless, and, in every case of destruction, loss or theft, the
applicant shall also furnish to the Company and to the Trustee evidence to their
satisfaction of the destruction, loss or theft of such Security and of the
ownership thereof. In every case of mutilation, the applicant shall surrender to
the Trustee, the mutilated Security or the Security to which the mutilated
coupon appertains, in the case of a Coupon Security, with all coupons (including
any mutilated coupons) appertaining thereto.
Upon the issuance of any substituted Security, the Company may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses connected therewith.
In case any Security or coupon which has matured or is about to mature shall
become mutilated or be destroyed, lost or stolen, the Company may, instead of
issuing a substitute Security or coupon, pay or authorize the payment of the
same (without surrender thereof except in the case of a mutilated Security or
coupon) if the applicant for such payment shall furnish to each of the Company
and the Trustee such security or indemnity as may be required by either of them,
as the case may be, to save each of them harmless and, in case of destruction,
loss or theft, evidence satisfactory to the Company and the Trustee of the
destruction, loss or theft of such Security or coupon and of the ownership
thereof.
Every substituted Security, and in the case of Coupon Securities, its
appurtenant coupons, issued pursuant to the provisions of this Section 2.06 by
virtue of the fact that any Security or coupon of that series is destroyed, lost
or stolen shall constitute an additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Security or coupon of that series
shall be found at any time, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Securities and
coupons of that series duly issued hereunder. All Securities and coupons shall
be held and owned upon the express condition that, to the extent permitted by
law, the foregoing provisions are exclusive with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities and coupons and shall
preclude any and all other rights or remedies notwithstanding any law or statute
existing or hereafter enacted to the contrary with respect to the replacement or
payment of negotiable instruments or other securities without their surrender.
SECTION 2.07. Temporary Securities. Pending the preparation of definitive
Securities of any series the Company may execute and the Trustee, upon
satisfaction of the provisions of Section 2.03, shall authenticate and deliver
printed or lithographed temporary Securities. Temporary Securities shall be
issuable in any authorized denomination, and substantially in the form of the
definitive Securities of that series, but with such omissions, insertions and
variations as may be appropriate for temporary Securities, all as may be
determined by the Company. Every such temporary Security of any series shall be
authenticated by the Trustee upon the same conditions and in substantially the
same manner, and with the same effect, as the definitive Securities of that
series. Without unreasonable delay, the Company will execute and deliver to the
Trustee definitive Securities of that series and thereupon any or all temporary
Securities of that series may be surrendered in exchange therefor, at the office
or agency of the Company in the Place of Payment for such series, and the
Company shall execute and the Trustee shall authenticate and deliver in exchange
for such temporary Securities an equal aggregate principal amount at Stated
Maturity of definitive Securities. Such exchange shall be made by the Company at
its own expense and without any charge therefor except that the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto. Until so exchanged, the
temporary Securities of any series shall in all respects be entitled to the same
benefits under this Indenture as definitive Securities of that series
authenticated and delivered hereunder.
SECTION 2.08. Cancellation of Securities Paid, etc. Securities of any
series surrendered for the purpose of payment, redemption, exchange or
registration of transfer and all coupons surrendered for payment, shall, if
surrendered to the Company or any paying agent, be surrendered to the Trustee
for cancellation, or, if surrendered to the Trustee, shall be canceled by it,
and no Securities or coupons shall be issued in lieu thereof
<PAGE>
12
except as expressly permitted by any of the provisions of this Indenture or of
such series of Securities. The Trustee shall destroy or otherwise dispose of, at
its discretion, canceled Securities or coupons and, where applicable, deliver a
certificate of such destruction to the Company. If the Company shall acquire any
of the Securities or coupons, however, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Securities or
coupons unless and until the same are surrendered to the Trustee for
cancellation.
ARTICLE THREE
REDEMPTION OF SECURITIES
SECTION 3.01. Applicability of Article. The Company may reserve the right
to redeem and pay, prior to Stated Maturity, all or any part of the Securities
of any series, either by optional redemption, sinking fund or otherwise, by
provision therefor in the Security for such series established pursuant to
Sections 2.01 and 2.02. Redemption of Securities of any series shall be made in
accordance with the terms of such Securities and, to the extent that this
Article does not conflict with such terms, in accordance with this Article.
SECTION 3.02. Notice of Redemption; Selection of Securities. In case the
Company shall desire to exercise the right to redeem all or any part of the
Securities of a series in accordance with their terms, it shall fix a date for
redemption and shall mail a notice of such redemption at least 30 and not more
than 60 days prior to the date fixed for redemption to each Holder of a
Registered Security to be redeemed as a whole or in part at his address as the
same appear on the registry books of the Company and, if Unregistered Securities
are to be redeemed, shall publish a notice of redemption at least 30 and not
more than 60 days prior to the date fixed for redemption in an Authorized
Newspaper in the Place of Payment. If mailed in the manner herein provided, the
notice shall be conclusively presumed to have been duly given, whether or not
any such Holder receives such notice. Any defect in the notice to the Holder of
any Security of a series designated for redemption as a whole or in part shall
not affect the validity of the proceedings for the redemption of any other
Security of such series.
Each such notice of redemption shall specify the date fixed for redemption,
the redemption price, the place where such Securities are to be surrendered for
payment of the redemption price, which shall be the office or agency of the
Company in each Place of Payment, that payment will be made upon presentation
and surrender of such Securities and all coupons appertaining thereto, if any,
that accrued interest, if any, to the redemption date will be paid as specified
in said notice, and that on and after said date, interest thereon or on the
portions thereof to be redeemed will cease to accrue. In case the redemption is
on account of a sinking fund, said notice shall so specify. If less than all the
outstanding Securities of a series are to be redeemed, the notice of redemption
shall specify the numbers of the Securities of that series to be redeemed. In
case any Security of a series is to be redeemed in part only, the notice of
redemption shall state the portion of the principal amount thereof to be
redeemed and shall state that on and after the date fixed for redemption, upon
surrender of such Security, a new Security or Securities of that series in the
principal amount and Stated Maturity equal to the unredeemed portion thereof
will be issued.
If fewer than all the Securities of a series are to be redeemed, the
Company shall give the Trustee written notice not less than 60 days prior to the
redemption date as to the aggregate principal amount at Stated Maturity of
Securities to be redeemed, and the Trustee shall select from the Securities
outstanding in such manner as in its sole discretion it shall deem appropriate
and fair, the Securities of that series or portions thereof to be redeemed.
Securities of a series may be redeemed in part only in multiples of $1,000,
except as otherwise set forth in the form of Security to be redeemed.
Any notice of redemption to be mailed by the Company pursuant to this
Section 3.02 may be mailed, at the Company's direction, by the Trustee in the
name and at the expense of the Company.
<PAGE>
13
SECTION 3.03. Payment of Securities Called for Redemption. If notice of
redemption has been mailed or published, as the case may be as above provided,
the Securities or portions or Securities of a series with respect to which such
notice has been mailed or published shall become due and payable on the date and
at the place or places stated in such notice at the applicable redemption price,
together with accrued interest to the redemption date and on and after said date
(unless the Company shall default in the payment of such Securities at the
applicable redemption price, together with accrued interest, if any, to said
date) any interest on the Securities or portions of Securities of any series so
called for redemption shall cease to accrue, and such Securities and portions of
Securities of any series shall be deemed not to be outstanding hereunder and
shall not be entitled to any benefit under this Indenture except to receive
payment of the redemption price, together with accrued interest, if any, to the
date fixed for redemption. On or before the Business Day preceding the
redemption date specified in the notice of redemption, the Company shall deposit
with the Trustee or with one or more paying agents an amount of money, in
immediately available funds, sufficient to redeem on the redemption date all the
Securities so called for redemption at the applicable redemption price, together
with accrued interest, if any, to the date fixed for redemption. On presentation
and surrender of such Securities at the Place of Payment, the said Securities or
the specified portions thereof shall be paid and redeemed by the Company at the
applicable redemption price, together with accrued interest, if any, to the date
fixed for redemption.
Upon presentation of any Security redeemed in part only, the Company shall
execute and the Trustee shall authenticate and deliver to the Holder thereof, at
the expense of the Company, a new Security or Securities of such series, of
authorized denominations in aggregate principal amount and Stated Maturity equal
to the unredeemed portion of the Security so presented.
ARTICLE FOUR
SINKING FUNDS
SECTION 4.01. Applicability of Article. The provisions of this Article
shall be applicable to any sinking fund for the retirement of Securities of a
series except as otherwise specified as contemplated by Section 2.01 for
Securities of such series.
The minimum amount of any sinking fund payment provided for by the terms
of Securities of any series is herein referred to as a "mandatory sinking fund
payment," and any payment in excess of such minimum amount provided for by the
terms of Securities of any series is herein referred to as an "optional sinking
fund payment."
SECTION 4.02. Satisfaction of Mandatory Sinking Fund Payments with
Securities. In lieu of making all or any part of any mandatory sinking fund
payment with respect to any Securities of a series in cash, the Company may at
its option (a) deliver to the Trustee Securities of that series theretofore
purchased or otherwise acquired by the Company, or (b) receive credit for the
principal amount of Securities of that series which have been redeemed either
at the election of the Company pursuant to the terms of such Securities or
through the application of permitted optional sinking fund payments pursuant to
the terms of such Securities, provided that such Securities have not been
previously so credited. Such Securities shall be received and credited for such
purpose by the Trustee at the redemption price specified in such Securities for
redemption through operation of the sinking fund and the amount of such
mandatory sinking fund payment shall be reduced accordingly.
SECTION 4.03. Redemption of Securities for Sinking Fund. Not less than 60
days prior to each sinking fund payment date for any series of Securities, the
Company will deliver to the Trustee an Officers' Certificate specifying the
amount of the next ensuing sinking fund payment for that series pursuant to the
terms of that series, the portion thereof, if any, which is to be satisfied by
payment of cash and the portion thereof, if any which is to be satisfied by
delivering and crediting Securities of that series pursuant to Section 4.02,
which
<PAGE>
14
Securities will accompany such certificate, if not theretofore delivered, and
whether the Company intends to exercise its right to make a permitted optional
sinking fund payment with respect to such series. Such certificate shall also
state that no Event of Default with respect to such series has occurred and is
continuing.
Any mandatory or optional sinking fund payment or payments made in cash
plus any unused balance of any preceding sinking fund payments made in cash
which shall equal or exceed $50,000 (or a lesser sum if the Company shall so
request) with respect to Securities of any particular series shall be applied by
the Trustee on the sinking fund payment date on which such payment is made (or,
if such payment is made prior to a sinking fund payment date, on the sinking
fund payment date following the date of such payment) to the redemption of such
Securities at the redemption price specified in such Securities for operation of
the sinking fund together with accrued interest to the date fixed for
redemption. Any sinking fund moneys not so applied or allocated by the Trustee
to the redemption of Securities shall be added to the next cash sinking fund
payment received by the Trustee for such series and, together with such payment,
shall be applied in accordance with the provisions of this Section 4.03. Any and
all sinking fund moneys with respect to the Securities of any particular series
held by the Trustee on the last sinking fund payment date with respect to such
Securities, and not held for the payment or redemption of particular Securities,
shall be applied by the Trustee, to the payment of the principal of the
Securities of that series at maturity.
The Trustee shall select the Securities to be redeemed upon such sinking
fund payment date in the manner specified in the penultimate paragraph of
Section 3.02 and the Company shall cause notice of the redemption thereof to be
given in the manner provided in Section 3.02. Such notice having been duly
given, the redemption of such Securities shall be made upon the terms and in the
manner stated in Section 3.03.
On each sinking fund payment date, the Company shall pay to the Trustee in
immediately available funds a sum equal to all accrued interest to the date
fixed for redemption on Securities to be redeemed on such sinking fund payment
date pursuant to this Section 4.03.
The Trustee shall not redeem any Securities of a series with sinking fund
moneys or mail or publish any notice of redemption of such Securities by
operation of the sinking fund for such series during the continuance of a
default in payment of interest on such Securities or of any Event of Default
(other than an Event of Default occurring as a consequence of this paragraph),
except that if the notice of redemption of any such Securities shall theretofore
have been mailed or published in a accordance with the provisions hereof, the
Trustee shall redeem Securities if cash sufficient for that purpose shall be
deposited with the Trustee for that purpose in accordance with the terms of this
Article Four. Except as aforesaid, any moneys in the sinking fund for such
series at the time when any such default or Event of Default shall occur and any
moneys thereafter paid into such sinking fund shall, during the continuance of
such default or Event of Default, be held as security for the payment of all
Securities of such series; provided, however, that in case such default or Event
or Default shall have been cured or waived as provided herein, such moneys shall
thereafter be applied on the next sinking fund payment date for such Securities
on which such moneys may be applied pursuant to the provisions of this
Section 4.03.
ARTICLE FIVE
PARTICULAR COVENANTS OF THE COMPANY
SECTION 5.01. Payment of Principal, Premium and Interest. The Company shall
duly and punctually pay or cause to be paid the principal of and premium, if
any, and interest, if any, on the Securities of each series in accordance with
the terms thereof and this Indenture and shall comply with all other forms,
agreements and conditions contained in or made in this Indenture for the benefit
of such Securities.
SECTION0N 5.02. Offices for Notices and Payments, etc. So long as any
Securities of a series remain outstanding, the Company shall maintain in each
Place of Payment for such series of Securities an office or
<PAGE>
15
agency where the Securities of that series may be presented for payment, for
registration of transfer and for exchange as provided in this Indenture and
where notices and demands to or upon the Company in respect of the Securities of
that series or of this Indenture may be served. The Company shall give to the
Trustee written notice of the location of any such office or agency and of any
change of location thereof. In case the Company shall fail to maintain any such
office or agency or shall fail to give such notice of the location or of any
change in the location therof, presentations and demands may be made at the
Principal Office of the Trustee (or at any other address previously furnished in
writing to the Company by the Trustee) and notices may be served at the
Principal Office of the Trustee. Unless otherwise provided pursuant to Section
2.01, the Company hereby initially designates as the Place of Payment for each
series of Securities, the office or agency of the Trustee in Chicago, Illinois
and the Borough of Manhattan, New York, New York, at which its corporate agency
business shall be conducted, and initially appoints the Trustee its agent for
payment, for registration of transfers, for exchange of the Securities and where
notices and demands may be served upon the Company. Notwithstanding any other
provisions to the contrary, the Company at its option may make payment of
principal, premium (if any) and interest with respect to Registered Securities
by check mailed to the address of the Person entitled thereto, as such address
appears on the registry books of the Company; provided, however, that in the
case of a Registered Security issued between a record date and the initial
Interest Payment Date relating to such record date, interest for the period
beginning on the Original Issue Date and ending on such initial Interest Payment
Date shall be paid on such initial Interest Payment Date to the person to whom
such Registered Security shall have been originally issued. Notwithstanding the
foregoing a holder of $10,000,000 or more in aggregate principal amount of
Registered Securities shall be entitled to receive such payments by wire
transfer of immediately available funds, but only if appropriate wire transfer
instructions have been received in writing by the Trustee not less than 15 days
prior to the applicable Interest Payment Date.
SECTION 5.03. Limitation on Liens. Nothing in this Indenture or in the
Securities shall in any way restrict or prevent the Company or any Subsidiary
from incurring any indebtedness; provided, however, that neither the Company nor
any Restricted Subsidiary shall issue, assume or guarantee any notes, bonds,
debentures or other similar evidences of indebtedness for money borrowed (notes,
bonds, debentures or other similar evidences of indebtedness for money borrowed
being hereinafter in this Article Five called "Debt") secured by mortgage, lien,
pledge or other encumbrance (mortgages, liens, pledges or other encumbrances
being hereinafter in this Article Five called "Mortgages") upon any Restricted
Property, without effectively providing that the Securities of each series then
outstanding and thereafter created (together with, if the Company so determines,
any other indebtedness or obligation then existing and any other indebtedness or
obligation thereafter created ranking equally with the Securities then existing
or thereafter created which is not subordinated to the Securities of each
series) shall be secured equally and ratably with (or prior to) such Debt so
long as such Debt shall be so secured, except that the foregoing provisions
shall not apply to:
(a) Mortgages affecting property of a corporation existing at the time it
becomes a Subsidiary or at the time it is merged into or consolidated with the
Company or a Subsidiary;
(b) Mortgages on property existing at the time of acquisition thereof or
incurred to secure payment of all or part of the purchase price thereof or to
secure Debt incurred prior to, at the time of or within 24 months after
acquisition therof for the purpose of financing all or part of the purchase
price thereof;
(c) Mortgages on property of the Company or a Subsidiary existing on the
date of this Indenture, including the encumbrances created by the two existing
capital lease financings for the olefins facilities;
(d) Mortgages on any property to secure all or part of the cost of
construction or improvements thereon or Debt incurred to provide funds for any
such purpose in a principal amount not exceeding the cost of such construction
or improvements;
(e) Mortgages which secure only an indebtedness owing by a Subsidiary to
the Company or a Subsidiary;
<PAGE>
16
(f) Mortgages in favor of the United States or any state thereof, or any
department, agency, instrumentality, or political subdivision of any such
jurisdiction, to secure partial, progress, advance or other payments pursuant to
any contract or statute or to secure any indebtedness incurred for the purpose
of financing all or any part of the purchase price or cost of constructing or
improving the property subject thereto, including, without limitation,
Mortgages to secure Debt of the pollution control or industrial revenue bond
type;
(g) Mortgages required by any contract or statute in order to permit the
Company or a Subsidiary to perform any contract or subcontract made by it with
or at the request of the United States of America, any state or any department,
agency or instrumentality or political subdivision of either; or
(h) any extension, renewal or replacement (or successive extensions,
renewals or replacements), in whole or in part, of any Mortgage referred to in
the foregoing clauses (a) to (g) inclusive or of any Debt secured thereby,
provided that the principal amount of Debt secured thereby shall not exceed the
principal amount of Debt so secured at the time of such extension, renewal or
replacement, and that such extension, renewal or replacement Mortgage shall be
limited to all or part of substantially the same property which secured the
Mortgage extended, renewed or replaced (plus improvements on such property).
Notwithstanding the foregoing provisions of this Section 5.03, the Company
and any one or more Restricted Subsidiaries may issue, assume or guarantee. Debt
secured by Mortgages which would otherwise be subject to the foregoing
restrictions in an aggregate principal amount which, together with the aggregate
outstanding principal amount of all other Debt of the Company and its Restricted
Subsidiaries which would otherwise be subject to the foregoing restrictions (not
including Debt permitted to be secured under clauses (a) to (h) inclusive above)
and the aggregate Value, as defined in Section 5.05, of the Sale and Lease-Back
Transactions, as defined in Section 5.04, in existence at such time (not
including Sale and Lease-Back Transactions as to which the Company has complied
with Section 5.04(b)), does not at any one time exceed the greater of $50
million or 10% of the Consolidated Net Tangible Assets of the Company and its
consolidated Subsidiaries.
SECTION 5.04. Limitation on Sale and Lease-Back. Neither the Company nor
any Restricted Subsidiary shall enter into any arrangement with any Person
(other than the Company or a Subsidiary), or to which any such Person is a
party, providing for the leasing to the Company or a Restricted Subsidiary for a
period of more than three years of any Restricted Property which has been or is
to be sold or transferred by the Company or such Restricted Subsidiary to such
Person or to any other Person (other than the Company or a Subsidiary), to which
funds have been or are to be advanced by such Person on the security of the
leased property (in this Article Five called "Sale and Lease-Back Transactions")
unless either:
(a) the Company or such Restricted Subsidiary would be entitled, pursuant
to the provisions of Section 5.03, to incur Debt in a principal amount equal to
or exceeding the Value of such Sale and Lease-Back Transaction, secured by a
Mortgage on the property to be leased, without equally and ratably securing the
Securities; or
(b) the Company (and in any such case the Company covenants and agrees that
it will do so) during or immediately after the expiration of four months after
the effective date of such Sale and Lease-Back Transaction (whether made by the
Company or a Restricted Subsidiary) applies to the voluntary retirement of
indebtedness of the Company (including Securities, provided that Securities may
only be redeemed at the redemption prices and in accordance with the other
provisions of the form thereof), maturing by the terms thereof more than one
year after the original creation thereof and ranking at least pari passu with
the Securities (hereinafter in this Section called "Funded Debt") an amount
equal to the Value of such Sale and Lease-Back Transaction, less the principal
amount of Securities delivered, within four months after the effective date of
such arrangement, to the Trustee for retirement and cancellation and the
principal amount of other Funded Debt voluntarily retired by the Company within
such four-month period, excluding retirements of Securities and other Funded
Debt as a result of conversions or pursuant to mandatory sinking fund or
prepayment provisions or by payment at maturity.
<PAGE>
17
SECTION 5.05. Definition of "Value." For purposes of Sections 5.03 and
5.04, the term "Value" shall mean, with respect to a Sale and Lease-Back
Transaction, as of any particular time, the amount equal to the greater of (1)
the net proceeds of the sale or transfer of the property leased pursuant to such
Sale and Lease-Back Transaction or (2) the fair value, in the opinion of the
Board of Directors, of such property at the time of entering into such Sale and
Lease-Back Transaction, in either case divided first by the number of full years
of the term of the lease and then multiplied by the number of full years of such
term remaining at the time of determination, without regard to any renewal or
extension options contained in the lease.
SECTION 5.06. Appointments to Fill Vacancies in Trustee's Office. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee
for any one or more series of Securities, shall appoint a Trustee, in the manner
provided in Section 8.10 so that there shall at all times be a Trustee with
respect to each series of Securities hereunder.
SECTION 5.07. Provision as to Paying Agent. (a) If the Company appoints a
paying agent other than the Trustee with respect to the Securities of any
series, it shall cause such paying agent to execute and deliver to the Trustee
an instrument in which such agent shall agree with the Trustee, subject to the
provisions of this Section 5.07:
(1) that it will hold all sums held by it as such agent for the payment of
the principal of and premium, if any, or interest, if any, on the Securities of
such series (whether such sums have been paid to it by the Company or by any
other obligor on the Securities of such series) in trust for the benefit of the
Holders of the Securities of such series; and
(2) that it will give the Trustee notice of any failure by the Company (or
by any other obligor on the Securities of such series) to make any payment of
the principal of and premium, if any, or interest, if any, on the Securities of
such series when the same shall be due and payable.
(b) If the Company acts as its own paying agent with respect to the
Securities of any series it shall, on or prior to each due date of the principal
of and premium, if any, or interest, if any, on any of the Securities of such
series, set aside, segregate and hold in trust for the benefit of the Holders of
such Securities or the coupons appertaining thereto, as the case may be, a sum
sufficient to pay such principal and premium, if any, or interest, if any, so
becoming due and will notify the Trustee of any failure to take such action and
of any failure by the Company (or by any other obligor under such Securities) to
make any payment of the principal of and premium, if any, or interest, if any,
on such Securities when the same shall become due and payable.
(c) Whenever the Company has one or more paying agents with respect to the
Securities of any series, it shall deposit with a paying agent (who shall make
any necessary funds available to any other paying agents), on the Business Day
next preceding each due date in funds available on the due date of the principal
of, premium, if any, and interest, if any, on such Securities, a sum in
immediately available funds sufficient to pay such principal, premium, if any,
and interest, if any, so becoming due, such sum to be held in trust for the
benefit of the Holders of such Securities or the coupons appertaining thereto,
as the case may be, entitled to any such principal, premium and interest, and
(unless such paying agent is the Trustee) the Company shall promptly notify the
Trustee of its action or failure so to act.
(d) Anything in this Section 5.07 to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust by it, or any paying agent hereunder, as
required by this Section 5.07, such sums to be held by the Trustee upon the
trusts herein contained.
(e) Anything in this Section 5.07 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 5.07 is subject to
Sections 13.03 and 13.04.
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18
SECTION 5.08. Annual Certificate to Trustee. The Company shall deliver to
the Trustee within 120 days after the end of each fiscal year of the Company
ending after the date hereof so long as any Securities are outstanding hereunder
(beginning with respect to Securities of each series with the fiscal year next
following the issue date of any series of Securities) an Officers' Certificate
stating that in the course of the performance by the signers of their duties as
officers of the Company and based upon a review made under their supervision of
the activities of the Company they would normally have knowledge of any default
by the Company in the performance of any covenants contained in Sections 5.03,
5.04, 12.01 or 12.02, stating whether or not they have knowledge of any such
default and, if so, specifying each such default of which the signers have
knowledge and the nature thereof.
ARTICLE SIX
HOLDERS LISTS AND REPORTS BY THE COMPANY
AND THE TRUSTEE
SECTION 6.01. Holders Lists. The Company shall furnish or cause to be
furnished to the Trustee, with respect to the Registered Securities of each
series (i) semi-annually, not later than each Interest Payment Date for such
series and on dates to be determined pursuant to Section 2.01 for non-interest
bearing Securities in each year, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders, as of the
respective record dates therefor, and on dates to be determined pursuant to
Section 2.01 for non-interest bearing Securities, and (ii) at such other times
as the Trustee may request in writing, within 30 days after receipt by the
Company of any such request, a list in such form as the Trustee may reasonably
require of the names and addresses of the Holders as of a date not more than 15
days prior to the time such information is furnished; provided, however, that so
long as the Trustee shall be the registrar of a series of Securities all of
which are Registered Securities, such list shall not be required to be
furnished in respect of that series.
SECTION 6.02. Preservation and Disclosure of Lists. (a) The Trustee shall
preserve, in as current a form as is reasonably practicable, all information as
to the names and addresses of the Holders of Registered Securities of any series
contained in the most recent list furnished to it as provided in Section 6.01 or
received by the Trustee in its capacity as Securities registrar. The Trustee may
destroy any list furnished to it as provided in Section 6.01 upon receipt of a
new list so furnished.
(b) In case three or more Holders of Securities of the same series
(hereinafter referred to as "applicants") apply in writing to the Trustee and
furnish to the Trustee reasonable proof that each such applicant has owned a
Security of such series for a period of at least six months preceding the date
of such application, and such application states that the applicants desire to
communicate with other Holders of Securities of such series or with Holders of
Securities of all series with respect to their rights under this Indenture or
under such Securities and is accompanied by a copy of the form of proxy or other
communication which such applicants propose to transmit for such purpose, then
the Trustee shall, within five Business Days after the receipt of such
application, at its election, either
(1) afford such applicants access to the information preserved at the time
by the Trustee in accordance with the provisions of subsection (a) of this
Section 6.02, or
(2) inform such applicants as to the approximate number of Holders of
Securities of such series of or all series, as the case may be, whose names and
addresses appear in the information preserved at the time by the Trustee in
accordance with the provisions of subsection (a) of this Section 6.02 and as to
the approximate cost of mailing to such Holders the form of proxy or other
communication, if any, specified in such application.
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19
If the Trustee shall elect not to afford such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each Holder of a Security of such series or of all series, as the case
may be, whose name and address appears in the information preserved at the time
by the Trustee in accordance with the provisions of subsection (a) of this
Section 6.02, a copy of the form of proxy or other communication which is
specified in such request, with reasonable promptness after a tender to the
Trustee of the material to be mailed and of payment, or provision for the
payment, of the reasonable expenses of mailing, unless within five days after
such tender, the Trustee shall mail to such applicants and rile with the
Securities and Exchange Commission, together with a copy of the material to be
mailed, a written statement to the effect that, in the opinion of the Trustee,
such mailing would be contrary to the best interests of the Holders of
Securities of such series or of all series, as the case may be, or would be in
violation of applicable law. Such written statement shall specify the basis of
such opinion. If said Commission, after opportunity for a hearing upon the
objections specified in the written statement so filed, shall enter an order
refusing to sustain any of such objections or if, after the entry of an order
sustaining one or more of such objections, said Commission shall find, after
notice and opportunity for hearing, that all the objections so sustained have
been met and shall enter an order so declaring, the Trustee shall mail copies of
such material to all such Holders with reasonable promptness after the entry of
such order and the renewal of such tender; otherwise, the Trustee shall be
relieved of any obligation or duty to such applicants respecting their
application.
(c) Each Holder of any Security or coupon or both, by receiving and holding
the same, agrees with the Company and the Trustee that neither the Company nor
the Trustee nor any paying agent shall be held accountable by reason of the
disclosure of the name and address of such Holder in accordance with the
provisions of subsection (b) of this Section 6.02, regardless of the source from
which such information was derived, and that the Trustee shall not be held
accountable by reason of mailing any material pursuant to a request made under
said subsection (b).
SECTION 6.03. Reports by the Company. (a) The Company shall file with the
Trustee, within 15 days after the Company is required to file the same with the
Securities and Exchange Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as said Commission may from time to time by rules and regulations
prescribe) relating to the equity or debt securities of the Company which the
Company may be required to file with said Commission pursuant to section 13 or
15(d) of the Securities Exchange Act of 1934; or, if the Company is not required
to file information, documents or reports pursuant to any of such sections, then
to file with the Trustee and said Commission, in accordance with rules and
regulations prescribed from time to time by said Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to section 13 of the Securities Exchange Act of 1934 in
respect of a security listed and registered on a national securities exchange as
may be prescribed from time to time in such rules and regulations.
(b) The Company shall file with the Trustee and the Securities and Exchange
Commission, in accordance with the rules and regulations prescribed from time to
time by said Commission, such additional information, documents and reports with
respect to compliance by the Company with the conditions and covenants provided
for in this Indenture as may be required from time to time by such rules and
regulations.
(c) The Company shall transmit by mail to each Holder of Securities, in the
manner and to the extent provided in Section 6.04, within 30 days after the
filing thereof with the Trustee, such summaries of any information, documents
and reports required to be filed by the Company pursuant to subsections (a) and
(b) of this Section 6.03 as may be required by rules and regulations prescribed
from time to time by the Securities and Exchange Commission.
SECTION 6.04. Reports by the Trustee. (a) Within 60 days after May 15 of
each year after the first series of Securities is issued hereunder, so long as
any Securities are outstanding hereunder, the Trustee shall transmit to the
Holders, as hereinafter in this Section 6.04 provided, a brief report dated as
of such May 15 with respect to any of the following events which may have
occurred during the 12 months preceding the date of such report (but if no such
event has occurred within such period, no report need be transmitted):
<PAGE>
20
(1) any change to its eligibility under Section 8.09 and its qualification
under Section 8.08;
(2) the creation of or any material change to a relationship specified in
Section 310(b)(l) through Section 310(b)(10) of the Trust Indenture Act of 1939;
(3) the character and amount of any advances (and if the Trustee elects so
to state, the circumstances surrounding the making thereof) made by the Trustee
(as such) which remain unpaid on the date of such report, and for the
reimbursement of which it claims or may claim a lien or charge, prior to that of
the Securities, on any property or funds held or collected by it as Trustee,
except that the Trustee shall not be required (but may elect) to state such
advances if such advances so remaining unpaid aggregate not more than 1/2 of 1%
of the principal amount at Stated Maturity of the Securities outstanding on the
date of such report;
(4) any change to the amount, interest rate and maturity date of all other
indebtedness owing by the Company (or by any other obligor on the Securities) to
the Trustee in its individual capacity, on the date of such report, with a brief
description of any property held as collateral security therefor, except an
indebtedness based upon a creditor relationship arising in any manner described
in paragraphs (2), (3), (4) or (6) of subsection (b) of Section 8.13;
(5) any change to the property and funds, if any, physically in the
possession of the Trustee, as such, on the date of such report;
(6) any additional issue of Securities which the Trustee has not previously
reported; and
(7) any action taken by the Trustee in the performance of its duties under
this Indenture which it has not previously reported and which in its opinion
materially affects any of the Securities, except action in respect of a default,
notice of which has been or is to be withheld by it in accordance with the
provisions of Section 7.08.
(b) The Trustee shall transmit to the Holders, as hereinafter provided, a
brief report with respect to the character and amount of any advances (and if
the Trustee elects so to state, the circumstances surrounding the making
thereof) made by the Trustee (as such), since the date of the last report
transmitted pursuant to the provisions of subsection (a) of this Section 6.04
(or, if no such report has yet been so transmitted, since the date of execution
of this Indenture), for the reimbursement of which it claims or may claim a lien
or charge prior to that of the Securities, on property or funds held or
collected by it as Trustee, and which it has not previously reported pursuant to
this subsection, except that the Trustee shall not be required (but may elect)
to report such advances if such advances remaining unpaid at any time aggregate
10% or less of the principal amount of Securities at Stated Maturity outstanding
at such time, such report to be transmitted within 90 days after such time.
(c) Reports pursuant to this Section shall be transmitted by mail:
(1) to all Registered Holders of Securities, as the names and addresses of
such Holders appear in the registry books of the Company,
(2) to such Holders of Securities as have, within the two years preceding
such transmission, filed their names and addresses with the Trustee for that
purpose; and
(3) except in the case of reports pursuant to subsection (b) of this
Section, to each Holder whose name and address is preserved at the time by the
Trustee, as provided in Section 6.02.
(d) A copy of each such report shall, at the time of such transmission to
Holders, be furnished to the Company and be filed by the Trustee with each stock
exchange upon which the Securities are listed and also with the Securities and
Exchange Commission. The Company shall notify the Trustee when any Securities
are listed on any stock exchange.
<PAGE>
21
ARTICLE SEVEN
REMEDIES OF THE TRUSTEE AND HOLDERS
ON EVENT OF DEFAULT
SECTION 7.01. Events of Default. "Event of Default," whenever used herein
with respect to Securities of any series means each one of the following events
unless it is either inapplicable to a particular series or it is specifically
deleted or modified in the supplemental indenture under which such series of
Securities is issued, if any, or in the form of Security for such series:
(a) default in the payment of any installment of interest upon any Security
of that series when the same becomes due and payable, and continuance of such
default for a period of 30 days; or
(b) default in the payment of the principal of or premium, if any, on any
Securities of that series as and when the same shall become due and payable
either at Maturity, upon redemption, by declaration or otherwise; or
(c) default in the payment of any sinking fund installment or analogous
obligation as and when the same shall become due and payable by the terms of
that series, and continuance of such default for a period of 30 days; or
(d) failure on the part of the Company duly to observe or perform any other
of the covenants or agreements on the part of the Company in the Securities of
such series or in this Indenture (other than a covenant or agreement in respect
of the Securities of such series a default in the performance of which or the
breach of which is elsewhere in this Section 7.01 specifically provided for or
which has expressly been included in this Indenture solely for the benefit of
one or more series of Securities other than such series) and continuance of
such default or breach for a period of 90 days after the date on which written
notice specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder, shall have been
given to the Company by the Trustee, or to the Company and the Trustee by the
Holders of at least 25% in aggregate principal amount of the Securities of that
series at the time outstanding; or
(e) if there shall be entered a decree or order by a court having
jurisdiction for relief in respect of the Company under any applicable Federal
or State bankruptcy law or other similar law, or appointing a receiver, trustee
or liquidator, or other similar official of the Company or of any substantial
part of its property, or ordering the winding-up or liquidation of its affairs
and the continuance of any such decree or order unstayed and in effect for a
period of 90 consecutive days; or
(f) if the Company shall file a petition or an answer or consent seeking
relief under any applicable Federal or State bankruptcy law or other similar
law, or shall consent to the institution of proceedings thereunder or to the
filing of any such petition or to the appointment or taking possession by a
receiver, trustee, custodian or other similar official of the Company or of any
substantial part of its property, or the Company shall make an assignment for
the benefit of creditors generally or shall admit in writing to its inability to
pay its debts generally as they become due; or
(g) any other event specified as an Event of Default in the form of
Security for such series, or in the supplemental indenture, Officers'
Certificate or resolution of the Board of Directors under which such series of
Securities is issued, if any.
<PAGE>
22
If an Event of Default described in clauses (a), (b), (c), (d) or (g) (if
the Event of Default under clause (d) or (g) is with respect to less than all
series of Securities then outstanding) occurs and is continuing, then and in
each and every such case, unless the principal of all the Securities of such
series shall have already become due and payable, either the Trustee or the
Holders of not less than 25% in aggregate principal amount at Stated Maturity of
the Securities of such series then outstanding hereunder (each such series
acting as a separate class), by notice in writing to the Company (and to the
Trustee if given by Holders), may declare the principal amount (in the case of
Securities that are Original Issue Discount Securities, such principal amount as
may be determined in accordance with the terms of that series) of all the
Securities of such series to be due and payable immediately, and upon any such
declaration the same shall become and shall be immediately due and payable,
anything in this Indenture or in the Securities of such series contained to the
contrary notwithstanding. If an Event of Default described in clauses (d) or (g)
(if the Event of Default under clause (d) or (g) is with respect to all series
of Securities then outstanding) or (e) or (f) occurs and is continuing, then and
in each and every such case, unless the principal of all the Securities shall
have already become due and payable, either the Trustee or the Holders of not
less than 25% in aggregate principal amount at Stated Maturity of all the
Securities then outstanding hereunder (treated as one class), by notice in
writing to the Company (and to the Trustee if given by Holders), may declare the
principal amount (in the case of Original Issue Discount Securities, such
portion of the principal amount to be determined as provided in Section 2.01(9))
of all the Securities to be due and payable immediately, and upon any such
declaration the same shall become and shall be immediately due and payable,
anything in this Indenture or in the Securities contained to the contrary
notwithstanding. The foregoing provisions are, however, subject to the condition
that if, at any time after the principal amount (in the case of Securities that
are Original Issue Discount Securities, such portion of the principal amount as
may be determined in accordance with the terms of that series) of the
Securities of any series or of all the Securities, as the case may be, shall
have been so declared due and payable, and before any judgment or decree for the
payment of the moneys due shall have been obtained or entered as hereinafter
provided, the Company shall pay or shall deposit with the Trustee a sum
sufficient to pay all matured installments of interest upon all the Securities
of such series or of all of the Securities, as the case may be, and the
principal of and premium, if any, on all Securities of such series or of all the
Securities, as the case may be, which shall have become due otherwise than by
acceleration (with interest on overdue installments of interest, to the extent
that payment of such interest is enforceable under applicable law, and on such
principal and premium, if any, at the rate of interest or yield to Maturity (in
the case of Original Issue Discount Securities) borne by the Securities of such
series or at the rates of interest or yields to Maturity of all the Securities,
as the case may be, to the date of such payment or deposit) and all sums paid or
advanced by the Trustee hereunder, and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel and any and
all defaults under this Indenture, other than the nonpayment of principal of or
premium, if any, or accrued interest, if any, on Securities of such series or of
all of the Securities, as the case may be, which shall have become due by
acceleration, shall have been remedied--then and in every such case the Holders
of a majority in aggregate principal amount at Stated Maturity of the Securities
of such series or of all of the Securities, as the case may be, then
outstanding, by written notice to the Company and to the Trustee, may waive all
defaults with respect to that series or of all of the Securities, as the case
may be, and rescind and annul such declaration and its consequences; but no
waiver or rescission and annulment shall extend to or shall affect any
subsequent default, or shall impair any right consequent thereon.
In case the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned because
of such rescission or annulment or for any other reason or shall have been
determined adversely to the Trustee, then and in every such case the Company and
the Trustee shall be restored respectively to their several positions and rights
hereunder, and all rights, remedies and powers of the Company and the Trustee
shall continue as though no such proceeding had been taken.
SECTION 7.02. Payment of Securities on Default; Suit Therefor. In case (1)
default shall be made in the payment of any installment of interest upon any
Security of any series as and when the same shall become due and payable, and
such default shall have continued for a period of 30 days, or (2) default shall
be made in the payment of the principal of or premium, if any, on any Security
of any series as and when the same shall have become due and payable, whether at
Maturity of Securities of that series or otherwise, or (3) default is made in
the making or satisfaction of any sinking fund payment or analogous obligation
when the same becomes due
<PAGE>
23
by the terms of the Securities of any series and such default shall continue for
a period of 30 days -- then, upon demand of the Trustee, the Company shall pay
to the Trustee, for the benefit of the Holder of any such Security, the whole
amount that then shall have become due and payable on any such Security for
principal and premium, if any, or interest, if any, or both, as the case may be,
with interest on the overdue principal and premium, if any, and (to the extent
that payment of such interest is enforceable under applicable law) on the
overdue installments of interest at the rate of interest or yield to Maturity
(in the case of Original Issue Discount Securities) borne by any such Security
and, in addition thereto, such further amount as shall be sufficient to cover
the costs and expenses of collection, including reasonable compensation to the
Trustee, its agents, attorneys and counsel, and any expenses or liabilities
incurred by the Trustee hereunder other than through its negligence or bad
faith.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor upon such
Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property, wherever situated, of the Company or
any other obligor upon such Securities.
In case there shall be pending proceedings for the bankruptcy or for the
reorganization of the Company or any other obligor on the Securities of any
series under any Federal or State bankruptcy law or other similar law, or in
case a receiver or trustee shall have been appointed for the property of the
Company or such other obligor, or in the case of any other similar judicial
proceedings relative to the Company or other obligor on the Securities of any
series, or to the creditors or property of the Company or such other obligor,
the Trustee (irrespective of whether the principal of any Securities of any
series shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand
pursuant to the provisions of this Section 7.02) shall be entitled and
empowered, by intervention in such proceedings or otherwise, to file and prove a
claim or claims for the whole amount of principal and premium, if any, and
interest, if any, owing and unpaid in respect of the Securities of any series
(in the case of Securities that are Original Issue Discount Securities, such
principal amount as would be then due and payable upon declaration of
acceleration in accordance with the terms of that series) and, in case of any
judicial proceedings, to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents or counsel) and of the Holders allowed
in such judicial proceedings relative to the Company or any other obligor on the
Securities of any series, its or their creditors, or its or their property, and
to collect and receive any moneys or other property payable or deliverable on
any such claims and to distribute the same after the deduction of its charges
and expenses; and any receiver, assignee, liquidator, sequestrator or trustee in
bankruptcy or reorganization is hereby authorized by each of the Holders to make
such payments to the Trustee, and, in the event that the Trustee shall consent
to the making of such payments directly to the Holders, to pay to the Trustee
any amount due it for compensation, expenses, disbursements and advances of the
Trustee, its agents or counsel, and any other amounts due to the Trustee under
Section 8.06 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to
approve, consent, accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment, or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
All rights of action and of asserting claims under this Indenture, or under
any of the Securities, may be enforced by the Trustee without the possession of
any of the Securities, or the production thereof at any trial or other
proceeding relative thereto, and any such suit or proceeding instituted by the
Trustee with respect to the Securities of any series shall be brought in its own
name as trustee of an express trust, and any recovery of judgment shall be for
the ratable benefit of the Holders of the Securities in respect of which such
action is taken.
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SECTION 7.03. Application of Moneys Collected by Trustee. Any moneys
collected by the Trustee with respect to any series of Securities under this
Article Seven shall be applied in the order following, at the date or dates
fixed by the Trustee for the distribution of such moneys on account of
principal, premium, if any, or interest, if any, upon presentation of the
several Securities of such series or the coupons appertaining thereto, as the
case may be, and stamping thereon the payment, if only partially paid, and upon
surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 8.06 hereof;
SECOND: In case the principal of the outstanding Securities of that
series shall not have become due and be unpaid, to the payment of interest
on the Securities of that series, in the order of the maturity of the
installments of such interest with interest (to the extent that such
interest has been collected by the Trustee) upon the overdue installments
of interest at the rate of interest (or yield to maturity in the case of
Original Issue Discount Securities) borne by the Securities of that series,
such payments to be made ratably to the Persons entitled thereto;
THIRD: In case the principal of the outstanding Securities of a series
in respect of which such moneys have been collected shall have become due
and payable, by declaration or otherwise, to the payment of the whole
amount then owing and unpaid upon the Securities of that series for
principal and premium, if any, and interest, if any, with interest on the
overdue principal and premium, if any, and (to the extent that such
interest has been collected by the Trustee) upon any overdue installments
of interest at the rate of interest (or yield to Maturity in the case of
Original Issue Discount Securities) borne by the Securities of that series,
and in case such moneys shall be insufficient to pay in full the whole
amounts so due and unpaid upon the Securities of that series, then to the
payment of such principal and premium, if any, and interest, if any,
without preference or priority of principal and premium, if any, over
interest, or of interest over principal and premium, if any, or of any
installment of interest over any other installment of interest, or of any
Security of that series over any other Security of that series, ratably to
the aggregate of such principal and premium, if any, and any accrued and
unpaid interest.
FOURTH: Any surplus then remaining shall be paid to the Company or to
such other Person as shall be entitled to receive it.
SECTION 7.04. Proceedings by Holders. No Holder of any Security of any
series or of any coupon appertaining thereto shall have any right by virtue of
or by availing of any provision of this Indenture to institute any suit, action
or proceeding in equity or at law upon or under or with respect to this
Indenture or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless such Holder previously shall have given to the Trustee
written notice of default and of the continuance thereof, as hereinbefore
provided, and unless also the Holders of not less than 25% in aggregate
principal amount at Stated Maturity of the Securities of that series (or, in
case of an Event of Default described in clause (d), (e) or (f) of Section 7.01,
25% in aggregate principal amount of all Securities then outstanding (in the
case of Original Issue Discount Securities, such principal amount to be
determined as provided in Section 2.01(9))) shall have made written request upon
the Trustee to institute such action, suit or proceeding in its own name as the
Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee for 60 days after its receipt of
such notice, request and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding and no direction inconsistent with
such written request shall have been given to the Trustee during such 60 day
period by the Holders of a majority in principal amount at Stated Maturity of
the outstanding Securities of such series, it being understood and intended, and
being expressly covenanted by the Holder of every Security of that series with
every other Holder of every Security of that series or coupons appertaining
thereto and the Trustee, that no one or more Holders of Securities of any series
shall have any right in any manner whatever by virtue of or by availing of any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holder of Securities of that series or any other series or coupons
appertaining thereto, or to obtain or seek to obtain
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25
priority over or preference to any other such Holder, or to enforce any right
under this Indenture, except in the manner herein provided and for the equal,
ratable and common benefit of all Holders of Securities.
Notwithstanding any other provisions in this Indenture, however, the right
of any Holder of any Security or coupon to receive payment of the principal of,
and premium, if any, and interest, if any, on such Security, on or after the
respective Stated Maturities expressed in such Security or, in the case of
redemption or repayment on or after the redemption date or repayment date, as
the case may be, and to institute suit for the enforcement of any such payment
on or after such respective date shall not be impaired or affected without the
consent of such Holder.
SECTION 7.05. Proceedings by Trustee. In case of an Event of Default
hereunder, the Trustee, in its discretion, may proceed to protect and enforce
the rights vested in it by this Indenture by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce any
of such rights, either by suit in equity or by action at law or by proceeding in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law.
SECTION 7.06. Remedies Cumulative and Continuing. All powers and remedies
given by this Article Seven to the Trustee or to the Holders of Securities or
coupons shall, to the extent permitted by law, be deemed cumulative and not
exclusive of any thereof or of any other powers and remedies available to the
Trustee or such Holders, by judicial proceedings or otherwise, to enforce the
performance or observance of the covenants and agreements contained in this
Indenture, and no delay or omission of the Trustee or of any Holder to exercise
any right or power accruing upon any default occurring and continuing as
aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or an acquiescence therein; and, subject to the
provisions of Section 7.04, every power and remedy given by this Article Seven
or by law to the Trustee or to the Holders may be exercised from time to time,
and as often as shall be deemed expedient, by the Trustee or by the Holders.
SECTION 7.07. Direction of Proceedings and Waiver of Defaults by Majority
of Holders. The Holders of a majority in aggregate principal amount of the
Securities of all series affected (voting as one class) (in the case of Original
Issue Discount Securities, such principal amount to be determined as provided in
Section 2.01(9)) at the time outstanding shall have the right to direct the
time, method, and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee,
provided, however, that such direction shall not conflict with any rule of law
or this Indenture, and provided further, that (subject to the provisions of
Section 8.01) the Trustee may take any action deemed proper by the Trustee which
is not inconsistent with such direction and the Trustee shall have the right to
decline to follow any such direction if the Trustee, being advised by counsel,
shall determine that the action or proceeding so directed may not lawfully be
taken or if the Trustee in good faith by its board of directors or trustees,
executive committee, or a trust committee of directors or trustees or
Responsible Officers shall determine that the action or proceedings so directed
would involve the Trustee in personal liability. Prior to any declaration
accelerating the maturity of the Securities of a particular series (or all of
the Securities as the case may be), the Holders of a majority in aggregate
principal amount at Stated Maturity of the Securities of that series at the time
outstanding may on behalf of the Holders of all the Securities of that series
waive any past default or Event of Default described in clause (a), (b), (c) or
(g) of Section 7.01 (or, in the case of an event specified in clause (d), (e) or
(f) of Section 7.01, the Holders of an aggregate principal amount of all the
Securities then outstanding (in the case of Original Issue Discount Securities,
such principal amount to be determined as provided in Section 2.01(9))) may
waive in writing such default or Event of Default as its consequences except (1)
a default in the payment of interest, if any, or premium, if any, on, or the
principal of, any of the Securities or in the payment of any sinking fund
installment or analogous obligation with respect to Securities or (2) in respect
of a covenant or provision hereof which under Article Eleven cannot be modified
or amended without the consent of the Holder of each Security outstanding of the
series affected. Upon any such waiver the Company, the Trustee and the Holders
of Securities of that series (or all of the Securities, as the case may be)
shall be restored to their
<PAGE>
26
former positions and rights hereunder, respectively, but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon. Whenever any default or Event of Default hereunder
shall have been waived as permitted by this Section 7.07, said default or Event
of Default shall for all purposes of the Securities and this Indenture be deemed
to have been cured and to be not continuing.
SECTION 7.08. Notice of Defaults. The Trustee shall, within 90 days after
the occurrence of any default hereunder with respect to Securities of any
series, mail to all Holders of Securities of that series in the manner and to
the extent provided in Section 6.04(c) notice of such default known to the
Trustee, unless such default shall have been cured prior to the giving of such
notice; provided, however, that, except in the case of default in the payment of
the principal of or premium, if any, or interest, if any, on any of the
Securities of that series or in the making of any sinking fund payment or
analogous obligation with respect to Securities of that series, the Trustee
shall be protected in withholding such notice if and so long as the board of
directors or trustees, the executive committee, or a trust committee of
directors or Responsible Officers of the Trustee in good faith determines that
the withholding of such notice is in the interests of the Holders of Securities
of such series; and provided, further, that in the case of any default of the
character specified in Section 7.01(d) with respect to Securities of such
series, no such notice to Holders of Securities of such series shall be given
until at least 90 days after the occurrence thereof. For the purpose of this
Section, the term "default," with respect to Securities of any series, means any
event which is, or after notice or lapse of time, or both, would become, an
Event of Default with respect to Securities of such series.
SECTION 7.09. Undertaking to Pay Costs. All parties to this Indenture
agree, and each Holder of any Security or coupon by his acceptance thereof shall
be deemed to have agreed, that any court may in its discretion require, in any
suit for the enforcement of any fight or remedy under this Indenture, or in any
suit against the Trustee for any action taken or omitted by it as Trustee, the
filing by any party litigant in such suit of an undertaking to pay the costs of
such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section 7.09 shall not apply to
any suit instituted by the Trustee, to any suit instituted by any Holder or
group of Holders, holding in the aggregate more than 10% in principal amount at
Stated Maturity of the Securities outstanding of that series (or, in case of any
suit relating to or arising under clause (d), (e) or (f) of Section 7.01, 10% in
principal amount of all Securities outstanding (in the case of Original Issue
Discount Securities, such principal amount to be determined as provided in
Section 2.01(9))) or to any suit instituted by any Holder for the enforcement of
the payment of the principal of or premium, if any, or interest, if any, on any
Security on or after the respective Stated Maturities expressed in such
Securities (or in the case of redemption or repayment on or after the redemption
date or repayment date).
ARTICLE EIGHT
CONCERNING THE TRUSTEE
SECTION 8.01. Duties and Responsibilities of Trustee. With respect to the
Holders of any series of Securities issued hereunder, the Trustee, prior to the
occurrence of an Event of Default with respect to the Securities of that series
and after the curing of all Events of Default which may have occurred with
respect to the Securities of that series, undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture and no implied
covenants or obligations with respect to such series shall be read into this
Indenture against the Trustee. In case an Event of Default with respect to the
Securities of any series has occurred (which has not been cured or waived), the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture with respect to that series and use the same degree of care and skill
in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
<PAGE>
27
Prior to the occurrence of an Event of Default with respect to the
Securities of a series, and after the curing or waiving of all Events of Default
with respect to that series which may have occurred and in the absence of bad
faith on the part of the Trustee, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to the Trustee and conforming to the
requirements or this Indenture; but, in the case of any such certificates or
opinions which by any provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this Indenture.
No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own willful misconduct, except that:
(a) the Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer or Officers of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts; and
(b) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
Holders pursuant to Section 7.07 of any series relating to the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if it has reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this
Section 8.01.
SECTION 8.02. Reliance on Documents, Opinions, etc. Except as otherwise
provided in Section 8.01:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, bond, debenture or other paper or
document believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(b) any request, direction, order or demand of the Company mentioned herein
shall be sufficiently evidenced by a written statement signed in the name of the
Company by its President and Chief Executive Officer, its Executive Vice
President and Chief Financial Officer or its Vice President and Treasurer
(unless other evidence in respect thereof is herein specifically prescribed);
and any resolution of the Board of Directors shall be sufficiently evidenced to
the Trustee by a copy thereof certified by the Secretary or an Assistant
Secretary of the Company;
(c) whenever in the administration of the Indenture, the Trustee shall deem
it desirable that a matter be proved or established prior to taking, suffering
or omitting any action hereunder, the Trustee (unless other evidence be herein
specifically provided) may, in the absence of bad faith on its part, rely on an
Officers' Certificate;
(d) the Trustee may consult with its counsel or require an Opinion of
Counsel and any such advice or Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or omitted by it
hereunder in good faith and in accordance with such advice or opinion of
Counsel;
(e) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request, order or direction of
any of the Holders, pursuant to the provisions of this Indenture,
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28
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby;
(f) the Trustee shall not be liable for any action taken or omitted by it
in good faith and believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Indenture;
(g) prior to the occurrence of an Event of Default hereunder and after the
curing or waiving of all Events of Default, the Trustee shall not be bound to
make any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, approval, bond, debenture, coupon or other paper or document, unless
requested in writing to do so by the Holders of not less than a majority in
principal amount at Stated Maturity of the Securities then outstanding of any
series affected or of all the Securities, as the case may be; provided, however,
that if the payment within a reasonable time to the Trustee of the costs,
expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to the
Trustee by the security afforded to it by the terms of this Indenture, the
Trustee may require reasonable indemnity against such expense or liability as a
condition to so proceeding; and
(h) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys, and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
SECTION 8.03. No Responsibility for Recitals, etc. The recitals contained
herein and in the Securities (except in the Trustee's certificate of
authentication) shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for the correctness of the same. The Trustee makes
no representations as to the validity or sufficiency of this Indenture, of any
of the Securities or coupons or of any prospectus related to the Securities of
any series; provided, however, that the Trustee shall not be relieved of its
duty to authenticate Securities as authorized by this Indenture. The Trustee
shall not be accountable for the use or application by the Company of any
Securities or the proceeds of any Securities authenticated and delivered by the
Trustee in conformity with the provisions of this Indenture.
SECTION 8.04. Trustee, Paying Agent or Registrar May Own Securities. The
Trustee or any paying agent or Security registrar or any other agent of the
Company or the Trustee, in its individual or any other capacity, may become the
owner or pledgee of Securities or the coupons appertaining thereto with the same
rights it would have if it were not Trustee, paying agent or Security registrar.
SECTION 8.05. Moneys to be Held in Trust. Subject to the provisions of
Section 13.04, all moneys received by the Trustee or any paying agent shall,
until used or applied as herein provided, be held in trust for the purposes for
which they were received, but need not be segregated from other funds except to
the extent required by law. The Trustee and any paying agent shall be under no
liability for interest on any moneys received by it hereunder except such as it
may agree with the Company to pay thereon.
SECTION 8.06. Compensation and Expenses of Trustee. The Company shall pay
to the Trustee from time to time, and the Trustee shall be entitled to,
reasonable compensation (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust), and the Company
shall pay or reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any of the provisions of this Indenture (including the reasonable compensation
and the expenses and disbursements of its counsel and of all persons not
regularly in its employ) except any such expense, disbursement or advance as may
be attributable to its negligence or willful misconduct. The Company shall
indemnify the Trustee for, and shall hold it harmless against, any loss,
liability or expense incurred without negligence or willful misconduct on the
part of the Trustee and arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of defending
itself against any claim of liability arising in connection with its duties
under this Indenture. The obligations of the Company under this Section 8.06 to
compensate the Trustee and to pay or reimburse the Trustee for
<PAGE>
29
expenses, disbursements and advances shall constitute additional indebtedness
hereunder. Such additional indebtedness shall be secured by a lien prior to that
of the Securities upon all property and funds held or collected by the Trustee
as such, except funds held in trust for the benefit of the Holders of particular
Securities.
SECTION 8.07. Officers' Certificate as Evidence. Except as otherwise
provided in Section 8.01, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or omitting any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of negligence or willful misconduct on the part
of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee, and such certificate, in the
absence of negligence or willful misconduct on the part of the Trustee, shall be
full warrant to the Trustee for any action taken or omitted by it under the
provisions of this Indenture upon the faith thereof.
SECTION 8.08. Qualification of Trustee; Conflicting Interests. The Trustee
with respect to each series of Securities issued hereunder shall be subject to
the provisions of Section 310(b) of the Trust Indenture Act of 1939 during the
period of time provided for therein. In determining whether the Trustee has a
conflicting interest as defined in Section 310(b) of the Trust Indenture Act of
1939 with respect to any series of Securities issued hereunder, there shall be
excluded this Indenture with respect to Securities of any particular series of
Securities other than that series. Nothing herein shall prevent the Trustee from
filing with the Securities and Exchange Commission the application referred to
in the second to the last paragraph of Section 310(b) of the Trust Indenture Act
of 1939.
SECTION 8.09. Eligibility of Trustee. The Trustee with respect to each
series of Securities hereunder shall at all times be either:
(a) a corporation organized and doing business under the laws of the United
States of America, any state thereof, or the District of Columbia, authorized
under such laws to exercise corporate trust powers, and subject to supervision
or examination by Federal or State authority, or
(b) a corporation or other Person organized and doing business under the
laws of a foreign government that is permitted to act as Trustee pursuant to a
rule, regulation, or other order of the Securities and Exchange Commission,
authorized under such laws to exercise corporate trust powers and subject to the
supervision or examination by authority or such foreign government or a
political subdivision thereof substantially equivalent to supervision or
examination applicable to a United States institutional trustee, having a
combined capital and surplus of at least $10,000,000. If such corporation
publishes reports of condition at least annually, pursuant to law or the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section 8.09, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. Neither the Company nor any
person directly or indirectly controlling, controlled by, or under common
control with the Company shall serve as trustee with respect to any series of
Securities issued hereunder. In case at any time the Trustee with respect to any
series of Securities shall cease to be eligible in accordance with the
provisions of this Section 8.09, the Trustee shall resign immediately in the
manner and with the effect specified in Section 8.10.
SECTION 8.10. Resignation or Removal of Trustee. (a) The Trustee may
resign with respect to any series of Securities at any time by giving written
notice of such resignation to the Company and by giving notice thereof to the
Holders of the applicable series of Securities in manner and to the extent
provided in Section 6.04(c). Upon receiving such notice of resignation with
respect to the applicable series of Securities, the Company shall promptly
appoint a successor trustee with respect to that series by written instrument,
in duplicate, executed by or pursuant to a resolution of the Board of Directors,
one copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor trustee. If a successor trustee shall not have been so
appointed with respect to any series of Securities, or shall not have accepted
appointment within 30 days after the giving of such notice of resignation to the
Holders of such series, the resigning Trustee may petition
<PAGE>
30
any court of competent jurisdiction for the appointment of a successor trustee,
or any Holder who has been a bona ride holder of a Security or Securities of the
applicable series for at least six months may, subject to the provisions of
Section 7.09, on behalf of such Holder and all others similarly situated,
petition any such court for the appointment of a successor trustee with respect
to that series.
(b) In case at any time any of the following shall occur--
(1) the Trustee shall fail to comply with the provisions of subsection (a)
of Section 8.08 after written request therefor by the Company or by any Holder
who has been a bona fide holder of a Security or Securities of the applicable
series for at least six months, or
(2) the Trustee shall cease to be eligible in accordance with the provisions
of Section 8.09 and shall fail to resign after written request therefor by the
Company or by any such Holder, or
(3) the Trustee shall become incapable of acting, with respect to any series
of Securities or shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the purpose
of rehabilitation, conservation or liquidation--
then, in any such case, the Company may remove the Trustee with respect to any
one or more of such series of Securities and appoint a successor trustee of that
series by written instrument, in duplicate, executed by or pursuant to a
resolution of the Board of Directors, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee, or
subject to the provisions of Section 7.09, any Holder who has been a bona fide
Holder of a Security or Securities of that series for at least six months may,
on behalf of such Holder and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee and the appointment of
a successor trustee with respect to that series.
(c) The Holders of a majority in aggregate principal amount at Stated
Maturity of the Securities of any series at the time outstanding may at any time
remove the Trustee with respect to such series and nominate with respect to such
series a successor trustee which shall be deemed appointed as successor trustee
with respect to such series unless within 10 days after such nomination the
Company objects thereto, in which case the Trustee so removed or any Holder of
Securities of the series may petition any court of competent jurisdiction for
appointment of a successor trustee with respect to such series upon the terms
and conditions and otherwise as provided in subsection (a) of this Section 8.10.
(d) Any resignation or removal of the Trustee and any appointment of a
successor trustee with respect to an applicable series of Securities pursuant to
any of the provisions of this Section 8.10 shall become effective upon
acceptance of appointment by the successor trustee for that series as provided
in Section 8.11.
(e) The Company shall give notice as provided in Section 16.05 of each
resignation or removal of the Trustee with respect to any series of Securities.
Each notice shall include the name of such successor trustee and the address of
its Principal Office and shall be given within 60 days of such event.
SECTION 8.11. Acceptance by Successor Trustee. Any successor trustee
appointed as provided in Section 8.10 shall execute, acknowledge and deliver to
the Company and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee with respect to all or any applicable series shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts, duties and
obligations with respect to such series as its predecessor hereunder, with like
effect as if originally named as trustee herein; but, nevertheless, on the
written request of the Company or of the successor trustee, the trustee ceasing
to act shall upon payment of any amounts then due it pursuant to the provisions
of Section 8.06, execute and deliver an instrument transferring to such
successor trustee all the rights and powers and trusts with respect to any
series of Securities of the trustee so ceasing to act. Upon request of any
successor trustee, the Company shall execute
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any and all instruments in writing in order more fully and certainly to vest in
and confirm to such successor trustee all such rights and powers. Any trustee
ceasing to act shall, nevertheless, retain a lien upon all property or funds
held or collected by such trustee to secure any amounts then due it pursuant to
the provisions of Section 8.06.
In case of the appointment hereunder of a successor trustee with respect to
the Securities of any one or more (but not all) series, the Company, the
predecessor trustee and each successor trustee with respect to the Securities of
any applicable series shall execute and deliver an indenture supplemental hereto
wherein each successor trustee shall accept such appointment and which shall
contain (1) such provisions as shall be necessary or desirable to transfer and
confirm to, and vest in each successor trustee all of the rights, powers and
duties of the predecessor trustee with respect to the Securities of that or
those series to which the appointment of such successor trustee relates, (2) if
the retiring trustee is not retiring with respect to all Securities, it shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the predecessor trustee with
respect to the Securities of any series as to which the predecessor trustee is
not retiring shall continue to be vested in the predecessor trustee and (3)
shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such trustees co-trustees of
the same trust and that each such trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such trustee.
No successor trustee shall accept appointment as provided in this Section
8.11 unless at the time of such acceptance such successor trustee shall be
qualified under the provisions of Section 8.08 and eligible under the provisions
of Section 8.09.
Upon acceptance of appointment by a successor trustee as provided in this
Section 8.11, the Company shall mail notice of the succession of such trustee
hereunder to all the Registered Holders of such series as the names and
addresses of such Holders shall appear on the registry books of the Company and
shall publish notice of such event once in an Authorized Newspaper in the Place
of Payment. If the Company fails to mail such notice in the prescribed manner
within 10 days after the acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be mailed at the expense of the
Company.
SECTION 8.12. Succession by Merger, etc. Any corporation into which the
Trustee may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding to the business of the
Trustee, shall be the successor of the Trustee hereunder provided such
corporation shall be qualified under the provisions of Section 8.08 and eligible
under the provisions of Section 8.09 without the execution or filing of any
paper or any further act on the part of any of the parties hereto.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any Securities of any series shall have been
authenticated but not delivered, any such successor to the Trustee by merger,
conversion or consolidation to such authenticating Trustee may adopt such
certificate of authentication and deliver such Securities of any series
so authenticated with the same effect as if such successor to the Trustee had
itself authenticated such Securities.
SECTION 8.13. Limitation on Rights of Trustee as a Creditor. (a) Subject to
the provision of subsection (b) of this Section 8.13, if the Trustee shall be or
shall become a creditor, directly or indirectly, secured or unsecured, of the
Company or of any other obligor on the Securities of any series within three
months prior to a default, as defined in subsection (c) of this Section 8.13, or
subsequent to such a default, then, unless and until such default shall be
cured, the Trustee shall set apart and hold in special account for the benefit
of the Trustee individually, the Holders of the Securities of any series, and
the holders of other indenture securities (as defined in paragraph (2) of
subsection (c) or this Section 8.13):
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32
(1) an amount equal to any and all reductions in the amount due and owing
upon any claim as such creditor in respect of principal or interest, effected
after the beginning of such three-month period and valid as against the Company
and its other creditors, except any such reduction resulting from the receipt or
disposition of any property described in paragraph (2) of this subsection, or
from the exercise of any right of set-off which the Trustee could have exercised
if a petition in bankruptcy had been filed by or against the Company upon the
date of such default; and
(2) all property received by the Trustee in respect of any claim as such
creditor, either as security therefor, or in satisfaction or composition
thereof, or otherwise, after the beginning of such three-month period, or an
amount equal to the proceeds of any such property, if disposed of, subject
however, to the rights, if any, of the Company and its other creditors in such
property or such proceeds.
Nothing herein contained, however, shall affect the right of the Trustee:
(A) to retain for its own account (i) payments made on account of any such
claim by any person (other than the Company) who is liable thereon, and (ii) the
proceeds of the bona fide sale of any such claim by the Trustee to a third
person, and (iii) distributions made in cash, securities, or other property in
respect of claims filed against the Company in bankruptcy or receivership or in
proceedings for reorganization pursuant to Federal or State bankruptcy laws or
other similar laws;
(B) to realize, for its own account, upon any property held by it as
security for any such claim, if such property was so held prior to the beginning
of such three-month period;
(C) to realize, for its own account, but only to the extent of the claim
hereinafter mentioned, upon any property held by it as security for any such
claim, if such claim was created after the beginning of such three-month period
and such property was received as security therefor simultaneously with the
creation thereof, and if the Trustee shall sustain the burden of proving that at
the time such property was so received the Trustee had no reasonable cause to
believe that a default, as defined in subsection (c) of this Section 8.13, would
occur within three months; or
(D) to receive payment on any claim referred to in paragraph (B) or (C),
against the release of any property held as security for such claim as provided
in such paragraph (B) or (C), as the case may be, to the extent of the fair
value of such property.
For the purposes of paragraphs (B), (C) and (D), property substituted after
the beginning of such three-month period for property held as security at the
time of such substitution shall, to the extent of the fair value of the property
released, have the same status as the property released, and, to the extent that
any claim referred to in any of such paragraphs is created in renewal of or in
substitution for or for the purpose of repaying or refunding any pre-existing
claim of the Trustee as such creditor, such claim shall have the same status as
such pre-existing claim.
If the Trustee shall be required to account, the funds and property held in
such special account and the proceeds thereof shall be apportioned between the
Trustee, the Holders of Securities of a series as to which such Trustee is
acting as Trustee hereunder and the holders of other indenture securities in
such manner that the Trustee, the Holders and the holders of other indenture
securities realize, as a result of payments from such special account and
payments of dividends on claims filed against the Company in bankruptcy or
receivership or in proceedings for reorganization pursuant to the Federal or
State bankruptcy laws or other similar laws, the same percentage of the
irrespective claims, figured before crediting to the claim of the Trustee
anything on account of the receipt by it from the Company of the funds and
Property in such special account and before crediting to the respective claims
of the Trustee, the Holders and the holders of other indenture securities
dividends on claims filed against the Company in bankruptcy or receivership or
in proceedings for reorganization pursuant to the Federal or State bankruptcy
laws or other similar laws, but after crediting thereon receipts on account of
the indebtedness represented by their respective claims from all sources other
than from such
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33
dividends and from the funds and property so held in such special account. As
used in this paragraph, with respect to any claim, the term "dividends" shall
include any distribution with respect to such claim, in bankruptcy or
receivership or in proceedings for reorganization pursuant to the Federal or
State bankruptcy laws or other similar laws, whether such distribution is made
in cash, securities or other property, but shall not include any such
distribution with respect to the secured portion, if any, of such claim. The
court in which such bankruptcy, receivership or proceeding for reorganization is
pending shall have jurisdiction (i) to apportion between the Trustee, the
Holders and the holders of other indenture securities, in accordance with the
provisions of this paragraph, the funds and property held in such special
account and the proceeds thereof, or (ii) in lieu of such apportionment, in
whole or in part, to give to the provisions of this paragraph due consideration
in determining the fairness of the distributions to be made to the Trustee, the
Holders and the holders of other indenture securities with respect to their
respective claims, in which event it shall not be necessary to liquidate or to
appraise the value of any securities or other property held in such special
account or as security for any such claim, or to make a specific allocation of
such distributions as between the secured and unsecured portions of such claims,
or otherwise to apply the provisions of this paragraph as a mathematical
formula.
Any Trustee who has resigned or been removed after the beginning of such
three-month period shall be subject to the provisions of this subsection (a) as
though such resignation or removal had not occurred. If any Trustee has resigned
or been removed prior to the beginning of such three-month period, it shall be
subject to the provisions of this subsection (a) if and only if the following
conditions exist:
(i) the receipt of property or reduction of claim which would have given
rise to the obligation to account, if such Trustee had continued as trustee,
occurred after the beginning of such three-month period; and
(ii) such receipt of property or reduction of claim occurred within three
months after such resignation or removal.
(b) There shall be excluded from the operation of subsection (a) of this
Section 8.13 a creditor relationship arising from:
(1) the ownership or acquisition of securities issued under any indenture,
or any security or securities having a maturity of one year or more at the time
of acquisition by the Trustee;
(2) advances authorized by a receivership or bankruptcy court of competent
jurisdiction, or by this Indenture, for the purpose of preserving any property
which shall at any time be subject to the lien of this Indenture or of
discharging tax liens or other prior liens or encumbrances thereon, if notice of
such advance and of the circumstances surrounding the making thereof is given to
the Holders at the time and in the manner provided in Section 6.04 with respect
to reports pursuant to subsections (a) and (b) thereof, respectively;
(3) disbursements made in the ordinary course of business in the capacity of
trustee under an indenture, transfer agent, registrar, custodian, paying agent,
fiscal agent or depositary, or other similar capacity;
(4) an indebtedness created as a result of services rendered or premises
rented; or an indebtedness created as a result of goods or securities sold in a
cash transaction as defined in subsection (c) of this Section 8.13;
(5) the ownership of stock or of other securities of a corporation organized
under the provisions of section 25(a) of the Federal Reserve Act, as amended,
which is directly or indirectly a creditor of the Company; or
(6) the acquisition, ownership, acceptance or negotiation of any drafts,
bills of exchange, acceptances or obligations which fall within the
classification of self-liquidating paper as defined in subsection (c) of this
Section 8.13.
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34
(c) For the purposes of this Section 8.13:
(1) The term "default" shall mean any failure to make payment in full of the
principal of or interest upon one of the Securities of any series or upon the
other indenture securities when and as such principal or interest becomes due
and payable.
(2) The term "other indenture securities" shall mean securities upon which
the Company is an obligor (as defined in the Trust Indenture Act of 1939)
outstanding under any other indenture (A) under which the Trustee is also
trustee, (B) which contains provisions substantially similar to the provisions
of subsection (a) of this Section 8.13, and (C) under which a default exists at
the time of the apportionment of the funds and property held in said special
account.
(3) The term "cash transaction" shall mean any transaction in which full
payment for goods or securities sold is made within seven days after delivery of
the goods or securities in currency or in checks or other orders drawn upon
banks or bankers and payable upon demand.
(4) The term "self-liquidating paper" shall mean any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or incurred
by the Company for the purpose of financing the purchase, processing,
manufacture, shipment, storage or sale of goods, wares or merchandise and which
is secured by documents evidencing title to, possession of, or a lien upon, the
goods, wares or merchandise or the receivables or proceeds arising from the sale
of the goods, wares or merchandise previously constituting the security,
provided that the security is received by the Trustee simultaneously with the
creation of the creditor relationship with the Company arising from the making,
drawing, negotiating or incurring of the draft, bill of exchange, acceptance or
obligation.
(5) The term "Company" shall mean any obligor upon the Securities.
ARTICLE NINE
CONCERNING THE HOLDERS
SECTION 9.01. Action by Holders. (a) Whenever in this Indenture it is
provided that the Holders of a specified percentage in aggregate principal
amount at Stated Maturity of the Securities of any or all series may take any
action (including the making of any demand or request, the giving of any notice,
consent or waiver or the taking of any other action) the fact that at the time
of taking any such action the Holders of such specified percentage have joined
therein may be evidenced (A) by any instrument or any number of instruments of
similar tenor executed by Holders in person or by agent or proxy appointed in
writing, or (B) by the record of the Holders of Securities voting in favor
thereof at any meeting of Holders duly called and held in accordance with the
provisions of Article Ten or (C) by a combination of such instrument or
instruments and any such record of such meeting of such Holders.
(b) If the Company or Trustee shall solicit from the Holders of any or all
series any request, demand, authorization, direction, notice, consent, waiver or
other act, the Company or Trustee, as the case may be, may, at its option, by or
pursuant to resolution of the Board of Directors fix in advance a record date
for the determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other act, but the Company
or Trustee, as the case may be, shall have no obligation to do so. If such a
record date is fixed, such request, demand, authorization, direction, notice,
consent, waiver or other act may be given before or after the record date, but
only the Holders of record at the close of business on the record date shall be
deemed to be Holders for the purposes of determining whether Holders of the
requisite proportion of Securities have authorized or agreed or consented to
such request, demand, authorization, direction, notice,
<PAGE>
35
consent, waiver or other act, and for that purpose the Securities deemed to be
outstanding shall be computed as of the record date; provided, however, that no
such authorization, agreement or consent by the Holders on the record date shall
be deemed effective unless it shall become effective pursuant to the provisions
of this Indenture not later than six months after the record date.
SECTION 9.02. Proof of Execution by Holders. Subject to the provisions of
Sections 8.01, 8.02 and 10.05, proof of the execution of any instrument by a
Holder, his agent or proxy shall be sufficient if made in accordance with such
reasonable rules and regulations as may be prescribed by the Trustee or in such
manner as shall be satisfactory to the Trustee. The ownership of Securities of
any series shall be proved by the registry books of the Company or by a
certificate of the registrar of the Securities of any series.
The record of any meeting of Holders of Securities may be proved in the
manner provided in Section 10.06.
SECTION 9.03. Who Deemed Absolute Owners. The Company, the Trustee, any
paying agent, any transfer agent and any Security registrar may treat the Holder
of any Unregistered Security and the Holder of any coupon, except with respect
to a Fully Registered Security, whether or not the Security to which it
appertained be registered, as the absolute owner of such Security or coupon for
the purpose of receiving payment thereof or on account thereof and for all other
purposes (whether or not such Security or coupon shall be overdue) and neither
the Company, the Trustee, any paying agent, any transfer agent nor any Security
registrar shall be affected by any notice to the contrary. The Company, the
Trustee, any paying agent, any transfer agent and any Security registrar may
treat the person in whose name a Registered Security shall be registered upon
the registry books of the Company as the absolute owner of such Security
(whether or not such Security shall be overdue) for the purpose of receiving
payment of principal of, premium, if any, on and, if such Registered Security is
a Fully Registered Security, interest, if any, on, such Registered Security and
for all other purposes; and neither the Company nor the Trustee nor any paying
agent nor any transfer agent nor any Security registrar shall be affected by any
notice to the contrary. All such payments so made to any Holder for the time
being or upon his order shall be valid, and, to the extent of the sum or sums so
paid, effectual to satisfy and discharge the liability for moneys payable upon
such Security.
The amount of Unregistered Securities held by any Person executing any
instrument or writing as a Holder, and the numbers of such Unregistered
Securities, and the date of his holding the same, may be proved by the
production of such Securities or by a certificate executed by any trust company,
bank, banker or member of a national securities exchange (wherever situated), as
depositary, if such certificate is in form satisfactory to the Trustee, showing
that at the date therein mentioned such Person had on deposit with such
depositary, or exhibited to it, the Unregistered Securities therein described;
or such facts may be proved by the certificate or affidavit of the Person
executing such instrument or writing as a Holder, if such certificate or
affidavit is in form satisfactory to the Trustee. The Trustee and the Company
may assume that such ownership of any Unregistered Security continues until (i)
another certificate bearing a later date issued in respect of the same
Unregistered Security is produced, or (ii) such Unregistered Security is
produced by some other Person, or (iii) such Unregistered Security is registered
as to principal or is surrendered in exchange for a Fully Registered Security,
or (iv) such Unregistered Security has been canceled in accordance with
Section 2.08.
SECTION 9.04. Company-Owned Securities Disregarded. In determining whether
the Holders of the requisite aggregate principal amount at Stated Maturity of
Securities have concurred in any direction, consent or waiver under this
Indenture, Securities which are owned by the Company or any other obligor on
such Securities or by any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or any
other obligor on the Securities shall be disregarded and deemed not to be
outstanding for the purpose of any such determination; provided that for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction or consent only Securities which the Trustee knows are so owned
shall be so disregarded. Securities so owned which have been pledged in good
faith may be regarded as outstanding for the purposes of this Section 9.04 if
the pledgee shall establish to the satisfaction of the Trustee the pledgee's
right to vote such Securities and that the pledgee is not a person directly or
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36
indirectly controlling or controlled by or under direct or indirect common
control with the Company or any such other obligor. In the case of a dispute as
to such right, any decision by the Trustee taken upon the advice of counsel
shall be full protection to the Trustee.
SECTION 9.05. Revocation of Consents; Future Holders Bound. (a) At any time
prior to but not after, the evidencing to the Trustee, as provided in Section
9.01, of the taking of any action by the Holders of the percentage in aggregate
principal amount at Stated Maturity of the Securities of any or all series, as
the case may be, specified in this Indenture in connection with such action, any
Holder of a Security the number, letter or other distinguishing symbol of which
is shown by the evidence to be included in the Securities the Holders of which
have consented to such action may, by filing written notice with the Trustee at
the Principal Office of the Trustee and upon proof of holding as provided in
Section 9.02, revoke such action so far as concerns such Holder and all future
Holders and owners of such Security and any Securities which may be issued in
exchange or substitution therefor, irrespective of whether or not any notation
in regard thereto is made upon such Security or such other Security issued in
exchange or substitution therefor.
(b) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Security shall bind every future Holder of
the same Security and the Holder of every Security issued upon the registration
of transfer thereof or in exchange therefor or in lieu thereof, in respect of
any action taken, suffered or omitted by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such Security.
ARTICLE TEN
HOLDERS' MEETINGS
SECTION 10.01. Purposes of Meetings. A meeting of the Holders of Securities
of any or all series may be called at any time and from time to time pursuant to
the provisions of this Article Ten for any of the following purposes:
(a) to give any notice to the Company or to the Trustee, or to give any
directions to the Trustee, or to consent to the waiving of any default hereunder
and its consequences, or to take any other action authorized to be taken by
Holders pursuant to any of the provisions of Article Seven;
(b) to remove the Trustee and nominate a successor trustee pursuant to the
provisions of Article Eight;
(c) to consent to the execution of an indenture or indentures supplemental
hereto pursuant to the provisions of Section 11.02; or
(d) to take any other action authorized to be taken by or on behalf of the
Holders of any specified aggregate principal amount at Stated Maturity of the
Securities of any or all series, as the case may be, under any other provisions
of this Indenture or under applicable law.
SECTION 10.02. Call of Meetings by Trustee. The Trustee may at any time call
a meeting of Holders of Securities of any or all series to take any action
specified in Section 10.01, to be held at such time and at such place in
Chicago, Illinois or Houston, Texas, or New York, New York, as the Trustee shall
determine. Notice of every meeting of the Holders of Securities of any or all
series, setting forth the time and the place of such meeting and in general
terms the action proposed to be taken at such meeting, shall be mailed to
Holders of Registered Securities of each series affected, at their addresses as
they appear on the registry books of the Company, and notice to Holders of
Unregistered Securities of each series affected shall be published in an
Authorized Newspaper in the Place of Payment. Such notice shall be mailed or
published, as the case may be,
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37
not less than 20 nor more than 90 days prior to the date fixed for the meeting.
However, if all Securities of any series with respect to which the meeting is to
be held are Registered Securities no notice need be given except notice by mail
as hereinabove provided.
Failure to receive such notice or any defect therein shall in no case affect
the validity of any action taken at such meeting. Any meeting of Holders of
Securities of any or all series, as the case may be, shall be valid without
notice if the Holders of all such Securities outstanding, the Company and the
Trustee are present in person or by proxy or shall have waived notice thereof
before or after the meeting.
SECTION 10.03. Call of Meetings by Company or Holders. In case at any time
the Company, pursuant to a resolution of its Board of Directors, or the Holders
of at least 10% in aggregate principal amount at Stated Maturity of the
Securities then outstanding of any or all series, as the case may be, that may
be affected by the action proposed to be taken at the meeting, shall have
requested the Trustee to call a meeting of Holders of Securities of any or all
series, as the case may be, that may be so affected by written request setting
forth in a reasonable detail the action proposed to be taken at the meeting, and
the Trustee shall not have mailed the notice of such meeting within 20 days
after receipt of such request, then the Company or such Holders, in the amount
specified, may determine the time and the place in a location designated in
Section 10.02 for such meeting and may call such meeting to take any action
authorized in Section 10.01, by mailing notice thereof as provided in
Section 10.02.
SECTION 10.04. Qualification for Voting. To be entitled to vote at any
meeting of Holders of Securities, a Person shall (a) be a Holder of one or more
Securities with respect to which such meeting is being held or (b) be a Person
appointed by an instrument in writing as proxy by such a Holder. The only
Persons who shall be entitled to be present or to speak at any meeting of
Holders of Securities of any or all series, as the case may be, shall be the
Persons entitled to vote at such meeting and their counsel and any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.
SECTION 10.05. Regulations. Notwithstanding any other provisions or this
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Holders of Securities, in regard to proof of the
holding of Securities and of the appointment of proxies, and in regard to the
appointment and duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it shall deem fit.
The Trustee shall, by an instrument in writing, appoint a temporary chairman
of the meeting, unless the meeting shall have been called by the Company or by
Holders of Securities as provided in Section 10.03, in which case the Company or
the Holders calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary of
the meeting shall be elected by vote of the Holders of a majority in principal
amount at Stated Maturity of the Securities represented at the meeting.
Subject to the provisions of Section 9.04, at any meeting each Holder of
Securities with respect to which such meeting is being held, or proxy therefor,
shall be entitled to one vote for each $1,000 in principal amount (in the case
of Original Issue Discount Securities, such principal amount to be determined as
provided in Section 2.01(9)) of such Securities held or represented by him;
provided, however, that no vote shall be cast or counted at any meeting in
respect of any such Security challenged as not outstanding and ruled by the
chairman of the meeting to be not outstanding. The chairman of the meeting shall
have no right to vote other than as a Holder of Securities or proxy therefor. At
any meeting of Holders of Securities, the presence of Persons holding or
representing the Securities with respect to which such meeting is being held in
such aggregate principal amount sufficient to take action on the business for
the transaction of which such meeting was called shall constitute a quorum, but,
if less than a quorum is present, the Persons holding or representing a majority
in such aggregate principal amount of such Securities represented at the meeting
may adjourn such meeting with the same effect, for all intents and purposes, as
though a quorum had been present. Any meeting of Holders of Securities with
respect to which such meeting is being held duty called pursuant to the
provisions of Section 10.02 or 10.03 may be adjourned to another specified time
and place from time to time by vote of the Holders of a majority in such
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38
aggregate principal amount of the Securities represented at the meeting and
entitled to vote, and the meeting may be held as so adjourned without further
notice.
SECTION 10.06. Voting. The vote upon any resolution submitted to any meeting
of Holders of Securities with respect to which such meeting is being held shall
be by written ballots on which shall be inscribed the signatures of the Holders
or of their representatives by proxy and the serial number or numbers of the
Securities held or represented by them. The permanent chairman of the meeting
shall appoint two inspectors of votes who shall count all votes cast at the
meeting for or against any resolution and who shall make and file with the
secretary of the meeting their verified written reports in duplicate of all
votes cast at the meeting. A record in duplicate of the proceedings of each
meeting of Holders shall be prepared by the secretary of the meeting and there
shall be attached to said record the original reports of the inspectors of votes
on any vote by ballot taken thereat and affidavits by one or more persons having
knowledge of the facts setting forth a copy of the notice of the meeting and
showing that said notice was mailed as provided in Section 10.02. The record
shall show the serial numbers of the Securities voting in favor of or against
any resolution. The record shall be signed and verified by the affidavits of the
permanent chairman and secretary of the meeting and one of the duplicates shall
be delivered to the Company and the other to the Trustee to be preserved by the
Trustee. Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
SECTION 10.07. No Delay of Rights by Meeting. Nothing contained in this
Article Ten shall be deemed or construed to authorize or permit, by reason of
any call of a meeting of Holders of Securities or any rights expressly or
impliedly conferred hereunder to make such call, any hindrance or delay in the
exercise of any right or rights conferred upon or reserved to the Trustee or to
the Holders of Securities under any of the provisions of this Indenture or of
the Securities.
ARTICLE ELEVEN
SUPPLEMENTAL INDENTURES
SECTION 11.01. Supplemental Indentures without Consent of Holders. Without
the consent of any Holders of any series of Securities, the Company, when
authorized by or pursuant to a resolution of the Board of Directors, and the
Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto for one or more of the following purposes:
(a) to evidence the succession of another corporation to the Company, or
successive successions, and the assumption by the successor corporation,
pursuant to Article Twelve hereof, of the covenants, agreements and obligations
of the Company herein and in the Securities contained;
(b) to add to the covenants of the Company such further covenants,
restrictions or conditions for the protection of the Holders of any series of
Securities as the Board of Directors and the Trustee shall consider to be for
the protection of the Holders or such Securities, and to make the occurrence, or
the occurrence and continuance, of a default in any of such additional
covenants, restrictions or conditions a default or an Event of Default
permitting the enforcement of all or any of the several remedies provided in
this Indenture as herein set forth; provided, however, that in respect of any
such additional covenant, restriction or condition such supplemental indenture
may provide for a particular period of grace after default (which period may be
shorter or longer than that allowed in the case of other defaults) or may
provide for an immediate enforcement upon such default or may limit the remedies
available to the Trustee upon such default and shall not adversely affect the
interests of the Holders of Securities of any series;
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(c) to convey, transfer, assign, mortgage or pledge to the Trustee as
security for the Securities of any series, any property or assets which the
Company may desire or may be required to convey, transfer, assign, mortgage or
pledge in accordance with the provisions of Section 5.03 or Section 12.02;
(d) to establish the form or terms of Securities of any series as permitted
by Section 2.01;
(e) to cure any ambiguity, to correct or supplement any provision contained
herein or in any supplemental indenture which may be defective or inconsistent
with any other provision contained herein or in any supplemental indenture, or
to make such other provisions in regard to matters or questions arising under
this Indenture which shall not be inconsistent with the provisions of this
Indenture; provided, however, that such action shall not adversely affect the
interests of the Holders of Securities of any series;
(f) to evidence and provide for the acceptance of appointment hereunder by a
successor trustee with respect to the Securities of one or more series and to
add to or change any of the provisions of this Indenture as shall be necessary
to provide for or facilitate the administration of the trusts hereunder by more
than one Trustee, pursuant to the requirements of Section 8.11;
(g) to provide for the documentation necessary for the issuance of
Securities outside the United States of America; or
(h) to conform the Indenture to the provisions of the Trust Indenture Act of
1939, as then in effect.
The Trustee is hereby authorized to join with the Company in the execution
of any such supplemental indenture, to make any further appropriate agreements
and stipulations which may be therein contained and to accept the conveyance,
transfer and assignment of any property thereunder, but the Trustee shall not be
obligated to, but may in its discretion, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section
11.01 may be executed by the Company and the Trustee without the consent of the
Holders of any of the Securities at the time outstanding, notwithstanding any of
the provisions of Section 11.02.
SECTION 11.02. Supplemental Indentures with Consent of Holders of a Series.
With the consent (evidenced as provided in Section 9.01) of the Holders of not
less than 50% in aggregate principal amount at Stated Maturity of the Securities
at the time outstanding of each series affected by such supplemental indenture
or indentures, the Company, when authorized by or pursuant to a resolution of
the Board of Directors, and the Trustee may from time to time and at any time
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of any supplemental indenture or of modifying in
any manner the rights of the Holders of the Securities of each such series under
this Indenture; provided, however, that no such supplemental indenture shall
without the consent of the Holder of each outstanding Security affected thereby
(i) extend the fixed Maturity of any Security, or reduce the rate of interest or
extend the time of payment of interest, if any, thereon or reduce the principal
thereof or the time during which premium is payable thereon, or make the
principal thereof or any premium or interest thereon payable in any coin or
currency other than that provided in the securities or reduce the amount of the
principal of an Original Issue Discount Security that would be due and payable
upon an acceleration of the maturity thereof pursuant to Section 7.01 or the
amount thereof provable in bankruptcy pursuant to Section 7.02 without the
consent of the Holder of each Security so affected, or (ii) reduce the
percentage in principal amount at Stated Maturity of the outstanding Securities,
the consent of whose Holders is required for any such supplemental indenture, or
the consent of whose Holders is required for any waiver of compliance with
certain provisions hereof or of certain defaults hereunder and their
consequences provided for in this Indenture, or (iii) modify any provision of
this Section 11.02 or Section 7.07 hereof except to increase any such percentage
or to provide certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Security affected thereby. A
supplemental indenture which changes or
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eliminates any covenant or other provision of this Indenture which has expressly
been included solely for the benefit of one or more particular series of
Securities, or which modifies the rights of the Holders of Securities of such
series with respect to such covenant or other provision, shall be deemed not to
affect the rights under this Indenture of the Holders of Securities of any other
series.
Upon the request of the Company, accompanied by a copy of a resolution of
the Board of Directors certified by its Secretary or Assistant Secretary
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence of the consent of Holders of such series as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.
It shall not be necessary for the consent of the Holders under this Section
11.02 to approve the particular form of any proposed supplemental indenture, but
it shall be sufficient if such consent shall approve the substance thereof.
SECTION 11.03. Compliance with This Indenture Act; Effect of Supplemental
Indentures. Any supplemental indenture executed pursuant to the provisions of
this Article Eleven shall comply with the Trust Indenture Act of 1939, as then
in effect. Upon the execution of any supplemental indenture pursuant to the
provisions of this Article Eleven, this Indenture shall be and be deemed to be
modified and amended in accordance therewith and the respective rights,
limitation of rights, obligations, duties and immunities under this Indenture of
the Trustee, the Company and the Holders of the series of Securities affected
shall thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
SECTION 11.04. Notation on Securities. Securities authenticated and
delivered after the execution of any supplemental indenture pursuant to the
provisions of this Article Eleven may bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture. If the
Company or the Trustee shall so determine, new Securities of any series so
modified as to conform, in the opinion of the Trustee and the Board of
Directors, to any modification of this Indenture contained in any such
supplemental indenture may be prepared and executed by the Company,
authenticated by the Trustee and delivered in exchange for the Securities of
such series then outstanding.
SECTION 11.05. Evidence of Compliance of Supplemental Indenture to be
Furnished Trustee. The Trustee, subject to the provisions of Sections 8.01 and
8.02, shall be entitled to receive and shall be fully protected in relying upon,
an Officers' Certificate and an Opinion of Counsel as conclusive evidence that
any supplemental indenture executed pursuant hereto is authorized and permitted
by this Indenture and complies with the requirements of this Article Eleven.
ARTICLE TWELVE
CONSOLIDATION, MERGER AND SALE
SECTION 12.01. Company may Consolidate, etc., on Certain Terms. Subject to
any modification contained in any indenture supplemental hereto under which any
series of Securities is issued and subject to the provisions of Section 12.02,
nothing contained in this Indenture or in any of the Securities shall prevent
any consolidation or merger of the Company with or into any other corporation or
corporations (whether or not affiliated with the Company), or successive
consolidations or mergers in which the Company or its successor or successors
shall be a party or parties, or shall prevent any sale or conveyance of all or
substantially all the
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property of the Company, to any other corporation (whether or not affiliated
with the Company) authorized to acquire and operate the same; provided, however,
that upon any such consolidation, merger, sale or conveyance, other than a
consolidation or merger in which the Company is the continuing corporation, the
due and punctual payment of the principal of and premium, if any, and interest,
if any, on all of the Securities, according to their tenor, and the due and
punctual performance and observance of all of the covenants and conditions of
this Indenture and in such series to be performed by the Company, shall be
expressly assumed, by supplemental indenture satisfactory in form to the
Trustee, executed and delivered to the Trustee by the corporation (if other than
the Company) formed by such consolidation, or into which the Company shall have
been merged, or by the corporation which shall have acquired such property; and
provided further that the Company or such successor corporation, as the case
may be, shall not immediately after such merger or consolidation, or such sale
or conveyance, be in default in the performance of any such covenant or
condition.
SECTION 12.02. Securities to be Secured in Certain Events. If, upon any
consolidation or merger of the Company with or into any other corporation, or
upon any sale or conveyance of all or substantially all the property of the
Company to any other corporation, any of the property of the Company or of any
Restricted Subsidiary would thereupon become subject to any mortgage, lien or
pledge, the Company, prior to or simultaneously with such consolidation, merger,
sale or conveyance, will secure the Securities of each series outstanding
hereunder, equally and ratably with any other obligations of the Company or any
Restricted Subsidiary then entitled thereto, by a direct lien on all such
property prior to all liens other than any theretofore existing thereon.
SECTION 12.03. Successor Corporation to be Substituted. In case of any such
consolidation, merger, sale or conveyance and upon the assumption by the
successor corporation, by supplemental indenture, executed and delivered to the
Trustee and satisfactory in form to the Trustee, of the due and punctual payment
of the principal of and premium, if any, and interest, if any, on all of the
Securities of each series and the due and punctual performance of all of the
covenants and conditions of this Indenture and in such series to be performed by
the Company, such successor corporation shall succeed to and be substituted for
the Company, with the same effect as if it had been named herein and, if the
Company is to be voluntarily dissolved, the Company shall thereupon be released
from all obligations hereunder and under the Securities of each series. Such
successor corporation thereupon may cause to be signed, and may issue either in
its own name or in the name of Lyondell Petrochemical Company any or all of the
Securities of each series issuable hereunder which theretofore shall not have
been signed by the Company and delivered to the Trustee; and, upon the order of
such successor corporation instead of the Company and subject to all the terms,
conditions and limitations in this Indenture prescribed, the Trustee shall
authenticate and shall deliver any Securities which previously shall have been
signed and delivered by the officers of the Company to the Trustee for
authentication, and any Securities which such successor corporation thereafter
shall cause to be signed and delivered to the Trustee for that purpose. All the
Securities so issued shall in all respects have the same legal rank and benefit
under this Indenture as the other Securities of such series theretofore or
thereafter issued in accordance with the terms of this Indenture as though all
of such Securities had been issued at the date of the execution hereof.
SECTION 12.04. Opinion of Counsel to be Given Trustee. Before the Trustee
shall execute any supplemental indenture required pursuant to this Article
Twelve, the Trustee, subject to Sections 8.01 and 8.02, shall receive and shall
be fully protected in relying upon, an Officers' Certificate and an Opinion of
Counsel as conclusive evidence that any such consolidation, merger, sale or
conveyance and any such assumption complies with the provisions of this Article.
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ARTICLE THIRTEEN
SATISFACTION AND DISCHARGE OF INDENTURE
Section 13.01. Discharge of Indenture. When (a) the Company shall deliver to
the Trustee for cancellation all Securities of any series theretofore
authenticated (other than any Securities of such series which shall have been
destroyed, lost or stolen or in lieu of or in substitution for which other
Securities shall have been authenticated and delivered) and not theretofore
canceled, or (b) all the Securities of any series not theretofore canceled or
delivered to the Trustee for cancellation shall have become due and payable, or
are by their terms to become due and payable within one year or are to be called
for redemption within one year under arrangements satisfactory to the Trustee
for the giving of notice of redemption, and the Company shall deposit with the
Trustee, in trust, funds (other than funds repaid by the Trustee to the Company
in accordance with Section 13.04) sufficient to pay at maturity or upon
redemption all of the Securities of such series (other than any Securities of
such series which shall have been mutilated, destroyed, lost or stolen and in
lieu of or in substitution for which other Securities shall have been
authenticated and delivered or which shall have been paid) not theretofore
canceled or delivered to the Trustee for cancellation, including principal and
premium, if any, and interest, if any, due or to become due to such date of
maturity or redemption date, as the case may be, and if in either case the
Company shall also pay or cause to be paid all other sums payable hereunder by
the Company, then this Indenture shall cease to be of further effect with
respect to Securities of such series, and the Trustee, on demand of the Company
accompanied by an Officers' Certificate and an Opinion of Counsel as required by
Section 16.07 and at the cost and expense of the Company, shall execute proper
instruments acknowledging satisfaction of and discharging this Indenture with
respect to Securities of such series, the Company, however, hereby agreeing to
reimburse the Trustee for any costs or expenses thereafter reasonably and
properly incurred and to compensate the Trustee for any services reasonably and
properly rendered by the Trustee in connection with this Indenture or the
Securities.
SECTION 13.02. Deposited Moneys to be Held in Trust by Trustee. All moneys
deposited with the Trustee pursuant to Section 13.01 shall be held in trust and
applied by it to the payment, either directly or through any paying agent
(including the Company if acting as its own paying agent), to the Holders of the
particular Securities for the payment or redemption of which such moneys have
been deposited with the Trustee, of all sums due and to become due thereon for
principal and interest and premium, if any.
SECTION 13.03. Paying Agent to Repay Moneys Held. Upon the satisfaction and
discharge of this Indenture, all moneys then held by any paying agent of the
Securities (other than the Trustee) shall, upon demand of the Company, be repaid
to it or paid to the Trustee, and thereupon such paying agent shall be released
from all further liability with respect to such moneys.
SECTION 13.04. Return of Unclaimed Moneys. Any moneys deposited with or paid
to the Trustee for payment of the principal of (and premium, if any) or
interest, if any, on Securities of any series and not applied but remaining
unclaimed by the Holders of Securities of that series for three years after the
date upon which the principal of, and premium, if any, or interest, if any, on
such Securities, as the case may be, shall have become due and payable, shall,
upon written demand, be repaid to the Company by the Trustee; and the Holder of
any of such Securities shall thereafter look only to the Company for any payment
which such Holder may be entitled to collect, provided, however, that, before
being required to make any such repayment, the Trustee may (at the cost of the
Company) mail to such Holders at their last known address or cause to be
published once a week for two successive weeks, in each case on any day of the
week, in an Authorized Newspaper in the Place of Payment, a notice (in such form
as may be deemed appropriate by the Trustee) that said moneys remain unclaimed
and that, after a date named therein, any unclaimed balance of said moneys then
remaining will be returned to the Company (except that with respect to
presentation of Securities for payment and transfer, such term shall mean the
office or agency of the Trustee in said city at which at any particular time its
corporate agency business shall be conducted).
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ARTICLE FOURTEEN
DEFEASANCE
SECTION 14.01. Applicability of Article. If pursuant to Section 2.01
provision is made for the defeasance of Securities of a series, then the
provisions of this Article shall be applicable except as otherwise specified as
contemplated by Section 2.01 for Securities of such series.
SECTION 14.02. Defeasance upon Deposit of Moneys or U.S. Government
Obligations. At the Company's option, either (i) the Company shall be deemed to
have been Discharged (as defined below) from its obligations with respect to
Securities of any series on the 121st day after the applicable conditions set
forth below have been satisfied, or (ii) the Company shall cease to be under any
obligation to comply with any term, provision or condition set forth in Sections
5.03, 5.04, 5.08, 12.01 and 12.02 with respect to Securities of any series at
any time after the applicable conditions set forth below have been satisfied:
(a) the Company shall have deposited or caused to be deposited irrevocably
with the Trustee as trust funds in trust, specifically pledged as security for,
and dedicated solely to, the benefit of the Holders of the Securities of such
series, (i) money in an amount, or (ii) U.S. Government Obligations (as defined
below), which through the payment of interest, principal and premium, if any, in
respect thereof in accordance with their terms will provide (without any
reinvestment of such interest, principal or premium), not later than one day
before the due date of any payment, money in an amount, or (iii) a combination
of (i) and (ii), sufficient, in the opinion (with respect to (ii) and (iii)) of
a nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee at or prior to the time
of such deposit, to pay and discharge each installment of principal (including
any mandatory sinking fund payments) of, premium, if any, and interest on, the
outstanding Securities of such series on the dates such installments of
interest, principal or premium are due or the outstanding Securities of such
series are redeemable, if applicable, pursuant to Section 14.02(b) below;
(b) in case any of the Securities of such series are to be redeemed on any
date prior to their Stated Maturity, the Company shall have given to the Trustee
an irrevocable notice pursuant to Section 3.02 of this Indenture requiring
redemption of such Securities on such date and the Company shall have given to
the Trustee in form satisfactory to the Trustee irrevocable instructions to
publish notice of redemption of such Securities prior to said date as provided
in Section 3.02 of this Indenture; and in the event such Securities are not to
be redeemed within the 60 days next succeeding the date of such deposit with the
Trustee, the Company shall have given the Trustee in form satisfactory to it
irrevocable instructions to publish, as soon as practicable, once in each of
two successive calendar weeks in an Authorized Newspaper, a notice to the
Holders of such Securities that the deposit required by Section 14.02(a) has
been made with the Trustee and stating such Maturity or redemption date or dates
upon which moneys are to be available for the payment of the principal of,
premium, if any, and interest on such Securities;
(c) the Company shall have delivered to the Trustee an Officers' Certificate
certifying as to whether the Securities of such series are then listed on the
New York Stock Exchange;
(d) if the Securities of such Series are listed on the New York Stock
Exchange, the Company shall have delivered to the Trustee an Opinion of Counsel
to the effect that the Company's exercise of its option under this Section would
not cause the Securities to be delisted;
(e) no Event of Default or event (including such deposit) which, with notice
or lapse of time, or both, would become an Event of Default with respect to the
Securities of such series shall have occurred and be continuing on the date of
such deposit as evidenced to the Trustee in an Officers' Certificate delivered
to the Trustee concurrently with such deposit; and
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(f) the Company shall have paid or duly provided for payment of all amounts
then due to the Trustee pursuant to Section 8.06.
"Discharged" means that the Company shall be deemed to have paid and discharged
the entire indebtedness represented by, and obligations under, the Securities of
such series and to have satisfied all the obligations under this Indenture
relating to the Securities of such series (and the Trustee, at the expense of
the Company, shall execute proper instruments acknowledging the same), except
(A) the rights of Holders of Securities of such series to receive, from the
trust fund described in clause (a) above, payment of the principal of, and
premium, if any, and the interest on such Securities when such payments are due,
(B) the Company's obligations with respect to the Securities of such series
under Sections 2.05, 2.06, 5.02 and 14.03 and (C) the rights, powers, trusts,
duties and immunities of the Trustee hereunder, including without limitation,
the provisions of Section 8.06.
"U.S. Government Obligations" means securities that are (i) direct obligations
of the United States of America for the payment of which its full faith and
credit is pledged or (ii) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the United States of America the
payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case under clauses
(i) or (ii) are not callable or redeemable at the option of the issuer thereof.
SECTION 14.03. Deposited Moneys and U.S. Government Obligations to be held
in Trust. All moneys and U.S. Government Obligations deposited with the Trustee
pursuant to Section 14.02 in respect of Securities of a series shall be held in
trust and applied by it, in accordance with the provisions of such Securities
and this Indenture, to the payment, either directly or through any paying agent
(including the Company acting as its own paying agent) as the Trustee may
determine, to the Holders of such Securities, of all sums due and to become due
thereon for principal, premium, if any, and interest, if any, but such money
need not be segregated from other funds except to the extent required by law.
SECTION 14.04. Repayment to Company. After the Maturity and payment of the
principal of, premium, if any, and interest on the Securities of any series for
which money or U.S. Government Obligations have been deposited pursuant to
Section 14.02, the Trustee and any paying agent shall promptly pay or return to
the Company upon request any money and U.S. Government Obligations held by them
that are not required for the payment of the principal of, premium, if any, and
interest on the Securities of such series. The provisions of Section 13.04 shall
apply to any money held by the Trustee or any paying agent under this Article
that remains unclaimed for two years after the Maturity of any series of
Securities for which money or U.S. Government Obligations have been deposited
pursuant to Section 14.02.
SECTION 14.05. Reinstatement. If the Trustee is unable to apply any money or
U.S. Government Obligations in accordance with Section 14.02 by reason of any
legal proceeding or by reason of any order or judgment or any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Securities
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 14.02 until such time as the Trustee is permitted to apply all such
money or U.S. Government Obligations in accordance with Section 14.02.
ARTICLE FIFTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 15.01. Indenture and Securities Solely Corporate Obligations. No
recourse for the payment of the principal of or premium, if any, or interest, if
any, on any Security, or for any claim based thereon or otherwise in respect
thereof, and no recourse under or upon any obligation, covenant or agreement of
the
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Company in this Indenture or in any supplemental indenture, or in any Security,
or because of the creation of any indebtedness represented thereby, shall be had
against any incorporator, stockholder, officer or director, as such, past,
present or future, of the Company or of any successor corporation, either
directly or through the Company or any successor corporation, whether by virtue
of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that all such
liability is hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issue of the
Securities.
ARTICLE SIXTEEN
MISCELLANEOUS PROVISIONS
SECTION 16.01. Provisions Binding on Company's Successors. All the
covenants, stipulations, promises and agreements by the Company contained in the
Indenture shall bind its successors and assigns whether so expressed or not.
SECTION 16.02. Benefits of Indenture Restricted to Parties and Holders.
Nothing in this Indenture or in the Securities, expressed or implied, shall give
or be construed to give to any person, firm or corporation, other than the
parties hereto and their successors and assigns and the Holders, any legal or
equitable right, remedy or claim under or in respect of this Indenture, or under
any covenant, condition or provision herein contained; and, subject to the
provisions of Articles Nine and Fifteen, all of such covenants, conditions and
provisions shall be for the sole benefit of the parties hereto and the Holders.
SECTION 16.03. Official Acts by Successor Corporation. Any act or proceeding
by any provision of this Indenture authorized or required to be done or
performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any corporation that shall at the time be the lawful sole successor
of the Company.
SECTION 16.04. Addresses for Notices, etc. Any notice or demand which by
any provision of this Indenture is required or permitted to be given or served
by the Trustee or by the Holders of Securities on the Company shall be deemed to
have been sufficiently given or served, for all purposes, if given or served at
the office of the Vice President and Treasurer at the principal office of the
Company at One Houston Center, 1221 McKinney Street, Suite 1600, Houston, Texas
77010 (until another address is filed by the Company with the Trustee). Any
notice, direction, request of demand by any Holder to or upon the Trustee shall
be deemed to have been sufficiently given or made, for all purposes, if given or
made in writing at 231 South LaSalle Street, Chicago, Illinois 60697, addressed
to the attention of its Corporate Trust Department.
SECTION 16.05. Notices to Holders, Waiver. Where this Indenture or any
Security provides for notice to Holders of any event, (a) if any of the
Securities affected by such event are Registered Securities, such notice shall
be sufficiently given (unless otherwise herein or in such Securities expressly
provided) if in writing and mailed, first-class, postage prepaid, to each
Registered Holder of such Securities, at his address as it appears on the
registry books of the Company, not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such notice, and (b) if any
of the Securities affected by such event are Unregistered Securities, such
notice shall be sufficiently given (unless otherwise herein or in such
Securities expressly provided) if published once in an Authorized Newspaper in
the Place of Payment not later than the latest date, and not earlier than the
earliest date, prescribed for the giving of such notice. In any case where
notice to Holders is given by mail, neither the failure to mail such notice, nor
any defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by
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Holders shall be filed with the Trustee, but such filing shall not be a
condition precedent to the validity of any action taken in reliance upon such
waiver. The Trustee shall deliver to the Company a copy of any notice delivered
by the Trustee to the Holders hereunder concurrently with the delivery of such
notice to the Holders.
In case, by reason of the suspension of publication of any Authorized
Newspaper, or by reason of any other cause, it shall be impossible to make
publication of any notice in one or more Authorized Newspapers as required by
any Security or this Indenture, then such method of publication or notification
as shall be made with the approval of the Trustee shall constitute a sufficient
publication of such notice.
In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or otherwise, it shall be impractical to mail notice of
any event to the Holders of Securities when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee and the Company shall be deemed
to be a sufficient giving of such notice.
SECTION 16.06. GOVERNING LAW. THIS INDENTURE AND EACH SECURITY SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 16.07. Evidence of Compliance with Conditions Precedent. Upon any
application or demand by the Company to the Trustee to take any action under any
of the provisions of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and an Opinion of Counsel stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
Each certificate or opinion provided for in this Indenture and delivered to
the Trustee with respect to compliance with a condition or covenant provided for
in this Indenture (other than annual certificates provided pursuant to Section
5.08) shall include (a) a statement that the person making such certificate or
opinion has read such covenant or condition; (b) a brief statement as to the
nature and scope of the examination or investigation upon which the statements
or opinion contained in such certificate or opinion are based; (c) a statement
that, in the opinion of such person. he or she has made such examination or
investigation as is necessary to enable him or her to express an informed
opinion as to whether or not such covenant or condition has been complied with;
and (d) a statement as to whether or not, in the opinion of such person, such
condition or covenant has been complied with.
SECTION 16.08. Legal Holidays. In any case where the date of maturity of
interest on or principal of the Securities or the date fixed for redemption of
any Security will not be a Business Day at the applicable Place of Payment, then
payment of such interest and premium, if any, on or principal of the Securities
need not be made at such Place of Payment on such date but may be made on the
next Business Day at such Place of Payment with the same force and effect as if
made on the date of maturity or the date fixed for redemption and no interest
shall accrue for the period from and after such date.
SECTION 16.09. Trust Indenture Act to Control. If and to the extent that any
provision of this Indenture limits, qualifies or conflicts with the duties
imposed by any of sections 310 to 317, inclusive, of the Trust Indenture Act of
1939, through operation of Section 318(c) thereof, such imposed duties shall
control.
SECTION 16.10. No Security Interest Created. Nothing in this Indenture or in
the Securities, expressed or implied, shall be construed to create or constitute
a security interest under the Uniform Commercial Code or similar legislation,
as now or hereafter enacted and in effect, in any jurisdiction where property of
the Company or its Subsidiaries is located.
SECTION 16.11. Table of Contents, Headings, etc. The table of contents and
the titles and headings of the Articles and Sections of this Indenture have been
inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
<PAGE>
47
SECTION 16.12. Execution in Counterparts. This Indenture may be executed in
any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
SECTION 16.13. Acceptance of Trust. The Trustee hereby accepts the trusts
declared and provided in this Indenture, upon the terms and conditions herein
above set forth.
IN WITNESS WHEREOF, LYONDELL PETROCHEMICAL COMPANY has caused this Indenture
to be signed and acknowledged by its Vice President and Treasurer, and its
corporate seal to be affixed hereunto, and the same to be attested by its
Secretary or an Assistant Secretary, and CONTINENTAL BANK, NATIONAL ASSOCIATION,
as Trustee, has caused this Indenture to be signed by one of its Vice Presidents
as of the day and year first written above.
LYONDELL PETROCHEMICAL COMPANY
(SEAL) By: /s/ Russell S. Young
-------------------------------
Russell S. Young
Vice President and Treasurer
Attest:
/s/ Gerald A. O'Brien
- ---------------------------
Gerald A. O'Brien
Assistant Secretary
CONTINENTAL BANK NATIONAL
ASSOCIATION, as Trustee
(SEAL) By: /s/ Greg Jordan
-------------------------------
Greg Jordan
Vice President
Attest:
/s/ R C Bergman
- ---------------------------
Trust Officer
<PAGE>
48
STATE OF TEXAS ) SS:
COUNTY OF HARRIS )
Before me, Rosemarie Maw, the undersigned officer, on this day personally
appeared Russell S. Young, known to me to be the person whose name is
subscribed to the foregoing instrument, and known to me to be the Vice
President and Treasurer of Lyondell Petrochemical Company, a Delaware
corporation, and acknowledged to me that he executed said instrument for the
purpose and consideration therein expressed, and as the act of said corporation.
Given under my hand and seal of office this 13th day of March, 1992.
(SEAL) ROSEMARIE MAW
Notary Public, State of Texas /s/ Rosemarie Maw
My Commission Expires 5/16/93 ----------------------
Notary Public
<PAGE>
49
STATE OF ILLINOIS ) SS.:
COUNTY OF COOK )
Before me, V. WASHINGTON, the undersigned officer, on this day personally
appeared Greg Jordan, known to me to be the person whose name is subscribed to
the foregoing instrument, and known to me to be a Vice President of Continental
Bank, National Association, a national banking association, and acknowledged to
me that he executed said instrument for the purpose and consideration therein
expressed, and as the act of said bank.
Given under my hand and seal of office this 16th day of March, 1992.
(SEAL) /s/ V. Washington
--------------------------------
Notary Public
"OFFICIAL SEAL"
V. WASHINGTON
NOTARY PUBLIC, STATE OF ILLINOIS
MY COMMISSION EXPIRES 9-20-92
<PAGE>
EXHIBIT 4.5(a)
LYONDELL PETROCHEMICAL COMPANY
AND
CONTINENTAL BANK, NATIONAL ASSOCIATION,
Trustee
FIRST SUPPLEMENTAL INDENTURE
Dated as of March 10, 1992
to the
INDENTURE
Dated as of March 10, 1992
--------------------
8.25% Notes Due 1997
9.125% Notes Due 2002
<PAGE>
TABLE OF CONTENTS
Page
----
Recitals of the Company....................................... 1
Section 1. Terms Defined in the Indenture................................ 1
Section 2. Designation................................................... 1
Section 3. Dating of the Notes........................................... 2
Section 4. Maximum Aggregate Outstanding Amount.......................... 2
Section 5. Stated Maturity............................................... 2
Section 6. Denomination of Notes......................................... 2
Section 7. Payments of Principal and Interest, Record Dates.............. 3
Section 8. Place of Payment.............................................. 4
Section 9. Form of Notes................................................. 4
Section 10. Ranking....................................................... 4
Section 11. Defeasance.................................................... 4
Section 12. Definition of Restricted Property and Subsidiary;
Limitation on Olefins Subsidiary.............................. 5
Section 13. Concerning the Trustee........................................ 5
Section 14. Governing Law................................................. 6
Section 15. Counterparts.................................................. 6
Section 16. Miscellaneous ................................................ 6
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of March 10, 1992 (the "Supplement"),
between LYONDELL PETROCHEMICAL COMPANY, a Delaware corporation (the "Company"),
and Continental Bank, National Association, a national banking association (the
"Trustee"), as Trustee under an Indenture, dated as of March 10, 1992 (the
"Indenture").
RECITALS OF THE COMPANY
The Company has previously executed and delivered to the Trustee the
Indenture. Sections 2.01 and 11.01 of the Indenture provide, among other things,
that the Company, when authorized by its Board of Directors, and the Trustee may
at any time and from time to time enter into an indenture supplemental to the
Indenture for the purpose of authorizing a series of Securities and specifying
the terms and form of each series of Securities. The Board of Directors of the
Company has duly authorized the creation, issuance, execution and delivery of
two series of notes consisting of the 8.25% Notes Due 1997 (the "1997 Notes")
and the 9.125% Notes Due 2002 (the "1997 Notes") in the maximum aggregate
principal amount of $200,000,000.
The Company and the Trustee are executing and delivering this Supplement in
order to provide for the issuance of the 1997 Notes and the 2002 Notes
(collectively the "Notes"). All things necessary to make this Supplement a valid
and legally binding agreement of the Company have been done.
AGREEMENT
For and in consideration of the premises and the purchase of the Notes by
the Holders thereof, it is mutually covenanted and agreed as follows:
SECTION 1.
TERMS DEFINED IN THE INDENTURE.
All capitalized terms that are used in this Supplement and that are defined
in the Indenture shall have the meanings assigned to them in the Indenture,
except to the extent that such terms are otherwise defined or amended in this
Supplement.
SECTION 2.
DESIGNATION.
The Notes are hereby created and shall be issuable in two series; the 1997
Notes shall be designated as the "8.25% Notes Due 1997" and the 2002 Notes shall
be designated as the "9.125% Notes Due 2002."
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<PAGE>
SECTION 3.
DATING OF THE NOTES.
The Notes shall be dated the date of authentication.
SECTION 4.
MAXIMUM AGGREGATE OUTSTANDING AMOUNT.
The maximum aggregate principal amount of the 1997 Notes and 2002 Notes that
may be authenticated and delivered under this Supplement is limited to
$100,000,000 and $100,000,000, respectively, except for Notes authenticated and
delivered upon transfer of, or in exchange for, or in lieu of, other Notes
pursuant to Sections 2.05, 2.06, 2.07, 3.03 or 11.04 of the Indenture.
SECTION 5.
STATED MATURITY.
The principal amount of the 1997 Notes shall be due and payable on March 15,
1997. The principal amount of the 2002 Notes shall be due and payable on March
15, 2002.
SECTION 6.
DENOMINATION OF NOTES.
The Notes initially will be represented by one or more global securities
(the "Global Securities") deposited with The Depository Trust Company ("DTC")
and registered in the name of a nominee of DTC. Except as set forth below, the
Notes will be available for purchase in denominations of $1,000 and integral
multiples thereof in book-entry form only. The term "Depository" refers to DTC
or any successor depository.
Upon the issuance by the Company of the Notes represented by the Global
Securities, the Depository or its nominee will credit, on its book-entry
registration and transfer system, the respective principal amounts of the Notes
represented by such Global Securities to the accounts of participants. Ownership
of beneficial interests in the Notes represented by the Global Securities will
be limited to persons who have accounts with DTC ("participants") or persons
that hold interests through participants. Ownership of such beneficial interests
in the Notes will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the Depository (with respect to
interests of participants in the Depository), or by participants in the
Depository or persons that may hold interests through such participants (with
respect to persons other than participants in the Depository).
2
<PAGE>
So long as the Depository for a Global Security, or its nominee, is the
registered owner of such Global Security, the Depository or its nominee, as the
case may be, will be considered the sole Holder of the Notes represented by such
Global Security for all purposes under the Indenture. Except as provided below,
owners of beneficial interests in Notes represented by Global Securities will
not be entitled to have the Notes represented by such Global Securities
registered in their names, will not receive or be entitled to receive physical
delivery of the Notes in definitive form and will not be considered the Holders
thereof under the Indenture.
Payments of principal and interest on the Notes represented by Global
Securities registered in the name of the Depository or its nominee will be made
by the Company through the paying agent to the Depository or its nominee, as the
case may be, as the registered owner of the Notes represented by such Global
Securities.
If the Depository is at any time unwilling or unable to continue as
Depository and a successor Depository is not appointed by the Company within 90
days, the Company will issue individual Notes in definitive form in exchange for
the Global Securities. In addition, the Company may at any time and in its sole
discretion determine not to have Global Securities, and, in such event, will
issue individual Notes in definitive form in exchange for the Global Securities.
In either instance, the Company will issue Notes in definitive form, equal in
aggregate principal amount to the Global Securities, in such names and in such
principal amounts as the Depository shall request. Notes so issued in definitive
form will be issued in denominations of $1,000 and integral multiples thereof
and will be issued in registered form only, without coupons.
Neither the Company, the Trustee, any paying agent nor the registrar for the
Notes will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in the
Notes represented by such Global Securities or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
SECTION 7.
PAYMENTS OF PRINCIPAL AND INTEREST, RECORD DATES.
Each Note shall bear interest on its outstanding principal balance from
March 19, 1992 at the following interest rates, until payment of the principal
thereof has been made or duly provided for: the 1997 Notes, 8.25%; and the 2002
Notes, 9.125%. Interest on the Notes shall be paid semi-annually on March 15 and
September 15, commencing on September 15, 1992. Interest on the Notes of each
series shall be computed on the basis of a 360-day year of twelve 30-day months,
from the later of: (1) March 19, 1992, or (2) the most recent Interest Payment
Date next preceding the date of such Note to which interest has been paid or
duly provided for (unless the date of such Note is an Interest Payment Date, in
which case the date of such Note). Interest on the Notes shall be payable in
lawful money of the United States of America.
The principal of each Note shall be payable on the date due upon delivery
and surrender of such Note to the Trustee at the Place of Payment in lawful
money of the United States of America in next-day funds by check as provided in
Section 5.02 of the Indenture.
The record date ("Record Date") for each Interest Payment Date shall be the
close of business on the March 1 and September 1 next preceding each Interest
Payment Date, whether or not such date shall be a Business Day.
Any interest not paid on the Interest Payment Date therefor ("Defaulted
Interest") may be paid to the person in whose name the Note is registered at the
close of business on a special record date for the payment of such Defaulted
Interest, notice of which shall be given by the Company to Holders of Notes not
less than fifteen days prior to such special record date, or may be paid in any
other lawful manner.
3
<PAGE>
At the option of the Company, payment of interest on each Note shall be made
on each Interest Payment Date to the Holder of each Note at the close of
business on the Record Date for each Interest Payment Date by check mailed to
the Holder at its address as it appears on the registration books maintained by
the Company pursuant to Section 2.05 of the Indenture or at any other address
that is furnished to the Trustee in writing by the Holder at least 15 Business
Days prior to the Interest Payment Date.
Any payment of principal or interest required to be made on an Interest
Payment Date or at Maturity of a Note that is not a Business Day need not be
made on that day, but may be made on the next succeeding Business Day with the
same force and effect as if made on the Interest Payment Date or at Maturity, as
the case may be, and no additional interest shall accrue as a result of such
delayed payment. The Company shall pay any administrative costs imposed by banks
in connection with any election by the Company, in its sole discretion, to make
payments by wire transfer in accordance with the requirements of this Section 7,
but any tax, assessment or governmental charge imposed upon or required to be
withheld from payments shall be borne by the Holders of the Notes in respect to
which payments are made.
SECTION 8.
PLACE OF PAYMENT.
The Place of Payment of the Notes shall be at the offices or agencies of the
Trustee in Chicago, Illinois or the Borough of Manhattan, the City of New York,
New York, which shall be maintained for such purpose in accordance with Section
5.02 of the Indenture.
SECTION 9.
FORM OF NOTES.
The form of the 1997 Notes and the 2002 Notes are attached hereto as
Exhibits A-I and A-II, respectively. Each of the 1997 Notes shall be numbered
consecutively from A-1 upward. Each of the 2002 Notes shall be numbered
consecutively from B-1 upward. The Notes shall bear CUSIP numbers, but any
failure to indicate or any error in such CUSIP numbers shall not in any way
affect the validity of the Notes.
SECTION 10.
RANKING.
The Notes shall constitute unsecured and unsubordinated indebtedness of the
Company and shall rank pari passu with any other unsecured and unsubordinated
indebtedness of the Company.
4
<PAGE>
SECTION 11.
DEFEASANCE.
The Notes shall be subject to defeasance as provided in Article Fourteen of
the Indenture. Upon any defeasance of the 1997 Notes or 2002 Notes, the Company
shall cease to be under any obligation to comply with any term, provision or
condition of Section 12 of this Supplement.
SECTION 12.
DEFINITION OF RESTRICTED PROPERTY AND SUBSIDIARY;
LIMITATION ON OLEFINS SUBSIDIARY DEBT.
The definition of Restricted Property in the Indenture shall be amended (i)
to include any plant for the refining of petroleum or the production of
petrochemicals that as of the date hereof is leased by the Company or its
Subsidiary. The definition of Restricted Subsidiary in the Indenture shall be
amended to include any Subsidiary that as of the date hereof leases Restricted
Property.
During any period that title to the Company's two olefins plants located at
Channelview, Texas ("Olefins Plants") is owned by one or more Subsidiaries (for
purposes of this Section 12 hereinafter referred to collectively as the "Olefins
Subsidiary"), the Company shall not permit any Olefins Subsidiary to issue,
guarantee, assume, incur or have outstanding directly or indirectly, any Debt
(as defined in Section 5.03 of the Indenture); provided, however, that this
limitation shall not apply to Debt secured by Mortgages permissible under
clauses (a) through (h) of Section 5.03 of the Indenture; and, further provided,
that the term Olefins Plants shall not include (i) the Company's methanol plant
and other petrochemical processing units located on the same site as the Olefins
Plants, or (ii) the polypropylene plant or the low density polyethylene plant
located in Pasadena, Texas that as of the date hereof is owned by a Subsidiary
of the Company. Notwithstanding the foregoing, an Olefins Subsidiary may issue,
assume, guarantee or have outstanding Debt which would otherwise be subject to
the foregoing restriction in an aggregate principal amount which, together with
the outstanding principal amount of (A) any Debt permitted under the last
paragraph of Section 5.03 of the Indenture and (B) all other Debt of an Olefins
Subsidiary subject to the foregoing restriction, does not at any one time exceed
the greater of $50 million or 10% of the Consolidated Net Tangible Assets of the
Company and its consolidated Subsidiaries.
Except as provided above, the definitions contained in, and Section 5.03 of,
the Indenture shall remain unchanged. The amendments and provisions set forth in
this Section 12 shall not affect any Security of any series created after the
date of this Supplement.
SECTION 13.
CONCERNING THE TRUSTEE.
(A) Subject to the provisions of the Trust Indenture Act of 1939, Section
8.02 of the Indenture shall be amended to add the following clause as Clause
(i):
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<PAGE>
"(i) the Trustee shall not be required to take notice of or be deemed to
have notice of any Event of Default under the Indenture, except for Events
of Default specified in Subsection (a), (b) or (c) of Section 7.01 of the
Indenture, unless the Trustee shall be specifically notified in writing of
such Event of Default by the Company or any Holder of the Notes, and all
notices in order to be effective must be delivered to the Principal Office
of the Trustee, and in the absence of such notice so delivered, the Trustee
may conclusively assume there is no Event of Default except as
aforementioned."
(B) Subject to the provisions of the Trust Indenture Act of 1939, Section
9.04 of the Indenture shall be amended to add at the end of Section 9.04 the
following paragraph:
"Upon request of the Trustee, the Company shall furnish the Trustee promptly
an Officer's Certificate listing and identifying all Notes if any, known by
the Company to be owned or held by or for the account of any of the above
described persons; and subject to Sec. 8.01, the Trustee shall be authorized
to accept such Officer's Certificate as conclusive evidence of the facts
therein set forth and the fact that all Notes not listed therein are
outstanding for the purpose of any such determination."
(C) Except as provided above, Sections 8.02 and 9.04 of the Indenture shall
remain unchanged. The amendments and provisions set forth in this Section 13
shall not affect any Security of any series created after the date of this
Supplement.
SECTION 14.
GOVERNING LAW.
THIS SUPPLEMENT AND EACH NOTE ISSUED HEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED THEREIN.
SECTION 15.
COUNTERPARTS.
This Supplement may be executed in any number of counterparts, each of which
so executed shall be deemed to be an original, but both of which shall together
constitute but one and the same instrument.
SECTION 16.
MISCELLANEOUS.
(a) Except as expressly amended and supplemented by this Supplement, the
Indenture shall remain unchanged and in full force and effect.
6
<PAGE>
(b) This Supplement shall be construed as supplemental to the Indenture and
shall form a part thereof.
IN WITNESS WHEREOF, the Company and the Trustee have caused this Supplement
to be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
LYONDELL PETROCHEMICAL COMPANY
By: /s/ Russell S. Young
-------------------------------
Name: Russell S. Young
Title: Vice President and Treasurer
CONTINENTAL BANK, NATIONAL
ASSOCIATION, as Trustee
By: /s/ Greg Jordan
-------------------------------
Name: Greg Jordan
Title: Vice President
7
<PAGE>
EXHIBIT A-I
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange, or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or such other entity as is requested by an authorized representative
of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co.,
has an interest herein.
LYONDELL PETROCHEMICAL COMPANY
8.25% NOTE DUE 1997 CUSIP 552078 AC 1
No. A-1 $100,000,000
LYONDELL PETROCHEMICAL COMPANY, a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company"), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of $100,000,000 at the office or agency of the Trustee (herein
defined) in The City of Chicago, Illinois or in the Borough of Manhattan, The
City of New York, on March 15, 1997, in such coin or currency of the United
States of America as at the time of payment shall be legal tender for payment of
public and private debts, and to pay interest thereon from March 19, 1992, or
from the most recent March 15 or September 15 next preceding the date of this
Note to which interest has been paid or duly provided for (unless the date
hereof is the date to which interest on the Notes has been paid, in which case
from the date of this Note), semiannually on March 15 and September 15 of each
year (each an "Interest Payment Date"), commencing September 15, 1992, on said
principal sum at said office or agency, in like coin or currency, at the rate
per annum specified in the title hereof, until the principal hereof is paid or
duly provided for. The interest so payable on any Interest Payment Date will be
paid, except as provided in the Indenture (herein defined), to the person in
whose name this Note is registered at the close of business on the Record Date
for such interest, which shall be the March 1 or September 1 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date;
provided, however, that at the option of the Company payment of interest may be
made by check mailed to the address of such person as such address shall appear
in the register for the Notes. For purposes of this Note, "Business Day" means
any day, other than a Saturday or Sunday, that is not a day on which banking
institutions are authorized or required by law or regulation to be closed in The
City of Chicago or The City of New York or The City of Houston.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
This Note shall not be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been signed by the Trustee under
the Indenture.
This Note is one of a duly authorized issue of debentures, notes or other
evidences of indebtedness of the Company (herein called the "Securities"), of
the series hereinafter specified, all issued or to be issued under and pursuant
to an Indenture dated as of March 10, 1992 (herein called the "Indenture"), duly
executed and delivered by the Company to Continental Bank, National Association,
as trustee (hereinafter called the "Trustee"), to which Indenture, and all
indentures supplemental thereto, reference is hereby made for a description of
the rights, limitation of rights, obligations, duties and immunities thereunder
of the Trustee, the Company and the Holders of the Securities. The Securities
may be issued in one or more series, which different series may be issued in
various aggregate principal amounts, may mature at different times, may bear
interest (if any) at different rates, may be subject to different redemption
provisions (if any), may be subject to different sinking, purchase or analogous
funds (if any), may be subject to different covenants and Events of Default and
may otherwise vary as provided in the Indenture. In the event of any
inconsistency between the provisions of this Note and the provisions of the
Indenture, and any indentures supplemental thereto, the terms of the Indenture
and any indentures supplemental thereto shall control. Each Holder of this Note
by accepting the
1
<PAGE>
same, agrees to and shall be bound by the provisions of the Indenture.
This Note is one of a series of Securities of the Company issued pursuant to
the First Supplemental Indenture dated as of March 10, 1992 (herein called the
"Supplement"), and the Indenture (as used herein the "Indenture" refers to the
Indenture as supplemented by the Supplement) designated as the 8.25% Notes Due
1997 (herein called the "Notes") limited in aggregate principal amount to
$100,000,000.
In case an Event of Default with respect to the Notes shall occur and be
continuing, the principal hereof may be declared, and upon such declaration
shall become, due and payable, in the manner, with the effect and subject to the
conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the Holders of not less than 50% in aggregate principal
amount at Stated Maturity of the Securities at the time outstanding of each
series affected by such supplemental indenture or indentures, evidenced as
provided in the Indenture, to execute supplemental indentures adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Indenture, or of any supplemental indenture or indentures, as such
provisions apply to such Securities, or modifying in any manner the rights of
the Holders of the Securities of each such series; provided, however, that no
such supplemental indenture shall, without the consent of the Holders of each
Security of such series so affected, thereby, (i) extend the fixed maturity of
any Security or reduce the rate or extend the time of payment of interest
thereon or reduce the principal thereof or the time during which premium is
payable thereon or change the method of computing the amount of principal
thereof or make the principal thereof or any premium or interest thereon payable
in any coin or currency other than that provided in the Securities, or (ii)
reduce the percentage in principal amount at Stated Maturity of the outstanding
Securities, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is required for
any waiver of compliance with certain provisions of the Indenture or of certain
defaults under, and their consequences provided for in, the Indenture. Any such
consent or waiver by the Holder of this Note (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such Holder and upon all future
Holders and owners of this Note and any Notes which may be issued in exchange or
substitution herefor, irrespective of whether any notation thereof is made upon
this Note or such other Notes.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the place, at the respective times, at the rate, and in the coin or currency
herein prescribed.
The Notes may not be redeemed prior to maturity. The Notes are unsecured
obligations of the Company ranking pari passu without any preference among
themselves and equally with all other unsecured indebtedness (other than
subordinated indebtedness) of the Company from time to time outstanding.
The Notes are issuable in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000 in excess of that amount. Notes may be
exchanged for a like aggregate principal amount of Notes of other authorized
denominations, without charge except for any tax or other governmental charge
imposed in relation thereto, at the office or agency of the Trustee in The City
of Chicago and in the Borough of Manhattan, The City of New York, and in the
manner and subject to the limitations provided in the Indenture.
Upon due presentment for registration of transfer of this Note at the office
or agency of the Trustee in The City of Chicago or the Borough of Manhattan, The
City of New York, a new Note or Notes of authorized denominations for an equal
aggregate principal amount at Stated Maturity will be issued to the transferee
in exchange therefor, in the manner and subject to the limitations provided in
the Indenture, without charge except for any tax or other governmental charge
imposed in relation thereto.
Prior to due presentment for registration of transfer of this Note, the
Company, the Trustee, any paying agent and any registrar for the Notes may deem
and treat the registered Holder hereof as the absolute owner of this Note
(whether or not this Note shall be overdue and notwithstanding any notation of
Ownership or other writing hereon by anyone other than the Company, any
registrar for the Notes or the Trustee), for the purpose of receiving payment
hereof or on account hereof, and for all other purposes (subject to the
provisions of the first paragraph hereof), and neither the Company nor the
Trustee nor any paying agent nor any registrar for the Notes shall be affected
by any notice to the contrary.
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<PAGE>
No recourse for the payment of the principal of or premium, if any, or
interest on this Note, or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture, or any indenture supplemental thereto, or in any
Note, or because of the creation of any indebtedness represented thereby, shall
be had against any incorporator, stockholder, officer or director, as such,
past, present or future, of the Company or of any successor corporation, either
directly or through the Company or any successor corporation, whether by virtue
of any constitution, statute or rule of law or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as a condition of and as part of the consideration for the issue
hereof, expressly waived and released.
Terms used herein which are defined in the Indenture shall have the meanings
assigned to them in the Indenture.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF
THE STATE OF NEW YORK.
IN WITNESS WHEREOF, LYONDELL PETROCHEMICAL COMPANY has caused this
instrument to be signed, manually or by facsimile, by its duly authorized
officers, and its corporate seal to be printed, engraved or otherwise reproduced
hereon, by facsimile or otherwise.
LYONDELL PETROCHEMICAL COMPANY
By By
- -------------------------------- -------------------------------------
Vice President and Treasurer President and Chief Executive Officer
Dated: March 19, 1992
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
THIS IS ONE OF THE SECURITIES ISSUED UNDER THE WITHIN-MENTIONED INDENTURE.
CONTINENTAL BANK, NATIONAL ASSOCIATION, AS TRUSTEE
BY _________________________________
Authorized Officer
Dated: March 19, 1992
3
<PAGE>
EXHIBIT A-II
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange, or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or such other entity as is requested by an authorized representative
of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co.,
has an interest herein.
LYONDELL PETROCHEMICAL COMPANY
9.125% NOTE DUE 2002 CUSIP 552078 AD 9
No. B-1 $100,000,000
LYONDELL PETROCHEMICAL COMPANY, a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company"), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of $100,000,000 at the office or agency of the Trustee (herein
defined) in The City of Chicago, Illinois or in the Borough of Manhattan, The
City of New York, on March 15, 2002, in such coin or currency of the United
States of America as at the time of payment shall be legal tender for payment of
public and private debts, and to pay interest thereon from March 19, 1992, or
from the most recent March 15 or September 15 next preceding the date of this
Note to which interest has been paid or duly provided for (unless the date
hereof is the date to which interest on the Notes has been paid, in which case
from the date of this Note), semiannually on March 15 and September 15 of each
year (each an "Interest Payment Date"), commencing September 15, 1992, on said
principal sum at said office or agency, in like coin or currency, at the rate
per annum specified in the title hereof, until the principal hereof is paid or
duly provided for. The interest so payable on any Interest Payment Date will be
paid, except as provided in the Indenture (herein defined), to the person in
whose name this Note is registered at the close of business on the Record Date
for such interest, which shall be the March 1 or September 1 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date;
provided, however, that at the option of the Company payment of interest may be
made by check mailed to the address of such person as such address shall appear
in the register for the Notes. For purposes of this Note, "Business Day" means
any day, other than a Saturday or Sunday, that is not a day on which banking
institutions are authorized or required by law or regulation to be closed in The
City of Chicago or The City of New York or The City of Houston.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
This Note shall not be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been signed by the Trustee under
the Indenture.
This Note is one of a duly authorized issue of debentures, notes or other
evidences of indebtedness of the Company (herein called the "Securities"), of
the series hereinafter specified, all issued or to be issued under and pursuant
to an Indenture dated as of March 10, 1992 (herein called the "Indenture"), duly
executed and delivered by the Company to Continental Bank, National Association,
as trustee (hereinafter called the "Trustee"), to which Indenture, and all
indentures supplemental thereto, reference is hereby made for a description of
the rights, limitation of rights, obligations, duties and immunities thereunder
of the Trustee, the Company and the Holders of the Securities. The Securities
may be issued in one or more series, which different series may be issued in
various aggregate principal amounts, may mature at different times, may bear
interest (if any) at different rates, may be subject to different redemption
provisions (if any), may be subject to different sinking, purchase or analogous
funds (if any), may be subject to different covenants and Events of Default and
may otherwise vary as provided in the Indenture. In the event of any
inconsistency between the provisions of this Note and the provisions of the
Indenture, and any indentures supplemental thereto, the terms of the
1
<PAGE>
Indenture and any indentures supplemental thereto shall control. Each Holder of
this Note by accepting the same, agrees to and shall be bound by the provisions
of the Indenture.
This Note is one of a series of Securities of the Company issued pursuant to
the First Supplemental Indenture dated as of March 10, 1992 (herein called the
"Supplement"), and the Indenture (as used herein the "Indenture" refers to the
Indenture as supplemented by the Supplement) designated as the 9.125% Notes Due
2002 (herein called the "Notes") limited in aggregate principal amount to
$100,000,000.
In case an Event of Default with respect to the Notes shall occur and be
continuing, the principal hereof may be declared, and upon such declaration
shall become, due and payable, in the manner, with the effect and subject to
the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the Holders of not less than 50% in aggregate principal
amount at Stated Maturity of the Securities at the time outstanding of each
series affected by such supplemental indenture or indentures, evidenced as
provided in the Indenture, to execute supplemental indentures adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Indenture, or of any supplemental indenture or indentures, as such
provisions apply to such Securities, or modifying in any manner the rights of
the Holders of the Securities of each such series; provided, however, that no
such supplemental indenture shall, without the consent of the Holders of each
Security of such series so affected, thereby, (i) extend the fixed maturity of
any Security or reduce the rate or extend the time of payment of interest
thereon or reduce the principal thereof or the time during which premium is
payable thereon or change the method of computing the amount of principal
thereof or make the principal thereof or any premium or interest thereon payable
in any coin or currency other than that provided in the Securities, or (ii)
reduce the percentage in principal amount at Stated Maturity of the outstanding
Securities, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is required for
any waiver of compliance with certain provisions of the Indenture or of certain
defaults under, and their consequences provided for in, the Indenture. Any such
consent or waiver by the Holder of this Note (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such Holder and upon all future
Holders and owners of this Note and any Notes which may be issued in exchange or
substitution herefor, irrespective of whether any notation thereof is made upon
this Note or such other Notes.
No reference herein to the Indenture and no provision of this Note or of the
Indenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of and interest on this Note at the
place, at the respective times, at the rate, and in the coin or currency herein
prescribed.
The Notes may not be redeemed prior to maturity. The Notes are unsecured
obligations of the Company ranking pari passu without any preference among
themselves and equally with all other unsecured indebtedness (other than
subordinated indebtedness) of the Company from time to time outstanding.
The Notes are issuable in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000 in excess of that amount. Notes may be
exchanged for a like aggregate principal amount of Notes of other authorized
denominations, without charge except for any tax or other governmental charge
imposed in relation thereto, at the office or agency of the Trustee in The City
of Chicago and in the Borough of Manhattan, The City of New York, and in the
manner and subject to the limitations provided in the Indenture.
Upon due presentment for registration of transfer of this Note at the office
or agency of the Trustee in The City of Chicago or the Borough of Manhattan,
The City of New York, a new Note or Notes of authorized denominations for an
equal aggregate principal amount at Stated Maturity will be issued to the
transferee in exchange therefor, in the manner and subject to the limitations
provided in the Indenture, without charge except for any tax or other
governmental charge imposed in relation thereto.
Prior to due presentment for registration of transfer of this Note, the
Company, the Trustee, any paying agent and any registrar for the Notes may deem
and treat the registered Holder hereof as the absolute owner of this Note
(whether or not this Note shall be overdue and notwithstanding any notation of
ownership or other writing hereon by anyone other than the Company, any
registrar for the Notes or the Trustee), for the purpose of receiving payment
hereof or on account hereof, and for all other purposes (subject to the
provisions of the first paragraph hereof), and neither the Company nor the
Trustee nor any paying agent nor any registrar for the
2
<PAGE>
Notes shall be affected by any notice to the contrary.
No recourse for the payment of the principal of or premium, if any, or
interest on this Note, or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture, or any indenture supplemental thereto, or in any
Note, or because of the creation of any indebtedness represented thereby, shall
be had against any incorporator, stockholder, officer or director, as such,
past, present or future, of the Company or of any successor corporation, either
directly or through the Company or any successor corporation, whether by virtue
of any constitution, statute or rule of law or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as a condition of and as part of the consideration for the issue
hereof, expressly waived and released.
Terms used herein which are defined in the Indenture shall have the meanings
assigned to them in the Indenture.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF
THE STATE OF NEW YORK.
IN WITNESS WHEREOF, LYONDELL PETROCHEMICAL COMPANY has caused this
instrument to be signed, manually or by facsimile, by its duly authorized
officers, and its corporate seal to be printed, engraved or otherwise reproduced
hereon, by facsimile or otherwise.
LYONDELL PETROCHEMICAL COMPANY
By By
- --------------------------------- -----------------------------------
Vice President and Treasurer President and Chief Executive Officer
Dated: March 19, 1992
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
THIS IS ONE OF THE SECURITIES ISSUED UNDER THE WITHIN-MENTIONED INDENTURE.
CONTINENTAL BANK, NATIONAL ASSOCIATION, AS TRUSTEE
By ___________________________________
Authorized Officer
Dated: March 19, 1992
3
<PAGE>
EXHIBIT 4.5(B)
CONFORMED COPY
LYONDELL PETROCHEMICAL COMPANY,
EQUISTAR CHEMICALS, LP
AND
FIRST TRUST NATIONAL ASSOCIATION,
TRUSTEE
SECOND SUPPLEMENTAL INDENTURE
DATED AS OF
DECEMBER 1, 1997
TO
INDENTURE
DATED AS OF
MARCH 10, 1992
(AS SUPPLEMENTED BY THE FIRST SUPPLEMENTAL INDENTURE
DATED AS OF MARCH 10, 1992)
<PAGE>
THIS SECOND SUPPLEMENTAL INDENTURE (this "Supplement"), dated as of
December 1, 1997, between Lyondell Petrochemical Company, a Delaware corporation
("Lyondell"), Equistar Chemicals, LP, a Delaware limited partnership
("Equistar") and First Trust National Association, as Trustee (the "Trustee"),
supplements the Indenture dated as of March 10, 1992 (the "Indenture"), between
Lyondell and Continental Bank, National Association, as the previous Trustee
under the Indenture, as supplemented by the First Supplemental Indenture dated
as of March 10, 1992 (the "First Supplemental Indenture"), pursuant to which the
Company's 9.125% Notes Due 2002 (the "Notes") were issued and are outstanding.
RECITALS
WHEREAS, Lyondell has executed and delivered to the Trustee the
Indenture, providing for the issuance from time to time of Lyondell's unsecured
debentures, notes or other evidences of indebtedness, issuable in one or more
series (the "Securities"), and Lyondell has executed and delivered to the
Trustee the First Supplemental Indenture, providing for the issuance of the
Notes, which are Securities under the Indenture;
WHEREAS, Lyondell and Millennium Chemicals Inc., a Delaware
corporation ("Millennium"), have entered into a Master Transaction Agreement
dated July 25, 1997, as amended (the "Master Transaction Agreement"), which
provides that, on the Closing Date (as defined in the Master Transaction
Agreement) each of Lyondell and Millennium will contribute or cause to be
contributed certain assets to a joint venture partnership and that such joint
venture partnership will assume certain liabilities of each of Lyondell and
Millennium;
WHEREAS, Lyondell has caused two of its wholly-owned subsidiaries,
Lyondell Petrochemical L.P. Inc. ("Lyondell LP") and Lyondell Petrochemical G.P.
Inc., each a Delaware corporation, and Millennium has caused two of its wholly-
owned subsidiaries, to execute and deliver the Limited Partnership Agreement of
Equistar dated as of October 10, 1997, and Equistar has been organized by the
partners thereof to serve as the joint venture partnership contemplated by the
Master Transaction Agreement;
WHEREAS, the Master Transaction Agreement provides that Lyondell will
contribute certain specified assets (the "Assets") to Equistar and that Equistar
will assume certain specified liabilities of Lyondell, including the Notes,
pursuant to an Asset Contribution Agreement to be entered into on the Closing
Date between Lyondell, Lyondell LP and Equistar (the "Asset Contribution
Agreement"), the form of which is attached as an exhibit to the Master
Transaction Agreement;
WHEREAS, pursuant to the Asset Contribution Agreement, on the Closing
Date, Lyondell will contribute the Assets to Equistar and Equistar will assume
the Notes;
<PAGE>
WHEREAS, Section 12.01 of the Indenture provides that nothing
contained in the Indenture or in any of the Securities shall prevent any sale or
conveyance of all or substantially all the property of Lyondell to any other
corporation, provided that upon any such sale or conveyance the due and punctual
payment of the principal of and premium, if any, and interest, if any, on all of
the Securities, according to their tenor, and the due and punctual performance
and observance of all of the covenants and conditions of the Indenture and in
such series to be performed by Lyondell shall be expressly assumed, by
supplemental indenture, by the corporation which shall have acquired such
property;
WHEREAS, for purposes of Section 12.01 of the Indenture, the Assets
constitute substantially all of the assets of Lyondell;
WHEREAS, pursuant to Section 12.03 of the Indenture, upon such
assumption by supplemental indenture as specified in the foregoing paragraph,
the transferee shall succeed to and be substituted for Lyondell, with the same
effect as if it had been named in the Indenture;
WHEREAS, Section 11.01 of the Indenture provides that under certain
conditions, Lyondell and the Trustee may, from time to time and at any time
enter into an indenture or indentures supplemental to the Indenture, inter alia,
to evidence the succession of another corporation to the Company and the
assumption by any such successor, pursuant to Article 12 of the Indenture of the
covenants, agreements and obligations of Lyondell contained in the Indenture and
the Securities; and
WHEREAS, in connection with the contribution of the Assets to Equistar
by Lyondell and the assumption of the Notes by Equistar, Lyondell and Equistar
have duly determined to make, execute and deliver to the Trustee this Supplement
pursuant to the Indenture;
NOW, THEREFORE, THIS SUPPLEMENT WITNESSETH:
In consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
to comply with Sections 12.01 and 12.03 of the Indenture, the parties hereto
hereby agree, for the equal and proportionate benefit of the respective Holders
from time to time of the Securities, as follows:
SECTION ONE
DEFINITIONS
Capitalized terms used and not otherwise defined herein have the
respective meanings assigned to such terms in the Indenture.
-3-
<PAGE>
SECTION TWO
SUCCESSION BY TRANSFER OF ASSETS
On the Closing Date, the Assets will be transferred to Equistar, and
effective upon such transfer, (a) Equistar hereby expressly assumes the due and
punctual payment of the principal of and premium, if any, and interest, if any,
on all of the Securities of each series, according to their tenor, and the due
and punctual performance and observance of all of the covenants and conditions
of the Indenture, as supplemented by the First Supplemental Indenture and this
Supplement, and in such series to be performed by Lyondell; and (b) Equistar
will succeed to and be substituted for Lyondell as the "Company" for purposes of
the Indenture, with the same effect as if Equistar had been named as the
"Company" in the Indenture, as supplemented; provided, however, that Lyondell
shall not be released from any of its obligations under the Indenture and under
the Securities of each series, including the obligation to pay the principal of
and premium, if any, and interest, if any, on the Securities.
After the Closing Date, for purposes of the Indenture, the term
"Company" shall mean and include both Equistar and Lyondell, and Equistar shall
not be a "Subsidiary" of Lyondell.
SECTION THREE
RATIFICATION
Except as expressly amended and supplemented on this Supplement, the
Indenture shall remain unchanged and in full force and effect. This Supplement
shall be construed as supplemental to the Indenture and shall form a part
thereof.
SECTION FOUR
GOVERNING LAW
This Supplement shall be governed by and construed in accordance with
the laws of the State of New York applicable to agreements made and to be
performed therein.
SECTION FIVE
COUNTERPARTS
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
-4-
<PAGE>
IN WITNESS WHEREOF, each of Lyondell Petrochemical Company and
Equistar Chemicals, LP have caused this Second Supplemental Indenture to be duly
executed and its seal to be affixed hereunto and the same to be attested by its
Secretary or an Assistant Secretary, and First Trust National Association as
Trustee, has caused this Second Supplemental Indenture to be signed by one of
its Vice Presidents or Assistant Vice Presidents as of the day and year first
above written.
LYONDELL PETROCHEMICAL COMPANY
[SEAL] By /s/ Russell S. Young
---------------------------------------
Name: Russell S. Young
Title: Senior Vice President, Chief
Financial Officer and Treasurer
Attest:
/s/ Kerry A. Galvin
- -------------------------------
Name: Kerry A. Galvin
Title: Assistant Secretary
EQUISTAR CHEMICALS, LP
[SEAL] By /s/ Joseph M. Putz
---------------------------------------
Name: Joseph M. Putz
Title: Senior Vice President, Finance
and Administration
Attest:
/s/ Gerald A. O'Brien
- -------------------------------
Name: Gerald A. O'Brien
Title: Vice President and Secretary
FIRST TRUST NATIONAL
ASSOCIATION, Trustee
By /s/ Bud W. Lord
---------------------------------------
Name: Bud W. Lord
Title: Asst. Vice President
-5-
<PAGE>
EXHIBIT 4.6
================================================================================
LYONDELL PETROCHEMICAL COMPANY
AND
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, TRUSTEE
--------------------
INDENTURE
Dated as of January 29, 1996
--------------------
================================================================================
<PAGE>
TIE-SHEET
showing the location in the Indenture dated as of January 29, 1996, between
Lyondell Petrochemical Company and Texas Commerce Bank National Association, as
Trustee of certain provisions of the Trust Indenture Act of 1939 (including
cross-references to the provisions of Sections 310 to 318(a) which, pursuant to
Section 318(c) of the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990, are part of and govern such Indenture Provisions
whether or not physically contained therein):
<TABLE>
<CAPTION>
Section of
Section of Act Indenture Provision
-------------- -------------------
<S> <C>
310 (a) (1), (2) and (5)...............................8.09
310 (a) (3) and (4)....................................Not applicable
310 (b)................................................8.08 and 8.10 (b)
310 (c)................................................Not applicable
311 (a) and (b)........................................8.13
311 (c)................................................Not applicable
312 (a)................................................6.01 and 6.02 (a)
312 (b) and (c)........................................6.02 (b) and (c)
313 (a)................................................6.04 (a)
313 (b) (1)............................................Not applicable
313 (b) (2)............................................6.04 (b)
313 (c)................................................6.04 (c)
313 (d)................................................6.04 (d)
314 (a) (1), (2) and (3)...............................6.03
314 (a) (4)............................................5.08
314 (b)................................................Not applicable
314 (c) (1) and (2)....................................16.07
314 (c) (3)............................................Not applicable
314 (d)................................................Not applicable
314 (e)................................................16.07
315 (a), (c) and (d)...................................8.01
315 (b)................................................7.08
315 (e)................................................7.09
316 (a) (1)............................................7.01 and 7.07
316 (a) (2)............................................Omitted
316 (a) last sentence..................................9.04
316 (b)................................................7.04
317 (a)................................................7.02
317 (b)................................................5.07
318 (a)................................................16.09
- -----------
</TABLE>
This tie-sheet is not part of the Indenture as executed
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PARTIES........................................................1
RECITALS.......................................................1
ARTICLE ONE
DEFINITIONS
SECTION 1.01
Definitions 1
Authorized Newspaper............................1
Board of Directors..............................1
Business Day....................................1
Company.........................................2
Consolidated Net Tangible Assets................2
Coupon Security.................................2
Dollar..........................................2
Event of Default................................2
Fully Registered Security.......................2
Holder..........................................2
Indenture.......................................2
Interest........................................3
Interest Payment Date...........................3
Maturity........................................3
Officers' Certificate...........................3
Opinion of Counsel..............................3
Original Issue Date.............................3
Original Issue Discount Security................3
Person..........................................3
Place of Payment................................4
Principal Office................................4
Registered Coupon Security......................4
Registered Holder...............................4
Registered Security.............................4
Responsible Officer.............................4
Restricted Property.............................4
Restricted Subsidiary...........................4
Securities and Exchange Commission..............5
Security or Securities Outstanding..............5
Stated Maturity.................................5
Subsidiary......................................5
Trustee.........................................6
Trust Indenture Act of 1939.....................6
</TABLE>
<PAGE>
ii
ARTICLE TWO
THE SECURITIES AND SECURITY FORMS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 2.01 Amount Unlimited; Issuable in Series.......... 6
SECTION 2.02 Form of Securities and of Trustee's
Certificate of Authentication................ 7
SECTION 2.03 Global Securities............................. 8
SECTION 2.04 Denomination, Authentication and
Dating of Securities......................... 8
SECTION 2.05 Execution of Securities.......................10
SECTION 2.06 Registration, Registration of Transfer
and Exchange.................................10
SECTION 2.07 Mutilated, Destroyed, Lost or Stolen
Securities...................................11
SECTION 2.08 Temporary Securities..........................12
SECTION 2.09 Cancellation of Securities Paid, etc..........12
ARTICLE THREE
REDEMPTION OF SECURITIES
SECTION 3.01 Applicability of Article......................12
SECTION 3.02 Notice of Redemption; Selection of
Securities...................................12
SECTION 3.03 Payment of Securities Called for
Redemption...................................13
ARTICLE FOUR
SINKING FUNDS
SECTION 4.01 Applicability of Article......................14
SECTION 4.02 Satisfaction of Mandatory Sinking Fund
Payments with Securities.....................14
SECTION 4.03 Redemption of Securities for Sinking
Fund.........................................14
</TABLE>
<PAGE>
iii
ARTICLE FIVE
PARTICULAR COVENANTS OF THE COMPANY
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 5.01 Payment of Principal, Premium and
Interest.....................................15
SECTION 5.02 Offices for Notices and Payments, etc.........15
SECTION 5.03 Limitation on Liens...........................16
SECTION 5.04 Limitation on Sale and Lease Back.............17
SECTION 5.05 Definition of "Value".........................17
SECTION 5.06 Appointments to Fill Vacancies in
Trustee's Office.............................17
SECTION 5.07 Provision as to Paying Agent..................17
SECTION 5.08 Annual Certificate to Trustee.................18
ARTICLE SIX
HOLDERS LISTS AND REPORTS BY THE COMPANY
AND THE TRUSTEE
SECTION 6.01 Holders Lists.................................18
SECTION 6.02 Preservation and Disclosure of Lists..........19
SECTION 6.03 Reports by the Company........................20
SECTION 6.04 Reports by the Trustee........................20
ARTICLE SEVEN
REMEDIES OF THE TRUSTEE AND HOLDERS
ON EVENT OF DEFAULT
SECTION 7.01 Events of Default.............................21
SECTION 7.02 Payment of Securities on Default;
Suit Therefor................................23
SECTION 7.03 Application of Moneys Collected by
Trustee......................................24
SECTION 7.04 Proceedings by Holders........................25
SECTION 7.05 Proceedings by Trustee........................25
SECTION 7.06 Remedies Cumulative and Continuing............26
SECTION 7.07 Direction of Proceedings and Waiver of
Defaults by Majority of Holders..............26
SECTION 7.08 Notice of Defaults............................26
SECTION 7.09 Undertaking to Pay Costs......................27
</TABLE>
<PAGE>
iv
ARTICLE EIGHT
CONCERNING THE TRUSTEE
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 8.01 Duties and Responsibilities of Trustee..............27
SECTION 8.02 Reliance on Documents, Opinions, etc................28
SECTION 8.03 No Responsibility for Recitals, etc.................29
SECTION 8.04 Trustee, Paying Agent or Registrar May
Own Securities.....................................29
SECTION 8.05 Moneys to be Held in Trust..........................29
SECTION 8.06 Compensation and Expenses of Trustee................29
SECTION 8.07 Officers' Certificate as Evidence...................29
SECTION 8.08 Qualification of Trustee; Conflicting Interests.....29
SECTION 8.09 Eligibility of Trustee..............................30
SECTION 8.10 Resignation or Removal of Trustee...................30
SECTION 8.11 Acceptance by Successor Trustee.....................31
SECTION 8.12 Succession by Merger, etc...........................32
SECTION 8.13 Limitation on Rights of Trustee as a
Creditor...........................................32
ARTICLE NINE
CONCERNING THE HOLDERS
SECTION 9.01 Action By Holders...................................35
SECTION 9.02 Proof of Execution by Holders.......................35
SECTION 9.03 Who Deemed Absolute Owners..........................35
SECTION 9.04 Company-Owned Securities Disregarded................36
SECTION 9.05 Revocation of Consents; Future Holders
Bound..............................................36
ARTICLE TEN
HOLDERS' MEETINGS
SECTION 10.01 Purposes of Meetings................................37
SECTION 10.02 Call of Meetings by Trustee.........................37
SECTION 10.03 Call of Meetings by Company or Holders..............37
SECTION 10.04 Qualification for Voting............................38
SECTION 10.05 Regulations.........................................38
SECTION 10.06 Voting..............................................38
SECTION 10.07 No Delay of Rights by Meeting.......................39
</TABLE>
<PAGE>
v
ARTICLE ELEVEN
SUPPLEMENTAL INDENTURES
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 11.01 Supplemental Indentures without Consent
of Holders.........................................39
SECTION 11.02 Supplemental Indentures with Consent of
Holders of a Series................................40
SECTION 11.03 Compliance with Trust Indenture Act;
Effect of Supplemental Indentures..................41
SECTION 11.04 Notation on Securities..............................41
SECTION 11.05 Evidence of Compliance of Supplemental
Indenture to be Furnished Trustee..................41
ARTICLE TWELVE
CONSOLIDATION, MERGER AND SALE
SECTION 12.01 Company May Consolidate, etc, on Certain
Terms..............................................41
SECTION 12.02 Securities to be Secured in Certain
Events.............................................42
SECTION 12.03 Successor Corporation to be Substituted.............42
SECTION 12.04 Opinion of Counsel to be Given Trustee..............42
ARTICLE THIRTEEN
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 13.01 Discharge of Indenture..............................42
SECTION 13.02 Deposited Moneys to be Held in Trust by
Trustee............................................43
SECTION 13.03 Paying Agent to Repay Moneys Held...................43
SECTION 13.04 Return of Unclaimed Moneys..........................43
</TABLE>
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vi
ARTICLE FOURTEEN
DEFEASANCE
<TABLE>
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PAGE
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<S> <C> <C>
SECTION 14.01 Applicability of Article............................43
SECTION 14.02 Defeasance Upon Deposit of Moneys or
U.S. Government Obligations........................43
SECTION 14.03 Deposited Moneys and U.S. Government
Obligations to be held in Trust....................45
SECTION 14.04 Repayment to Company................................45
SECTION 14.05 Reinstatement.......................................45
ARTICLE FIFTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 15.01 Indenture and Securities Solely
Corporate Obligations..............................45
ARTICLE SIXTEEN
MISCELLANEOUS PROVISIONS
SECTION 16.01 Provisions Binding on Company's
Successors.........................................46
SECTION 16.02 Benefits of Indenture Restricted to
Parties and Holders................................46
SECTION 16.03 Official Acts by Successor Corporation..............46
SECTION 16.04 Addresses for Notices, etc..........................46
SECTION 16.05 Notices to Holders; Waiver..........................46
SECTION 16.06 Governing Law.......................................47
SECTION 16.07 Evidence of Compliance with Conditions
Precedent..........................................47
SECTION 16.08 Legal Holidays......................................47
SECTION 16.09 Trust Indenture Act to Control......................47
SECTION 16.10 No Security Interest Created........................47
SECTION 16.11 Table of Contents, Headings, etc....................47
SECTION 16.12 Execution in Counterparts...........................47
SECTION 16.13 Acceptance of Trust.................................47
</TABLE>
<PAGE>
INDENTURE, dated as of January 29, 1996, between LYONDELL PETROCHEMICAL
COMPANY, a corporation duly organized and existing under the laws of the State
of Delaware (the "Company"), and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a
national banking association, as trustee (the "Trustee").
RECITAL OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness to be issued in one or more
series (the "Securities"), as provided herein.
AGREEMENT
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.01. Definitions. The terms defined in this Section 1.01 (except
as herein otherwise expressly provided or unless the context otherwise requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section 1.01. All other
terms used in this Indenture which are defined in the Trust Indenture Act of
1939 or which are by reference therein defined in the Securities Act of 1933, as
amended, or by Securities and Exchange Commission rule under the Trust Indenture
Act of 1939 (except as herein otherwise expressly provided or unless the context
otherwise requires) shall have the meanings assigned to such terms in said Trust
Indenture Act, rule thereunder or in said Securities Act as in force at the date
of the execution of this Indenture.
Authorized Newspaper:
The term "Authorized Newspaper" shall mean The Wall Street Journal or other
newspaper of general circulation in The City of New York (and, if any Place of
Payment is not in The City of New York, in each such Place of Payment) printed
in the English language and customarily published on each Business Day, whether
or not published on Saturdays, Sundays or holidays. Whenever successive weekly
publications in an Authorized Newspaper are authorized hereunder, they may be
made (unless otherwise expressly provided herein) on the same or different days
of the week and in the same or different Authorized Newspapers.
Board of Directors:
The term "Board of Directors" shall mean the Board of Directors of the
Company or any committee of such Board duly authorized to act for such Board.
Business Day:
The term "Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which any banking institutions in that Place of
Payment are authorized or obligated by law to close.
<PAGE>
2
Company:
The term "Company" shall mean Lyondell Petrochemical Company, a Delaware
corporation, and subject to the provisions of Article Twelve shall include its
successors and assigns.
Consolidated Net Tangible Assets:
The term "Consolidated Net Tangible Assets" shall mean the total amount of
assets (less applicable reserves and other properly deductible items) after
deducting therefrom (a) all current liabilities (excluding any thereof which are
by their terms extendible or renewable at the option of the obligor thereon to a
time more than 12 months after the time as of which the amount thereof is being
computed), and (b) all goodwill, trade names, trademarks, patents, purchased
technology, unamortized debt discount and other like intangible assets, all as
set forth on the most recent quarterly balance sheet of the Company and its
consolidated Subsidiaries and computed in accordance with generally accepted
accounting principles.
Coupon Security:
The term "Coupon Security" shall mean any Security authenticated and
delivered with one or more interest coupons appertaining thereto.
Dollar:
The term "Dollar" or "$" means the coin or currency of the United States of
America as at the time of payment is legal tender for the payment of public and
private debts.
Event of Default:
The term "Event of Default" shall mean any event specified in Section 7.01,
continued for the period of time, if any, and after the giving of the notice, if
any, therein designated.
Fully Registered Security:
The term "Fully Registered Security" shall mean any Security registered as
to principal and interest, if any.
Holder:
The term "Holder," "Holder of Securities," or other similar terms, when
used with respect to any Security shall mean a Registered Holder of a Registered
Security and when used with respect to any coupon, means the bearer thereof.
Indenture:
The term "Indenture" shall mean this instrument as originally executed or,
if amended or supplemented as herein provided, as so amended or supplemented,
and shall include the form and terms of particular series of Securities
established as contemplated hereunder; provided, however, that if at any time
more than one Person is acting as Trustee under this instrument, "Indenture"
shall mean with respect to any one or more series of Securities for which such
Person is Trustee, this instrument as originally executed or as it may from time
to time be supplemented or amended by one or more indentures supplemental hereto
entered into pursuant to the applicable provisions hereof and shall include the
terms of a particular series of Securities established as contemplated by
Section 2.01, exclusive, however, of any provisions or terms which relate solely
to one or more series of Securities for which such Person is not Trustee,
regardless of when such terms or provisions were adopted, and exclusive of
<PAGE>
3
any provisions or terms adopted by means of one or more indentures supplemental
hereto executed and delivered after such Person had become such Trustee but to
which such Person, as such Trustee, was not a party.
Interest:
The term "interest" when used with respect to any series of non-interest
bearing Securities, shall mean interest payable after Maturity.
Interest Payment Date:
The term "Interest Payment Date," with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.
Maturity:
The term "Maturity," when used with respect to any Security, means the date
on which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption, repayment at the option of the Holder or
otherwise.
Officers' Certificate:
The term "Officers' Certificate" shall mean a certificate signed by the
Chairman, the President or the Senior Vice President, Chief Financial Officer
and Treasurer, and by one of its Assistant Treasurers, and delivered to the
Trustee. If applicable, each certificate shall include the statements provided
for in Section 16.07 if and to the extent required by the provisions of such
Section.
Opinion of Counsel:
The term "Opinion of Counsel" shall mean an opinion in writing signed by
legal counsel, who may be an employee of, or of counsel to the Company, or may
be other counsel reasonably acceptable to Trustee. Each such opinion shall
include the statements provided for in Section 16.07 if and to the extent
required by the provisions of such Section.
Original Issue Date:
The term "original issue date" of any Security (or portion thereof) shall
mean the earlier of (a) the date of such Security or (b) the date of any
Security (or portion thereof) for which such Security was issued (directly or
indirectly) on registration of transfer, exchange or substitution.
Original Issue Discount Security:
The term "Original Issue Discount Security" shall mean (a) a Security which
has been issued at an issue price lower than the principal amount thereof and
which provides that upon redemption or acceleration of the maturity thereof an
amount less than the principal amount thereof shall become due and payable and
(b) any other Security which for United States federal income tax purposes would
be considered an original issue discount security.
Person:
The term "Person" shall mean any individual, corporation, partnership,
joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
<PAGE>
4
Place of Payment:
The term "Place of Payment" for a series of Securities shall mean the Place
or Places of Payment designated for each series pursuant to Sections 2.01(5)
and 5.02.
Principal Office:
The term "Principal Office" shall mean the principal corporate trust
office of the Trustee in Houston, at which at any particular time its
corporate trust business shall be administered and which on the date hereof is
at 600 Travis Street 8th Floor, Houston, Texas 77002, Attention: Corporate Trust
Department, (except that with respect to presentation of Securities for payment
and transfer, such term shall mean the office or agency of the Trustee in the
Borough of Manhattan, The City of New York, New York at which at any particular
time its corporate agency business shall be conducted, which on the date hereof
is at 55 Water Street, North Building, Room 234, Windows 20 and 21, New York,
New York, 10041).
Registered Coupon Security:
The term "Registered Coupon Security" shall mean any Coupon Security
registered as to principal only.
Registered Holder:
The term "Registered Holder," when used with respect to a Registered
Security, shall mean the person in whose name such Security is registered on the
books of the Company kept for that purpose in accordance with the terms hereof.
Registered Security:
The term "Registered Security" shall mean any Security registered on the
books of the Company.
Responsible Officer:
The term "Responsible Officer" shall mean any officer to whom any corporate
trust matter is referred because of his knowledge of and familiarity with the
particular subject.
Restricted Property:
The term "Restricted Property" shall mean:
(a) any plant for the production of petrochemicals owned by the Company or
a Subsidiary, except (1) related facilities which in the opinion of the Board of
Directors are transportation or marketing facilities, and (2) any plant for the
production of petrochemicals which in the opinion of the Board of Directors is
not a principal plant of the Company and its Subsidiaries; and
(b) any shares of capital stock or indebtedness of a Restricted Subsidiary
owned by the Company or a Subsidiary.
Restricted Subsidiary:
The term "Restricted Subsidiary" shall mean any Subsidiary which owns any
Restricted Property.
<PAGE>
5
Securities and Exchange Commission:
The term "Securities and Exchange Commission" shall mean the Securities and
Exchange Commission, as from time to time constituted, created under the
Securities Exchange Act of 1934, or if at any time after the execution and
delivery of this Indenture the Securities and Exchange Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act of 1939, then the body performing such duties at such time.
Security or Securities Outstanding:
The terms "Security" or "Securities" shall have the meaning stated in the
recital of this Indenture and shall mean any Security or Securities, as the case
may be, authenticated and delivered pursuant to this Indenture (including,
without limitation, the Securities of any series issued in temporary or
permanent global form pursuant to Section 2.01(12)); provided, however, that if
at any time there is more than one Person acting as Trustee under this
instrument, "Securities" with respect to the Indenture as to which such Person
is Trustee shall have the meaning stated in the recital and shall more
particularly mean Securities authenticated and delivered pursuant to this
instrument, exclusive of Securities of any series as to which such Person is not
Trustee.
The term "outstanding," when used with reference to Securities or
Securities of any series shall, subject to the provisions of Section 9.04, mean,
as of any particular time, all such Securities authenticated and delivered by
the Trustee pursuant to this Indenture, except:
(a) such Securities theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(b) such Securities, or portions thereof, for the payment or redemption of
which moneys (or U.S. Government Obligations as provided in Article Fourteen) in
the necessary amount shall have been deposited in trust with the Trustee or with
any paying agent (other than the Company) or shall have been set aside and
segregated in trust by the Company (if the Company shall act as its own paying
agent), provided that if such Securities are to be redeemed prior to the
maturity thereof, notice of such redemption shall have been mailed as provided
in Article Three, or provision satisfactory to the Trustee shall have been made
for mailing such notice; and
(c) Securities in lieu of or in substitution for which other Securities
shall have been authenticated and delivered pursuant to the terms of
Section 2.07 except to the extent that a bona fide holder in due course of any
such Securities shall have presented proof satisfactory to the Trustee that such
holder is a bona fide holder in due course of any such Securities.
In determining whether the Holders of the requisite principal amount of
outstanding Securities of a series have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, the principal
amount of an Original Issue Discount Security that shall be deemed to be
outstanding for such purposes shall be the amount of the principal thereof that
would be due and payable as of the date of such determination upon a declaration
of acceleration of the Maturity thereof determined in accordance with
Section 7.01.
Stated Maturity:
The term "Stated Maturity" when used with respect to any Security or any
installment of interest thereon shall mean the date specified in such Security
as the fixed date on which the principal of such Security or such installment of
interest is due and payable.
Subsidiary:
The term "Subsidiary" shall mean any corporation at least a majority of the
outstanding securities of which having ordinary voting power to elect a majority
of the board of directors of such corporation (whether or not any
<PAGE>
6
other class of securities has or might have voting power by reason of the
happening of a contingency) is at the time owned or controlled directly or
indirectly by the Company or one or more Subsidiaries or by the Company and one
or more Subsidiaries. Without in any other way limiting the foregoing,
LYONDELL-CITGO Refining Company Ltd. shall not be deemed to be a subsidiary.
Trustee:
The term "Trustee" shall mean Texas Commerce Bank National Association
until another or a successor trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter shall mean and include
each Person who is then a Trustee hereunder; provided, however, that if at any
time there is more than one such Person, "Trustee" as used with respect to the
Securities of any series shall mean only the Trustee with respect to the
Securities of that series.
Trust Indenture Act of 1939:
The term "Trust Indenture Act of 1939" shall mean the Trust Indenture Act
of 1939, as amended by the Trust Indenture Reform Act of 1990, as it was in
force at the date of execution of this Indenture, except as provided in
Section 11.03.
ARTICLE TWO
THE SECURITIES AND SECURITY FORMS
SECTION 2.01. Amount Unlimited; Issuable in Series. The aggregate
principal amount of Securities which may be authenticated and delivered under
this Indenture is unlimited. Securities may be issued in one or more series.
The terms and conditions listed below, as applicable, of any series of
Securities shall be established (i) in an indenture supplemental hereto, (ii) in
a resolution of the Board of Directors or (iii) by an Officers' Certificate
authorized pursuant to a resolution of the Board of Directors:
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from Securities of all other
series);
(2) any limit upon the aggregate principal amount of the Securities
of the series which may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Sections 2.06, 2.07, 2.08, 3.03 or 11.04);
(3) the date or dates on which the principal and premium, if any, of
the Securities of the series are payable;
(4) the rate or rates at which the Securities of the series shall
bear interest, if any, or the formula by which interest shall be
calculated, the date or dates from which such interest shall accrue, the
interest payment dates on which such interest shall be payable and the
record dates for the determination of Holders thereof to whom interest is
payable;
<PAGE>
7
(5) the place or places where the principal of, and premium, if any,
and any interest on Securities of the series shall be payable (herein
called the "Place of Payment"); provided, however, that payment of
principal, premium, if any, and interest with respect to Registered
Securities may be made as provided in Section 5.02;
(6) the price or prices at which, the period or periods within which
and the terms and conditions upon which Securities of the series may be
redeemed, in whole or in part, at the option of the Company, pursuant to
any sinking fund or otherwise;
(7) the obligation, if any, of the Company to redeem, purchase or
repay Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of a Holder thereof and the price or prices at
which and the period or periods within which and the terms and conditions
upon which Securities of the series shall be redeemed, purchased or repaid,
in whole or in part, pursuant to such obligation;
(8) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which Securities of the series shall be
issuable;
(9) if other than the principal amount at Stated Maturity thereof,
the portion of the principal amount of Securities of the series which shall
be payable upon declaration of acceleration of the maturity thereof
pursuant to Section 7.01 or provable in bankruptcy pursuant to Section 7.02
or used to determine the relative voting rights of the Holders thereof
pursuant to Section 10.05 or the method by which such portion of the
principal amount shall be determined;
(10) any Events of Default with respect to the Securities of a
particular series, if not set forth herein;
(11) if the rate or rate at which the Securities of the series shall
bear interest is to be fixed until Maturity, provisions, if any, for the
defeasance of Securities of the series;
(12) the extent to which any Securities will be issuable in whole or
in part in the form of a global Security or Securities, and, in such case,
the depositary for such global Security or Securities;
(13) the form of Securities of such series; and
(14) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture).
All Securities of any series issued under this Indenture shall in all
respects be equally and ratably entitled to the benefits hereof with respect to
such series without preference, priority or distinction on account of actual
time or times of authentication and delivery or maturity of the Securities of
such series. All Securities of the same series shall be substantially identical
except as to denomination and except as may otherwise be provided in (i) an
indenture supplemental hereto, (ii) a resolution of the Board of Directors or
(iii) a certificate of an officer of the Company authorized pursuant to a
resolution of the Board of Directors.
SECTION 2.02. Form of Securities and of Trustee's Certificate of
Authentication. The Securities of each series, the appurtenant coupons, if any,
and the certificates of authentication thereon shall be in substantially the
form as shall be established as provided in Section 2.01 with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with any law or with any rules made pursuant thereto or with
any rules of any securities exchange or as may be determined consistently
<PAGE>
8
herewith by the officers executing such Securities and coupons, if any, as
evidenced by their execution of the Securities and coupons, if any.
The definitive Securities and coupons, if any, shall be printed,
lithographed or engraved or produced by any combination of these methods on
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange, all as determined by the officers executing
such Securities and coupons, if any, as evidenced by their execution of such
Securities and coupons, if any.
The form of Trustee's certificate of authentication shall be substantially
as follows:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities issued under the within-mentioned Indenture.
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
as Trustee
By ________________________________________________
Authorized Signatory
SECTION 2.03. Securities in Global Form. If any Security of a series is
issuable in global form, such Security may provide that it shall represent the
aggregate amount of Securities Outstanding from time to time endorsed thereon
and may also provide that the aggregate amount of Securities Outstanding
represented thereby may from time to time be reduced to reflect exchanges. Any
endorsement of a Security in global form to reflect the amount, or any increase
or decrease in the amount, of Securities Outstanding represented thereby shall
be made by the Trustee and in such manner as shall be specified in such
Security. Any instructions by the Company with respect to a Security in global
form, after its initial issuance, shall be in writing.
SECTION 2.04. Denomination, Authentication and Dating of Securities. The
Securities of each series may be issued as Registered Securities without coupons
in such denominations of $1,000 and any integral multiple of $1,000, or such
other denominations as authorized as provided in Section 2.01. Each Security
shall be dated as of the date of its authentication.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication. Except as otherwise provided in this
Article Two, the Trustee shall thereupon authenticate and deliver said
Securities to or upon the written order of the Company, signed by the Chairman,
the President, or the Senior Vice President, Chief Financial Officer and
Treasurer. In authenticating such Securities, and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive, and, subject to Section 8.01, shall be
fully protected in relying upon:
(a) A copy of the resolution or resolutions of the Board of Directors
in or pursuant to which the terms and form of the Securities were
established, certified by the Secretary or an Assistant Secretary of the
Company to have been duly adopted by the Board of Directors and to be in
full force and effect as of the date of such certificate, and if the terms
and form of such Securities are established by an Officers' Certificate
pursuant to general authorization of the Board of Directors, such Officers'
Certificate;
<PAGE>
9
(b) an executed supplemental indenture, if any;
(c) an Officers' Certificate delivered in accordance with
Section 16.07; and
(d) an Opinion of Counsel which shall state:
(1) that the form of such Securities has been established by a
supplemental indenture or by or pursuant to a resolution of the Board
of Directors in accordance with Sections 2.01 and 2.02 and in
conformity with the provisions of this Indenture;
(2) that the terms of such Securities have been established in
accordance with Section 2.01 and in conformity with the other
provisions of this Indenture;
(3) that such Securities, when authenticated and delivered by
the Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid
and legally binding obligations of the Company, enforceable in
accordance with their terms, subject to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting the enforcement of creditors' rights and to general equity
principles; and
(4) that all laws and requirements in respect of the execution
and delivery by the Company of such Securities have been complied
with.
The Trustee shall have the right to decline to authenticate and deliver any
Securities under this Section if the Trustee, being advised by counsel,
determines that such action may not lawfully be taken or if the Trustee in good
faith by its board of directors or trustees, executive committee, or a trust
committee of directors or trustees or vice presidents shall determine that such
action would expose the Trustee to personal liability to existing Holders.
If the Company shall establish pursuant to Section 2.03 that the Securities
of a series are to be issued in the form of one or more global Securities, then
the Company shall execute and the Trustee shall, in accordance with this Section
and the Company instructions with respect to such series, authenticate and
deliver one or more global Securities that (i) shall represent and shall be
denominated in an amount equal to the aggregate principal amount of all of the
Securities of such series issued and not yet canceled, (ii) shall be registered
in the name of the depositary for such global Security or Securities or the
nominee of such depositary, (iii) shall be delivered by the Trustee to such
depositary or pursuant to such depositary's instructions and (iv) shall bear a
legend substantially to the following effect: "Unless this certificate is
presented by an authorized representative of the depositary to the Company or
its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of the nominee of the depositary or
in such other name as is requested by an authorized representative of the
depositary (and any payment is made to the nominee of the depositary or to such
other entity as is requested by an authorized representative of the depositary),
ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL inasmuch as the registered owner hereof, the nominee of the
Depositary, has an interest herein."
Each depositary designated pursuant to Section 2.01(12) for a global
Security must, at the time of its designation and at all times while it serves
as depositary, be a clearing agency registered under the Securities Exchange Act
of 1934, as amended, and any other applicable statute or regulation.
SECTION 2.05. Execution of Securities. The Securities, and any coupons
appertaining thereto, shall be signed in the name and on behalf of the Company
manually or by facsimile by its Chairman, its President or its Senior Vice
President, Chief Financial Officer and Treasurer, under its corporate seal
(which may be printed,
<PAGE>
10
engraved or otherwise reproduced thereon, by facsimile or otherwise). Only such
Securities as shall bear thereon a certificate of authentication substantially
in the form hereinbefore recited, executed manually by the Trustee, shall be
entitled to the benefits of this Indenture or be valid or obligatory for any
purpose. Such certificate by the Trustee upon any Security executed by the
Company shall be conclusive evidence that the Security so authenticated has been
duly authenticated and delivered hereunder and that the Holder is entitled to
the benefits of this Indenture.
In case any officer of the Company who shall have signed any of the
Securities shall cease to be such officer before the Securities so signed shall
have been authenticated and delivered by the Trustee, or disposed of by the
Company, such Securities nevertheless may be authenticated and delivered or
disposed of as though the person who signed such Securities had not ceased to be
such officer of the Company; and any Security or coupon may be signed on behalf
of the Company by such persons as, at the actual date of the execution of such
Securities or coupons, shall be the proper officers of the Company, although at
the date of the execution of this Indenture any such person was not such an
officer.
SECTION 2.06. Registration, Registration of Transfer and Exchange. The
Company shall keep or cause to be kept a register (herein sometimes referred to
as the "registry books of the Company") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Registered Securities and the registration of transfers of Registered
Securities. Any such register shall be in written form or in any other form
capable of being converted into written form within a reasonable time. At all
reasonable times the information contained in such register or registers shall
be available for inspection by the Trustee at the office or agency to be
maintained by the Company as provided in Section 5.02.
Upon surrender of any Registered Security of any series for registration of
transfer at the office or agency of the Company to be maintained as provided in
Section 5.02, the Company shall execute, and the Trustee, upon the written
authorization or request of any officer of the Company, shall authenticate and
deliver, in the name of the designated transferee or transferees, at the expense
of the Company, one or more new Registered Securities of such series of any
authorized denominations and of a like aggregate principal amount and Stated
Maturity.
At the option of the Holder thereof, Securities of a series, which by their
terms are registrable as to principal only or as to principal and interest, may
be exchanged for Registered Coupon Securities or Fully Registered Securities of
such series, as may be issued by the terms thereof. Securities so issued in
exchange for other Securities shall be of any authorized denomination and of
like principal amount and Stated Maturity and shall be issued upon surrender of
the Securities for which they are to be exchanged and, in the case of Coupon
Securities, together with all unmatured coupons and all matured coupons in
default appertaining thereto, at the office of the Company provided for in
Section 5.02 and upon payment, if the Company shall require, of charges provided
herein. Whenever any Securities are so surrendered, the Company shall execute,
and the Trustee shall authenticate and deliver, the Securities which the Holder
making such exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Registered Security presented or surrendered for registration of
transfer or exchange shall (if so required by the Company or the Trustee) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company, duly executed, by the Holder thereof or his
attorney duly authorized in writing.
Unless otherwise provided in the Securities to be transferred or exchanged,
no service charge shall be made for any registration of transfer or exchange of
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto.
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11
The Company shall not be required (i) to issue, register the transfer of or
exchange any Securities of any series for a period of 15 days next preceding any
selection of Securities of such series to be redeemed, or (ii) to register the
transfer or exchange of any Securities so selected for redemption in whole or in
part except, in the case of any Security to be redeemed in part, the portion
thereof not to be so redeemed.
SECTION 2.07. Mutilated, Destroyed, Lost or Stolen Securities. In case
any temporary or definitive Security or any coupon appurtenant to a Coupon
Security shall become mutilated or be destroyed, lost or stolen, the Company in
the Trustee shall authenticate and deliver, a new Security (in the case of a
Coupon Security, with coupons corresponding to the coupons appertaining to the
mutilated, destroyed, lost or stolen Security or the Security with respect to
which a coupon shall have become mutilated, destroyed, stolen or lost) of the
same series and of like tenor and principal amount at Stated Maturity bearing a
number not contemporaneously outstanding. In every case the applicant for a
substituted Security shall furnish to each of the Company and the Trustee such
security or indemnity as may be required by either of them, as the case may be,
to save each of them harmless, and, in every case of destruction, loss or theft,
the applicant shall also furnish to the Company and to the Trustee evidence to
their satisfaction of the destruction, loss or theft of such Security and of the
ownership thereof. In every case of mutilation, the applicant shall surrender to
the Trustee, the mutilated Security or the Security to which the mutilated
coupon appertains, in the case of a Coupon Security, with all coupons (including
any mutilated coupons) appertaining thereto.
Upon the issuance of any substituted Security, the Company may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses connected therewith.
In case any Security or coupon which has matured or is about to mature shall
become mutilated or be destroyed, lost or stolen, the Company may, instead of
issuing a substitute Security or coupon, pay or authorize the payment of the
same (without surrender thereof except in the case of a mutilated Security or
coupon) if the applicant for such payment shall furnish to each of the Company
and the Trustee such security or indemnity as may be required by either of them,
as the case may be, to save each of them harmless and, in case of destruction,
loss or theft, evidence satisfactory to the Company and the Trustee of the
destruction, loss or theft of such Security or coupon and of the ownership
thereof.
Every substituted Security, and in the case of Coupon Securities, its
appurtenant coupons, issued pursuant to the provisions of this Section 2.07 by
virtue of the fact that any Security or coupon of that series is destroyed, lost
or stolen shall constitute an additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Security or coupon of that series
shall be found at any time, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Securities and
coupons of that series duly issued hereunder. All Securities and coupons shall
be held and owned upon the express condition that, to the extent permitted by
law, the foregoing provisions are exclusive with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities and coupons and shall
preclude any and all other rights or remedies notwithstanding any law or statute
existing or hereafter enacted to the contrary with respect to the replacement or
payment of negotiable instruments or other securities without their surrender.
SECTION 2.08. Temporary Securities. Pending the preparation of definitive
Securities of any series the Company may execute and the Trustee, upon
satisfaction of the provisions of Section 2.03, shall authenticate and deliver
printed or lithographed temporary Securities. Temporary Securities shall be
issuable in any authorized denomination, and substantially in the form of the
definitive Securities of that series, but with such omissions, insertions and
variations as may be appropriate for temporary Securities, all as may be
determined by the Company. Every such temporary Security of any series shall be
authenticated by the Trustee upon the same conditions and in substantially the
same manner, and with the same effect, as the definitive Securities of that
series. Without unreasonable delay, the Company will execute and deliver to the
Trustee definitive Securities of that series and thereupon any or all temporary
Securities of that series may be surrendered in exchange therefor, at the office
or agency of the Company in the Place of Payment for such series, and the
Company shall execute and the Trustee shall authenticate and deliver in exchange
for such temporary Securities an equal aggregate principal amount at Stated
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12
Maturity of definitive Securities. Such exchange shall be made by the Company
at its own expense and without any charge therefor except that the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto. Until so exchanged, the
temporary Securities of any series shall in all respects be entitled to the same
benefits under this Indenture as definitive Securities of that series
authenticated and delivered hereunder.
SECTION 2.09. Cancellation of Securities Paid, etc. Securities of any
series surrendered for the purpose of payment, redemption, exchange or
registration of transfer and all coupons surrendered for payment, shall, if
surrendered to the Company or any paying agent, be surrendered to the Trustee
for cancellation, or, if surrendered to the Trustee, shall be canceled by it,
and no Securities or coupons shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Indenture or of such series of
Securities. The Trustee shall destroy or otherwise dispose of, or retain in
accordance with its standard retention policy, at its discretion, canceled
Securities or coupons and, where applicable, deliver a certificate of such
destruction or retention to the Company. If the Company shall acquire any of the
Securities or coupons, however, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Securities or
coupons unless and until the same are surrendered to the Trustee for
cancellation.
ARTICLE THREE
REDEMPTION OF SECURITIES
SECTION 3.01. Applicability of Article. The Company may reserve the right
to redeem and pay, prior to Stated Maturity, all or any part of the Securities
of any series, either by optional redemption, sinking fund or otherwise, by
provision therefor in the Security for such series established pursuant to
Sections 2.01 and 2.02. Redemption of Securities of any series shall be made in
accordance with the terms of such Securities and, to the extent that this
Article does not conflict with such terms, in accordance with this Article.
SECTION 3.02. Notice of Redemption; Selection of Securities. In case the
Company shall desire to exercise the right to redeem all or any part of the
Securities of a series in accordance with their terms, it shall fix a date for
redemption and shall mail a notice of such redemption at least 30 and not more
than 60 days prior to the date fixed for redemption to each Holder of a
Registered Security to be redeemed as a whole or in part at his address as the
same appear on the registry books of the Company. If mailed in the manner herein
provided, the notice shall be conclusively presumed to have been duly given,
whether or not any such Holder receives such notice. Any defect in the notice to
the Holder of any Security of a series designated for redemption as a whole or
in part shall not affect the validity of the proceedings for the redemption of
any other Security of such series.
Each such notice of redemption shall specify the date fixed for redemption,
the redemption price, the place where such Securities are to be surrendered for
payment of the redemption price, which shall be the office or agency of the
Company in each Place of Payment, that payment will be made upon presentation
and surrender of such Securities and all coupons appertaining thereto, if any,
that accrued interest, if any, to the redemption date will be paid as specified
in said notice, and that on and after said date, interest thereon or on the
portions thereof to be redeemed will cease to accrue. In case the redemption is
on account of a sinking fund, said notice shall so specify. If less than all
the outstanding Securities of a series are to be redeemed, the notice of
redemption shall specify the numbers of the Securities of that series to be
redeemed. In case any Security of a series is to be redeemed in part only, the
notice of redemption shall state the portion of the principal amount thereof to
be redeemed and shall state that on and after the date fixed for redemption,
upon surrender of such Security, a new Security or Securities of that series in
the principal amount and Stated Maturity equal to the unredeemed portion thereof
will be issued.
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13
If all of the Securities of a series are to be redeemed, the Company shall
give the Trustee written notice not less than 45 days prior to the redemption
date of the proposed redemption of such securities. If fewer than all the
Securities of a series are to be redeemed, the Company shall give the Trustee
written notice not less than 60 days prior to the redemption date as to the
aggregate principal amount at Stated Maturity of Securities to be redeemed, and
the Trustee shall select from the Securities outstanding in such manner as in
its sole discretion it shall deem appropriate and fair, the Securities of that
series or portions thereof to be redeemed. Securities of a series may be
redeemed in part only in multiples of $1,000, except as otherwise set forth in
the form of Security to be redeemed.
Any notice of redemption to be mailed by the Company pursuant to this
Section 3.02 may be mailed, at the Company's direction, by the Trustee in the
name and at the expense of the Company.
SECTION 3.03. Payment of Securities Called for Redemption. If notice of
redemption has been mailed or published, as the case may be as above provided,
the Securities or portions of Securities of a series with respect to which such
notice has been mailed or published shall become due and payable on the date and
at the place or places stated in such notice at the applicable redemption price,
together with accrued interest to the redemption date and on and after said date
(unless the Company shall default in the payment of such Securities at the
applicable redemption price, together with accrued interest, if any, to said
date) any interest on the Securities or portions of Securities of any series so
called for redemption shall cease to accrue, and such Securities and portions of
Securities of any series shall be deemed not to be outstanding hereunder and
shall not be entitled to any benefit under this Indenture except to receive
payment of the redemption price, together with accrued interest, if any, to the
date fixed for redemption. On or before the Business Day preceding the
redemption date specified in the notice of redemption, the Company shall deposit
with the Trustee or with one or more paying agents an amount of money, in
immediately available funds, sufficient to redeem on the redemption date all the
Securities so called for redemption at the applicable redemption price, together
with accrued interest, if any, to the date fixed for redemption. On
presentation and surrender of such Securities at the Place of Payment, the said
Securities or the specified portions thereof shall be paid and redeemed by the
Company at the applicable redemption price, together with accrued interest, if
any, to the date fixed for redemption.
Upon presentation of any Security redeemed in part only, the Company shall
execute and the Trustee shall authenticate and deliver to the Holder thereof, at
the expense of the Company, a new Security or Securities of such series, of
authorized denominations in aggregate principal amount and Stated Maturity equal
to the unredeemed portion of the Security so presented.
ARTICLE FOUR
SINKING FUNDS
SECTION 4.01. Applicability of Article. The provisions of this Article
shall be applicable to any sinking fund for the retirement of Securities of a
series except as otherwise specified as contemplated by Section 2.01 for
Securities of such series.
The minimum amount of any sinking fund payment provided for by the terms of
Securities of any series is herein referred to as a "mandatory sinking fund
payment," and any payment in excess of such minimum amount provided for by the
terms of Securities of any series is herein referred to as an "optional sinking
fund payment."
SECTION 4.02. Satisfaction of Mandatory Sinking Fund Payments with
Securities. In lieu of making all or any part of any mandatory sinking fund
payment with respect to any Securities of a series in cash, the Company may at
its option (a) deliver to the Trustee Securities of that series theretofore
purchased or otherwise acquired by
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14
the Company, or (b) receive credit for the principal amount of Securities of
that series which have been redeemed either at the election of the Company
pursuant to the terms of such Securities or through the application of permitted
optional sinking fund payments pursuant to the terms of such Securities,
provided that such Securities have not been previously so credited. Such
Securities shall be received and credited for such purpose by the Trustee at a
principal amount equal to the redemption price (exclusive of accrued interest
and any premium) specified in such Securities for redemption through operation
of the sinking fund and the amount of such mandatory sinking fund payment shall
be reduced accordingly.
SECTION 4.03. Redemption of Securities for Sinking Fund. Not less than 60
days prior to each sinking fund payment date for any series of Securities, the
Company will deliver to the Trustee an Officers' Certificate specifying the
amount of the next ensuing sinking fund payment for that series pursuant to the
terms of that series, the portion thereof, if any, which is to be satisfied by
payment of cash and the portion thereof, if any, which is to be satisfied by
delivering and crediting Securities of that series pursuant to Section 4.02,
which Securities will accompany such certificate, if not theretofore delivered,
and whether the Company intends to exercise its right to make a permitted
optional sinking fund payment with respect to such series. Such certificate
shall also state that no Event of Default with respect to such series has
occurred and is continuing.
Any mandatory or optional sinking fund payment or payments made in cash
plus any unused balance of any preceding sinking fund payments made in cash
which shall equal or exceed $50,000 (or a lesser sum if the Company shall so
request) with respect to Securities of any particular series shall be applied by
the Trustee on the sinking fund payment date on which such payment is made (or,
if such payment is made prior to a sinking fund payment date, on the sinking
fund payment date following the date of such payment) to the redemption of such
Securities at the redemption price specified in such Securities for operation of
the sinking fund together with accrued interest to the date fixed for
redemption. Any and all sinking fund moneys with respect to the Securities of
any particular series held by the Trustee on the last sinking fund payment date
with respect to such Securities, and not held for the payment or redemption of
particular Securities, shall be applied by the Trustee, to the payment of the
principal of the Securities of that series at maturity.
The Trustee shall select the Securities to be redeemed upon such sinking
fund payment date in the manner specified in the penultimate paragraph of
Section 3.02 and the Company shall cause notice of the redemption thereof to be
given in the manner provided in Section 3.02. Such notice having been duly
given, the redemption of such Securities shall be made upon the terms and in the
manner stated in Section 3.03.
On or before the Business Day preceding each sinking fund payment date, the
Company shall pay to the Trustee in immediately available funds a sum equal to
all accrued interest to the date fixed for redemption on Securities to be
redeemed on such sinking fund payment date pursuant to this Section 4.03.
The Trustee shall not redeem any Securities of a series with sinking fund
moneys or mail or publish any notice of redemption of such Securities by
operation of the sinking fund for such series during the continuance of a
default in payment of interest on such Securities or of any Event of Default
(other than an Event of Default occurring as a consequence of this paragraph),
except that if the notice of redemption of any such Securities shall theretofore
have been mailed or published in accordance with the provisions hereof, the
Trustee shall redeem Securities if cash sufficient for that purpose shall be
deposited with the Trustee for that purpose in accordance with the terms of this
Article Four. Except as aforesaid, any moneys in the sinking fund for such
series at the time when any such default or Event of Default shall occur and any
moneys thereafter paid into such sinking fund shall, during the continuance of
such default or Event of Default, be held as security for the payment of all
Securities of such series; provided, however, that in case such default or Event
or Default shall have been cured or waived as provided herein, such moneys shall
thereafter be applied on the next sinking fund payment date for such Securities
on which such moneys may be applied pursuant to the provisions of this
Section 4.03.
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15
ARTICLE FIVE
PARTICULAR COVENANTS OF THE COMPANY
SECTION 5.01. Payment of Principal, Premium and Interest. The Company
shall duly and punctually pay or cause to be paid the principal of and premium,
if any, and interest, if any, on the Securities of each series in accordance
with the terms thereof and this Indenture and shall comply with all other forms,
agreements and conditions contained in or made in this Indenture for the benefit
of such Securities.
SECTION 5.02. Offices for Notices and Payments, etc. So long as any
Securities of a series remain outstanding, the Company shall maintain in each
Place of Payment for such series of Securities an office or agency where the
Securities of that series may be presented for payment, for registration of
transfer and for exchange as provided in this Indenture and where notices and
demands to or upon the Company in respect of the Securities of that series or of
this Indenture may be served. The Company shall give to the Trustee written
notice of the location of any such office or agency and of any change of
location thereof. In case the Company shall fail to maintain any such office or
agency or shall fail to give such notice of the location or of any change in the
location thereof, presentations and demands may be made at the Principal Office
of the Trustee (or at any other address previously furnished in writing to the
Company by the Trustee) and notices may be served at the Principal Office of the
Trustee. Unless otherwise provided pursuant to Section 2.01, the Company hereby
initially designates as the Place of Payment for each series of Securities, the
office or agency of the Trustee in the Borough of Manhattan, New York, New York,
at which its corporate agency business shall be conducted, and initially
appoints the Trustee its agent for payment, for registration of transfers, for
exchange of the Securities and where notices and demands may be served upon the
Company. Notwithstanding any other provisions to the contrary, the Company at
its option may make payment of principal, premium (if any) and interest with
respect to Registered Securities by check mailed to the address of the Person
entitled thereto, as such address appears on the registry books of the Company;
provided, however, that in the case of a Registered Security issued between a
record date and the initial Interest Payment Date relating to such record date,
interest for the period beginning on the Original Issue Date and ending on such
initial Interest Payment Date shall be paid on such initial Interest Payment
Date to the person to whom such Registered Security shall have been originally
issued. Notwithstanding the foregoing, a holder of $10,000,000 or more in
aggregate principal amount of Registered Securities shall be entitled to receive
such payments by wire transfer of immediately available funds, but only if
appropriate wire transfer instructions have been received in writing by the
Trustee not less than 15 days prior to the applicable Interest Payment Date.
SECTION 5.03. Limitation on Liens. Nothing in this Indenture or in the
Securities shall in any way restrict or prevent the Company or any Subsidiary
from incurring any indebtedness; provided, however, that neither the Company nor
any Restricted Subsidiary shall issue, assume or guarantee any notes, bonds,
debentures or other similar evidences of indebtedness for money borrowed (notes,
bonds, debentures or other similar evidences of indebtedness for money borrowed
being hereinafter in this Article Five called "Debt") secured by mortgage, lien,
pledge or other encumbrance (mortgages, liens, pledges or other encumbrances
being hereinafter in this Article Five called "Mortgages") upon any Restricted
Property, without effectively providing that the Securities of each series then
outstanding and thereafter created (together with, if the Company so determines,
any other indebtedness or obligation then existing and any other indebtedness or
obligation thereafter created ranking equally with the Securities then existing
or thereafter created which is not subordinated to the Securities of each
series) shall be secured equally and ratably with (or prior to) such Debt so
long as such Debt shall be so secured, except that the foregoing provisions
shall not apply to:
(a) Mortgages affecting property of a corporation existing at the time it
becomes a Subsidiary or at the time it is merged into or consolidated with the
Company or a Subsidiary;
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16
(b) Mortgages on property existing at the time of acquisition thereof or
incurred to secure payment of all or part of the purchase price thereof or to
secure Debt incurred prior to, at the time of or within 24 months after
acquisition thereof for the purpose of financing all or part of the purchase
price thereof;
(c) Mortgages on property of the Company or a Subsidiary existing on the
date of this Indenture;
(d) Mortgages on any property to secure all or part of the cost of
construction or improvements thereon or Debt incurred to provide funds for any
such purpose in a principal amount not exceeding the cost of such construction
or improvements;
(e) Mortgages which secure only an indebtedness owing by a Subsidiary to
the Company or a Subsidiary;
(f) Mortgages in favor of the United States or any state thereof, or any
department, agency, instrumentality, or political subdivision of any such
jurisdiction, to secure partial, progress, advance or other payments pursuant to
any contract or statute or to secure any indebtedness incurred for the purpose
of financing all or any part of the purchase price or cost of constructing or
improving the property subject thereto, including, without limitation, Mortgages
to secure Debt of the pollution control or industrial revenue bond type;
(g) Mortgages required by any contract or statute in order to permit the
Company or a Subsidiary to perform any contract or subcontract made by it with
or at the request of the United States of America, any state or any department,
agency or instrumentality or political subdivision of either; or
(h) any extension, renewal or replacement (or successive extensions,
renewals or replacements), in whole or in part, of any Mortgage referred to in
the foregoing clauses (a) to (g) inclusive or of any Debt secured thereby,
provided that the principal amount of Debt secured thereby shall not exceed the
greater of (i) the principal amount of Debt so secured or (ii) the fair market
value of the underlying property or assets to which such Mortgage relates at the
time of such extension, renewal or replacement, and that such extension, renewal
or replacement Mortgage shall be limited to all or part of substantially the
same property which secured the Mortgage extended, renewed or replaced (plus
improvements on such property).
Notwithstanding the foregoing provisions of this Section 5.03, the Company
and any one or more Restricted Subsidiaries may issue, assume or guarantee Debt
secured by Mortgages which would otherwise be subject to the foregoing
restrictions in an aggregate principal amount which, together with the aggregate
outstanding principal amount of all other Debt of the Company and its Restricted
Subsidiaries which would otherwise be subject to the foregoing restrictions (not
including Debt permitted to be secured under clauses (a) to (h) inclusive above)
and the aggregate Value, as defined in Section 5.05, of the Sale and Lease-Back
Transactions, as defined in Section 5.04, in existence at such time (not
including Sale and Lease-Back Transactions as to which the Company has complied
with Section 5.04(b)), does not at any one time exceed the greater of $100
million or 10% of the Consolidated Net Tangible Assets of the Company and its
consolidated Subsidiaries.
SECTION 5.04. Limitation on Sale and Lease-Back. Neither the Company nor
any Restricted Subsidiary shall enter into any arrangement with any Person
(other than the Company or a Subsidiary), or to which any such Person is a
party, providing for the leasing to the Company or a Restricted Subsidiary for a
period of more than five years of any Restricted Property which has been or is
to be sold or transferred by the Company or such Restricted Subsidiary to such
Person or to any other Person (other than the Company or a Subsidiary), to which
funds have been or are to be advanced by such Person on the security of the
leased property (in this Article Five called "Sale and Lease-Back Transactions")
unless either:
(a) the Company or such Restricted Subsidiary would be entitled, pursuant
to the provisions of Section 5.03, to incur Debt in a principal amount equal to
or exceeding the Value of such Sale and Lease-Back Transaction, secured by a
Mortgage on the property to be leased, without equally and ratably securing the
Securities; or
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17
(b) the Company (and in any such case the Company covenants and agrees
that it will do so) during or immediately after the expiration of four months
after the effective date of such Sale and Lease-Back Transaction (whether made
by the Company or a Restricted Subsidiary) applies to the voluntary retirement
of indebtedness of the Company (including Securities, provided that Securities
may only be redeemed at the redemption prices and in accordance with the other
provisions of the form thereof), maturing by the terms thereof more than one
year after the original creation thereof and ranking at least pari passu with
the Securities (hereinafter in this Section called "Funded Debt") an amount
equal to the Value of such Sale and Lease-Back Transaction, less the principal
amount of Securities delivered, within four months after the effective date of
such arrangement, to the Trustee for retirement and cancellation and the
principal amount of other Funded Debt voluntarily retired by the Company within
such four-month period, excluding retirements of Securities and other Funded
Debt as a result of conversions or pursuant to mandatory sinking fund or
prepayment provisions or by payment at maturity.
SECTION 5.05. Definition of "Value." For purposes of Sections 5.03
and 5.04, the term "Value" shall mean, with respect to a Sale and Lease-Back
Transaction, as of any particular time, the amount equal to the greater of (1)
the net proceeds of the sale or transfer of the property leased pursuant to such
Sale and Lease-Back Transaction or (2) the fair value, in the opinion of the
Board of Directors, of such property at the time of entering into such Sale and
Lease-Back Transaction, in either case divided first by the number of full years
of the term of the lease and then multiplied by the number of full years of such
term remaining at the time of determination, without regard to any renewal or
extension options contained in the lease.
SECTION 5.06. Appointments to Fill Vacancies in Trustee's Office. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee
for any one or more series of Securities, shall appoint a Trustee, in the manner
provided in Section 8.10 so that there shall at all times be a Trustee with
respect to each series of Securities hereunder.
SECTION 5.07. Provision as to Paying Agent. (a) If the Company appoints a
paying agent other than the Trustee with respect to the Securities of any
series, it shall cause such paying agent to execute and deliver to the Trustee
an instrument in which such agent shall agree with the Trustee, subject to the
provisions of this Section 5.07:
(1) that it will hold all sums held by it as such agent for the payment of
the principal of and premium, if any, or interest, if any, on the Securities of
such series (whether such sums have been paid to it by the Company or by any
other obligor on the Securities of such series) in trust for the benefit of the
Holders of the Securities of such series; and
(2) that it will give the Trustee notice of any failure by the Company (or
by any other obligor on the Securities of such series) to make any payment of
the principal of and premium, if any, or interest, if any, on the Securities of
such series when the same shall be due and payable.
(b) If the Company acts as its own paying agent with respect to the
Securities of any series it shall, on or prior to each due date of the principal
of and premium, if any, or interest, if any, on any of the Securities of such
series, set aside, segregate and hold in trust for the benefit of the Holders of
such Securities or the coupons appertaining thereto, as the case may be, a sum
sufficient to pay such principal and premium, if any, or interest, if any, so
becoming due and will notify the Trustee of any failure to take such action and
of any failure by the Company (or by any other obligor under such Securities) to
make any payment of the principal of and premium, if any, or interest, if any,
on such Securities when the same shall become due and payable.
(c) Whenever the Company has one or more paying agents with respect to the
Securities of any series, it shall deposit with a paying agent (who shall make
any necessary funds available to any other paying agents), on the Business Day
next preceding each due date in funds available on the due date of the principal
of, premium, if any, and interest, if any, on such Securities, a sum in
immediately available funds sufficient to pay such principal, premium, if any,
and interest, if any, so becoming due, such sum to be held in trust for the
benefit of the Holders
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18
of such Securities or the coupons appertaining thereto, as the case may be,
entitled to any such principal, premium and interest, and (unless such paying
agent is the Trustee) the Company shall promptly notify the Trustee of its
action or failure so to act.
(d) Anything in this Section 5.07 to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust by it, or any paying agent hereunder, as
required by this Section 5.07, such sums to be held by the Trustee upon the
trusts herein contained.
(e) Anything in this Section 5.07 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 5.07 is subject to
Sections 13.03 and 13.04.
SECTION 5.08. Annual Certificate to Trustee. The Company shall deliver to
the Trustee within 120 days after the end of each fiscal year of the Company
ending after the date hereof so long as any Securities are outstanding hereunder
(beginning with respect to Securities of each series with the fiscal year next
following the issue date of any series of Securities) an Officers' Certificate
stating that in the course of the performance by the signers of their duties as
officers of the Company and based upon a review made under their supervision of
the activities of the Company they would normally have knowledge of any default
by the Company in the performance of any covenants contained in Sections 5.03,
5.04, 12.01 or 12.02, stating whether or not they have knowledge of any such
default and, if so, specifying each such default of which the signers have
knowledge and the nature thereof.
ARTICLE SIX
HOLDERS LISTS AND REPORTS BY THE COMPANY
AND THE TRUSTEE
SECTION 6.01. Holders Lists. The Company shall furnish or cause to be
furnished to the Trustee, with respect to the Registered Securities of each
series (i) semi-annually, not later than each Interest Payment Date for such
series and on dates to be determined pursuant to Section 2.01 for non-interest
bearing Securities in each year, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders, as of the
respective record dates therefor, and on dates to be determined pursuant to
Section 2.01 for non-interest bearing Securities, and (ii) at such other times
as the Trustee may request in writing, within 30 days after receipt by the
Company of any such request, a list in such form as the Trustee may reasonably
require of the names and addresses of the Holders as of a date not more than 15
days prior to the time such information is furnished; provided, however, that so
long as the Trustee shall be the registrar of a series of Securities all of
which are Registered Securities, such list shall not be required to be furnished
in respect of that series.
SECTION 6.02. Preservation and Disclosure of Lists. (a) The Trustee shall
preserve, in as current a form as is reasonably practicable, all information as
to the names and addresses of the Holders of Registered Securities of any series
contained in the most recent list furnished to it as provided in Section 6.01 or
received by the Trustee in its capacity as Securities registrar. The Trustee may
destroy any list furnished to it as provided in Section 6.01 upon receipt of a
new list so furnished.
(b) In case three or more Holders of Securities of the same series
(hereinafter referred to as "applicants") apply in writing to the Trustee and
furnish to the Trustee reasonable proof that each such applicant has owned a
Security of such series for a period of at least six months preceding the date
of such application, and such application states that the applicants desire to
communicate with other Holders of Securities of such series or with Holders of
Securities of all series with respect to their rights under this Indenture or
under such Securities and is accompanied
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19
by a copy of the form of proxy or other communication which such applicants
propose to transmit for such purpose, then the Trustee shall, within five
Business Days after the receipt of such application, at its election, either
(1) afford such applicants access to the information preserved at the time
by the Trustee in accordance with the provisions of subsection (a) of this
Section 6.02, or
(2) inform such applicants as to the approximate number of Holders of
Securities of such series or of all series, as the case may be, whose names and
addresses appear in the information preserved at the time by the Trustee in
accordance with the provisions of subsection (a) of this Section 6.02 and as to
the approximate cost of mailing to such Holders the form of proxy or other
communication, if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each Holder of a Security of such series or of all series, as the case
may be, whose name and address appears in the information preserved at the time
by the Trustee in accordance with the provisions of subsection (a) of this
Section 6.02, a copy of the form of proxy or other communication which is
specified in such request, with reasonable promptness after a tender to the
Trustee of the material to be mailed and of payment, or provision for the
payment, of the reasonable expenses of mailing, unless within five days after
such tender, the Trustee shall mail to such applicants and file with the
Securities and Exchange Commission, together with a copy of the material to be
mailed, a written statement to the effect that, in the opinion of the Trustee,
such mailing would be contrary to the best interests of the Holders of
Securities of such series or of all series, as the case may be, or would be in
violation of applicable law. Such written statement shall specify the basis of
such opinion. If said Commission, after opportunity for a hearing upon the
objections specified in the written statement so filed, shall enter an order
refusing to sustain any of such objections or if, after the entry of an order
sustaining one or more of such objections, said Commission shall find, after
notice and opportunity for hearing, that all the objections so sustained have
been met and shall enter an order so declaring, the Trustee shall mail copies of
such material to all such Holders with reasonable promptness after the entry of
such order and the renewal of such tender; otherwise, the Trustee shall be
relieved of any obligation or duty to such applicants respecting their
application.
(c) Each Holder of any Security or coupon or both, by receiving and
holding the same, agrees with the Company and the Trustee that neither the
Company nor the Trustee nor any paying agent shall be held accountable by reason
of the disclosure of the name and address of such Holder in accordance with the
provisions of subsection (b) of this Section 6.02, regardless of the source from
which such information was derived, and that the Trustee shall not be held
accountable by reason of mailing any material pursuant to a request made under
said subsection (b).
SECTION 6.03. Reports by the Company. (a) The Company shall file with the
Trustee, within 30 days after the Company is required to file the same with the
Securities and Exchange Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as said Commission may from time to time by rules and regulations
prescribe) relating to the equity or debt securities of the Company which the
Company may be required to file with said Commission pursuant to section 13 or
15(d) of the Securities Exchange Act of 1934; or, if the Company is not required
to file information, documents or reports pursuant to any of such sections, then
to file with the Trustee and said Commission, in accordance with rules and
regulations prescribed from time to time by said Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to section 13 of the Securities Exchange Act of 1934 in
respect of a security listed and registered on a national securities exchange as
may be prescribed from time to time in such rules and regulations.
(b) The Company shall file with the Trustee and the Securities and
Exchange Commission, in accordance with the rules and regulations prescribed
from time to time by said Commission, such additional information, documents and
reports with respect to compliance by the Company with the conditions and
covenants provided for in this Indenture as may be required from time to time by
such rules and regulations.
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20
(c) The Company shall transmit by mail to each Holder of Securities, in
the manner and to the extent provided in Section 6.04, within 30 days after the
filing thereof with the Trustee, such summaries of any information, documents
and reports required to be filed by the Company pursuant to subsections (a) and
(b) of this Section 6.03 as may be required by rules and regulations prescribed
from time to time by the Securities and Exchange Commission.
SECTION 6.04. Reports by the Trustee. (a) Within 60 days after May 15 of
each year after the first series of Securities is issued hereunder, so long as
any Securities are outstanding hereunder, the Trustee shall transmit to the
Holders, as hereinafter in this Section 6.04 provided, a brief report dated as
of such May 15 with respect to any of the following events which may have
occurred during the 12 months preceding the date of such report (but if no such
event has occurred within such period, no report need be transmitted):
(1) any change to its eligibility under Section 8.09 or its qualification
under Section 8.08;
(2) the creation of or any material change to a relationship specified in
Section 310(b)(1) through Section 310(b)(10) of the Trust Indenture Act of 1939;
(3) the character and amount of any advances (and if the Trustee elects so
to state, the circumstances surrounding the making thereof) made by the Trustee
(as such) which remain unpaid on the date of such report, and for the
reimbursement of which it claims or may claim a lien or charge, prior to that of
the Securities, on any property or funds held or collected by it as Trustee,
except that the Trustee shall not be required (but may elect) to state such
advances if such advances so remaining unpaid aggregate not more than 1/2 of 1%
of the principal amount at Stated Maturity of the Securities outstanding on the
date of such report;
(4) the amount, interest rate and maturity date of all other indebtedness
owing by the Company (or by any other obligor on the Securities) to the Trustee
in its individual capacity, on the date of such report, with a brief description
of any property held as collateral security therefor, except an indebtedness
based upon a creditor relationship arising in any manner described in paragraphs
(2), (3), (4) or (6) of subsection (b) of Section 8.13;
(5) any change to the property and funds, if any, physically in the
possession of the Trustee, as such, on the date of such report;
(6) any additional issue of Securities which the Trustee has not
previously reported; and
(7) any action taken by the Trustee in the performance of its duties under
this Indenture which it has not previously reported and which in its opinion
materially affects any of the Securities, except action in respect of a default,
notice of which has been or is to be withheld by it in accordance with the
provisions of Section 7.08.
(b) The Trustee shall transmit to the Holders, as hereinafter provided, a
brief report with respect to the character and amount of any advances (and if
the Trustee elects so to state, the circumstances surrounding the making
thereof) made by the Trustee (as such), since the date of the last report
transmitted pursuant to the provisions of subsection (a) of this Section 6.04
(or, if no such report has yet been so transmitted, since the date of execution
of this Indenture), for the reimbursement of which it claims or may claim a lien
or charge prior to that of the Securities, on property or funds held or
collected by it as Trustee, and which it has not previously reported pursuant to
this subsection, except that the Trustee shall not be required (but may elect)
to report such advances if such advances remaining unpaid at any time aggregate
10% or less of the principal amount of Securities at Stated Maturity outstanding
at such time, such report to be transmitted within 90 days after such time.
(c) Reports pursuant to this Section shall be transmitted by mail:
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21
(1) to all Registered Holders of Securities, as the names and addresses of
such Holders appear in the registry books of the Company;
(2) to such Holders of Securities as have, within the two years preceding
such transmission, filed their names and addresses with the Trustee for that
purpose; and
(3) except in the case of reports pursuant to subsection (b) of this
Section, to each Holder whose name and address is preserved at the time by the
Trustee, as provided in Section 6.02.
(d) A copy of each such report shall, at the time of such transmission to
Holders, be furnished to the Company and be filed by the Trustee with each stock
exchange upon which the Securities are listed and also with the Securities and
Exchange Commission. The Company shall notify the Trustee when any Securities
are listed on any stock exchange.
ARTICLE SEVEN
REMEDIES OF THE TRUSTEE AND HOLDERS
ON EVENT OF DEFAULT
SECTION 7.01. Events of Default. "Event of Default," whenever used herein
with respect to Securities of any series means each one of the following events
unless it is either inapplicable to a particular series or it is specifically
deleted or modified in the supplemental indenture under which such series of
Securities is issued, if any, or in the form of Security for such series:
(a) default in the payment of any installment of interest upon any
Security of that series when the same becomes due and payable, and continuance
of such default for a period of 30 days; or
(b) default in the payment of the principal of or premium, if any, on any
Securities of that series as and when the same shall become due and payable
either at Maturity, upon redemption, by declaration or otherwise; or
(c) default in the payment of any sinking fund installment or analogous
obligation as and when the same shall become due and payable by the terms of
that series, and continuance of such default for a period of 30 days; or
(d) failure on the part of the Company duly to observe or perform any
other of the covenants or agreements on the part of the Company in the
Securities of such series or in this Indenture (other than a covenant or
agreement in respect of the Securities of such series a default in the
performance of which or the breach of which is elsewhere in this Section 7.01
specifically provided for or which has expressly been included in this Indenture
solely for the benefit of one or more series of Securities other than such
series), and continuance of such default or breach for a period of 90 days after
the date on which written notice specifying such default or breach and requiring
it to be remedied and stating that such notice is a "Notice of Default"
hereunder, shall have been given to the Company by the Trustee, or to the
Company and the Trustee by the Holders of at least 25% in aggregate principal
amount of the Securities of that series at the time outstanding; or
(e) if there shall be entered a decree or order by a court having
jurisdiction for relief in respect of the Company under any applicable Federal
or State bankruptcy law or other similar law, or appointing a receiver, trustee
or liquidator, or other similar official of the Company or of any substantial
part of its property, or ordering the
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22
winding-up or liquidation of its affairs and the continuance of any such decree
or order unstayed and in effect for a period of 90 consecutive days; or
(f) if the Company shall file a petition or an answer or consent seeking
relief under any applicable Federal or State bankruptcy law or other similar
law, or shall consent to the institution of proceedings thereunder or to the
filing of any such petition or to the appointment or taking possession by a
receiver, trustee, custodian or other similar official of the Company or of any
substantial part of its property, or the Company shall make an assignment for
the benefit of creditors generally or shall admit in writing to its inability to
pay its debts generally as they become due; or
(g) any other event specified as an Event of Default in the form of
Security for such series, or in the supplemental indenture, Officers'
Certificate or resolution of the Board of Directors under which such series of
Securities is issued, if any.
If an Event of Default described in clauses (a), (b), (c), (d) or (g) (if the
Event of Default under clause (d) or (g) is with respect to less than all series
of Securities then outstanding) occurs and is continuing, then and in each and
every such case, unless the principal of all the Securities of such series shall
have already become due and payable, either the Trustee or the Holders of not
less than 25% in aggregate principal amount at Stated Maturity of the Securities
of such series then outstanding hereunder (each such series acting as a separate
class), by notice in writing to the Company (and to the Trustee if given by
Holders), may declare the principal amount (in the case of Securities that are
Original Issue Discount Securities, such principal amount as may be determined
in accordance with the terms of that series) of all the Securities of such
series to be due and payable immediately, and upon any such declaration the same
shall become and shall be immediately due and payable, anything in this
Indenture or in the Securities of such series contained to the contrary
notwithstanding. If an Event of Default described in clauses (d) or (g) (if the
Event of Default under clause (d) or (g) is with respect to all series of
Securities then outstanding) or (e) or (f) occurs and is continuing, then and in
each and every such case, unless the principal of all the Securities shall have
already become due and payable, either the Trustee or the Holders of not less
than 25% in aggregate principal amount at Stated Maturity of all the Securities
then outstanding hereunder (treated as one class), by notice in writing to the
Company (and to the Trustee if given by Holders), may declare the principal
amount (in the case of Original Issue Discount Securities, such portion of the
principal amount to be determined as provided in Section 2.01(9)) of all the
Securities to be due and payable immediately, and upon any such declaration the
same shall become and shall be immediately due and payable, anything in this
Indenture or in the Securities contained to the contrary notwithstanding. The
foregoing provisions are, however, subject to the condition that if, at any time
after the principal amount (in the case of Securities that are Original Issue
Discount Securities, such portion of the principal amount as may be determined
in accordance with the terms of that series) of the Securities of any series or
of all the Securities, as the case may be, shall have been so declared due and
payable, and before any judgment or decree for the payment of the moneys due
shall have been obtained or entered as hereinafter provided, the Company shall
pay or shall deposit with the Trustee a sum sufficient to pay all matured
installments of interest upon all the Securities of such series or of all of the
Securities, as the case may be, and the principal of and premium, if any, on all
Securities of such series or of all the Securities, as the case may be, which
shall have become due otherwise than by acceleration (with interest on overdue
installments of interest, to the extent that payment of such interest is
enforceable under applicable law, and on such principal and premium, if any, at
the rate of interest or yield to Maturity (in the case of Original Issue
Discount Securities) borne by the Securities of such series or at the rates of
interest or yields to Maturity of all the Securities, as the case may be, to the
date of such payment or deposit) and all sums paid or advanced by the Trustee
hereunder, and the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel and any and all defaults under this
Indenture, other than the nonpayment of principal of or premium, if any, or
accrued interest, if any, on Securities of such series or of all of the
Securities, as the case may be, which shall have become due by acceleration,
shall have been remedied--then and in every such case the Holders of a majority
in aggregate principal amount at Stated Maturity of the Securities of such
series or of all of the Securities, as the case may be, then outstanding, by
written notice to the Company and to the Trustee, may waive all defaults with
respect to that series or of all of the Securities, as the case may be, and
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23
rescind and annul such declaration and its consequences; but no waiver or
rescission and annulment shall extend to or shall affect any subsequent default,
or shall impair any right consequent thereon.
In case the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned because
of such rescission or annulment or for any other reason or shall have been
determined adversely to the Trustee, then and in every such case the Company and
the Trustee shall be restored respectively to their several positions and rights
hereunder, and all rights, remedies and powers of the Company and the Trustee
shall continue as though no such proceeding had been taken.
SECTION 7.02. Payment of Securities on Default; Suit Therefor. In case
(1) default shall be made in the payment of any installment of interest upon any
Security of any series as and when the same shall become due and payable, and
such default shall have continued for a period of 30 days, or (2) default shall
be made in the payment of the principal of or premium, if any, on any Security
of any series as and when the same shall have become due and payable, whether at
Maturity of Securities of that series or otherwise, or (3) default is made in
the making or satisfaction of any sinking fund payment or analogous obligation
when the same becomes due by the terms of the Securities of any series and such
default shall continue for a period of 30 days -- then, upon demand of the
Trustee, the Company shall pay to the Trustee, for the benefit of the Holder of
any such Security, the whole amount that then shall have become due and payable
on any such Security for principal and premium, if any, or interest, if any, or
both, as the case may be, with interest on the overdue principal and premium, if
any, and (to the extent that payment of such interest is enforceable under
applicable law) on the overdue installments of interest at the rate of interest
or yield to Maturity (in the case of Original Issue Discount Securities) borne
by any such Security and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including reasonable
compensation to the Trustee, its agents, attorneys and counsel, and any expenses
or liabilities incurred by the Trustee hereunder other than through its
negligence or bad faith.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor upon such
Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property, wherever situated, of the Company or
any other obligor upon such Securities.
In case there shall be pending proceedings for the bankruptcy or for the
reorganization of the Company or any other obligor on the Securities of any
series under any Federal or State bankruptcy law or other similar law, or in
case a receiver or trustee shall have been appointed for the property of the
Company or such other obligor, or in the case of any other similar judicial
proceedings relative to the Company or other obligor on the Securities of any
series, or to the creditors or property of the Company or such other obligor,
the Trustee (irrespective of whether the principal of any Securities of any
series shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand
pursuant to the provisions of this Section 7.02) shall be entitled and
empowered, by intervention in such proceedings or otherwise, to file and prove a
claim or claims for the whole amount of principal and premium, if any, and
interest, if any, owing and unpaid in respect of the Securities of any series
(in the case of Securities that are Original Issue Discount Securities, such
principal amount as would be then due and payable upon declaration of
acceleration in accordance with the terms of that series) and, in case of any
judicial proceedings, to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents or counsel) and of the Holders allowed
in such judicial proceedings relative to the Company or any other obligor on the
Securities of any series, its or their creditors, or its or their property, and
to collect and receive any moneys or other property payable or deliverable on
any such claims, and to distribute the same after the deduction of its charges
and expenses; and any receiver, assignee, liquidator, sequestrator or trustee in
bankruptcy or reorganization is hereby authorized by each of the Holders to make
such payments to the Trustee, and, in the event that the Trustee shall consent
to the making of such
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24
payments directly to the Holders, to pay to the Trustee any amount due it for
compensation, expenses, disbursements and advances of the Trustee, its agents or
counsel, and any other amounts due to the Trustee under Section 8.06 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to
approve, consent, accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment, or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
All rights of action and of asserting claims under this Indenture, or under
any of the Securities, may be enforced by the Trustee without the possession of
any of the Securities, or the production thereof at any trial or other
proceeding relative thereto, and any such suit or proceeding instituted by the
Trustee with respect to the Securities of any series shall be brought in its own
name as trustee of an express trust, and any recovery of judgment shall be for
the ratable benefit of the Holders of the Securities in respect of which such
action is taken.
SECTION 7.03. Application of Moneys Collected by Trustee. Any moneys
collected by the Trustee with respect to any series of Securities under this
Article Seven shall be applied in the order following, at the date or dates
fixed by the Trustee for the distribution of such moneys on account of
principal, premium, if any, or interest, if any, upon presentation of the
several Securities of such series or the coupons appertaining thereto, as the
case may be, and stamping thereon the payment, if only partially paid, and upon
surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 8.06 hereof;
SECOND: In case the principal of the outstanding Securities of that
series shall not have become due and be unpaid, to the payment of interest
on the Securities of that series, in the order of the maturity of the
installments of such interest with interest (to the extent that such
interest has been collected by the Trustee) upon the overdue installments
of interest at the rate of interest (or yield to maturity in the case of
Original Issue Discount Securities) borne by the Securities of that series,
such payments to be made ratably to the Persons entitled thereto;
THIRD: In case the principal of the outstanding Securities of a
series in respect of which such moneys have been collected shall have
become due and payable, by declaration or otherwise, to the payment of the
whole amount then owing and unpaid upon the Securities of that series for
principal and premium, if any, and interest, if any, with interest on the
overdue principal and premium, if any, and (to the extent that such
interest has been collected by the Trustee) upon any overdue installments
of interest at the rate of interest (or yield to Maturity in the case of
Original Issue Discount Securities) borne by the Securities of that series,
and in case such moneys shall be insufficient to pay in full the whole
amounts so due and unpaid upon the Securities of that series, then to the
payment of such principal and premium, if any, and interest, if any,
without preference or priority of principal and premium, if any, over
interest, or of interest over principal and premium, if any, or of any
installment of interest over any other installment of interest, or of any
Security of that series over any other Security of that series, ratably to
the aggregate of such principal and premium, if any, and any accrued and
unpaid interest.
FOURTH: Any surplus then remaining shall be paid to the Company or to
such other Person as shall be entitled to receive it.
SECTION 7.04. Proceedings by Holders. No Holder of any Security of any
series or of any coupon appertaining thereto shall have any right by virtue of
or by availing of any provision of this Indenture to institute any suit, action
or proceeding in equity or at law upon or under or with respect to this
Indenture or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless such Holder previously shall have given to the Trustee
written notice of default and of the continuance thereof, as hereinbefore
provided, and unless
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25
also the Holders of not less than 25% in aggregate principal amount at Stated
Maturity of the Securities of that series (or, in case of an Event of Default
described in clause (d), (e) or (f) of Section 7.01, 25% in aggregate principal
amount of all Securities then outstanding (in the case of Original Issue
Discount Securities, such principal amount to be determined as provided in
Section 2.01(9))) shall have made written request upon the Trustee to institute
such action, suit or proceeding in its own name as the Trustee hereunder and
shall have offered to the Trustee such reasonable indemnity as it may require
against the costs, expenses and liabilities to be incurred therein or thereby,
and the Trustee for 60 days after its receipt of such notice, request and offer
of indemnity, shall have neglected or refused to institute any such action, suit
or proceeding and no direction inconsistent with such written request shall have
been given to the Trustee during such 60 day period by the Holders of a majority
in principal amount at Stated Maturity of the outstanding Securities of such
series, it being understood and intended, and being expressly covenanted by the
Holder of every Security of that series with every other Holder of every
Security of that series or coupons appertaining thereto and the Trustee, that no
one or more Holders of Securities of any series shall have any right in any
manner whatever by virtue of or by availing of any provision of this Indenture
to affect, disturb or prejudice the rights of any other Holder of Securities of
that series or any other series or coupons appertaining thereto, or to obtain or
seek to obtain priority over or preference to any other such Holder, or to
enforce any right under this Indenture, except in the manner herein provided and
for the equal, ratable and common benefit of all Holders of Securities.
Notwithstanding any other provisions in this Indenture, however, the right
of any Holder of any Security or coupon to receive payment of the principal of,
and premium, if any, and interest, if any, on such Security, on or after the
respective Stated Maturities expressed in such Security or, in the case of
redemption or repayment on or after the redemption date or repayment date, as
the case may be, and to institute suit for the enforcement of any such payment
on or after such respective date shall not be impaired or affected without the
consent of such Holder.
SECTION 7.05. Proceedings by Trustee. In case of an Event of Default
hereunder, the Trustee, in its discretion, may proceed to protect and enforce
the rights vested in it by this Indenture by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce any
of such rights, either by suit in equity or by action at law or by proceeding in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law.
SECTION 7.06. Remedies Cumulative and Continuing. All powers and remedies
given by this Article Seven to the Trustee or to the Holders of Securities or
coupons shall, to the extent permitted by law, be deemed cumulative and not
exclusive of any thereof or of any other powers and remedies available to the
Trustee or such Holders, by judicial proceedings or otherwise, to enforce the
performance or observance of the covenants and agreements contained in this
Indenture, and no delay or omission of the Trustee or of any Holder to exercise
any right or power accruing upon any default occurring and continuing as
aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or an acquiescence therein; and, subject to the
provisions of Section 7.04, every power and remedy given by this Article Seven
or by law to the Trustee or to the Holders may be exercised from time to time,
and as often as shall be deemed expedient, by the Trustee or by the Holders.
SECTION 7.07. Direction of Proceedings and Waiver of Defaults by Majority
of Holders. The Holders of a majority in aggregate principal amount of the
Securities of all series affected (voting as one class) (in the case of Original
Issue Discount Securities, such principal amount to be determined as provided in
Section 2.01(9)) at the time outstanding shall have the right to direct the
time, method, and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee,
provided, however, that such direction shall not conflict with any rule of law
or this Indenture, and provided further, that (subject to the provisions of
Section 8.01) the Trustee may take any action deemed proper by the Trustee which
is not inconsistent with such direction and the Trustee shall have the right to
decline to follow any such direction if the Trustee, being advised by counsel,
shall determine that the action or proceeding so directed may not lawfully be
taken or if the Trustee in good faith by its board of directors or trustees,
executive committee, or a trust committee of directors or
<PAGE>
26
trustees or Responsible Officers shall determine that the action or proceedings
so directed would involve the Trustee in personal liability. Prior to any
declaration accelerating the maturity of the Securities of a particular series
(or all of the Securities as the case may be), the Holders of a majority in
aggregate principal amount at Stated Maturity of the Securities of that series
at the time outstanding may on behalf of the Holders of all the Securities of
that series waive any past default or Event of Default described in clause (a),
(b), (c) or (g) of Section 7.01 (or, in the case of an event specified in clause
(d), (e) or (f) of Section 7.01, the Holders of a majority in aggregate
principal amount of all the Securities then outstanding (in the case of Original
Issue Discount Securities, such principal amount to be determined as provided in
Section 2.01(9))) may waive in writing such default or Event of Default and its
consequences except (1) a default in the payment of interest, if any, or
premium, if any, on, or the principal of, any of the Securities or in the
payment of any sinking fund installment or analogous obligation with respect to
Securities or (2) in respect of a covenant or provision hereof which under
Article Eleven cannot be modified or amended without the consent of the Holder
of each Security outstanding of the series affected. Upon any such waiver the
Company, the Trustee and the Holders of Securities of that series (or all of the
Securities, as the case may be) shall be restored to their former positions and
rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon. Whenever any default or Event of Default hereunder shall have been
waived as permitted by this Section 7.07, said default or Event of Default shall
for all purposes of the Securities and this Indenture be deemed to have been
cured and to be not continuing.
SECTION 7.08. Notice of Defaults. The Trustee shall, within 90 days after
the occurrence of any default hereunder with respect to Securities of any
series, mail to all Holders of Securities of that series in the manner and to
the extent provided in Section 6.04(c) notice of such default known to the
Trustee, unless such default shall have been cured prior to the giving of such
notice; provided, however, that, except in the case of default in the payment of
the principal of or premium, if any, or interest, if any, on any of the
Securities of that series or in the making of any sinking fund payment or
analogous obligation with respect to Securities of that series, the Trustee
shall be protected in withholding such notice if and so long as the board of
directors or trustees, the executive committee, or a trust committee of
directors or Responsible Officers of the Trustee in good faith determines that
the withholding of such notice is in the interests of the Holders of Securities
of such series; and provided, further, that in the case of any default of the
character specified in Section 7.01(d) with respect to Securities of such
series, no such notice to Holders of Securities of such series shall be given
until at least 90 days after the occurrence thereof. For the purpose of this
Section, the term "default," with respect to Securities of any series, means any
event which is, or after notice or lapse of time, or both, would become, an
Event of Default with respect to Securities of such series. Except with respect
to a default or Event of Default pursuant to Section 7.01(a), (b) or (c), the
Trustee will not be charged with knowledge of any default or Event of Default
unless written notice thereof shall have been given to a Responsible Officer by
the Issuer or any Holder.
SECTION 7.09. Undertaking to Pay Costs. All parties to this Indenture
agree, and each Holder of any Security or coupon by his acceptance thereof shall
be deemed to have agreed, that any court may in its discretion require, in any
suit for the enforcement of any right or remedy under this Indenture, or in any
suit against the Trustee for any action taken or omitted by it as Trustee, the
filing by any party litigant in such suit of an undertaking to pay the costs of
such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section 7.09 shall not apply to
any suit instituted by the Trustee, to any suit instituted by any Holder or
group of Holders, holding in the aggregate more than 10% in principal amount at
Stated Maturity of the Securities outstanding of that series (or, in case of any
suit relating to or arising under clause (d), (e) or (f) of Section 7.01, 10% in
principal amount of all Securities outstanding (in the case of Original Issue
Discount Securities, such principal amount to be determined as provided in
Section 2.01(9))) or to any suit instituted by any Holder for the enforcement of
the payment of the principal of or premium, if any, or interest, if any, on any
Security on or after the respective Stated Maturities expressed in such
Securities (or in the case of redemption or repayment on or after the redemption
date or repayment date).
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27
ARTICLE EIGHT
CONCERNING THE TRUSTEE
SECTION 8.01. Duties and Responsibilities of Trustee. With respect to the
Holders of any series of Securities issued hereunder, the Trustee, prior to the
occurrence of an Event of Default with respect to the Securities of that series
and after the curing of all Events of Default which may have occurred with
respect to the Securities of that series, undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture and no implied
covenants or obligations with respect to such series shall be read into this
Indenture against the Trustee. In case an Event of Default with respect to the
Securities of any series has occurred (which has not been cured or waived), the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture with respect to that series and use the same degree of care and skill
in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
Prior to the occurrence of an Event of Default with respect to the
Securities of a series, and after the curing or waiving of all Events of Default
with respect to that series which may have occurred and in the absence of bad
faith on the part of the Trustee, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture; but, in the case of any such certificates or
opinions which by any provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this Indenture.
No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own willful misconduct, except that:
(a) the Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer or Officers of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts; and
(b) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
Holders pursuant to Section 7.07 of any series relating to the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if it has reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this
Section 8.01.
SECTION 8.02. Reliance on Documents, Opinions, etc. Except as otherwise
provided in Section 8.01:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, bond, debenture or other paper or
document believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(b) any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by a written statement signed in the name
of the Company by its Chairman and Chief Executive Officer,
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28
its President or its Senior Vice President, Chief Financial Officer and
Treasurer (unless other evidence in respect thereof is herein specifically
prescribed); and any resolution of the Board of Directors shall be sufficiently
evidenced to the Trustee by a copy thereof certified by the Secretary or an
Assistant Secretary of the Company;
(c) whenever in the administration of the Indenture, the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically provided) may, in the absence of bad faith on its part,
rely on an Officers' Certificate;
(d) the Trustee may consult with its counsel or require an Opinion of
Counsel and any such advice or Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or omitted by it
hereunder in good faith and in accordance with such advice or Opinion of
Counsel;
(e) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request, order or direction of
any of the Holders, pursuant to the provisions of this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred therein or
thereby;
(f) the Trustee shall not be liable for any action taken or omitted by it
in good faith and believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Indenture;
(g) prior to the occurrence of an Event of Default hereunder and after the
curing or waiving of all Events of Default, the Trustee shall not be bound to
make any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, approval, bond, debenture, coupon or other paper or document, unless
requested in writing to do so by the Holders of not less than a majority in
principal amount at Stated Maturity of the Securities then outstanding of any
series affected or of all the Securities, as the case may be; provided, however,
that if the payment within a reasonable time to the Trustee of the costs,
expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to the
Trustee by the security afforded to it by the terms of this Indenture, the
Trustee may require reasonable indemnity against such expense or liability as a
condition to so proceeding; and
(h) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys, and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
SECTION 8.03. No Responsibility for Recitals, etc. The recitals contained
herein and in the Securities (except in the Trustee's certificate of
authentication) shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Indenture, of any of
the Securities or coupons or of any prospectus related to the Securities of any
series; provided, however, that the Trustee shall not be relieved of its duty to
authenticate Securities as authorized by this Indenture. The Trustee shall not
be accountable for the use or application by the Company of any Securities or
the proceeds of any Securities authenticated and delivered by the Trustee in
conformity with the provisions of this Indenture.
SECTION 8.04. Trustee, Paying Agent or Registrar May Own Securities. The
Trustee or any paying agent or Security registrar or any other agent of the
Company or the Trustee, in its individual or any other capacity, may become the
owner or pledgee of Securities or the coupons appertaining thereto with the same
rights it would have if it were not Trustee, paying agent or Security registrar.
SECTION 8.05. Moneys to be Held in Trust. Subject to the provisions of
Section 13.04, all moneys received by the Trustee or any paying agent shall,
until used or applied as herein provided, be held in trust for the purposes for
which they were received, but need not be segregated from other funds except to
the extent required
<PAGE>
29
by law. The Trustee and any paying agent shall be under no liability for
interest on any moneys received by it hereunder except such as it may agree with
the Company to pay thereon.
SECTION 8.06. Compensation and Expenses of Trustee. The Company shall pay
to the Trustee from time to time, and the Trustee shall be entitled to,
reasonable compensation (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust), and the Company
shall pay or reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any of the provisions of this Indenture (including the reasonable compensation
and the expenses and disbursements of its counsel and of all persons not
regularly in its employ) except any such expense, disbursement or advance as may
be attributable to its negligence or willful misconduct. The Company shall
indemnify the Trustee for, and shall hold it harmless against, any loss,
liability or expense incurred without negligence or willful misconduct on the
part of the Trustee and arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of defending
itself against any claim of liability arising in connection with its duties
under this Indenture. The obligations of the Company under this Section 8.06 to
compensate the Trustee and to pay or reimburse the Trustee for expenses,
disbursements and advances shall constitute additional indebtedness hereunder.
Such additional indebtedness shall be secured by a lien prior to that of the
Securities upon all property and funds held or collected by the Trustee as such,
except funds held in trust for the benefit of the Holders of particular
Securities.
SECTION 8.07. Officers' Certificate as Evidence. Except as otherwise
provided in Section 8.01, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or omitting any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of negligence or willful misconduct on the part
of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee, and such certificate, in the
absence of negligence or willful misconduct on the part of the Trustee, shall be
full warrant to the Trustee for any action taken or omitted by it under the
provisions of this Indenture upon the faith thereof.
SECTION 8.08. Qualification of Trustee; Conflicting Interests. The Trustee
with respect to each series of Securities issued hereunder shall be subject to
the provisions of Section 310(b) of the Trust Indenture Act of 1939 during the
period of time provided for therein. In determining whether the Trustee has a
conflicting interest as defined in Section 310(b) of the Trust Indenture Act of
1939 with respect to any series of Securities issued hereunder, there shall be
excluded from the operation of this paragraph of this Indenture the Securities
of any particular series other than that series and any indenture or indentures
under which other securities, or certificates of interest or participation in
other securities, of the Company are outstanding, as provided in Section 3.10(b)
of the Trust Indenture Act of 1939. Nothing herein shall prevent the Trustee
from filing with the Securities and Exchange Commission the application referred
to in the second to the last paragraph of Section 3.10(b) of the Trust Indenture
Act of 1939.
SECTION 8.09. Eligibility of Trustee. The Trustee with respect to each
series of Securities hereunder shall at all times be either:
(a) a corporation organized and doing business under the laws of the
United States of America, any state thereof, or the District of Columbia,
authorized under such laws to exercise corporate trust powers, and subject to
supervision or examination by Federal or State authority, or
(b) a corporation or other Person organized and doing business under the
laws of a foreign government that is permitted to act as Trustee pursuant to a
rule, regulation, or other order of the Securities and Exchange Commission,
authorized under such laws to exercise corporate trust powers and subject to the
supervision or examination by authority of such foreign government or a
political subdivision thereof substantially equivalent to supervision or
examination applicable to a United States institutional trustee, having a
combined capital and surplus
<PAGE>
30
of at least $10,000,000. If such corporation publishes reports of condition at
least annually, pursuant to law or the requirements of the aforesaid supervising
or examining authority, then for the purposes of this Section 8.09, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. Neither the Company nor any person directly or indirectly
controlling, controlled by, or under common control with the Company shall serve
as trustee with respect to any series of Securities issued hereunder. In case at
any time the Trustee with respect to any series of Securities shall cease to be
eligible in accordance with the provisions of this Section 8.09, the Trustee
shall resign immediately in the manner and with the effect specified in
Section 8.10.
SECTION 8.10. Resignation or Removal of Trustee. (a) The Trustee may
resign with respect to any series of Securities at any time by giving written
notice of such resignation to the Company and by giving notice thereof to the
Holders of the applicable series of Securities in manner and to the extent
provided in Section 6.04(c). Upon receiving such notice of resignation with
respect to the applicable series of Securities, the Company shall promptly
appoint a successor trustee with respect to that series by written instrument,
in duplicate, executed by or pursuant to a resolution of the Board of Directors,
one copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor trustee. If a successor trustee shall not have been so
appointed with respect to any series of Securities, or shall not have accepted
appointment within 30 days after the giving of such notice of resignation to the
Holders of such series, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee, or any Holder
who has been a bona fide holder of a Security or Securities of the applicable
series for at least six months may, subject to the provisions of Section 7.09,
on behalf of such Holder and all others similarly situated, petition any such
court for the appointment of a successor trustee with respect to that series.
(b) In case at any time any of the following shall occur--
(1) the Trustee shall fail to comply with the provisions of subsection (a)
of Section 8.08 after written request therefor by the Company or by any Holder
who has been a bona fide holder of a Security or Securities of the applicable
series for at least six months, or
(2) the Trustee shall cease to be eligible in accordance with the
provisions of Section 8.09 and shall fail to resign after written request
therefor by the Company or by any such Holder, or
(3) the Trustee shall become incapable of acting, with respect to any
series of Securities or shall be adjudged a bankrupt or insolvent, or a receiver
of the Trustee or of its property shall be appointed, or any public officer
shall take charge or control of the Trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation -- then, in any such
case, the Company may remove the Trustee with respect to any one or more of such
series of Securities and appoint a successor trustee of that series by written
instrument, in duplicate, executed by or pursuant to a resolution of the Board
of Directors, one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee, or subject to the provisions of
Section 7.09, any Holder who has been a bona fide Holder of a Security or
Securities of that series for at least six months may, on behalf of such Holder
and all others similarly situated, subject to Section 3.15(e) of the Trust
Indenture Act of 1939, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor trustee with respect
to that series.
(c) The Holders of a majority in aggregate principal amount at Stated
Maturity of the Securities of any series at the time outstanding may at any time
remove the Trustee with respect to such series and nominate with respect to such
series a successor trustee which shall be deemed appointed as successor trustee
with respect to such series unless within 10 days after such nomination the
Company objects thereto, in which case the Trustee so removed or any Holder of
Securities of the series may petition any court of competent jurisdiction for
appointment of a successor trustee with respect to such series upon the terms
and conditions and otherwise as provided in subsection (a) of this Section 8.10.
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(d) Any resignation or removal of the Trustee and any appointment of a
successor trustee with respect to an applicable series of Securities pursuant to
any of the provisions of this Section 8.10 shall become effective upon
acceptance of appointment by the successor trustee for that series as provided
in Section 8.11.
(e) The Company shall give notice as provided in Section 16.05 of each
resignation or removal of the Trustee with respect to any series of Securities.
Each notice shall include the name of such successor trustee and the address of
its Principal Office and shall be given within 60 days of such event.
SECTION 8.11. Acceptance by Successor Trustee. Any successor trustee
appointed as provided in Section 8.10 shall execute, acknowledge and deliver to
the Company and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee with respect to all or any applicable series shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts, duties and
obligations with respect to such series as its predecessor hereunder, with like
effect as if originally named as trustee herein; but, nevertheless, on the
written request of the Company or of the successor trustee, the trustee ceasing
to act shall, upon payment of any amounts then due it pursuant to the provisions
of Section 8.06, execute and deliver an instrument transferring to such
successor trustee all the rights and powers and trusts with respect to any
series of Securities of the trustee so ceasing to act. Upon request of any
successor trustee, the Company shall execute any and all instruments in writing
in order more fully and certainly to vest in and confirm to such successor
trustee all such rights and powers. Any trustee ceasing to act shall,
nevertheless, retain a lien upon all property or funds held or collected by such
trustee to secure any amounts then due it pursuant to the provisions of
Section 8.06.
In case of the appointment hereunder of a successor trustee with respect to
the Securities of any one or more (but not all) series, the Company, the
predecessor trustee and each successor trustee with respect to the Securities of
any applicable series shall execute and deliver an indenture supplemental hereto
wherein each successor trustee shall accept such appointment and which shall
contain (1) such provisions as shall be necessary or desirable to transfer and
confirm to, and vest in each successor trustee all of the rights, powers and
duties of the predecessor trustee with respect to the Securities of that or
those series to which the appointment of such successor trustee relates, (2) if
the retiring trustee is not retiring with respect to all Securities, it shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the predecessor trustee with
respect to the Securities of any series as to which the predecessor trustee is
not retiring shall continue to be vested in the predecessor trustee and (3)
shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such trustees co-trustees of the
same trust and that each such trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such trustee.
No successor trustee shall accept appointment as provided in this
Section 8.11 unless at the time of such acceptance such successor trustee shall
be qualified under the provisions of Section 8.08 and eligible under the
provisions of Section 8.09.
Upon acceptance of appointment by a successor trustee as provided in this
Section 8.11, the Company shall mail notice of the succession of such trustee
hereunder to all the Registered Holders of such series as the names and
addresses of such Holders shall appear on the registry books of the Company and
shall publish notice of such event once in an Authorized Newspaper in the Place
of Payment. If the Company fails to mail such notice in the prescribed manner
within 10 days after the acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be mailed at the expense of the
Company.
SECTION 8.12. Succession by Merger, etc. Any corporation into which the
Trustee may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding to the business of the
Trustee, shall
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32
be the successor of the Trustee hereunder provided such corporation shall be
qualified under the provisions of Section 8.08 and eligible under the provisions
of Section 8.09 without the execution or filing of any paper or any further act
on the part of any of the parties hereto.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any Securities of any series shall have been
authenticated but not delivered, any such successor to the Trustee by merger,
conversion or consolidation to such authenticating Trustee may adopt such
certificate of authentication and deliver such Securities of any series so
authenticated with the same effect as if such successor to the Trustee had
itself authenticated such Securities.
SECTION 8.13. Limitation on Rights of Trustee as a Creditor. (a) Subject
to the provision of subsection (b) of this Section 8.13, if the Trustee shall be
or shall become a creditor, directly or indirectly, secured or unsecured, of the
Company or of any other obligor on the Securities of any series within three
months prior to a default, as defined in subsection (c) of this Section 8.13, or
subsequent to such a default, then, unless and until such default shall be
cured, the Trustee shall set apart and hold in special account for the benefit
of the Trustee individually, the Holders of the Securities of any series, and
the holders of other indenture securities (as defined in paragraph (2) of
subsection (c) of this Section 8.13):
(1) an amount equal to any and all reductions in the amount due and owing
upon any claim as such creditor in respect of principal or interest, effected
after the beginning of such three-month period and valid as against the Company
and its other creditors, except any such reduction resulting from the receipt or
disposition of any property described in paragraph (2) of this subsection, or
from the exercise of any right of set-off which the Trustee could have exercised
if a petition in bankruptcy had been filed by or against the Company upon the
date of such default; and
(2) all property received by the Trustee in respect of any claim as such
creditor, either as security therefor, or in satisfaction or composition
thereof, or otherwise, after the beginning of such three-month period, or an
amount equal to the proceeds of any such property, if disposed of, subject
however, to the rights, if any, of the Company and its other creditors in such
property or such proceeds.
Nothing herein contained, however, shall affect the right of the Trustee:
(A) to retain for its own account (i) payments made on account of any such
claim by any person (other than the Company) who is liable thereon, and (ii) the
proceeds of the bona fide sale of any such claim by the Trustee to a third
person, and (iii) distributions made in cash, securities, or other property in
respect of claims filed against the Company in bankruptcy or receivership or in
proceedings for reorganization pursuant to Federal or State bankruptcy laws or
other similar laws;
(B) to realize, for its own account, upon any property held by it as
security for any such claim, if such property was so held prior to the beginning
of such three-month period;
(C) to realize, for its own account, but only to the extent of the claim
hereinafter mentioned, upon any property held by it as security for any such
claim, if such claim was created after the beginning of such three-month period
and such property was received as security therefor simultaneously with the
creation thereof, and if the Trustee shall sustain the burden of proving that at
the time such property was so received the Trustee had no reasonable cause to
believe that a default, as defined in subsection (c) of this Section 8.13, would
occur within three months; or
(D) to receive payment on any claim referred to in paragraph (B) or (C),
against the release of any property held as security for such claim as provided
in such paragraph (B) or (C), as the case may be, to the extent of the fair
value of such property.
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33
For the purposes of paragraphs (B), (C) and (D), property substituted after
the beginning of such three-month period for property held as security at the
time of such substitution shall, to the extent of the fair value of the property
released, have the same status as the property released, and, to the extent that
any claim referred to in any of such paragraphs is created in renewal of or in
substitution for or for the purpose of repaying or refunding any pre-existing
claim of the Trustee as such creditor, such claim shall have the same status as
such pre-existing claim.
If the Trustee shall be required to account, the funds and property held in
such special account and the proceeds thereof shall be apportioned between the
Trustee, the Holders of Securities of a series as to which such Trustee is
acting as Trustee hereunder and the holders of other indenture securities in
such manner that the Trustee, the Holders and the holders of other indenture
securities realize, as a result of payments from such special account and
payments of dividends on claims filed against the Company in bankruptcy or
receivership or in proceedings for reorganization pursuant to the Federal or
State bankruptcy laws or other similar laws, the same percentage of the
irrespective claims, figured before crediting to the claim of the Trustee
anything on account of the receipt by it from the Company of the funds and
property in such special account and before crediting to the respective claims
of the Trustee, the Holders and the holders of other indenture securities
dividends on claims filed against the Company in bankruptcy or receivership or
in proceedings for reorganization pursuant to the Federal or State bankruptcy
laws or other similar laws, but after crediting thereon receipts on account of
the indebtedness represented by their respective claims from all sources other
than from such dividends and from the funds and property so held in such special
account. As used in this paragraph, with respect to any claim, the term
"dividends" shall include any distribution with respect to such claim, in
bankruptcy or receivership or in proceedings for reorganization pursuant to the
Federal or State bankruptcy laws or other similar laws, whether such
distribution is made in cash, securities or other property, but shall not
include any such distribution with respect to the secured portion, if any, of
such claim. The court in which such bankruptcy, receivership or proceeding for
reorganization is pending shall have jurisdiction (i) to apportion between the
Trustee, the Holders and the holders of other indenture securities, in
accordance with the provisions of this paragraph, the funds and property held in
such special account and the proceeds thereof, or (ii) in lieu of such
apportionment, in whole or in part, to give to the provisions of this paragraph
due consideration in determining the fairness of the distributions to be made to
the Trustee, the Holders and the holders of other indenture securities with
respect to their respective claims, in which event it shall not be necessary to
liquidate or to appraise the value of any securities or other property held in
such special account or as security for any such claim, or to make a specific
allocation of such distributions as between the secured and unsecured portions
of such claims, or otherwise to apply the provisions of this paragraph as a
mathematical formula.
Any Trustee who has resigned or been removed after the beginning of such
three-month period shall be subject to the provisions of this subsection (a) as
though such resignation or removal had not occurred. If any Trustee has resigned
or been removed prior to the beginning of such three-month period, it shall be
subject to the provisions of this subsection (a) if and only if the following
conditions exist:
(i) the receipt of property or reduction of claim which would have given
rise to the obligation to account, if such Trustee had continued as trustee,
occurred after the beginning of such three-month period; and
(ii) such receipt of property or reduction of claim occurred within three
months after such resignation or removal.
(b) There shall be excluded from the operation of subsection (a) of this
Section 8.13 a creditor relationship arising from:
(1) the ownership or acquisition of securities issued under any
indenture, or any security or securities having a maturity of one year or more
at the time of acquisition by the Trustee;
(2) advances authorized by a receivership or bankruptcy court of
competent jurisdiction, or by this Indenture, for the purpose of preserving any
property which shall at any time be subject to the lien of this Indenture
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34
or of discharging tax liens or other prior liens or encumbrances thereon, if
notice of such advance and of the circumstances surrounding the making thereof
is given to the Holders at the time and in the manner provided in Section 6.04
with respect to reports pursuant to subsections (a) and (b) thereof,
respectively;
(3) disbursements made in the ordinary course of business in the capacity
of trustee under an indenture, transfer agent, registrar, custodian, paying
agent, fiscal agent or depositary, or other similar capacity;
(4) an indebtedness created as a result of services rendered or premises
rented; or an indebtedness created as a result of goods or securities sold in a
cash transaction as defined in subsection (c) of this Section 8.13;
(5) the ownership of stock or of other securities of a corporation
organized under the provisions of section 25(a) of the Federal Reserve Act, as
amended, which is directly or indirectly a creditor of the Company; or
(6) the acquisition, ownership, acceptance or negotiation of any drafts,
bills of exchange, acceptances or obligations which fall within the
classification of self-liquidating paper as defined in subsection (c) of this
Section 8.13.
(c) For the purposes of this Section 8.13:
(1) The term "default" shall mean any failure to make payment in full of
the principal of or interest upon one of the Securities of any series or upon
the other indenture securities when and as such principal or interest becomes
due and payable.
(2) The term "other indenture securities" shall mean securities upon
which the Company is an obligor (as defined in the Trust Indenture Act of 1939)
outstanding under any other indenture (A) under which the Trustee is also
trustee, (B) which contains provisions substantially similar to the provisions
of subsection (a) of this Section 8.13, and (C) under which a default exists at
the time of the apportionment of the funds and property held in said special
account.
(3) The term "cash transaction" shall mean any transaction in which full
payment for goods or securities sold is made within seven days after delivery of
the goods or securities in currency or in checks or other orders drawn upon
banks or bankers and payable upon demand.
(4) The term "self-liquidating paper" shall mean any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or incurred
by the Company for the purpose of financing the purchase, processing,
manufacture, shipment, storage or sale of goods, wares or merchandise and which
is secured by documents evidencing title to, possession of, or a lien upon, the
goods, wares or merchandise or the receivables or proceeds arising from the sale
of the goods, wares or merchandise previously constituting the security;
provided that the security is received by the Trustee simultaneously with the
creation of the creditor relationship with the Company arising from the making,
drawing, negotiating or incurring of the draft, bill of exchange, acceptance or
obligation.
(5) The term "Company" shall mean any obligor upon the Securities.
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ARTICLE NINE
CONCERNING THE HOLDERS
SECTION 9.01. Action by Holders. (a) Whenever in this Indenture it is
provided that the Holders of a specified percentage in aggregate principal
amount at Stated Maturity of the Securities of any or all series may take any
action (including the making of any demand or request, the giving of any notice,
consent or waiver or the taking of any other action) the fact that at the time
of taking any such action the Holders of such specified percentage have joined
therein may be evidenced (A) by any instrument or any number of instruments of
similar tenor executed by Holders in person or by agent or proxy appointed in
writing, or (B) by the record of the Holders of Securities voting in favor
thereof at any meeting of Holders duly called and held in accordance with the
provisions of Article Ten or (C) by a combination of such instrument or
instruments and any such record of such meeting of such Holders.
(b) If the Company or Trustee shall solicit from the Holders of any or all
series any request, demand, authorization, direction, notice, consent, waiver or
other act, the Company or Trustee, as the case may be, may, at its option, by or
pursuant to resolution of the Board of Directors fix in advance a record date
for the determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other act, but the Company
or Trustee, as the case may be, shall have no obligation to do so. If such a
record date is fixed, such request, demand, authorization, direction, notice,
consent, waiver or other act may be given before or after the record date, but
only the Holders of record at the close of business on the record date shall be
deemed to be Holders for the purposes of determining whether Holders of the
requisite proportion of Securities have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or other
act, and for that purpose the Securities deemed to be outstanding shall be
computed as of the record date; provided, however, that no such authorization,
agreement or consent by the Holders on the record date shall be deemed effective
unless it shall become effective pursuant to the provisions of this Indenture
not later than six months after the record date.
SECTION 9.02. Proof of Execution by Holders. Subject to the provisions of
Sections 8.01, 8.02 and 10.05, proof of the execution of any instrument by a
Holder, his agent or proxy shall be sufficient if made in accordance with such
reasonable rules and regulations as may be prescribed by the Trustee or in such
manner as shall be satisfactory to the Trustee. The ownership of Securities of
any series shall be proved by the registry books of the Company or by a
certificate of the registrar of the Securities of any series.
The record of any meeting of Holders of Securities may be proved in the
manner provided in Section 10.06.
SECTION 9.03. Who Deemed Absolute Owners. The Company, the Trustee, any
paying agent, any transfer agent and any Security registrar may treat the person
in whose name a Registered Security shall be registered upon the registry books
of the Company as the absolute owner of such Security (whether or not such
Security shall be overdue) for the purpose of receiving payment of principal of,
premium, if any, on and, if such Registered Security is a Fully Registered
Security, interest, if any, on, such Registered Security and for all other
purposes; and neither the Company nor the Trustee nor any paying agent nor any
transfer agent nor any Security registrar shall be affected by any notice to the
contrary. All such payments so made to any Holder for the time being or upon his
order shall be valid, and, to the extent of the sum or sums so paid, effectual
to satisfy and discharge the liability for moneys payable upon such Security.
SECTION 9.04. Company-Owned Securities Disregarded. In determining
whether the Holders of the requisite aggregate principal amount at Stated
Maturity of Securities have concurred in any direction, consent or waiver under
this Indenture, Securities which are owned by the Company or any other obligor
on such Securities or by any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or any
other obligor on the Securities shall be disregarded and deemed not to be
outstanding for the
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36
purpose of any such determination; provided that for the purposes of determining
whether the Trustee shall be protected in relying on any such direction or
consent only Securities which the Trustee knows are so owned shall be so
disregarded. Securities so owned which have been pledged in good faith may be
regarded as outstanding for the purposes of this Section 9.04 if the pledgee
shall establish to the satisfaction of the Trustee the pledgee's right to vote
such Securities and that the pledgee is not a person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company or any such other obligor. In the case of a dispute as to such right,
any decision by the Trustee taken upon the advice of counsel shall be full
protection to the Trustee.
SECTION 9.05. Revocation of Consents; Future Holders Bound. (a) At any
time prior to but not after, the evidencing to the Trustee, as provided in
Section 9.01, of the taking of any action by the Holders of the percentage in
aggregate principal amount at Stated Maturity of the Securities of any or all
series, as the case may be, specified in this Indenture in connection with such
action, any Holder of a Security the number, letter or other distinguishing
symbol of which is shown by the evidence to be included in the Securities the
Holders of which have consented to such action may, by filing written notice
with the Trustee at the Principal Office of the Trustee and upon proof of
holding as provided in Section 9.02, revoke such action so far as concerns such
Holder and all future Holders and owners of such Security and any Securities
which may be issued in exchange or substitution therefor, irrespective of
whether or not any notation in regard thereto is made upon such Security or such
other Security issued in exchange or substitution therefor.
(b) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Security shall bind every future Holder of
the same Security and the Holder of every Security issued upon the registration
of transfer thereof or in exchange therefor or in lieu thereof, in respect of
any action taken, suffered or omitted by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such Security.
ARTICLE TEN
HOLDERS' MEETINGS
SECTION 10.01. Purposes of Meetings. A meeting of the Holders of
Securities of any or all series may be called at any time and from time to time
pursuant to the provisions of this Article Ten for any of the following
purposes:
(a) to give any notice to the Company or to the Trustee, or to give any
directions to the Trustee, or to consent to the waiving of any default hereunder
and its consequences, or to take any other action authorized to be taken by
Holders pursuant to any of the provisions of Article Seven;
(b) to remove the Trustee and nominate a successor trustee pursuant to the
provisions of Article Eight;
(c) to consent to the execution of an indenture or indentures supplemental
hereto pursuant to the provisions of Section 11.02; or
(d) to take any other action authorized to be taken by or on behalf of the
Holders of any specified aggregate principal amount at Stated Maturity of the
Securities of any or all series, as the case may be, under any other provisions
of this Indenture or under applicable law.
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37
SECTION 10.02. Call of Meetings by Trustee. The Trustee may at any time
call a meeting of Holders of Securities of any or all series to take any action
specified in Section 10.01, to be held at such time and at such place in
Houston, Texas, or New York, New York, as the Trustee shall determine. Notice
of every meeting of the Holders of Securities of any or all series, setting
forth the time and the place of such meeting and in general terms the action
proposed to be taken at such meeting, shall be mailed to Holders of Registered
Securities of each series affected, at their addresses as they appear on the
registry books of the Company. Such notice shall be mailed or published, as the
case may be, not less than 20 nor more than 90 days prior to the date fixed for
the meeting. However, if all Securities of any series with respect to which the
meeting is to be held are Registered Securities no notice need be given except
notice by mail as hereinabove provided.
Failure to receive such notice or any defect therein shall in no case
affect the validity of any action taken at such meeting. Any meeting of Holders
of Securities of any or all series, as the case may be, shall be valid without
notice if the Holders of all such Securities outstanding, the Company and the
Trustee are present in person or by proxy or shall have waived notice thereof
before or after the meeting.
SECTION 10.03. Call of Meetings by Company or Holders. In case at any time
the Company, pursuant to a resolution of its Board of Directors, or the Holders
of at least 10% in aggregate principal amount at Stated Maturity of the
Securities then outstanding of any or all series, as the case may be, that may
be affected by the action proposed to be taken at the meeting, shall have
requested the Trustee to call a meeting of Holders of Securities of any or all
series, as the case may be, that may be so affected by written request setting
forth in a reasonable detail the action proposed to be taken at the meeting, and
the Trustee shall not have mailed the notice of such meeting within 20 days
after receipt of such request, then the Company or such Holders, in the amount
specified, may determine the time and the place in a location designated in
Section 10.02 for such meeting and may call such meeting to take any action
authorized in Section 10.01, by mailing notice thereof as provided in
Section 10.02.
SECTION 10.04. Qualification for Voting. To be entitled to vote at any
meeting of Holders of Securities, a Person shall (a) be a Holder of one or more
Securities with respect to which such meeting is being held or (b) be a Person
appointed by an instrument in writing as proxy by such a Holder. The only
Persons who shall be entitled to be present or to speak at any meeting of
Holders of Securities of any or all series, as the case may be, shall be the
Persons entitled to vote at such meeting and their counsel and any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.
SECTION 10.05. Regulations. Notwithstanding any other provisions of this
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Holders of Securities, in regard to proof of the
holding of Securities and of the appointment of proxies, and in regard to the
appointment and duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it shall deem fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Holders of Securities as provided in Section 10.03, in which case
the Company or the Holders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by vote of the Holders of a majority
in principal amount at Stated Maturity of the Securities represented at the
meeting.
Subject to the provisions of Section 9.04, at any meeting each Holder of
Securities with respect to which such meeting is being held, or proxy therefor,
shall be entitled to one vote for each $1,000 in principal amount (in the case
of Original Issue Discount Securities, such principal amount to be determined as
provided in Section 2.01(9)) of such Securities held or represented by him;
provided, however, that no vote shall be cast or counted at any meeting in
respect of any such Security challenged as not outstanding and ruled by the
chairman of the meeting to be not outstanding. The chairman of the meeting
shall have no right to vote other than as a Holder of Securities or proxy
therefor. At any meeting of Holders of Securities, the presence of Persons
holding or representing the Securities with respect to which such meeting is
being held in such aggregate principal amount sufficient to take action on the
business for the transaction of which such meeting was called shall constitute a
quorum, but, if less than a quorum is present, the Persons holding or
representing a majority in such aggregate principal amount of such Securities
<PAGE>
38
represented at the meeting may adjourn such meeting with the same effect, for
all intents and purposes, as though a quorum had been present. Any meeting of
Holders of Securities with respect to which such meeting is being held duly
called pursuant to the provisions of Section 10.02 or 10.03 may be adjourned to
another specified time and place from time to time by vote of the Holders of a
majority in such aggregate principal amount of the Securities represented at the
meeting and entitled to vote, and the meeting may be held as so adjourned
without further notice.
SECTION 10.06. Voting. The vote upon any resolution submitted to any
meeting of Holders of Securities with respect to which such meeting is being
held shall be by written ballots on which shall be inscribed the signatures of
the Holders or of their representatives by proxy and the serial number or
numbers of the Securities held or represented by them. The permanent chairman of
the meeting shall appoint two inspectors of votes who shall count all votes cast
at the meeting for or against any resolution and who shall make and file with
the secretary of the meeting their verified written reports in duplicate of all
votes cast at the meeting. A record in duplicate of the proceedings of each
meeting of Holders shall be prepared by the secretary of the meeting and there
shall be attached to said record the original reports of the inspectors of votes
on any vote by ballot taken thereat and affidavits by one or more persons having
knowledge of the facts setting forth a copy of the notice of the meeting and
showing that said notice was mailed as provided in Section 10.02. The record
shall show the serial numbers of the Securities voting in favor of or against
any resolution. The record shall be signed and verified by the affidavits of the
permanent chairman and secretary of the meeting and one of the duplicates shall
be delivered to the Company and the other to the Trustee to be preserved by the
Trustee. Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
SECTION 10.07. No Delay of Rights by Meeting. Nothing contained in this
Article Ten shall be deemed or construed to authorize or permit, by reason of
any call of a meeting of Holders of Securities or any rights expressly or
impliedly conferred hereunder to make such call, any hindrance or delay in the
exercise of any right or rights conferred upon or reserved to the Trustee or to
the Holders of Securities under any of the provisions of this Indenture or of
the Securities.
ARTICLE ELEVEN
SUPPLEMENTAL INDENTURES
SECTION 11.01. Supplemental Indentures without Consent of Holders.
Without the consent of any Holders of any series of Securities, the Company,
when authorized by or pursuant to a resolution of the Board of Directors, and
the Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto for one or more of the following purposes:
(a) to evidence the succession of another corporation to the Company, or
successive successions, and the assumption by the successor corporation,
pursuant to Article Twelve hereof, of the covenants, agreements and obligations
of the Company herein and in the Securities contained;
(b) to add to the covenants of the Company such further covenants,
restrictions or conditions for the protection of the Holders of any series of
Securities as the Board of Directors and the Trustee shall consider to be for
the protection of the Holders of such Securities, and to make the occurrence, or
the occurrence and continuance, of a default in any of such additional
covenants, restrictions or conditions a default or an Event of Default
permitting the enforcement of all or any of the several remedies provided in
this Indenture as herein set forth; provided, however, that in respect of any
such additional covenant, restriction or condition such supplemental indenture
may provide for a particular period of grace after default (which period may be
shorter or longer than that allowed in the case of other defaults) or may
provide for an immediate enforcement upon such default or may limit the remedies
<PAGE>
39
available to the Trustee upon such default and shall not adversely affect the
interests of the Holders of Securities of any series;
(c) to convey, transfer, assign, mortgage or pledge to the Trustee as
security for the Securities of any series, any property or assets which the
Company may desire or may be required to convey, transfer, assign, mortgage or
pledge in accordance with the provisions of Section 5.03 or Section 12.02;
(d) to establish the form or terms of Securities of any series as
permitted by Section 2.01;
(e) to cure any ambiguity, to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture, or to make such other provisions in regard to matters or questions
arising under this Indenture which shall not be inconsistent with the provisions
of this Indenture; provided, however, that such action shall not adversely
affect the interests of the Holders of Securities of any series;
(f) to evidence and provide for the acceptance of appointment hereunder by
a successor trustee with respect to the Securities of one or more series and to
add to or change any of the provisions of this Indenture as shall be necessary
to provide for or facilitate the administration of the trusts hereunder by more
than one Trustee, pursuant to the requirements of Section 8.11;
(g) to provide for the documentation necessary for the issuance of
Securities outside the United States of America; or
(h) to conform the Indenture to the provisions of the Trust Indenture Act
of 1939, as then in effect.
The Trustee is hereby authorized to join with the Company in the execution
of any such supplemental indenture, to make any further appropriate agreements
and stipulations which may be therein contained and to accept the conveyance,
transfer and assignment of any property thereunder, but the Trustee shall not be
obligated to, but may in its discretion, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this
Section 11.01 may be executed by the Company and the Trustee without the consent
of the Holders of any of the Securities at the time outstanding, notwithstanding
any of the provisions of Section 11.02.
SECTION 11.02. Supplemental Indentures with Consent of Holders of a
Series. With the consent (evidenced as provided in Section 9.01) of the Holders
of not less than 50% in aggregate principal amount at Stated Maturity of the
Securities at the time outstanding of each series affected by such supplemental
indenture or indentures, the Company, when authorized by or pursuant to a
resolution of the Board of Directors, and the Trustee may from time to time and
at any time enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of any supplemental indenture or of
modifying in any manner the rights of the Holders of the Securities of each such
series under this Indenture; provided, however, that no such supplemental
indenture shall without the consent of the Holder of each outstanding Security
affected thereby (i) extend the fixed Maturity of any Security, or reduce the
rate of interest or extend the time of payment of interest, if any, thereon or
reduce the principal thereof or the time during which premium is payable
thereon, or make the principal thereof or any premium or interest thereon
payable in any coin or currency other than that provided in the securities or
reduce the amount of the principal of an Original Issue Discount Security that
would be due and payable upon an acceleration of the maturity thereof pursuant
to Section 7.01 or the amount thereof provable in bankruptcy pursuant to
Section 7.02 without the consent of the Holder of each Security so affected, or
(ii) reduce the percentage in principal amount at Stated Maturity of the
outstanding Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is
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40
required for any waiver of compliance with certain provisions hereof or of
certain defaults hereunder and their consequences provided for in this
Indenture, or (iii) modify any provision of this Section 11.02 or Section 7.07
hereof except to increase any such percentage or to provide certain other
provisions of this Indenture cannot be modified or waived without the consent of
the Holder of each Security affected thereby. A supplemental indenture which
changes or eliminates any covenant or other provision of this Indenture which
has expressly been included solely for the benefit of one or more particular
series of Securities, or which modifies the rights of the Holders of Securities
of such series with respect to such covenant or other provision, shall be deemed
not to affect the rights under this Indenture of the Holders of Securities of
any other series.
Upon the request of the Company, accompanied by a copy of a resolution of
the Board of Directors certified by its Secretary or Assistant Secretary
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence of the consent of Holders of such series as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.
It shall not be necessary for the consent of the Holders under this
Section 11.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
SECTION 11.03. Compliance with Trust Indenture Act; Effect of Supplemental
Indentures. Any supplemental indenture executed pursuant to the provisions of
this Article Eleven shall comply with the Trust Indenture Act of 1939, as then
in effect. Upon the execution of any supplemental indenture pursuant to the
provisions of this Article Eleven, this Indenture shall be and be deemed to be
modified and amended in accordance therewith and the respective rights,
limitation of rights, obligations, duties and immunities under this Indenture of
the Trustee, the Company and the Holders of the series of Securities affected
shall thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
SECTION 11.04. Notation on Securities. Securities authenticated and
delivered after the execution of any supplemental indenture pursuant to the
provisions of this Article Eleven may bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture. If the
Company or the Trustee shall so determine, new Securities of any series so
modified as to conform, in the opinion of the Trustee and the Board of
Directors, to any modification of this Indenture contained in any such
supplemental indenture may be prepared and executed by the Company,
authenticated by the Trustee and delivered in exchange for the Securities of
such series then outstanding.
SECTION 11.05. Evidence of Compliance of Supplemental Indenture to be
Furnished Trustee. The Trustee, subject to the provisions of Sections 8.01
and 8.02, shall be entitled to receive and shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel as conclusive evidence
that any supplemental indenture executed pursuant hereto is authorized and
permitted by this Indenture and complies with the requirements of this Article
Eleven.
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41
ARTICLE TWELVE
CONSOLIDATION, MERGER AND SALE
SECTION 12.01. Company may Consolidate, etc., on Certain Terms. Subject
to any modification contained in any indenture supplemental hereto under which
any series of Securities is issued and subject to the provisions of
Section 12.02, nothing contained in this Indenture or in any of the Securities
shall prevent any consolidation or merger of the Company with or into any other
corporation or corporations (whether or not affiliated with the Company), or
successive consolidations or mergers in which the Company or its successor or
successors shall be a party or parties, or shall prevent any sale or conveyance
of all or substantially all the property of the Company, to any other
corporation (whether or not affiliated with the Company) authorized to acquire
and operate the same; provided, however, that upon any such consolidation,
merger, sale or conveyance, other than a consolidation or merger in which the
Company is the continuing corporation, the due and punctual payment of the
principal of and premium, if any, and interest, if any, on all of the
Securities, according to their tenor, and the due and punctual performance and
observance of all of the covenants and conditions of this Indenture and in such
series to be performed by the Company, shall be expressly assumed, by
supplemental indenture satisfactory in form to the Trustee, executed and
delivered to the Trustee by the corporation (if other than the Company) formed
by such consolidation, or into which the Company shall have been merged, or by
the corporation which shall have acquired such property; and provided further
that the Company or such successor corporation, as the case may be, shall not
immediately after such merger or consolidation, or such sale or conveyance, be
in default in the performance of any such covenant or condition.
SECTION 12.02. Securities to be Secured in Certain Events. If, upon any
consolidation or merger of the Company with or into any other corporation, or
upon any sale or conveyance of all or substantially all the property of the
Company to any other corporation, any of the property of the Company or of any
Restricted Subsidiary would thereupon become subject to any mortgage, lien or
pledge, the Company, prior to or simultaneously with such consolidation, merger,
sale or conveyance, will secure the Securities of each series outstanding
hereunder, equally and ratably with any other obligations of the Company or any
Restricted Subsidiary then entitled thereto, by a direct lien on all such
property prior to all liens other than any theretofore existing thereon.
SECTION 12.03. Successor Corporation to be Substituted. In case of any
such consolidation, merger, sale or conveyance and upon the assumption by the
successor corporation, by supplemental indenture, executed and delivered to the
Trustee and satisfactory in form to the Trustee, of the due and punctual payment
of the principal of and premium, if any, and interest, if any, on all of the
Securities of each series and the due and punctual performance of all of the
covenants and conditions of this Indenture and in such series to be performed by
the Company, such successor corporation shall succeed to and be substituted for
the Company, with the same effect as if it had been named herein and, if the
Company is to be voluntarily dissolved, the Company shall thereupon be released
from all obligations hereunder and under the Securities of each series. Such
successor corporation thereupon may cause to be signed, and may issue either in
its own name or in the name of Lyondell Petrochemical Company any or all of the
Securities of each series issuable hereunder which theretofore shall not have
been signed by the Company and delivered to the Trustee; and, upon the order of
such successor corporation instead of the Company and subject to all the terms,
conditions and limitations in this Indenture prescribed, the Trustee shall
authenticate and shall deliver any Securities which previously shall have been
signed and delivered by the officers of the Company to the Trustee for
authentication, and any Securities which such successor corporation thereafter
shall cause to be signed and delivered to the Trustee for that purpose. All the
Securities so issued shall in all respects have the same legal rank and benefit
under this Indenture as the other Securities of such series theretofore or
thereafter issued in accordance with the terms of this Indenture as though all
of such Securities had been issued at the date of the execution hereof.
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42
SECTION 12.04. Opinion of Counsel to be Given Trustee. Before the Trustee
shall execute any supplemental indenture required pursuant to this Article
Twelve, the Trustee, subject to Sections 8.01 and 8.02, shall receive and shall
be fully protected in relying upon, an Officers' Certificate and an Opinion of
Counsel as conclusive evidence that any such consolidation, merger, sale or
conveyance and any such assumption complies with the provisions of this Article.
ARTICLE THIRTEEN
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 13.01. Discharge of Indenture. When (a) the Company shall deliver
to the Trustee for cancellation all Securities of any series theretofore
authenticated (other than any Securities of such series which shall have been
destroyed, lost or stolen or in lieu of or in substitution for which other
Securities shall have been authenticated and delivered) and not theretofore
canceled, or (b) all the Securities of any series not theretofore canceled or
delivered to the Trustee for cancellation shall have become due and payable, or
are by their terms to become due and payable within one year or are to be called
for redemption within one year under arrangements satisfactory to the Trustee
for the giving of notice of redemption, and the Company shall deposit with the
Trustee, in trust, funds (other than funds repaid by the Trustee to the Company
in accordance with Section 13.04) sufficient to pay at maturity or upon
redemption all of the Securities of such series (other than any Securities of
such series which shall have been mutilated, destroyed, lost or stolen and in
lieu of or in substitution for which other Securities shall have been
authenticated and delivered or which shall have been paid) not theretofore
canceled or delivered to the Trustee for cancellation, including principal and
premium, if any, and interest, if any, due or to become due to such date of
maturity or redemption date, as the case may be, and if in either case the
Company shall also pay or cause to be paid all other sums payable hereunder by
the Company, then this Indenture shall cease to be of further effect with
respect to Securities of such series, and the Trustee, on demand of the Company
accompanied by an Officers' Certificate and an Opinion of Counsel as required by
Section 16.07 and at the cost and expense of the Company, shall execute proper
instruments acknowledging satisfaction of and discharging this Indenture with
respect to Securities of such series, the Company, however, hereby agreeing to
reimburse the Trustee for any costs or expenses thereafter reasonably and
properly incurred and to compensate the Trustee for any services reasonably and
properly rendered by the Trustee in connection with this Indenture or the
Securities.
SECTION 13.02. Deposited Moneys to be Held in Trust by Trustee. All
moneys deposited with the Trustee pursuant to Section 13.01 shall be held in
trust and applied by it to the payment, either directly or through any paying
agent (including the Company if acting as its own paying agent), to the Holders
of the particular Securities for the payment or redemption of which such moneys
have been deposited with the Trustee, of all sums due and to become due thereon
for principal and interest and premium, if any.
SECTION 13.03. Paying Agent to Repay Moneys Held. Upon the satisfaction
and discharge of this Indenture, all moneys then held by any paying agent of the
Securities (other than the Trustee) shall, upon demand of the Company, be repaid
to it or paid to the Trustee, and thereupon such paying agent shall be released
from all further liability with respect to such moneys.
SECTION 13.04. Return of Unclaimed Moneys. Any moneys deposited with or
paid to the Trustee for payment of the principal of (and premium, if any) or
interest, if any, on Securities of any series and not applied but remaining
unclaimed by the Holders of Securities of that series for three years after the
date upon which the principal of, and premium, if any, or interest, if any, on
such Securities, as the case may be, shall have become due and payable, shall,
upon written demand, be repaid to the Company by the Trustee; and the Holder of
any of such Securities shall thereafter look only to the Company for any payment
which such Holder may be entitled to collect,
<PAGE>
43
provided, however, that, before being required to make any such repayment, the
Trustee may (at the cost of the Company) mail to such Holders at their last
known address or cause to be published once a week for two successive weeks, in
each case on any day of the week, in an Authorized Newspaper in the Place of
Payment, a notice (in such form as may be deemed appropriate by the Trustee)
that said moneys remain unclaimed and that, after a date named therein, any
unclaimed balance of said moneys then remaining will be returned to the Company
(except that with respect to presentation of Securities for payment and
transfer, such term shall mean the office or agency of the Trustee in said city
at which at any particular time its corporate agency business shall be
conducted).
ARTICLE FOURTEEN
DEFEASANCE
SECTION 14.01. Applicability of Article. If pursuant to Section 2.01
provision is made for the defeasance of Securities of a series, then the
provisions of this Article shall be applicable except as otherwise specified as
contemplated by Section 2.01 for Securities of such series.
SECTION 14.02. Defeasance upon Deposit of Moneys or U.S. Government
Obligations. At the Company's option, either (i) the Company shall be deemed to
have been Discharged (as defined below) from its obligations with respect to
Securities of any series on the 91st day after the applicable conditions set
forth below have been satisfied, or (ii) the Company shall cease to be under any
obligation to comply with any term, provision or condition set forth in
Sections 5.03, 5.04, 5.08, 12.01 and 12.02 with respect to Securities of any
series at any time after the applicable conditions set forth below have been
satisfied:
(a) the Company shall have deposited or caused to be deposited irrevocably
with the Trustee as trust funds in trust, specifically pledged as security for,
and dedicated solely to, the benefit of the Holders of the Securities of such
series, (i) money in an amount, or (ii) U.S. Government Obligations (as defined
below), which through the payment of interest, principal and premium, if any, in
respect thereof in accordance with their terms will provide (without any
reinvestment of such interest, principal or premium), not later than one day
before the due date of any payment, money in an amount, or (iii) a combination
of (i) and (ii), sufficient, in the opinion (with respect to (ii) and (iii)) of
a nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee at or prior to the time
of such deposit, to pay and discharge each installment of principal (including
any mandatory sinking fund payments) of, premium, if any, and interest on, the
outstanding Securities of such series on the dates such installments of
interest, principal or premium are due or the outstanding Securities of such
series are redeemable, if applicable, pursuant to Section 14.02(b) below;
(b) in case any of the Securities of such series are to be redeemed on any
date prior to their Stated Maturity, the Company shall have given to the Trustee
an irrevocable notice pursuant to Section 3.02 of this Indenture requiring
redemption of such Securities on such date and the Company shall have given to
the Trustee in form satisfactory to the Trustee irrevocable instructions to
publish notice of redemption of such Securities prior to said date as provided
in Section 3.02 of this Indenture; and in the event such Securities are not to
be redeemed within the 60 days next succeeding the date of such deposit with the
Trustee, the Company shall have given the Trustee in form satisfactory to it
irrevocable instructions to publish, as soon as practicable, once in each of two
successive calendar weeks in an Authorized Newspaper, a notice to the Holders of
such Securities that the deposit required by Section 14.02(a) has been made with
the Trustee and stating such Maturity or redemption date or dates upon which
moneys are to be available for the payment of the principal of, premium, if any,
and interest on such Securities;
(c) the Company shall have delivered to the Trustee an Officers'
Certificate certifying as to whether the Securities of such series are then
listed on the New York Stock Exchange;
<PAGE>
44
(d) if the Securities of such Series are listed on the New York Stock
Exchange, the Company shall have delivered to the Trustee an Opinion of Counsel
to the effect that the Company's exercise of its option under this Section would
not cause the Securities to be delisted;
(e) no Event of Default or event (including such deposit) which, with
notice or lapse of time, or both, would become an Event of Default with respect
to the Securities of such series shall have occurred and be continuing on the
date of such deposit as evidenced to the Trustee in an Officers' Certificate
delivered to the Trustee concurrently with such deposit; and
(f) the Company shall have paid or duly provided for payment of all
amounts then due to the Trustee pursuant to Section 8.06.
"Discharged" means that the Company shall be deemed to have paid and discharged
the entire indebtedness represented by, and obligations under, the Securities of
such series and to have satisfied all the obligations under this Indenture
relating to the Securities of such series (and the Trustee, at the expense of
the Company, shall execute proper instruments acknowledging the same), except
(A) the rights of Holders of Securities of such series to receive, from the
trust fund described in clause (a) above, payment of the principal of, and
premium, if any, and the interest on such Securities when such payments are due,
(B) the Company's obligations with respect to the Securities of such series
under Sections 2.05, 2.06, 5.02 and 14.03 and (C) the rights, powers, trusts,
duties and immunities of the Trustee hereunder, including without limitation,
the provisions of Section 8.06.
"U.S. Government Obligations" means securities that are (i) direct obligations
of the United States of America for the payment of which its full faith and
credit is pledged or (ii) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the United States of America the
payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case under clauses
(i) or (ii) are not callable or redeemable at the option of the issuer thereof.
SECTION 14.03. Deposited Moneys and U.S. Government Obligations to be held
in Trust. All moneys and U.S. Government Obligations deposited with the Trustee
pursuant to Section 14.02 in respect of Securities of a series shall be held in
trust and applied by it, in accordance with the provisions of such Securities
and this Indenture, to the payment, either directly or through any paying agent
(including the Company acting as its own paying agent) as the Trustee may
determine, to the Holders of such Securities, of all sums due and to become due
thereon for principal, premium, if any, and interest, if any, but such money
need not be segregated from other funds except to the extent required by law.
SECTION 14.04. Repayment to Company. After the Maturity and payment of
the principal of, premium, if any, and interest on the Securities of any series
for which money or U.S. Government Obligations have been deposited pursuant to
Section 14.02, the Trustee and any paying agent shall promptly pay or return to
the Company upon request any money and U.S. Government Obligations held by them
that are not required for the payment of the principal of, premium, if any, and
interest on the Securities of such series. The provisions of Section 13.04
shall apply to any money held by the Trustee or any paying agent under this
Article that remains unclaimed for two years after the Maturity of any series of
Securities for which money or U.S. Government Obligations have been deposited
pursuant to Section 14.02.
SECTION 14.05. Reinstatement. If the Trustee is unable to apply any money
or U.S. Government Obligations in accordance with Section 14.02 by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Securities
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 14.02 until such time as the Trustee is permitted to apply all such
money or U.S. Government Obligations in accordance with Section 14.02.
<PAGE>
45
ARTICLE FIFTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS, DIRECTORS, EMPLOYEE AND AFFILIATES
SECTION 15.01. Indenture and Securities Solely Corporate Obligations. No
recourse for the payment of the principal of or premium, if any, or interest, if
any, on any Security, or for any claim based thereon or otherwise in respect
thereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in this Indenture or in any supplemental indenture, or in any
Security, or because of the creation of any indebtedness represented thereby,
shall be had against any incorporator, stockholder, officer, director, employee
or affiliate as such, past, present or future, of the Company or of any
successor corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issue of the Securities.
ARTICLE SIXTEEN
MISCELLANEOUS PROVISIONS
SECTION 16.01. Provisions Binding on Company's Successors. All the
covenants, stipulations, promises and agreements by the Company contained in the
Indenture shall bind its successors and assigns whether so expressed or not.
SECTION 16.02. Benefits of Indenture Restricted to Parties and Holders.
Nothing in this Indenture or in the Securities, expressed or implied, shall give
or be construed to give to any person, firm or corporation, other than the
parties hereto and their successors and assigns and the Holders, any legal or
equitable right, remedy or claim under or in respect of this Indenture, or under
any covenant, condition or provision herein contained; and, subject to the
provisions of Articles Nine and Fifteen, all of such covenants, conditions and
provisions shall be for the sole benefit of the parties hereto and the Holders.
SECTION 16.03. Official Acts by Successor Corporation. Any act or
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any corporation that shall at the time be the lawful sole successor
of the Company.
SECTION 16.04. Addresses for Notices, etc. Any notice or demand which by
any provision of this Indenture is required or permitted to be given or served
by the Trustee or by the Holders of Securities on the Company shall be deemed to
have been sufficiently given or served, for all purposes, if given or served at
the office of the Senior Vice President and Treasurer at the principal office of
the Company at One Houston Center, 1221 McKinney Street, Suite 1600, Houston,
Texas 77010 (until another address is filed by the Company with the Trustee).
Any notice, direction, request of demand by any Holder to or upon the Trustee
shall be deemed to have been sufficiently given or made, for all purposes, if
given or made in writing at Texas Commerce Bank National Association, 600 Travis
St., 8th Floor, Houston, Texas 77002, addressed to the attention of its
Corporate Trust Department.
<PAGE>
46
SECTION 16.05. Notices to Holders; Waiver. Where this Indenture or any
Security provides for notice to Holders of any event, such notice shall
be sufficiently given (unless otherwise herein or in such Securities expressly
provided) if in writing and mailed, first-class, postage prepaid, to each
Registered Holder of such Securities, at his address as it appears on the
registry books of the Company, not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such notice. In any case
where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other Holders. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver. The Trustee shall deliver to the Company a copy of any notice delivered
by the Trustee to the Holders hereunder concurrently with the delivery of such
notice to the Holders.
In case, by reason of the suspension of publication of any Authorized
Newspaper, or by reason of any other cause, it shall be impossible to make
publication of any notice in one or more Authorized Newspapers as required by
any Security or this Indenture, then such method of publication or notification
as shall be made with the approval of the Trustee shall constitute a sufficient
publication of such notice.
In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or otherwise, it shall be impractical to mail notice of
any event to the Holders of Securities when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee and the Company shall be deemed
to be a sufficient giving of such notice.
SECTION 16.06. GOVERNING LAW. THIS INDENTURE AND EACH SECURITY SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 16.07. Evidence of Compliance with Conditions Precedent. Upon any
application or demand by the Company to the Trustee to take any action under any
of the provisions of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and an Opinion of Counsel stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
Each certificate or opinion provided for in this Indenture and delivered
to the Trustee with respect to compliance with a condition or covenant provided
for in this Indenture (other than annual certificates provided pursuant to
Section 5.08) shall include (a) a statement that the person making such
certificate or opinion has read such covenant or condition; (b) a brief
statement as to the nature and scope of the examination or investigation upon
which the statements or opinion contained in such certificate or opinion are
based; (c) a statement that, in the opinion of such person, he or she has made
such examination or investigation as is necessary to enable him or her to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and (d) a statement as to whether or not, in the opinion of
such person, such condition or covenant has been complied with.
SECTION 16.08. Legal Holidays. In any case where the date of maturity of
interest on or principal of the Securities or the date fixed for redemption of
any Security will not be a Business Day at the applicable Place of Payment, then
payment of such interest and premium, if any, on or principal of the Securities
need not be made at such Place of Payment on such date but may be made on the
next Business Day at such Place of Payment with the same force and effect as if
made on the date of maturity or the date fixed for redemption and no interest
shall accrue for the period from and after such date.
<PAGE>
47
SECTION 16.09. Trust Indenture Act to Control. If and to the extent that
any provision of this Indenture limits, qualifies or conflicts with the duties
imposed by any of sections 310 to 317, inclusive, of the Trust Indenture Act of
1939, through operation of Section 318(c) thereof, such imposed duties shall
control.
SECTION 16.10. No Security Interest Created. Nothing in this Indenture or
in the Securities, expressed or implied, shall be construed to create or
constitute a security interest under the Uniform Commercial Code or similar
legislation, as now or hereafter enacted and in effect, in any jurisdiction
where property of the Company or its Subsidiaries is located.
SECTION 16.11. Table of Contents, Headings, etc. The table of contents
and the titles and headings of the Articles and Sections of this Indenture have
been inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
SECTION 16.12. Execution in Counterparts. This Indenture may be executed
in any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
SECTION 16.13. Acceptance of Trust. The Trustee hereby accepts the trusts
declared and provided in this Indenture, upon the terms and conditions herein
above set forth.
IN WITNESS WHEREOF, LYONDELL PETROCHEMICAL COMPANY has caused this
Indenture to be signed and acknowledged by its Senior Vice President, Chief
Financial Officer and Treasurer, and its corporate seal to be affixed hereunto,
and the same to be attested by its Secretary or an Assistant Secretary, and
Texas Commerce Bank National Association, as Trustee, has caused this Indenture
to be signed by one of its Vice Presidents or Assistant Vice Presidents as of
the day and year first written above.
LYONDELL PETROCHEMICAL COMPANY
(SEAL) By: /s/ Russell S. Young
_______________________________________
Russell S. Young
Senior Vice President,
Chief Financial Officer and Treasurer
Attest:
/s/ Kerry A. Galvin
____________________________
Kerry A. Galvin
Assistant Secretary
Texas Commerce Bank National Association,
as Trustee
(SEAL) By: /s/ Terry L. Stewart
______________________________________
TERRY STEWART
AVP & TRUST OFFICER
<PAGE>
48
STATE OF TEXAS ) SS.:
COUNTY OF HARRIS )
Before me, Rosemarie G. Maw, the undersigned officer, on this day
personally appeared Russell S. Young, known to me to be the person whose name is
subscribed to the foregoing instrument, and known to me to be the Senior Vice
President, Chief Financial Officer and Treasurer of Lyondell Petrochemical
Company, a Delaware corporation, and acknowledged to me that he executed said
instrument for the purpose and consideration therein expressed, and as the act
of said corporation.
Given under my hand and seal of office this 31st day of January, 1996.
(SEAL) /s/ Rosemarie G. Maw
________________________________________________
Notary Public
STATE OF ) SS.:
COUNTY OF )
Before me, B. Y. Stampp, the undersigned officer, on this day personally
appeared Terry L. Stewart, known to me to be the person whose name is subscribed
to the foregoing instrument, and known to me to be an Assistant Vice President
of Texas Commerce Bank National Association, a national banking association, and
acknowledged to me that he executed said instrument for the purpose and
consideration therein expressed, and as the act of said bank.
Given under my hand and seal of office this 1st day of February, 1996.
(SEAL) /s/ B. Y. Stampp
________________________________________________
Notary Public
<PAGE>
EXHIBIT 4.6(a)
LYONDELL PETROCHEMICAL COMPANY
AND
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
Trustee
FIRST SUPPLEMENTAL INDENTURE
Dated as of February 15, 1996
to the
INDENTURE
Dated as of January 29, 1996
-----------------
$150,000,000 6.50% Notes Due 2006
$150,000,000 7.55% Debentures Due 2026
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of February 15, 1996 (the
"Supplement"), between LYONDELL PETROCHEMICAL COMPANY, a Delaware corporation
(the "Company"), and Texas Commerce Bank National Association, a national
banking association (the "Trustee"), as Trustee under an Indenture, dated as of
January 29, 1996 (the "Indenture").
RECITALS OF THE COMPANY
The Company has previously executed and delivered to the Trustee the
Indenture. Section 2.01 and 11.01 of the Indenture provide, among other things,
that the Company, when authorized by its Board of Directors, and the Trustee may
at any time and from time to time enter into an indenture supplemental to the
Indenture for the purpose of authorizing a series of Securities and specifying
the terms and form of each series of Securities. The Board of Directors of the
Company has duly authorized the creation, issuance, execution and delivery of
two series of Securities consisting of the 6.50% Notes Due 2006 (the "Notes")
and the 7.55% Debentures Due 2026 (the "Debentures") in the aggregate principal
amount of $300,000,000. The Company and the Trustee are executing and delivering
this Supplement in order to provide for the Notes and the Debentures
(collectively the "Securities").
1
<PAGE>
All things necessary to make this Supplement a valid and legally binding
agreement of the Company have been done.
SECTION 1. Terms Defined in the Indenture.
All capitalized terms used in this Supplement that are defined in the
Indenture have the meanings assigned to them in the Indenture, except to the
extent that such terms are otherwise defined in this Supplement.
SECTION 2. Certain Defined Terms.
Defined in
Term Section
---- -------
Indenture Preliminary Statement
Notes Recitals of the Company
Debentures Recitals of the Company
Securities Recitals of the Company
Record Date 8
SECTION 3. Designation.
The Securities are hereby created and shall be issuable in two series. The
Notes shall be designated as the "6.50% Notes Due 2006" and the Debentures shall
be designated as the
2
<PAGE>
"7.55% Debentures Due 2026".
SECTION 4. Dating of the Securities.
All Securities shall be dated the date of authentication.
SECTION 5. Maximum Aggregate Outstanding Amount.
The maximum aggregate principal amount of the Notes and the Debentures that
may be authenticated and delivered under this Supplement is limited to
$150,000,000 and $150,000,000, respectively, except for Securities authenticated
and delivered upon transfer of, or in exchange for, or in lieu of, other
Securities pursuant to Sections 2.05, 2.06, 2.07 or 11.04 of the Indenture.
SECTION 6. Stated Maturity.
The principal amount of the Notes shall be due and payable on February 15,
2006 and the principal amount of the Debentures shall be due and payable on
February 15, 2026.
3
<PAGE>
SECTION 7. Denomination of Securities.
The Securities shall initially be represented by one or more global
securities (the "Global Securities") deposited with the Depository Trust Company
("DTC"), as depositary, and registered in the name of a nominee of DTC. Except
as set forth below, the Securities will be available for purchase in
denominations of $1,000 and integral multiples therof in book-entry form only.
The term "Depository" refers to DTC or any successor depository, as depositary.
SECTION 8. Payments of Principal and Interest, Record Dates.
Each Security shall bear interest on its outstanding principal balance from
February 21, 1996 at the following interest rates until payment of the principal
thereof has been made or duly provided for: the Notes, 6.50%; and the
Debentures, 7.55%. Interest on the Securities shall be paid semi-annually on
February 15 and August 15, commencing on August 15, 1996. Interest on the
Securities of each series shall be computed on the basis of a 360-day year of
twelve 30-day months, from the later of: (1) February 21, 1996 or (2) the most
recent Interest Payment Date to which interest has been paid or duly provided
for (unless the date of such Note or Debenture is an Interest Payment Date, in
which case the date of such Note or Debenture) to the end of the semi-annual
interest accrual period. Interest on the Securities shall be payable in lawful
money of the United States of America.
4
<PAGE>
The principal of each Security shall be payable on the date due upon
delivery and surrender of such Security to the Trustee at the Place of Payment
in lawful money of the United States of America by check or by wire transfer of
immediately available funds, all as provided in Section 5.02 of the Indenture.
The record date ("Record Date") for each Interest Payment Date shall be the
close of business on the February 1 and August 1 next preceding each Interest
Payment Date, whether or not such date shall be a Business Day.
Any interest not paid on the Interest Payment Date therefor ("Defaulted
Interest") may be paid to the person in whose name each Security is registered
at the close of business on a special record date for the payment of such
Defaulted Interest, notice of which shall be given by the Company to Holders of
Securities not less than fifteen days prior to such special record date, or such
interest may be paid in any other lawful manner.
The Company shall pay any administrative costs imposed by banks in
connection with making payments by wire transfer in accordance with the
requirements of this Section 8, but any tax, assessment or governmental charge
imposed upon or required to be withheld from payments shall be borne by the
Holders of the Securities in respect to which payments are made.
5
<PAGE>
SECTION 9. Form of Securities.
The Securities shall all be issued in global form. The form of the Notes and
the form of the Debentures are attached hereto as Exhibits A-I and A-II,
respectively. Each of the Notes shall be numbered consecutively from A-1 upward.
Each of the Debentures shall be numbered consecutively from B-1 upward. The
Securities shall bear CUSIP numbers, but any failure to indicate or any error in
such CUSIP numbers shall not in any way affect the validity of the Securities.
SECTION 10. Ranking.
The Securities shall constitute unsecured and unsubordinated indebtedness of
the Company and shall rank pari passu with any other unsecured and
unsubordinated indebtedness of the Company.
SECTION 11. Defeasance.
The Securities shall be subject to defeasance as provided in Article
Fourteen of the Indenture. Upon any defeasance of the Notes or the Debentures,
the Company shall cease to be under any obligation to comply with any term,
provision or condition of this Supplement.
6
<PAGE>
SECTION 12. GOVERNING LAW.
THIS SUPPLEMENT AND EACH SECURITY ISSUED HEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED THEREIN.
SECTION 13. Counterparts.
This Supplement may be executed in any number of counterparts, each of which
so executed shall be deemed to be an original, but both of which shall together
constitute but one and the same instrument.
SECTION 14. Miscellaneous.
(a) Except as expressly amended and supplemented by this Supplement, the
Indenture shall remain unchanged and in full force and effect.
(b) This Supplement shall be construed as supplemental to the Indenture and
shall form a part thereof.
7
<PAGE>
IN WITNESS WHEREOF, the Company and the Trustee have caused this Supplement
to be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
LYONDELL PETROCHEMICAL
COMPANY
By: /s/ Russell S. Young
-------------------------------
Name: Russell S. Young
Title: Senior Vice President,
Chief Financial Officer and
Treasurer
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By: /s/ Terry L. Stewart
-------------------------------
Name: Terry L. Stewart
Title: Assistant Vice President
and Trust Officer
8
<PAGE>
EXHIBIT A-I
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange, or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or such other entity as is requested by an authorized representative
of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co.,
has an interest herein.
LYONDELL PETROCHEMICAL COMPANY
6.50% NOTE DUE 2006 CUSIP No.
No. A-1 $150,000,000
LYONDELL PETROCHEMICAL COMPANY, a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company"), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of $150,000,000 at the office or agency of the Trustee (herein
defined) in the Borough of Manhattan, The City of New York, on February 15,
2006, in such coin or currency of the United States of America as at the time of
payment shall be legal tender for payment of public and private debts, and to
pay interest thereon from February 21, 1996, or from the most recent February 15
or August 15 next preceding the date of this Note to which interest has been
paid or duty provided for (unless the date hereof is the date to which interest
on the Notes has been paid, in which case from the date of this Note),
semiannually on February 15 and August 15 of each year (each an "Interest
Payment Date"), commencing August 15, 1996, on said principal sum at said office
or agency, in like coin or currency, at the rate per annum specified in the
title hereof, until the principal hereof is paid or duly provided for. The
interest so payable on any Interest Payment Date will be paid, except as
provided in the Indenture (herein defined), to the person in whose name this
Note is registered at the close of business on the Record Date for such
interest, which shall be the February 1 or August 1 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date; provided
however, that at the option of the Company payment of interest may be made by
check mailed to the address of such person as such address shall appear in the
register for the Notes. For purposes of this Note, "Business Day" means each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which any
banking institutions in that Place of Payment are authorized or obligated by law
to close.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
This Note shall not be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been signed by the Trustee under
the Indenture.
This Note is one of a duly authorized issue of debentures, notes or other
evidences of indebtedness of the Company (herein called the "Securities"), of
the series hereinafter specified, all issued or to be issued under and pursuant
to an Indenture dated as of January 29, 1996 (herein called the "Indenture"),
duly executed and delivered by the Company to Texas Commerce Bank National
Association, as trustee (hereinafter called the "Trustee"), to which Indenture,
and all indentures supplemental thereto, reference is hereby made for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the Holders of the
Securities. The Securities may be issued in one or more series, which different
series may be issued in various aggregate principal amounts, may mature at
different times, may bear interest (if any) at different rates, may be subject
to different redemption provisions (if any), may be subject to different
sinking, purchase or analogous funds (if any), may be subject to different
covenants and Events of Default and may otherwise vary as provided in the
Indenture. In the event of any inconsistency between the provisions of this Note
and the provisions of the Indenture, and any indentures supplemental thereto,
the terms of the Indenture and any indentures supplemental thereto shall
control. Each Holder of this Note by accepting the same, agrees to and shall be
bound by the provisions of the
1
<PAGE>
Indenture and any indenture supplements thereto.
This Note is one of a series of Securities of the Company issued pursuant to
the First Supplemental Indenture dated as of February 15, 1996 (herein called
the "Supplement"), and the Indenture (as used herein the "Indenture" refers to
the Indenture as supplemented by the Supplement) designated as the 6.500% Notes
Due 2006 (herein called the "Notes") limited in aggregate principal amount to
$150,000,000.
In case an Event of Default with respect to the Notes shall occur and be
continuing, the principal hereof may be declared, and upon such declaration
shall become, due and payable, in the manner, with the effect and subject to the
conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the Holders of not less than 50% in aggregate principal
amount at Stated Maturity of the Securities at the time outstanding of each
series affected by such supplemental indenture or indentures, evidenced as
provided in the Indenture, to execute supplemental indentures adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Indenture, or of any supplemental indenture or indentures, as such
provisions apply to such Securities, or modifying in any manner the rights of
the Holders of the Securities of each such series; provided, however, that no
such supplemental indenture shall, without the consent of the Holders of each
Security of such series so affected thereby, (i) extend the fixed maturity of
any Security or reduce the rate or extend the time of payment of interest
thereon or reduce the principal thereof or the time during which premium is
payable thereon or change the method of computing the amount of principal
thereof or make the principal thereof or any premium or interest thereon payable
in any coin or currency other than that provided in the Securities, or (ii)
reduce the percentage in principal amount at Stated Maturity of the outstanding
Securities, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is required for
any waiver of compliance with certain provisions of the Indenture or of certain
defaults under, and their consequences provided for in, the Indenture. Any such
consent or waiver by the Holder of this Note (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such Holder and upon all future
Holders and owners of this Note and any Notes which may be issued in exchange or
substitution herefor, irrespective of whether any notation thereof is made upon
this Note or such other Notes.
No reference herein to the Indenture and no provision of this Note or of the
Indenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of and interest on this Note at the
place, at the respective times, at the rate, and in the coin or currency herein
prescribed.
The Notes may not be redeemed prior to maturity. The Notes are unsecured
obligations of the Company ranking pari passu without any preference among
themselves and equally with all other unsecured indebtedness (other than
subordinated indebtedness) of the Company from time to time outstanding.
The Notes are issuable in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000 in excess of that amount. Notes may be
exchanged for a like aggregate principal amount of Notes of other authorized
denominations, without charge except for any tax or other governmental charge
imposed in relation thereto, at the office or agency of the Trustee in the
Borough of Manhattan, The City of New York, and in the manner and subject to the
limitations provided in the Indenture.
Upon due presentment for registration of transfer of this Note at the office
or agency of the Trustee in the Borough of Manhattan, The City of New York, a
new Note or Notes of authorized denominations for an equal aggregate principal
amount at Stated Maturity will be issued to the transferee in exchange therefor,
in the manner and subject to the limitations provided in the Indenture, without
charge except for any tax or other governmental charge imposed in relation
thereto.
Prior to due presentment for registration of transfer of this Note, the
Company, the Trustee, any paying agent and any registrar for the Notes may deem
and treat the registered Holder hereof as the absolute owner of this Note
(whether or not this Note shall be overdue and notwithstanding any notation of
ownership or other writing hereon by anyone other than the Company, any
registrar for the Notes or the Trustee), for the purpose of receiving payment
hereof or on account hereof, and for all other purposes (subject to the
provisions of the first paragraph hereof), and neither the Company nor the
Trustee nor any paying agent nor any registrar for the Notes shall be
2
<PAGE>
affected by any notice to the contrary.
No recourse for the payment of the principal of or premium, if any, or
interest on this Note, or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture, or any indenture supplemental thereto, or in any
Note, or because of the creation of any indebtedness represented thereby, shall
be had against any incorporator, stockholder, officer or director, as such,
past, present or future, of the Company or of any successor corporation, either
directly or through the Company or any successor corporation, whether by virtue
of any constitution, statute or rule of law or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as a condition of and as part of the consideration for the issue
hereof, expressly waived and released.
Terms used herein which are defined in the Indenture shall have the meanings
assigned to them in the Indenture.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
IN WITNESS WHEREOF, LYONDELL PETROCHEMICAL COMPANY has caused this
instrument to be signed, manually or by facsimile, by its duly authorized
officers, and its corporate seal to be printed, engraved or otherwise reproduced
hereon, by facsimile or otherwise.
LYONDELL PETROCHEMICAL COMPANY
By By
- ---------------------------------- -----------------------------------
Senior Vice President, Chief Chairman of the Board and
Financial Officer and Chief Executive Officer
Treasurer
Dated: February 21, 1996
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
THIS IS ONE OF THE SECURITIES ISSUED UNDER THE WITHIN-MENTIONED INDENTURE.
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, AS TRUSTEE
By
---------------------------
Authorized Officer
Dated: February 21, 1996
3
<PAGE>
EXHIBIT A-II
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange, or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or such other entity as is requested by an authorized representative
of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co.,
has an interest herein.
LYONDELL PETROCHEMICAL COMPANY
7.55% DEBENTURE DUE 2026 CUSIP No.______
No. B-1 $150,000,000
LYONDELL PETROCHEMICAL COMPANY, a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company"), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of $150,000,000 at the office or agency of the Trustee (herein
defined) in the Borough of Manhattan, The City of New York, on February 15,
2026, in such coin or currency of the United States of America as at the time of
payment shall be legal tender for payment of public and private debts, and to
pay interest thereon from February 21, 1996, or from the most recent February 15
or August 15 next preceding the date of this Debenture to which interest has
been paid or duly provided for (unless the date hereof is the date to which
interest on the Debentures has been paid, in which case from the date of this
Debenture), semiannually on February 15 and August 15 of each year (each an
"Interest Payment Date"), commencing August 15, 1996, on said principal sum at
said office or agency, in like coin or currency, at the rate per annum specified
in the title hereof, until the principal hereof is paid or duly provided for.
The interest so payable on any Interest Payment Date will be paid, except as
provided in the Indenture (herein defined), to the person in whose name this
Debenture is registered at the close of business on the Record Date for such
interest, which shall be the February 1 or August 1 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date; provided,
however, that at the option of the Company payment of interest may be made by
check mailed to the address of such person as such address shall appear in the
register for the Debentures. For purposes of this Debenture, "Business Day"
means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on
which any banking institutions in that Place of Payment are authorized or
obligated by law to close.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
This Debenture shall not be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been signed by the Trustee
under the Indenture.
This Debenture is one of a duly authorized issue of debentures, notes or
other evidences of indebtedness of the Company (herein called the "Securities"),
of the series hereinafter specified, all issued or to be issued under and
pursuant to an Indenture dated as of January 29, 1996 (herein called the
"Indenture"), duly executed and delivered by the Company to Texas Commerce Bank
National Association, as trustee (hereinafter called the "Trustee"), to which
Indenture, and all indentures supplemental thereto, reference is hereby made for
a description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the Holders of the
Securities. The Securities may be issued in one or more series, which different
series may be issued in various aggregate principal amounts, may mature at
different times, may bear interest (if any) at different rates, may be subject
to different redemption provisions (if any), may be subject to different
sinking, purchase or analogous funds (if any), may be subject to different
covenants and Events of Default and may otherwise vary as provided in the
Indenture. In the event of any inconsistency between the provisions of this
Debenture and the provisions of the Indenture, and any indentures supplemental
thereto, the terms of the Indenture and any indentures supplemental thereto
shall control. Each Holder of this Debenture by accepting the same, agrees to
and shall be bound by the provisions of the Indenture and any indenture
supplements thereto.
1
<PAGE>
This Debenture is one of a series of securities of the Company issued
pursuant to the First Supplemental Indenture dated as of February 15, 1996
(herein called the "Supplement), and the Indenture (as used herein the
"Indenture" refers to the Indenture as supplemented by the Supplement)
designated as the 7.55% Debentures Due 2026 (herein called the "Debentures")
limited in aggregate principal amount to $150,000,000.
In case an Event of Default with respect to the Debentures shall occur and
be continuing, the principal hereof may be declared, and upon such decimation
shall become, due and payable, in the manner, with the effect and subject to the
conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the Holders of not less than 50% in aggregate principal
amount at Stated Maturity of the Securities at the time outstanding of each
series affected by such supplemental indenture or indentures, evidenced as
provided in the Indenture, to execute supplemental indentures adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Indenture, or of any supplemental indenture or indentures, as such
provisions apply to such Securities, or modifying in any manner the rights of
the Holders of the Securities of each such series; provided, however, that no
such supplemental indenture shall, without the consent of the Holders of each
Security of such series so affected thereby, (i) extend the fixed maturity of
any Security or reduce the rate or extend the time of payment of interest
thereon or reduce the principal thereof or the time during which premium is
payable thereon or change the method of computing the amount of principal
thereof or make the principal thereof or any premium or interest thereon payable
in any coin or currency other than that provided in the Securities, or (ii)
reduce the percentage in principal amount at Stated Maturity of the outstanding
Securities, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is required for
any waiver of compliance with certain provisions of the Indenture or of certain
defaults under, and their consequences provided for in, the Indenture. Any such
consent or waiver by the Holder of this Debenture (unless revoked as provided in
the Indenture) shall be conclusive and binding upon such Holder and upon
all future Holders and owners of this Debenture and any Debentures which may be
issued in exchange or substitution herefor, irrespective of whether any notation
thereof is made upon this Debenture or such other Debentures.
No reference herein to the Indenture and no provision of this Debenture or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this
Debenture at the place, at the respective times, at the rate, and in the coin or
currency herein prescribed.
The Debentures may not be redeemed prior to maturity. The Debentures are
unsecured obligations of the Company ranking pari passu without any preference
among themselves and equally with all other unsecured indebtedness (other than
subordinated indebtedness) of the Company from time to time outstanding.
The Debentures are issuable in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000 in excess of that amount.
Debentures may be exchanged for a like aggregate principal amount of Debentures
of other authorized denominations, without charge except for any tax or other
governmental charge imposed in relation thereto, at the office or agency of the
Trustee in the Borough of Manhattan, The City of New York, and in the manner and
subject to the limitations provided in the Indenture.
Upon due presentment for registration of transfer of this Debenture at the
office or agency of the Trustee in the Borough of Manhattan, The City of New
York, a new Debenture or Debentures of authorized denominations for an equal
aggregate principal amount at Stated Maturity will be issued to the transferee
in exchange therefor, in the manner and subject to the limitations provided in
the Indenture, without charge except for any tax or other governmental charge
imposed in relation thereto.
Prior to due presentment for registration of transfer of this Debenture, the
Company, the Trustee, any paying agent and any registrar for the Debentures may
deem and treat the registered Holder hereof as the absolute owner of this
Debenture (whether or not this Debenture shall be overdue and notwithstanding
any notation of ownership or other writing hereon by anyone other than the
Company, any registrar for the Debentures or the Trustee), for the purpose of
receiving payment hereof or on account hereof, and for all other purposes
(subject to the provisions of the first paragraph hereof), and neither the
Company nor the Trustee nor any paying agent nor any registrar for the
Debentures shall be affected by any notice to the contrary.
No recourse for the payment of the principal of or premium, if any, or
interest on this Debenture, or for
2
<PAGE>
any claim based hereon or otherwise in respect hereof, and no recourse under or
upon any obligation, covenant or agreement of the Company in the Indenture, or
any indenture supplemental thereto, or in any Debenture, or because of the
creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or of any successor corporation, either directly or
through the Company or any successor corporation, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any assessment or
penalty or otherwise, all such liability being, by the acceptance hereof and as
a condition of and as part of the consideration for the issue hereof, expressly
waived and released.
Terms used herein which are defined in the Indenture shall have the meanings
assigned to them in the Indenture.
THIS DEBENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, LYONDELL PETROCHEMICAL COMPANY has caused this
instrument to be signed, manually or by facsimile, by its duly authorized
officers, and its corporate seal to be printed, engraved or otherwise reproduced
hereon, by facsimile or otherwise.
LYONDELL PETROCHEMICAL COMPANY
By By
- --------------------------------- -----------------------------------
Senior Vice President, Chief Chairman of the Board and
Financial Officer and Chief Executive Officer
Treasurer
Dated: February 21, 1996
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
THIS IS ONE OF THE SECURITIES ISSUED UNDER THE WITHIN-MENTIONED INDENTURE.
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, AS TRUSTEE
BY
--------------------------
Authorized Officer
Dated: February 21, 1996
<PAGE>
EXHIBIT 4.6(b)
CONFORMED COPY
LYONDELL PETROCHEMICAL COMPANY,
EQUISTAR CHEMICALS, LP
AND
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
TRUSTEE
SECOND SUPPLEMENTAL INDENTURE
DATED AS OF
DECEMBER 1, 1997
TO
INDENTURE
DATED AS OF
JANUARY 29, 1996
(AS SUPPLEMENTED BY THE FIRST SUPPLEMENTAL INDENTURE
DATED AS OF FEBRUARY 15, 1996)
<PAGE>
THIS SECOND SUPPLEMENTAL INDENTURE (this "Supplement"), dated as of
December 1, 1997, between Lyondell Petrochemical Company, a Delaware corporation
("Lyondell"), Equistar Chemicals, LP, a Delaware limited partnership
("Equistar") and Texas Commerce Bank National Association, as Trustee (the
"Trustee"), supplements the Indenture dated as of January 29, 1996 (the
"Indenture"), between Lyondell and the Trustee, as supplemented by the First
Supplemental Indenture dated as of February 15, 1996 (the "First Supplemental
Indenture"), pursuant to which the Company's 6.50% Notes Due 2006 and 7.55%
Notes Due 2026 (collectively, the "Notes") were issued and are outstanding.
RECITALS
WHEREAS, Lyondell has executed and delivered to the Trustee the
Indenture, providing for the issuance from time to time of Lyondell's unsecured
debentures, notes or other evidences of indebtedness, issuable in one or more
series (the "Securities"), and Lyondell has executed and delivered to the
Trustee the First Supplemental Indenture, providing for the issuance of the
Notes, which are Securities under the Indenture;
WHEREAS, Lyondell and Millennium Chemicals Inc., a Delaware
corporation ("Millennium"), have entered into a Master Transaction Agreement
dated July 25, 1997, as amended (the "Master Transaction Agreement"), which
provides that, on the Closing Date (as defined in the Master Transaction
Agreement) each of Lyondell and Millennium will contribute or cause to be
contributed certain assets to a joint venture partnership and that such joint
venture partnership will assume certain liabilities of each of Lyondell and
Millennium;
WHEREAS, Lyondell has caused two of its wholly-owned subsidiaries,
Lyondell Petrochemical L.P. Inc. ("Lyondell LP") and Lyondell Petrochemical G.P.
Inc., each a Delaware corporation, and Millennium has caused two of its wholly-
owned subsidiaries, to execute and deliver the Limited Partnership Agreement of
Equistar dated as of October 10, 1997, and Equistar has been organized by the
partners thereof to serve as the joint venture partnership contemplated by the
Master Transaction Agreement;
WHEREAS, the Master Transaction Agreement provides that Lyondell will
contribute certain specified assets (the "Assets") to Equistar and that Equistar
will assume certain specified liabilities of Lyondell, including the Notes,
pursuant to an Asset Contribution Agreement to be entered into on the Closing
Date between Lyondell, Lyondell LP and Equistar (the "Asset Contribution
Agreement"), the form of which is attached as an exhibit to the Master
Transaction Agreement;
WHEREAS, pursuant to the Asset Contribution Agreement, on the Closing
Date, Lyondell will contribute the Assets to Equistar and Equistar will assume
the Notes;
WHEREAS, Section 12.01 of the Indenture provides that nothing
contained in the Indenture or in any of the Securities shall prevent any sale or
conveyance of all or substantially all
<PAGE>
the property of Lyondell to any other corporation, provided that upon any such
sale or conveyance the due and punctual payment of the principal of and premium,
if any, and interest, if any, on all of the Securities, according to their
tenor, and the due and punctual performance and observance of all of the
covenants and conditions of the Indenture and in such series to be performed by
Lyondell shall be expressly assumed, by supplemental indenture, by the
corporation which shall have acquired such property;
WHEREAS, for purposes of Section 12.01 of the Indenture, the Assets
constitute substantially all of the assets of Lyondell;
WHEREAS, pursuant to Section 12.03 of the Indenture, upon such
assumption by supplemental indenture as specified in the foregoing paragraph,
the transferee shall succeed to and be substituted for Lyondell, with the same
effect as if it had been named in the Indenture;
WHEREAS, Section 11.01 of the Indenture provides that under certain
conditions, Lyondell and the Trustee may, from time to time and at any time
enter into an indenture or indentures supplemental to the Indenture, inter alia,
to evidence the succession of another corporation to the Company and the
assumption by any such successor, pursuant to Article 12 of the Indenture of the
covenants, agreements and obligations of Lyondell contained in the Indenture and
the Securities; and
WHEREAS, in connection with the contribution of the Assets to Equistar
by Lyondell and the assumption of the Notes by Equistar, Lyondell and Equistar
have duly determined to make, execute and deliver to the Trustee this Supplement
pursuant to the Indenture;
NOW, THEREFORE, THIS SUPPLEMENT WITNESSETH:
In consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
to comply with Sections 12.01 and 12.03 of the Indenture, the parties hereto
hereby agree, for the equal and proportionate benefit of the respective Holders
from time to time of the Securities, as follows:
SECTION ONE
DEFINITIONS
Capitalized terms used and not otherwise defined herein have the
respective meanings assigned to such terms in the Indenture.
-3-
<PAGE>
SECTION TWO
SUCCESSION BY TRANSFER OF ASSETS
On the Closing Date, the Assets will be transferred to Equistar, and
effective upon such transfer, (a) Equistar hereby expressly assumes the due and
punctual payment of the principal of and premium, if any, and interest, if any,
on all of the Securities of each series and the due and punctual performance of
all of the covenants and conditions of the Indenture, as supplemented by the
First Supplemental Indenture and this Supplement, and in such series to be
performed by Lyondell; and (b) Equistar will succeed to and be substituted for
Lyondell as the "Company" for purposes of the Indenture, with the same effect as
if Equistar had been named as the "Company" in the Indenture, as supplemented;
provided, however, that Lyondell shall not be released from any of its
obligations under the Indenture and under the Securities of each series,
including the obligation to pay the principal of and premium, if any, and
interest, if any, on the Securities.
After the Closing Date, for purposes of the Indenture, the term
"Company" shall mean and include both Equistar and Lyondell, and Equistar shall
not be a "Subsidiary" of Lyondell.
SECTION THREE
RATIFICATION
Except as expressly amended and supplemented on this Supplement, the
Indenture shall remain unchanged and in full force and effect. This Supplement
shall be construed as supplemental to the Indenture and shall form a part
thereof.
SECTION FOUR
GOVERNING LAW
This Supplement shall be governed by and construed in accordance with
the laws of the State of New York applicable to agreements made and to be
performed therein.
SECTION FIVE
COUNTERPARTS
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
-4-
<PAGE>
IN WITNESS WHEREOF, each of Lyondell Petrochemical Company and
Equistar Chemicals, LP have caused this Second Supplemental Indenture to be duly
executed and its seal to be affixed hereunto and the same to be attested by its
Secretary or an Assistant Secretary, and Texas Commerce Bank National
Association as Trustee, has caused this Second Supplemental Indenture to be
signed by one of its Vice Presidents or Assistant Vice Presidents as of the day
and year first above written.
LYONDELL PETROCHEMICAL COMPANY
[SEAL] By /s/ Russell S. Young
---------------------------------------
Name: Russell S. Young
Title: Senior Vice President, Chief
Financial Officer and Treasurer
Attest:
/s/ Kerry A. Galvin
- -------------------------------
Name: Kerry A. Galvin
Title: Assistant Secretary
EQUISTAR CHEMICALS, LP
[SEAL] By /s/ Joseph M. Putz
---------------------------------------
Name: Joseph M. Putz
Title: Senior Vice President, Finance
and Administration
Attest:
/s/ Gerald A. O'Brien
- -------------------------------
Name: Gerald A. O'Brien
Title: Vice President and Secretary
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, Trustee
By /s/ Mauri J. Cowen
---------------------------------------
Name: Mauri J. Cowen
Title: Vice President and Trust Officer
-5-
<PAGE>
Exhibit 10.1
FORM OF
EXECUTIVE SEVERANCE AGREEMENT,
Dated as of ______________, 1997,
between
LYONDELL PETROCHEMICAL COMPANY,
a Delaware corporation (the "Company"), and
______________________ ("Executive")
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. Termination Following Employment by Partnership............. 1
Section 2. Rights and Benefits upon Termination........................ 2
(a) Stock Options............................................... 2
(b) Salary and Other Payment at Termination..................... 3
(c) Crediting of Additional Pension Benefit..................... 4
(d) Executive Deferral Plan..................................... 4
(e) Insurance and Other Benefits................................ 4
(f) Financial Counseling........................................ 5
(g) Outplacement................................................ 5
(h) No Duty to Mitigate......................................... 5
Section 3. Other Benefit Plans......................................... 5
Section 4. Payment Obligations Absolute................................ 5
Section 5. Conditions to Employer's Obligations........................ 6
Section 6. Confidentiality and Cooperation............................. 6
(a) Cooperation................................................. 6
(b) Release of Liability........................................ 7
Section 7. Term of Agreement........................................... 7
Section 8. Arbitration................................................. 7
(a) Arbitrable Matters.......................................... 7
(b) Submission to Arbitration................................... 8
(c) Arbitration Procedures...................................... 8
(d) Compliance with Decisions................................... 9
(e) Costs and Expenses.......................................... 9
Section 9. Notices..................................................... 9
Section 10. Miscellaneous...............................................10
(a) Assignment..................................................10
(b) Construction of Agreement...................................10
(c) Amendment...................................................10
(i)
<PAGE>
(d) Waiver......................................................10
(e) Severability................................................10
(f) Successors..................................................10
(g) Taxes.......................................................11
(h) Governing Law...............................................11
(i) Entire Agreement............................................11
(ii)
<PAGE>
EXECUTIVE SEVERANCE AGREEMENT
THIS EXECUTIVE SEVERANCE AGREEMENT, is made and entered into this ____ day
of ______________, 1997, by and between LYONDELL PETROCHEMICAL COMPANY, a
Delaware corporation (hereinafter referred to as "Company"), and _____________
an individual (hereinafter referred to as "Executive").
W I T N E S S E T H:
WHEREAS, the Compensation Committee of the Board of Directors of the
Company (the "Compensation Committee") has authorized the Company to enter into
a severance agreement in the form hereof with Executive;
WHEREAS, Executive has been offered a position, anticipated to be effective
on or about January 1, 1998, with Equistar Chemicals L.P. ("Equistar") and it is
in the best interest of the Company that Executive accept this position without
concern that Executive be distracted by personal uncertainties and risks created
by this new assignment;
WHEREAS, it is the Company's intent to assign this Agreement to Equistar
upon Executive's employment by Equistar and all obligations under this Agreement
shall be assumed by Equistar, unless specifically retained by Company;
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of Executive and the availability of Executive's advice and counsel
prior to Executive's employment with Equistar, to induce Executive to remain in
the employ of the Company until employment by Equistar and further, to accept
employment with Equistar and for other good and valuable consideration, the
parties agree as follows:
Section 1. Termination Following Employment by Partnership.
Employer will provide or cause to be provided to Executive the rights and
benefits described in Section 2 of this Agreement in the event that Executive's
employment is terminated within two years following Executive's Employment with
Equistar.
For purposes of this Agreement, "Employer" shall refer to Company prior to
assignment of this Agreement to Equistar and shall refer to Equistar following
Equistar's assumption of the obligations under this Agreement.
Termination must not occur as a result of (A) "Cause" (as defined in
Section 5), (B) Executives' death or permanent disability or (C) Executive's
retirement upon reaching age 65 ("Normal Retirement Date"). Termination shall
also include termination of employment by
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Executive within ninety (90) days following the occurrence of any event which
shall constitute "Constructive Termination for Good Reason."
For purposes of this Agreement, Constructive Termination for Good Reason
means:
(i) the Executive is assigned to any duties or responsibilities that
are not comparable to Executive's position, offices, duties,
responsibilities or status with Equistar at the time of Equistar
employment, or the Executive's reporting responsibilities or titles are
changed and the change results in a reduction of Executive's
responsibilities or position at Equistar;
(ii) the level of benefits or compensation provided to Executive is
reduced below the comparable level of benefits or compensation payable to
similarly situated Executives at Equistar; or
(iii) the Executive is actually transferred, or offered a proposed
transfer, as evidenced in a written communication from Employer to
Executive, to another location other than the location at which he was
primarily employed immediately preceding his initial employment with
Equistar, unless that new location is a major operating unit or facility
of the Company or Equistar that is located within 50 miles of Executive's
primary location as of the date immediately preceding a transfer; provided,
however, (1) Executive, within thirty (30) days from the date that he is
given written notice by the Employer of such actual or proposed transfer,
shall provide the Compensation Committee or the Partnership Governance
Committee of Equistar ("Partnership Governance Committee") with written
notice that the transfer shall constitute a Constructive Termination for
Good Reason, (2) Employer, within twenty (20) days of receipt of the
notice, fails to provide Executive with written notice rescinding the
actual or proposed transfer and (3) if the Employer does not rescind the
transfer, Executive must terminate his employment due to Constructive
Termination for Good Reason within forty (40) days following expiration of
the 20-day period so that in any event Executive shall have terminated his
employment with Employer within 90 days after Executive first receives
written notice from Employer of such actual or proposed transfer.
Section 2. Rights and Benefits upon Termination. In the event Executive
is entitled to receive the rights and benefits described in this Section as a
result of the termination or Constructive Termination for Good Reason of
Executive's employment as described in Section 1 (collectively referred to as
"Termination"), the Employer agrees to provide or cause to be provided to
Executive the following rights and benefits.
(a) Stock Options. With respect to any stock options granted to Executive
under the Company's Executive Long-Term Incentive Plan (the "Stock Option
Plan"), notwithstanding any provision of the Stock Option Plan or Executive's
associated stock option agreement, if any, to the
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contrary, all non-vested options shall become 100% vested and fully exercisable
as of the last business day immediately proceeding Executive's Termination.
If Company experiences a Change in Control and no longer offers any
publicly traded securities prior to Executive's Termination, Employer shall also
pay or cause to be paid to Executive a cash lump sum payment for all outstanding
dividend share credits associated with stock options granted under the Stock
Option Plan. This lump sum payment shall be paid within forty-five (45) calendar
days from the date of the Change in Control.
For purposes of this section, the value of the outstanding dividend share
credits shall be calculated by SCA Consultants, or any other compensation
consultant that is mutually agreeable to the parties (the "Compensation
Consultant"). In preparing its valuation, the Compensation Consultant in its
good faith discretion shall be responsible for designating reasonable and
customary parameters for the methodology used in its calculation. Employer shall
deliver to Executive the determination of the value of his dividend share
credits with payment therefore.
All stock options owned by Executive shall be freely exercisable following
Termination for the remainder of their existing terms without regard to any
earlier date that may be specified therein including, without limitation, an
earlier expiration date specified with respect to Executive's termination of
employment.
(b) Salary and Other Payment at Termination. Employer shall pay to
Executive not later than thirty (30) days following Termination a lump-sum
payment in cash in the amount of three (3) times Executive's "Applicable Annual
Earnings" (as defined below); provided, however, if there are fewer than twenty-
four (24) full months remaining from the date of Termination to Executive's
Normal Retirement Date, the payment Executive shall be entitled to receive
pursuant to this Section 2(b) will equal such amount multiplied by a fraction,
the numerator of which is the number of months (including any fraction of a
month) so remaining to Executive's Normal Retirement Date and the denominator of
which is 24.
For purposes of this Agreement, "Applicable Annual Earnings" shall mean the
sum of Executive's annual base salary in effect on the last day of employment
with Company and Executive's base salary in effect on the last day of employment
with Company and Executive's Average Award (whether or not paid) for personal
services on behalf of the Company prior to Equistar employment. The Average
Award shall be the average, determined over the three year period immediately
prior to Executive's employment by Equistar, of the cash amount of an
Executive's annual award payable under the Company's Value Share Plan (but not
deferred cash associated with any grant of restricted stock or the additional
amount paid to executive which represents pro rata awards for outstanding
performance cycles). Applicable Annual Earnings shall include Executive's annual
base salary and Average Award whether or not paid on a deferred basis, including
without limitation, amounts contributed by or on behalf of Executive under an
Employer-sponsored plan, such as (i) a plan described in section 125 or 401(k)
of the Internal Revenue Code
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of 1986, as amended, or (ii) the Employer's Executive Deferral Plan or an
"excess benefit plan" as defined in the Employee Retirement Income Security Act
of 1974, as amended. Notwithstanding the preceding provisions of this paragraph,
Applicable Annual Earnings does not include any income attributable to stock
options, stock appreciation rights, performance awards other than awards under
an executive bonus plan described above, dividend credits, and restricted stock
granted under, and dividends on shares acquired pursuant to, any stock option
plan, restricted stock plan or performance unit plan.
(c) Crediting of Additional Pension Benefit. Company shall cause
Executive to be credited with an additional five (5) years of (i) age (not to
exceed age 65) and (ii) service with the Employer, under the Company's
Supplementary Executive Retirement Plan (or its successor) for purposes of
determining his accrued benefits thereunder.
If the method to calculate a retirement benefit under Company's qualified
retirement plan and Supplementary Executive Retirement Plan is changed, then the
Executive shall be entitled to an amount under the new plan formula that is the
equivalent of the amount that would have been payable if the Executive had been
credited with the additional age and service described above. Payments
attributable to this enhanced retirement benefit shall be payable under the
Company's non-qualified retirement plan for executives.
(d) Executive Deferral Plan. The provisions of this Section 2(d) shall
apply notwithstanding any provisions of the Company's Executive Deferral Plan
(the "Deferral Plan") or the initial paragraph of Section 2 hereof to the
contrary.
If the Executive experiences a Termination of employment with Equistar
within two years of Executive's employment by Equistar, then, notwithstanding
any other provision of this Agreement, the full amount of contributions and
earnings accrued or credited to Executive's account balance under the Deferral
Plan (as of the date immediately preceding the Termination) shall be immediately
distributed to Executive in a cash lump-sum payment.
(e) Insurance and Other Benefits. To the extent that Executive is
eligible thereunder, then for a period of twenty-four (24) months following
Termination, Executive (and his dependents, as applicable) shall continue to be
covered at Employer's expense by Employer's life insurance, medical, dental,
accident and disability plans or any successor to a plan or program in effect at
Termination for employees in the same class or category as Executive (hereafter
individually and collectively referred to as "Welfare Plan"), subject to the
terms of the Welfare Plan and to Executive's making any required contributions
thereto which contributions shall not exceed those charged to employees in the
same class or category in which Executive was employed by Employer. In the event
that Executive is ineligible to continue to be so covered under the terms of any
welfare Plan, or in the event that Executive is eligible but the benefits
applicable to Executive (and his dependents, as applicable) are not
substantially equivalent to such benefits immediately prior to Termination,
then, for a period of twenty-four (24) months following Termination, Equistar,
at its
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expense, shall provide to Executive (and his dependents, as applicable) through
other sources such benefits as may be necessary to make the benefits applicable
to Executive (and his dependents, as applicable) substantially equivalent to
those in effect immediately prior to Termination. Continuation coverage provided
pursuant to any group health plan maintained by Employer shall be credited
against, and not in addition to, any continuation coverage required under the
Consolidated Omnibus Budget Reconciliation Act of 1985 as amended ("COBRA"). Any
retiree coverage provided to Executive shall be on the same terms and
conditions, including bridging of coverage, as that provided to executives in
the same class or category in which Executive was employed by Employer.
(f) Financial Counseling. For a period of one year following Termination,
Executive shall continue to be covered at Employer's expense under Employer's
financial counseling program, or any successor program, in effect at Termination
for employees in the same class or category as Executive, subject to the terms
of such program. In the event that benefits available to Executive under that
financial counseling program are not substantially equivalent to the benefits
available to Executive at Termination, Employer, at its expense, shall provide
to Executive through other sources such benefits as may be necessary to make the
benefits available to Executive substantially equivalent to those in effect at
Termination.
(g) Outplacement. Employer shall provide to Executive, at its expense but
not to exceed $40,000.00, outplacement assistance for Executive from a
professional outplacement assistance firm which is reasonably suitable to
Executive.
(h) No Duty to Mitigate. Executive's entitlement to benefits hereunder
shall not be governed by any duty to mitigate Executive's damages by seeking
further employment nor offset by any compensation which Executive may receive
from future employment.
Section 3. Other Benefit Plans. The specific arrangements referred to in
this Agreement are not intended (i) to exclude or limit Executive's
participation in other benefit plans or programs in which Executive currently
participates or may participate including, without limitation, retiree benefits,
or benefits which are available to executive personnel generally in the same
class or category as Executive (excluding only the Company's Special Termination
Plan and the special supplemental retirement benefit authorized by the
Compensation Committee on September 13, 1991) or, (ii) to preclude or limit
other compensation or benefits as may be authorized by the Compensation
Committee or the Partnership Governance Committee of Equistar ("Partnership
Governance Committee") from time to time. To the extent not otherwise paid or
provided, Employer shall timely pay or provide to the Executive and/or the
Executive's dependents any other amounts or benefits required to be paid or
provided or which the Executive or the Executive's dependents are eligible to
receive pursuant to this Agreement and under any plan program, policy or
practice or contract or agreement of Employer as in effect and applicable
generally to executive personnel in the same class or category of Executive.
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Section 4. Payment Obligations Absolute. Employer's obligation to pay or
provide to cause to be paid or provided to Executive the amounts and benefits
and to make the arrangements provided in this Agreement shall be absolute and
unconditional and shall not be affected by any circumstances (including, without
limitation, any setoff, claim, counterclaim, recoupment, defense or other right,
which the Employer may have against Executive or anyone else). All amounts
payable by or on behalf of Employer hereunder shall be paid without notice or
demand. Each and every payment made hereunder by or on behalf of the employer
shall be final and Employer and its subsidiaries or affiliates, for any reason
whatsoever, shall not seek to recover all or any part of such payment from
Executive or from whomever shall be entitled thereto. In no event shall an
asserted violation of any provision of this Agreement constitute a basis for
deferring or withholding any amount payable to, or on behalf of, Executive under
this Agreement.
Section 5. Conditions to Employer's Obligations. The Employer shall have
no obligation to provide or cause to be provided to Executive the rights and
benefits described in this Agreement if Employer terminates Executive's
employment for "Cause," which for purposes of this Agreement shall be defined
and limited to: (i) the continued and willful refusal by Executive to
substantially perform his duties (other than a willful refusal to perform a duty
which constitutes Constructive Termination for Good Reason or refusal resulting
from Executive's incapacity due to physical or mental illness), after demand for
substantial performance is delivered by the Partnership Governance Committee
which demand specifically identifies the manner in which Partnership Governance
Committee has determined that Executive has not substantially performed his
duties, and Executive's performance is not cured to the Partnership Governance
Committee's reasonable satisfaction within thirty (30) days from such demand;
(ii) the engagement by Executive in willful misconduct or dishonesty that is
materially injurious to the Company or Equistar, monetarily or otherwise; or
(iii) Executive's final conviction of a felony. Notwithstanding the foregoing,
Employer shall not be deemed to have terminated Executive for Cause without (i)
reasonable written notice to Executive setting forth the reasons for Employer's
intention to terminate Executive for Cause and (ii) an opportunity for
Executive, together with his counsel, to be heard before the Partnership
Governance Committee. Notwithstanding any contrary provision of this Agreement,
it is specifically agreed that Cause shall not include any act or omission by
Executive in the good faith exercise of Executive's business judgment as an
officer of the Company or Equistar.
If Executive is terminated for Cause, Employer, in accordance with and
subject to the provisions of the immediately preceding paragraph, shall not be
required to provide Executive with at least sixty (60) days advance written
notice of such termination for Cause. If Executive is terminated for a reason
other than for Cause, Employer shall be required to provide sixty (60) days
advance written notice to Executive unless Executive agrees to a shorter notice
period. Regardless of the reason for termination, Executive shall receive, an
addition to any other payments provided to Executive hereunder or otherwise,
payment for his accrued base salary and a vacation allowance based on years of
service through his termination date.
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Section 6. Confidentiality and Cooperation.
(a) Cooperation. Executive agrees that, at all times following
Termination, Executive will furnish such information and render such assistance
and cooperation as may reasonably be requested in connection with any litigation
or legal proceedings concerning the Company, any of its subsidiaries or
affiliates or Equistar (other than any legal proceedings arising out of or
concerning Executive's employment or its Termination). In connection with such
cooperation, Employer will pay or reimburse Executive for reasonable expenses.
(b) Release of Liability. Executive hereby represents and covenants that
prior to the time he is eligible to receive any payments provided for in Section
2 of this Agreement, he will execute and deliver to the Employer, on a form
reasonably satisfactory to Employer and the Executive, a separate release and
waiver, which, without limiting the generality of the foregoing, shall include a
release and discharge of the Company, its subsidiaries and affiliates or
Equistar, and its and their directors, Partnership Governance Committee,
officers, employees, owners, agents, successors and assigns from any and all
suits, causes of action, demands, claims, charges, complaints, liabilities,
costs, losses, damages, injuries, bonds, judgments, attorneys' fees and
expenses, in any form whatsoever, in law or in equity, whether known or unknown,
whether suspected or unsuspected, arising out of Executive's employment with
Company or with Equistar through his Termination, including, without limitation,
claims arising under any federal, state or local law for breach of an implied
covenant of good faith and fair dealing, breach of contract, defamation,
slander, negligent misrepresentation, fraud, intentional or negligent
interference with business relations, and employment discrimination, including,
but not limited to, claims under the Age Discrimination in Employment Act, the
Americans with Disabilities Act and the Texas Commission on Human Rights Act.
Section 7. Term of Agreement. This Agreement shall remain in effect until
two years from the date of Executive's employment by Equistar, unless otherwise
terminated by resolution of the Compensation Committee of the Company's Board of
Directors prior to Executive's employment by Equistar or by the Partnership
Governance Committee following Executive's employment by Equistar. Employer
shall notify Executive in writing of the effective date of Termination if the
Compensation Committee or Partnership Governance Committee determines to
terminate this Agreement. It is the Employer's intention to provide or cause to
be provided to Executive the benefits set forth herein if Executive is
terminated from employment by Equistar and the other applicable conditions are
satisfied.
Section 8. Arbitration.
(a) Arbitrable Matters. Any dispute under this Agreement arising between
the parties shall be settled by binding arbitration. In the event of any dispute
between Executive and Employer hereunder, either party shall be entitled to
submit the dispute to arbitration. The arbitration proceeding shall be held in
Houston, Texas (unless otherwise mutually agreed by the parties), and shall be
conducted in accordance with the Center for Public Resources ("CPR") Rules for
Non-
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Administered Arbitration of Business Disputes. The arbitration shall be
conducted by a sole arbitrator appointed in accordance with the rules
established by CPR (the "Arbitrator").
Any arbitration between Executive and Employer pursuant to this Agreement
shall be governed by the United States Arbitration Act, 9 U.S.C. (S)(S) 1-16 (or
its successor). If the United States Arbitration Act is determined by the
Arbitrator not to apply to this type of employer/employee agreement based on
precedential legal authority, the parties agree to arbitrate any dispute under
the Texas General Arbitration Act, V.A.T.S. Art. 238-6 et. seq. (or its
successor).
(b) Submission to Arbitration. The party submitting any matter arising
out of this Agreement to arbitration (the "demanding party") shall do so by
delivering written notice thereof (the "arbitration notice") to the other party
(the "noticed party"). In addition to indicating the demanding party's intention
to commence arbitration proceedings, the arbitration notice shall state the
nature, with reasonable detail, of the dispute and the demanding party's claim
or claims, the question or questions to be submitted for decision or award by
arbitration and the relief or remedy sought. A copy of the arbitration notice
shall be concurrently provided to CPR, along with a copy of this Agreement and a
request to appoint an Arbitrator. Either party may bring an action in any court
of competent jurisdiction to compel arbitration under this Agreement.
(c) Arbitration Procedures. The Arbitrator shall apply the substantive
law (and the law of remedies, if applicable) of the State of Texas as applicable
to the claim asserted. The Federal Rules of Evidence shall apply. The Arbitrator
shall have no authority to change this Agreement unless otherwise agreed by both
parties. The Arbitrator, and not any federal, state, or local court or agency,
shall have exclusive authority to resolve any dispute relating to the
interpretation, applicability, enforceability or formation of this Agreement,
including but not limited to any claim that all or any part of this Agreement is
void or voidable. Any party may be represented by an attorney or other
representative selected by the party.
The Arbitrator shall have jurisdiction to hear and rule on pre-hearing
disputes and is authorized to hold pre-hearing conferences by telephone or in
person as the Arbitrator deems necessary. The Arbitrator shall have the
authority to entertain a motion to dismiss and/or a motion for summary judgment
by any party and shall apply the standards governing such motions under the
Federal Rules of Civil Procedure.
At any time after the date of receipt of the arbitration notice, each party
can make discovery requests of the other in any form permitted under the Federal
Rules of Civil Procedure. The recipient of a discovery request shall have 20
days after the receipt of such request to object to any or all portions of such
request, and shall respond to any portions of such request not so objected to
within 30 days of the receipt of such request. All objections shall be in
writing and shall indicate the reasons for such objections. The objecting party
shall insure that all objections and responses are received by other parties
within the above time periods. Any party seeking to compel discovery following
receipt of an objection shall file with the other party and the Arbitrator a
motion to compel, including
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a copy of the initial request and the objection. The Arbitrator shall allow 10
days for responses to the motion to compel before ruling. Claims of privilege
and other objections shall be determined as they would in federal court in a
case applying Texas law.
At least 30 days before the arbitration, the parties must exchange lists of
witnesses, including any expert witnesses, and copies of all exhibits intended
to be used at the arbitration. Each party shall have the right to subpoena
witnesses and documents for the arbitration. Either party may arrange for a
court reporter to provide a stenographic record of proceedings. The cost of the
court reporter will be paid by the Company or Equistar.
(d) Compliance with Decisions. To the extent permissible under applicable
law, the parties agree that the award of the Arbitrator shall be final and
binding and shall be subject only to the judicial review permitted by the United
States Arbitration Act or other applicable arbitration law pursuant to Section
10(a) hereof. Judgment on the arbitration award may be entered and enforced in
any court having jurisdiction over the parties or their assets. It is the intent
of the parties that the arbitration provisions hereof be enforced to the fullest
extent permitted by applicable law.
(e) Costs and Expenses. The Employer shall promptly pay or reimburse
Executive for all costs and expenses, including, without limitation, attorneys'
fees and witnesses' fees, incurred by Executive as a result of any arbitration
(regardless of the outcome thereof) arising out of this Agreement. All expenses
of such arbitration, including the reasonable fees and expenses of legal counsel
for Executive and the costs and expenses incurred by the Arbitrator, shall be
borne by Employer.
Section 9. Notices. All notices, requests, demands and other
communications required or permitted to be given hereunder (hereinafter referred
to as "notices") shall be in writing and shall be deemed to have been duly given
if delivered by-hand, given by prepaid telecopy, telex or telegram, or mailed
via certified or registered U.S. mail, to the party to receive such notice at
such party's address set forth below; provided that either party may change its
address for notice by giving to the other party written notice of such change.
If to Company:
Lyondell Petrochemical Company
1221 McKinney, Suite 1600
Houston, TX 77002
Attn: Chairman of the Board of Directors
If to Equistar:
Equistar Chemicals L.P.
1221 McKinney, Suite 1600
Houston, Texas 77010
Attn: Partnership Governance Committee
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If to Executive:
____________________
____________________
____________________
Any notice given pursuant to this Agreement shall be deemed received (i) if
delivered by-hand, when delivered; (ii) if sent by telecopy, telex or telegram,
24 hours after sending; and (iii) if mailed, when delivered.
Section 10. Miscellaneous.
(a) Assignment. No right, benefit or interest hereunder shall be subject
to assignment, anticipation, alienation, sale, encumbrance, charge, pledge,
hypothecation or set-off in respect of any claim, debt or obligation, or to
execution, attachment, levy or similar process; provided, however, that
Executive may assign any right, benefit or interest hereunder if such assignment
is permitted under the terms of any plan or policy of insurance, or annuity
contract governing such right, benefit or interest.
(b) Construction of Agreement. Nothing in this Agreement shall be
construed to amend any provision of any plan or policy of the Company or
Equistar except as otherwise expressly noted herein. This Agreement is not, and
nothing herein shall be deemed to create, a commitment of continued employment
of Executive by the Company or any of its subsidiaries or by Equistar. The
captions of this Agreement are not part of the provisions hereof and shall have
no force or effect. Whenever the context of this Agreement so requires, the
masculine gender includes the feminine gender, and words used in the singular or
plural will include the other. The words "herein," "hereunder" and other similar
compounds of the word "here" refer to the entire Agreement and not to any
particular, section or provision.
(c) Amendment. This Agreement may not be amended, modified or canceled
except by written agreement of the parties or their respective successors and
legal representatives.
(d) Waiver. No provision of this Agreement may be waived except by a
writing signed by the party to be bound thereby.
(e) Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall remain in full force and effect to
the fullest extent permitted by law.
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(f) Successors. This Agreement is personal to Executive and without the
prior written consent of the Company or Equistar shall not be assignable by
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives. The Company will require Equistar to assume this
Agreement on Executive's employment with Equistar, and to agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform this Agreement if no such succession had taken place.
Failure of the Company to obtain such assumption and agreement shall constitute
a breach of this Agreement and shall entitle Executive to compensation from the
Company in the same amount and on the same terms as he would be entitled
hereunder with respect to Constructive Termination for Good Reason.
This Agreement shall be binding upon and inure to the benefit of the
Company, Equistar and any successor organization or organizations which shall
success to substantially all of the business and/or assets of the Company
(whether direct or indirect by means of merger, consolidation, acquisition of
substantially all the assets of the Company, or otherwise, including by
operation of law).
(g) Taxes. Any payment or delivery required under this Agreement shall be
subject to all requirements of the law with regard to withholding of taxes,
filing, making of reports and the like.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO ITS
CONFLICTS OF LAW PRINCIPLES.
(i) Entire Agreement. Except as otherwise provided in Section 4 or
Section 12(b) hereof, this Agreement sets forth the entire agreement and
understanding of the parties hereto with respect to the matters covered hereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the ___
day of ________________, 19__.
LYONDELL PETROCHEMICAL COMPANY
By:
----------------------------
Name: Dan F. Smith
Title: President & CEO
EXECUTIVE
By:
----------------------------
Name:
-------------------------
Title:
-------------------------
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Exhibit 10.2
FORM OF
EXECUTIVE SEVERANCE AGREEMENT
Dated as of ______________, 19___,
between
MILLENNIUM PETROCHEMICALS INC.,
a Delaware corporation (the "Company"), and
_____________________
("Executive")
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
Section 1. Termination Following Employment by Equistar.............. 1
Section 2. Rights and Benefits upon Termination...................... 3
(a) Salary and Other Payment at Termination................... 3
(b) Crediting of Additional Pension Benefit................... 3
(c) 401(k) Plan............................................... 4
(d) Insurance and Other Benefits.............................. 4
(e) Financial Counseling...................................... 4
(f) Outplacement.............................................. 5
(g) No Duty to Mitigate....................................... 5
Section 3. Other Benefit Plans....................................... 5
Section 4. Payment Obligations Absolute.............................. 5
Section 5. Conditions to Employer's Obligations...................... 5
Section 6. Special Tax Provision..................................... 6
Section 7. Confidentiality and Cooperation........................... 9
(a) Cooperation............................................... 9
(b) Release of Liability...................................... 9
Section 8. Term of Agreement.........................................10
Section 9. Indemnification...........................................10
Section 10. Arbitration...............................................11
(a) Arbitrable Matters........................................11
(b) Submission to Arbitration.................................11
(c) Arbitration Procedures....................................12
(d) Compliance with Decisions.................................12
(e) Costs and Expenses........................................13
Section 11. Notices...................................................13
Section 12. Miscellaneous.............................................14
(a) Assignment................................................14
(b) Construction of Agreement.................................14
(c) Amendment.................................................14
(d) Waiver....................................................14
(i)
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(e) Severability..............................................14
(f) Successors................................................14
(g) Taxes.....................................................15
(h) Governing Law.............................................15
(i) Entire Agreement..........................................15
(j) Independent Representation................................15
(ii)
<PAGE>
EXECUTIVE SEVERANCE AGREEMENT
THIS EXECUTIVE SEVERANCE AGREEMENT, is made and entered into this ___ day
of _________, 1997, by and between MILLENNIUM PETROCHEMICALS INC., a Delaware
corporation (hereinafter referred to as "Company"), and ____________________, an
individual (hereinafter referred to as "Executive").
WITNESSETH:
WHEREAS, the Board of Directors of the Company (the "Board") has authorized
the Company to enter into a severance agreement in the form hereof with
Executive;
WHEREAS, pursuant to an arrangement between Millennium and Equistar
Chemicals, LP ("Equistar"), Executive is expected to begin performing services
for Equistar on or about December 1, 1997 (the "Closing Date"), Executive has
been offered employment by Equistar, anticipated to be effective on or about
January 1, 1998, and it is in the best interest of the Company that Executive
accept this position without concern that Executive is distracted by personal
uncertainties and risks created by this new assignment;
WHEREAS, it is the Company's intent to assign this Agreement to Equistar
upon Executive's employment by Equistar and all obligations under this Agreement
shall be assumed by Equistar, unless specifically retained by Company;
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of Executive and the availability of Executive's advice and counsel
prior to Executive's employment with Equistar, to induce Executive to remain in
the employ of the Company until employment by Equistar and further, to accept
employment with Equistar and for other good and valuable consideration, the
parties agree as follows:
SECTION 1. TERMINATION FOLLOWING EMPLOYMENT BY EQUISTAR.
Employer will provide or cause to be provided to Executive the rights and
benefits described in Section 2 of this Agreement in the event that Executive's
employment is terminated prior to January 1, 2001 (A) by the Employer (as
defined in the next paragraph) without Cause (as defined in Section 6) other
than for death, Disability (as defined below) or retirement upon reaching age
sixty-five (65) ("Normal Retirement Date") or (B) by the Executive effected by
written notice ("Constructive Termination Notice") within ninety (90) days after
any event that constitutes Constructive Termination for Good Reason, as defined
below. The Constructive Termination Notice shall provide for a date of
termination not less than ten (10) nor more than sixty (60) days after the date
of such Constructive Termination Notice.
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For purposes of this Agreement, "Employer" shall refer to the Company prior
to assignment of this Agreement to Equistar and shall refer to Equistar
following Equistar's assumption of the obligations under this Agreement. The
Executive's employment shall not be deemed to be terminated as a result of the
transfer of his employment to Equistar.
"Disability" for purposes of this Agreement shall mean Executive's
inability to perform his material duties and responsibilities due to the same or
related physical or mental illness for one hundred and eighty (180) consecutive
days. A termination for Disability shall be deemed to occur when Executive is
terminated by the Employer by written notice while Executive remains disabled.
For purposes of this Agreement, "Constructive Termination for Good Reason"
means:
(i) the Executive is assigned to any duties or responsibilities that
are not comparable to Executive's position, offices, duties, responsibilities or
status with Equistar at the time of Executive's initial employment with Equistar
or on the Closing Date, or the Executive's reporting responsibilities or titles
are changed and the change results in a reduction of Executive's
responsibilities or position at Equistar from those in effect at the time of the
Executive's initial employment by Equistar or on the Closing Date;
(ii) a relocation of Equistar's principal executive offices to a
location more than twenty-five (25) miles from where they are at the time of
Executive's initial employment with Equistar, or the Executive is actually
transferred, or offered a proposed transfer, as evidenced in a written
communication from Employer to Executive, to another location other than the
location at which he was primarily assigned at the time of his initial
employment by Equistar;
(iii) a reduction of Executive's rate of annual base salary to a level
below Executive's rate of base salary at the time of the Executive's initial
employment by Equistar, or a reduction of the level of benefits or compensation
provided to Executive below the comparable level of benefits or compensation
payable to similarly situated Executives at Equistar;
(iv) a failure by the Employer (A) to continue any bonus plan,
program or arrangement provided by Employer, in which Executive was entitled to
participate as of January 1, 1998, or, if such plans have not been finalized as
of January 1, 1998, as of March 1, 1998 (the "Bonus Plans"), provided that any
such Bonus Plans may be modified at the Employer's discretion from time to time
but shall be deemed terminated if plans providing Executive with substantially
similar benefits are not substituted therefor ("Substitute Plans") or (B) to
consider Executive a participant in the Bonus Plans or Substitute Plans on not
less than the same target level of award and not more than the same level of
difficulty for achievability of such award as was applicable to Executive
immediately prior to any change in such plans, in accordance with the Bonus
Plans or Substitute Plans; or
(v) any breach by the Employer of any material provision of this
Agreement.
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SECTION 2. RIGHTS AND BENEFITS UPON TERMINATION. In the event Executive is
entitled to receive the rights and benefits described in this Section as a
result of the termination or Constructive Termination for Good Reason of
Executive's employment as described in Section 1 (collectively referred to as
"Termination"), the Employer agrees to provide or cause to be provided to
Executive the following rights and benefits.
(a) Salary and Other Payment at Termination. Employer shall pay to
Executive not later than five (5) days following Termination a lump-sum payment
in cash in the amount of (i) three (3) times Executive's Applicable Annual
Earnings (as defined below); (ii) any unreimbursed business expenses for the
period prior to Termination payable in accordance with Employer's policies, and
(iii) any base salary, bonus, vacation pay or other deferred compensation
accrued or earned under law or in accordance with the Employer's policies
applicable to Executive but not yet paid.
For purposes of this Agreement, "Applicable Annual Earnings" shall mean the
sum of Executive's highest annual base salary in effect within one hundred and
eighty (180) days of the last day of employment with the Company or Executive's
highest annual base salary within one hundred and eighty (180) days of
Termination, whichever is higher, plus the highest annual bonus paid or payable
to Executive for any of the last three (3) completed years by Equistar, the
Company or its predecessors. Applicable Annual Earnings shall include such
annual base salary and bonus whether or not paid on a deferred basis, including
without limitation, amounts contributed by or on behalf of Executive under an
Employer-sponsored plan, such as (i) a plan described in section 125 or 401(k)
of the Internal Revenue Code of 1986, as amended, or (ii) the Employer's
deferral plan or an "excess benefit plan" as defined in the Employee Retirement
Income Security Act of 1974, as amended. Notwithstanding the preceding
provisions of this paragraph, Applicable Annual Earnings does not include any
income attributable to stock options, stock appreciation rights, performance
awards other than awards under an executive bonus plan described above, dividend
credits, and restricted stock granted under, and dividends on shares acquired
pursuant to, any stock option plan, restricted stock plan or performance unit
plan.
(b) Crediting of Additional Pension Benefit. Employer shall cause
Executive to be credited with three (3) years of additional (i) age (not to
exceed age sixty-five (65)) and (ii) service credit (at the level of Executive's
Applicable Annual Earnings, to the extent accounted for under the Retirement
Plans, as defined below) for pension purposes under any defined benefit type
qualified or nonqualified pension plan or arrangement of the Employer and its
affiliates applicable to Executive (the "Retirement Plans"), measured from the
date of Termination and not otherwise credited, to the extent that Executive
would otherwise be entitled to such credit during such three (3) year period.
Payments to which Executive would be entitled under any of the Retirement Plans
as a result of this additional age and service credit shall be made through and
in accordance with the terms of the nonqualified defined benefit pension plan or
arrangement if any then exists, or, if not, in an actuarially equivalent lump
sum (using the actuarial factors then applying in the Employer's or its
affiliates' defined benefit plan covering Executive).
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If the method to calculate a retirement benefit under Employer's qualified
retirement plan and Supplementary Executive Retirement Plan is changed, then the
Executive shall be entitled to an amount under the new plan formula that is the
equivalent of the amount that would have been payable if the Executive had been
credited with the age and service credit described above. Payments attributable
to this enhanced retirement benefit shall be payable under the Employer's non-
qualified retirement plan for executives.
(c) 401(k) Plan. The Employer shall pay to Executive an amount equal to
three (3) years of the maximum Employer contribution (assuming Executive
deferred the maximum amount and continued to earn his then current salary)
measured from the date of Termination under any type of qualified or
nonqualified 401(k) plan (payable at the end of each such year and not payable
to the extent otherwise contributed to such plan).
(d) Insurance and Other Benefits. To the extent that Executive is eligible
thereunder, then for a period of thirty-six (36) months following Termination,
Executive (and his dependents, as applicable) shall continue to be covered at
Employer's expense by Employer's life insurance, medical, dental, accident and
disability plans or any successor to a plan or program in effect at Termination
for employees in the same class or category as Executive (hereafter individually
and collectively referred to as "Welfare Plan"), subject to the terms of the
Welfare Plan and to Executive's making any required contributions thereto which
contributions shall not exceed those charged to employees in the same class or
category in which Executive was employed by Employer. In the event that
Executive is ineligible to continue to be so covered under the terms of any
welfare Plan, or in the event that Executive is eligible but the benefits
applicable to Executive (and his dependents, as applicable) are not
substantially equivalent to such benefits immediately prior to Termination,
then, for a period of thirty-six (36) months following Termination, Equistar, at
its expense, shall provide to Executive (and his dependents, as applicable)
through other sources such benefits as may be necessary to make the benefits
applicable to Executive (and his dependents, as applicable) substantially
equivalent to those in effect immediately prior to Termination. Continuation
coverage provided pursuant to any group health plan maintained by Employer shall
be credited against, and not in addition to, any continuation coverage required
under the Consolidated Omnibus Budget Reconciliation Act of 1985 as amended
("COBRA"). Any retiree coverage provided to Executive shall be on the same terms
and conditions, including bridging of coverage, as that provided to executives
in the same class or category in which Executive was employed by Employer.
(e) Financial Counseling. For a period of one year following Termination,
Executive shall continue to be covered at Employer's expense under Employer's
financial counseling program, or any successor program in effect at Termination
for employees in the same class or category as Executive, subject to the terms
of such program. In the event that benefits available to Executive under that
financial counseling program are not substantially equivalent to the benefits
available to Executive at Termination, Employer, at its expense, shall provide
to Executive through other sources such benefits as may be necessary to make the
benefits available to Executive substantially equivalent to those in effect at
Termination.
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(f) Outplacement. Employer shall provide to Executive, at its expense but
not to exceed $40,000.00, outplacement assistance for Executive from a
professional outplacement assistance firm which is reasonably suitable to
Executive.
(g) No Duty to Mitigate. Executive's entitlement to benefits hereunder
shall not be governed by any duty to mitigate Executive's damages by seeking
further employment nor offset by any compensation which Executive may receive
from future employment.
SECTION 3. OTHER BENEFIT PLANS. The Employer shall pay to Executive any
other amounts or benefits due under the then applicable employee benefit
incentive or equity plans of the Employer applicable to Executive as shall be
determined and paid in accordance with such plans, except to the extent paid
pursuant to Section 2 above.
SECTION 4. PAYMENT OBLIGATIONS ABSOLUTE. Employer's obligation to pay or
provide, or to cause to be paid or provided to Executive the amounts and
benefits and to make the arrangements provided in this Agreement shall be
absolute and unconditional and shall not be affected by any circumstances
(including, without limitation, any set off, claim, counterclaim, recoupment,
defense or other right, which the Employer may have against Executive or anyone
else). All amounts payable by or on behalf of Employer hereunder shall be paid
without notice or demand. The amounts due under Section 2 are inclusive, and in
lieu of, any amounts payable under any other salary continuation or cash
severance arrangement of the Company and to the extent paid or provided under
any other such arrangement shall be offset against the amount due hereunder.
Each and every payment made hereunder by or on behalf of the Employer shall be
final and Employer and its subsidiaries or affiliates, for any reason
whatsoever, shall not seek to recover all or any part of such payment from
Executive or from whomever shall be entitled thereto. In no event shall an
asserted violation of any provision of this Agreement constitute a basis for
deferring or withholding any amount payable to, or on behalf of, Executive under
this Agreement.
SECTION 5. CONDITIONS TO EMPLOYER'S OBLIGATIONS. The Employer shall have no
obligation to provide or cause to be provided to Executive the rights and
benefits described in this Agreement if Employer terminates Executive's
employment for "Cause," which for purposes of this Agreement shall be defined
and limited to: (i) the continued and willful refusal by Executive to
substantially perform his duties (other than a willful refusal to perform a duty
which constitutes Constructive Termination for Good Reason or refusal resulting
from Executive's incapacity due to physical or mental illness), after demand for
substantial performance is delivered by the Partnership Governance Committee
which demand specifically identifies the manner in which Partnership Governance
Committee has determined that Executive has not substantially performed his
duties, and Executive's performance is not cured to the Partnership Governance
Committee's reasonable satisfaction within thirty (30) days from such demand;
(ii) the engagement by Executive in willful misconduct or dishonesty that is
materially injurious to the Company or Equistar, monetarily or otherwise; (iii)
Executive's final conviction of (or pleading nolo contendere to) a felony; (iv)
breach of any fiduciary duty owed to the Company or any affiliate; or (v)
dishonesty, misappropriation or fraud with regard to the Company (other than
good faith expense account disputes).
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Notwithstanding the foregoing, Employer shall not be deemed to have terminated
Executive for Cause without (i) reasonable written notice to Executive setting
forth the reasons for Employer's intention to terminate Executive for Cause and
(ii) an opportunity for Executive, together with his counsel, to be heard before
the Partnership Governance Committee. Notwithstanding any contrary provision of
this Agreement, it is specifically agreed that Cause shall not include any act
or omission by Executive in the good faith exercise of Executive's business
judgment as an officer of the Company or Equistar.
Termination for Cause shall be effected by a written notice of termination
for Cause. If Executive is terminated for Cause, Employer, in accordance with
and subject to the provisions of the immediately preceding paragraph, shall not
be required to provide Executive with at least sixty (60) days advance written
notice of such termination for Cause. If Executive is terminated for a reason
other than for Cause, Employer shall be required to provide sixty (60) days
advance written notice to Executive unless Executive agrees to a shorter notice
period. Regardless of the reason for termination, Executive shall receive, an
addition to any other payments provided to Executive hereunder or otherwise,
payment for his accrued base salary and a vacation allowance based on years of
service through his termination date.
SECTION 6. SPECIAL TAX PROVISION. (a) Anything in this Agreement to the
contrary notwithstanding, in the event that any amount or benefit paid, payable,
or to be paid, or distributed, distributable, or to be distributed to or with
respect to Executive (whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with Equistar or the Company, any person
whose actions result in a change of ownership covered by Section 280G(b)(2) of
the Internal Revenue Code of 1986, as amended (the "Code") or any person
affiliated with Equistar or the Company or such person) as a result of a change
in ownership covered by Code Section 280G(b)(2) (collectively, the "Covered
Payments") is or becomes subject to the excise tax imposed by or under Section
4999 of the Code (or any similar tax that may hereafter be imposed), and/or any
interest or penalties with respect to such excise tax (such excise tax, together
with such interest and penalties, is hereinafter collectively referred to as the
"Excise Tax"), Employer shall pay to Executive an additional amount (the "Tax
Reimbursement Payment") such that after payment by Executive of all taxes
(including, without limitation, any interest or penalties and any Excise Tax
imposed on or attributable to the Tax Reimbursement Payment itself) Executive
retains an amount of the Tax Reimbursement Payment equal to the sum of (i) the
amount of the Excise Tax imposed upon the Covered Payments, and (ii) without
duplication, an amount equal to the product of (A) any deductions disallowed for
federal, state or local income tax purposes because of the inclusion of the Tax
Reimbursement Payment in Executive's adjusted gross income, and (B) the highest
applicable marginal rate of federal, state or local income taxation,
respectively, for the calendar year in which the Tax Reimbursement Payment is
made or is to be made. The intent of this Section 6 is that after paying
Executive's federal, state and local income tax and any payroll taxes, Executive
will be in the same position as if Executive was not subject to the Excise Tax
under Section 4999 of the Code and did not receive the extra payments pursuant
to this Section 6 and this Section 6 shall be interpreted accordingly.
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(b) Except as otherwise provided in Section 6(a), for purposes of
determining whether any of the Covered Payments will be subject to the Excise
Tax and the amount of such Excise Tax, (i) such Covered Payments will be treated
as "parachute payments" (within the meaning of Section 280G(b)(2) of the Code)
and such payments in excess of the Code Section 280G(b)(3) "base amount" shall
be treated as subject to the Excise Tax, unless, and except to the extent that,
Employer's independent certified public accountants appointed prior to the
change in ownership covered by Code Section 280G(b)(2) or legal counsel
(reasonably acceptable to Executive) appointed by such public accountants, (or,
if the public accountants decline such appointment and decline appointing such
legal counsel, such independent certified public accountants as promptly
mutually agreed on in good faith by Employer and Executive) (the "Accountant"),
deliver a written opinion to Executive, reasonably satisfactory to Executive's
legal counsel, that Executive has a reasonable basis to claim that the Covered
Payments (in whole or in part) (A) do not constitute "parachute payments," (B)
represent reasonable compensation for services actually rendered (within the
meaning of Section 280G(b)(4) of the Code) in excess of the "base amount"
allocable to such reasonable compensation, or (C) such "parachute payments" are
otherwise not subject to such Excise Tax (with appropriate legal authority,
detailed analysis and explanation provided therein by the Accountant); and (ii)
the value of any Covered Payments which are non-cash benefits or deferred
payments or benefits shall be determined by the Accountant in accordance with
the principles of Section 280G of the Code.
(c) For purposes of determining the amount of the Tax Reimbursement
Payment, Executive shall be deemed: (i) to pay federal, state and/or local
income taxes at the highest applicable marginal rate of income taxation for the
calendar year in which the Tax Reimbursement Payment is made or is to be made,
and (ii) to have otherwise allowable deductions for federal, state and local
income tax purposes at least equal to those disallowed due to the inclusion of
the Tax Reimbursement Payment in Executive's adjusted gross income.
(d) (i) (A) In the event that prior to the time Executive has filed any
of Executive's tax returns for the calendar year in which the change in
ownership event covered by Code Section 280G(b)(2) occurred, the Accountant
determines, for any reason whatsoever, the correct amount of the Tax
Reimbursement Payment to be less than the amount determined at the time the Tax
Reimbursement Payment was made, Executive shall repay to the employer, at the
time that the amount of such reduction in Tax Reimbursement Payment is
determined by the Accountant, the portion of the prior Tax Reimbursement Payment
attributable to such reduction (including the portion of the Tax Reimbursement
Payment attributable to the Excise Tax and federal, state and local income tax
imposed on the portion of the Tax Reimbursement Payment being repaid by
Executive, using the assumptions and methodology utilized to calculate the Tax
Reimbursement Payment (unless manifestly erroneous)), plus interest on the
amount of such repayment at the rate provided in section 1274(b)(2)(B) of the
Code.
(B) In the event that the determination set forth in (A) above is
made by the Accountant after the filing by Executive of any of Executive's tax
returns for the calendar year in which the change in ownership event covered by
Code Section 280G(b)(2) occurred but prior to
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one (1) year after the occurrence of such change in ownership, Executive shall
file at the request of Employer an amended tax return in accordance with the
Accountant's determination, but no portion of the Tax Reimbursement Payment
shall be required to be refunded to Employer until actual refund or credit of
such portion has been made to Executive, and interest payable to Employer shall
not exceed the interest received or credited to Executive by such tax authority
for the period it held such portion (less any tax Executive must pay on such
interest and which Executive is unable to deduct as a result of payment of the
refund).
(C) In the event Executive receives a refund pursuant to (B) above
and repays such amount to Employer, Executive shall thereafter file for any
refunds or credits that may be due to Executive by reason of the repayments to
Employer. Executive and Employer shall mutually agree upon the course of action,
if any, to be pursued (which shall be at the expense of Executive) if
Executive's claim for such refund or credit is denied.
(ii) In the event that the Excise Tax is later determined by the
Accountant or the Internal Revenue Service to exceed the amount taken into
account hereunder at the time the Tax Reimbursement Payment is made (including
by reason of any payment the existence or amount of which cannot be determined
at the time of the Tax Reimbursement Payment), Employer shall make an additional
Tax Reimbursement Payment in respect of such excess (plus any interest or
penalties payable with respect to such excess) once the amount of such excess is
finally determined.
(iii) In the event of any controversy with the Internal Revenue
Service (or other taxing authority) under this Section 6, subject to the second
sentence of subpart (i)(C) above, Executive shall permit Employer to control
issues related to this Section 6 (at its expense), provided that such issues do
not potentially materially adversely affect Executive, but Executive shall
control any other issues. In the event the issues are interrelated, Executive
and Employer shall in good faith cooperate so as not to jeopardize resolution of
either issue, but if the parties cannot agree Executive shall made the final
determination with regard to the issues. In the event of any conference with any
taxing authority as to the Excise Tax or associated income taxes, Executive
shall permit the representative of Employer to accompany Executive, and
Executive and Executive's representative shall cooperate with Employer and its
representative.
(iv) With regard to any initial filing for a refund or any other
action required pursuant to this Section 6 (other than by mutual agreement) or,
if not required, agreed to by Employer and Executive, Executive shall cooperate
fully with Employer, provided that the foregoing shall not apply to actions that
are provided herein to be at Executive's sole discretion.
(e) The Tax Reimbursement Payment, or any portion thereof, payable by
Employer shall be paid not later than the fifth (5th) day following the
determination by the Accountant, and any payment made after such fifth (5th)
day shall bear interest at the rate provided in Code Section 1274(b)(2)(B).
Employer shall use its best efforts to cause the Accountant to promptly deliver
the initial determination required hereunder and, if not delivered, within
ninety (90) days after the change in ownership event covered by Section
280G(b)(2) of the Code, Employer shall pay
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Executive the Tax Reimbursement Payment set forth in an opinion from counsel
recognized as knowledgeable in the relevant areas selected by Executive, and
reasonably acceptable to Employer, within five (5) days after delivery of such
opinion. In accordance with Section 12(g), Employer may withhold from the Tax
Reimbursement Payment and deposit into applicable taxing authorities such
amounts as they are required to withhold by applicable law. To the extent that
Executive is required to pay estimated or other taxes on amounts received by
Executive beyond any withheld amounts, Executive shall promptly make such
payments. The amount of such payment shall be subject to later adjustment in
accordance with the determination of the Accountant as provided herein.
(f) Employer shall be responsible for all charges of the Accountant and if
(e) is applicable the reasonable charges for the opinion given by Executive's
counsel.
(g) Executive and Employer shall mutually agree on and promulgate further
guidelines in accordance with the Section 6 to the extent, if any, necessary to
effect the reversal of excessive or shortfall Tax Reimbursement Payments. The
foregoing shall not in any way be inconsistent with Section 6(d)(i)(C) hereof.
SECTION 7. CONFIDENTIALITY AND COOPERATION.
(a) Cooperation. Executive agrees that, at all times following
Termination, Executive will furnish such information and render such assistance
and cooperation as may reasonably be requested in connection with any litigation
or legal proceedings concerning the Company, any of its subsidiaries or
affiliates or Equistar (other than any legal proceedings arising out of or
concerning Executive's employment or its Termination). In connection with such
cooperation, Employer will pay or reimburse Executive for reasonable expenses.
(b) Release of Liability. Executive hereby represents and covenants that
prior to the time he is eligible to receive any payments provided for in Section
2 of this Agreement, he will execute and deliver to the Employer, on a form
reasonably satisfactory to Employer and the Executive, a separate release and
waiver, which, without limiting the generality of the foregoing, shall include a
release and discharge of the Company, its subsidiaries and affiliates or
Equistar, and its and their directors, Partnership Governance Committee,
officers, employees, owners, agents, successors and assigns from any and all
suits, causes of action, demands, claims, charges, complaints, liabilities,
costs, losses, damages, injuries, bonds, judgments, attorneys' fees and
expenses, in any form whatsoever, in law or in equity, whether known or unknown,
whether suspect or unsuspected, arising out of Executive's employment with
Company or with Equistar through his Termination, including, without limitation,
claims arising under any federal, state or local law for breach of an implied
covenant of good faith and fair dealing, breach of contract, defamation,
slander, negligent misrepresentation, fraud, intentional or negligent
interference with business relations, and employment discrimination, including,
but not limited to, claims under the Age Discrimination in Employment Act, the
Americans with Disabilities Act and the Texas Commission on Human Rights Act,
except to the extent that Executive's rights are vested under the terms of
employee benefit plans
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sponsored by Equistar or the Company and except with respect to such rights or
claims (other than agreements herein to perform future employment-related
actions) as may arise after termination.
SECTION 8. TERM OF AGREEMENT. This Agreement shall remain in effect until
three (3) years from the date of Executive's employment by Equistar, unless
otherwise terminated by resolution of the Company's Board of Directors prior to
Executive's employment by Equistar. Employer shall notify Executive in writing
of the effective date of termination if the Company's Board determines to
terminate this Agreement. It is the Employer's intention to provide or cause to
be provided to Executive the benefits set forth herein if Executive is
terminated from employment by Equistar and the other applicable conditions are
satisfied.
SECTION 9. INDEMNIFICATION. (a) The Company and Equistar, jointly and
severally, agree that if Executive is made a party to or threatened to be made a
party to any action, suit or proceeding, whether civil, criminal, administrative
or investigative (a "Proceeding"), by reason of the fact that Executive is or
was a director or officer of the Company, Equistar, and/or any other affiliate
of any of such companies, or is or was serving at the request of any of such
companies as a director, officer, member, employee, fiduciary or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including, without limitation, service with respect to employee
benefit plans, whether or not the basis of such Proceeding is alleged action in
an official capacity as a director, officer, member, employee, fiduciary or
agent, Executive shall be indemnified and held harmless by the Company and
Equistar to the fullest extent authorized by Texas law (or, if different, the
law applicable to such company), as the same exists or may hereafter be amended,
against all Expenses incurred or suffered by Executive in connection therewith,
and such indemnification shall continue as to Executive even if Executive has
ceased to be an officer, director, member, fiduciary or agent, or is no longer
employed by Employer, and shall inure to the benefit of Executive's heirs,
executors and administrators. With respect to the obligations set forth in this
Section 9, the Company and Equistar shall become liable hereunder with respect
to any Proceeding which arises out of or relates to events occurring on or after
July 1, 1996, except to the extent that the liability relates to service with or
for another assignee under Section 12(f) hereof (in which case such assignee
shall be liable).
(b) As used in this Agreement, the term "Expenses" shall include, without
limitation, damages, losses, judgments, liabilities, fines, penalties, excise
taxes, settlements and reasonable costs, reasonable attorneys' fees, reasonable
accountants' fees, and reasonable disbursements and costs of attachment or
similar bonds, investigations, and any reasonable expenses of establishing a
right to indemnification under this Agreement.
(c) Expenses incurred by Executive in connection with any Proceeding shall
be paid by the Company and Equistar in advance upon Executive's request and the
giving by Executive of any undertakings required by applicable law.
(d) Executive shall give the Company and Equistar prompt notice of any
claim made against Executive for which indemnity will or could be sought under
this Agreement. In addition,
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Executive shall give the Company and Equistar such information and cooperation
as they may reasonably require and as shall be within Executive's power and at
such times and places as are reasonably convenient for Executive.
(e) With respect to any Proceeding as to which Executive notifies the
Company and Equistar of the commencement thereof: (i) the Company and/or
Equistar will be entitled to participate therein at their own expense; and (ii)
except as otherwise provided below, to the extent that they may wish, the
Company and/or Equistar, jointly with any other indemnifying party similarly
notified, will be entitled to assume the defense thereof. Executive also shall
have the right to employ Executive's own counsel in such Proceeding and the fees
and expenses of such counsel shall be at the expense of Employer.
(f) The Company and Equistar shall not be liable to indemnify Executive
under this Agreement for any amounts paid in settlement of any Proceeding
effected without its written consent. Neither the Company nor Equistar shall
settle any Proceeding in any manner which would impose any penalty or limitation
on Executive without Executive's written consent. Neither the Company, Equistar
nor Executive will unreasonably withhold or delay their consent to any proposed
settlement.
(g) The right to indemnification and the payment of expenses incurred in
defending a Proceeding in advance of its final disposition conferred in this
Section 9 shall not be exclusive of any other right which Executive may have or
hereafter may acquire under any statute, provision of the certificate of
incorporation or by-laws of the Company, agreement, vote of stockholders or
disinterested directors or otherwise.
SECTION 10. ARBITRATION.
(a) Arbitrable Matters. Any dispute under this Agreement arising between
the parties shall be settled by binding arbitration. In the event of any dispute
between Executive and Employer hereunder, either party shall be entitled to
submit the dispute to arbitration. The arbitration proceeding shall be held in
Houston, Texas (unless otherwise mutually agreed by the parties), and shall be
conducted in accordance with the Center for Public Resources ("CPR") Rules for
Non-Administered Arbitration of Business Disputes. The arbitration shall be
conducted by a sole arbitrator appointed in accordance with the rules
established by CPR (the "Arbitrator").
Any arbitration between Executive and Employer pursuant to this Agreement
shall be governed by the United States Arbitration Act, 9 U.S.C. (S)(S) 1-16 (or
its successor). If the United States Arbitration Act is determined by the
Arbitrator not to apply to this type of employer/employee agreement based on
precedential legal authority, the parties agree to arbitrate any dispute under
the Texas General Arbitration Act, V.A.T.S. Art. 238-6 et. seq. (or its
successor).
(b) Submission to Arbitration. The party submitting any matter arising out
of this Agreement to arbitration (the "demanding party") shall do so by
delivering written notice thereof
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<PAGE>
(the "arbitration notice") to the other party (the "noticed party"). In addition
to indicating the demanding party's intention to commence arbitration
proceedings, the arbitration notice shall state the nature, with reasonable
detail, of the dispute and the demanding party's claim or claims, the question
or questions to be submitted for decision or award by arbitration and the relief
or remedy sought. A copy of the arbitration notice shall be concurrently
provided to CPR, along with a copy of this Agreement and a request to appoint an
Arbitrator. Either party may bring an action in any court of competent
jurisdiction to compel arbitration under this Agreement.
(c) Arbitration Procedures. The Arbitrator shall apply the substantive law
(and the law of remedies, if applicable) of the State of Texas as applicable to
the claim asserted. The Federal Rules of Evidence shall apply. The Arbitrator
shall have no authority to change this Agreement unless otherwise agreed by both
parties. The Arbitrator, and not any federal, state, or local court or agency,
shall have exclusive authority to resolve any dispute relating to the
interpretation, applicability, enforceability or formation of this Agreement,
including but not limited to any claim that all or any part of this Agreement is
void or voidable. Any party may be represented by an attorney or other
representative selected by the party.
The Arbitrator shall have jurisdiction to hear and rule on pre-hearing
disputes and is authorized to hold pre-hearing conferences by telephone or in
person as the Arbitrator deems necessary. The Arbitrator shall have the
authority to entertain a motion to dismiss and/or a motion for summary judgment
by any party and shall apply the standards governing such motions under the
Federal Rules of Civil Procedure.
At any time after the date of receipt of the arbitration notice, each party
can make discovery requests of the other in any form permitted under the Federal
Rules of Civil Procedure. The recipient of a discovery request shall have
twenty (20) days after the receipt of such request to object to any or all
portions of such request, and shall respond to any portions of such request not
so objected to within thirty (30) days of the receipt of such request. All
objections shall be in writing and shall indicate the reasons for such
objections. The objecting party shall insure that all objections and responses
are received by other parties within the above time periods. Any party seeking
to compel discovery following receipt of an objection shall file with the other
party and the Arbitrator a motion to compel, including a copy of the initial
request and the objection. The Arbitrator shall allow ten (10) days for
responses to the motion to compel before ruling. Claims of privilege and other
objections shall be determined as they would in federal court in a case applying
Texas law.
At least thirty (30) days before the arbitration, the parties must exchange
lists of witnesses, including any expert witnesses, and copies of all exhibits
intended to be used at the arbitration. Each party shall have the right to
subpoena witnesses and documents for the arbitration. Either party may arrange
for a court reporter to provide a stenographic record of proceedings. The cost
of the court reporter will be paid by the Company or Equistar.
(d) Compliance with Decisions. To the extent permissible under applicable
law, the parties agree that the award of the Arbitrator shall be final and
binding and shall be subject only to
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<PAGE>
the judicial review permitted by the United States Arbitration Act or other
applicable arbitration law pursuant to Section 10(a) hereof. Judgment on the
arbitration award may be entered and enforced in any court having jurisdiction
over the parties or their assets. It is the intent of the parties that the
arbitration provisions hereof be enforced to the fullest extent permitted by
applicable law.
(e) Costs and Expenses. The Employer shall promptly pay or reimburse
Executive for all costs and expenses, including, without limitation, attorneys'
fees and witnesses' fees, incurred by Executive as a result of any arbitration
(regardless of the outcome thereof) arising out of this Agreement. All expenses
of such arbitration, including the reasonable fees and expenses of legal counsel
for Executive and the costs and expenses incurred by the Arbitrator, shall be
borne by Employer.
SECTION 11. NOTICES. All notices, requests, demands and other
communications required or permitted to be given hereunder (hereinafter referred
to as "notices") shall be in writing and shall be deemed to have been duly given
if delivered by-hand, given by prepaid telecopy, telex or telegram, or mailed
via certified or registered U.S. mail, to the party to receive such notice at
such party's address set forth below; provided that either party may change its
address for notice by giving to the other party written notice of such change.
If to Company:
Millennium Petrochemicals Inc.
11500 North Lake Drive
Cincinnati, OH 45249
Attn: President
With a copy to:
Millennium Petrochemicals Inc.
99 Wood Ave S.
Iselin, NJ 08830
Attn: General Counsel
If to Equistar:
1221 McKinney Street
Houston, Texas 77010
Attn: Partnership Governance Committee
If to Executive:
The last address on the books of the Employer.
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<PAGE>
Any notice given pursuant to this Agreement shall be deemed received (i) if
delivered by-hand, when delivered; (ii) if sent by telecopy, telex or telegram,
24 hours after sending; and (iii) if mailed, when delivered.
SECTION 12. MISCELLANEOUS.
(a) Assignment. No right, benefit or interest hereunder shall be subject
to assignment, anticipation, alienation, sale, encumbrance, charge, pledge,
hypothecation or set-off in respect of any claim, debt or obligation, or to
execution, attachment, levy or similar process; provided, however, that
Executive may assign any right, benefit or interest hereunder if such assignment
is permitted under the terms of any plan or policy of insurance, or annuity
contract governing such right, benefit or interest.
(b) Construction of Agreement. Nothing in this Agreement shall be
construed to amend any provision of any plan or policy of the Company or
Equistar except as otherwise expressly noted herein. This Agreement is not, and
nothing herein shall be deemed to create, a commitment of continued employment
of Executive by the Company or any of its subsidiaries or by Equistar. The
Employer reserves the right to terminate Executive's employment at any time with
or without Cause, subject to the payment provisions hereof. Executive
acknowledges that he is aware that he shall have no claim against the Company or
Equistar hereunder or for deprivation of the right to receive the amounts
hereunder as a result of any termination that does not specifically satisfy the
requirements hereof. The foregoing shall not affect Executive's rights under any
other agreement with the Company or Equistar. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. Whenever
the context of this Agreement so requires, the masculine gender includes the
feminine gender, and words used in the singular or plural will include the
other. The words "herein" "hereunder" and other similar compounds of the word
"here" refer to the entire Agreement and not to any particular section or
provision.
(c) Amendment. This Agreement may not be amended, modified or canceled
except by written agreement of the parties or their respective successors and
legal representatives.
(d) Waiver. No provision of this Agreement may be waived except by a
writing signed by the party to be bound thereby.
(e) Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall remain in full force and effect to
the fullest extent permitted by law.
(f) Successors. This Agreement is personal to Executive and without the
prior written consent of the Company or Equistar shall not be assignable by
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives. The Company will require Equistar to assume this
Agreement on Executive's employment with Equistar, and to agree to perform this
Agreement in the
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<PAGE>
same manner and to the same extent that the Company would be required to perform
this Agreement if no such succession had taken place. Failure of the Company to
obtain such assumption and agreement shall constitute a breach of this Agreement
and shall entitle Executive to compensation from the Company in the same amount
and on the same terms as he would be entitled hereunder with respect to
Constructive Termination for Good Reason.
This Agreement shall be binding upon and inure to the benefit of the
Company, Equistar and any successor organization or organizations which shall
success to substantially all of the business and/or assets of the Company
(whether direct or indirect by means of merger, consolidation, acquisition of
substantially all the assets of the of the Company, or otherwise, including by
operation of law).
(g) Taxes. Any payment or delivery required under this Agreement shall be
subject to all requirements of the law with regard to withholding of taxes,
filing, making of reports and the like.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO ITS
CONFLICTS OF LAW PRINCIPLES.
(i) Entire Agreement. Except as otherwise provided in Section 4 hereof,
this Agreement sets forth the entire agreement and understanding of the parties
hereto with respect to the matters covered hereby.
(j) Independent Representation. Executive acknowledges that he has been
advised by the Company to have the Agreement reviewed by independent counsel and
has been given the opportunity to do so.
[END OF PAGE]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the ____
day of ________________________, 19___.
MILLENNIUM PETROCHEMICALS INC.
By:
---------------------------
Name:
Title:
EXECUTIVE
By:
---------------------------
ACCEPTED AND AGREED BY:
EQUISTAR CHEMICALS, LP
By:
-----------------------------
Name:
Title:
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<PAGE>
Exhibit 10.6
Summary Description of
Equistar Chemicals, LP
Executive Supplemental Savings Plan (ESSP)
Eligibility: Employees who earn in excess of $160m annually
Eligible employees receive an "employer match" on the monies that are limited in
the 401(k) plan due to the plan's exclusion of a company match on employees who
earn $160m annually in base pay.
The employer "match" may be taken in cash at year-end, or deferred in the Salary
and Bonus Deferral Plan.
<PAGE>
Exhibit 10.7
Summary Description of
Equistar Chemicals, LP
Executive Medical Plan
Eligibility: Officers
Medical expenses are covered at 100% of allowed charges. The plan also
reimburses up to $250 annually for Physicals. There is a $1,000,000 lifetime
maximum benefit per covered participant.
<PAGE>
Exhibit 10.8
Summary Description of
Equistar Chemicals, LP
Salary Deferral Plan
Eligibility: Officers & certain Key Managers
Eligible participants have the ability to defer up to 50% of base salary and
100% of their annual incentive awards into an income deferral plan. Elections
are made on an annual basis. Earnings are credited at a market rate utilizing
the Moody's Investment Grade Bond Yield Index. (Baa for Equistar for 1999.)
<PAGE>
Exhibit 10.9
Summary Description of
Equistar Chemicals, LP
Executive Disability Plan
Eligibility: Officers
The Executive Disability plan provides a benefit equal to 60% of base and annual
bonus pay while actively employed in the event of a qualifying disability. The
maximum annual benefit amount is $300m.
<PAGE>
Exhibit 10.10
Summary Description of
Equistar Chemicals, LP
Executive Life Insurance
Eligibility: Officers
This plan provides a benefit of 3x base salary while actively employed. On
retirement at age 65, benefit is reduced to 1x base salary.
This benefit can be paid as a lump sum or a 10-year annuity to the beneficiary.
<PAGE>
EXHIBIT 10.11
ASSET CONTRIBUTION AGREEMENT
AMONG
LYONDELL PETROCHEMICAL COMPANY,
LYONDELL PETROCHEMICAL L.P. INC.
AND
EQUISTAR CHEMICALS, LP
DATED: DECEMBER 1, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
SECTION 1 DEFINITIONS.................................................. 1
SECTION 2 CONTRIBUTION OF ASSETS; ASSUMPTION OF CERTAIN
LIABILITIES.................................................. 8
2.1 Transfer of Assets........................................... 8
2.2 Excluded Assets.............................................. 10
2.3 Instruments of Conveyance and Assignment..................... 11
2.4 Further Assurances........................................... 11
2.5 Assumption of Liabilities.................................... 12
2.6 Excluded Liabilities......................................... 13
2.7 Master Intellectual Property Agreement....................... 14
2.8 Employee Matters............................................. 14
2.9 Joint Contracts.............................................. 16
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTOR............ 16
3.1 Due Organization; Good Standing and Power.................... 16
3.2 Authorization and Validity of Agreements..................... 16
3.3 No Consents Required; No Conflict with Instruments to which
the Contributor is a Party................................... 17
3.4 Employee Benefits............................................ 17
3.5 Title to Assets; Absence of Liens and Encumbrances; Leases... 18
3.6 Title Matters; Defects in Improvements....................... 19
3.7 Working Capital.............................................. 19
3.8 Technology and Similar Rights................................ 20
3.9 Government Licenses, Permits and Related Approvals........... 20
3.10 All Necessary Assets......................................... 20
3.11 Conduct of Business in Compliance with Regulatory and
Contractual Requirements..................................... 20
3.12 Legal Proceedings............................................ 20
3.13 Consents..................................................... 20
3.14 Tax Matters.................................................. 21
3.15 [Reserved]................................................... 21
3.16 HSE Matters.................................................. 21
3.17 Investigation to Acquire Knowledge........................... 22
SECTION 4 REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP............ 22
4.1 Due Organization; Good Standing and Power.................... 22
4.2 Authorization and Validity of Agreement...................... 22
4.3 No Consents Required; No Conflict with Instruments to which the
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
Partnership is a Party...................................... 22
SECTION 5 COVENANTS SUBSEQUENT TO CLOSING DATE........................ 23
5.1 Access to Information....................................... 23
5.2 Mail or Other Communications................................ 23
5.3 Use of Contributor's Trade Name............................. 23
5.4 Closing Date Balance Sheet.................................. 24
5.5 Payment of Retained Accounts Payable........................ 24
5.6 Collection of Accounts Receivable........................... 24
5.7 Reimbursement for Prepaid Expenses.......................... 24
SECTION 6 SURVIVAL AND INDEMNIFICATION................................. 24
6.1 Survival Limitations......................................... 24
6.2 Indemnification.............................................. 25
6.3 Procedures................................................... 28
6.4 Subrogation.................................................. 30
6.5 Claims for HSE Work.......................................... 30
6.6 EXTENT OF INDEMNIFICATION.................................... 30
SECTION 7 MISCELLANEOUS................................................ 30
7.1 Construction................................................. 30
7.2 Payment of Certain Expenses and Taxes........................ 31
7.3 Notices 32
7.4 [Reserved]................................................... 33
7.5 Binding Effect; Benefit...................................... 33
7.6 Occasional and Bulk Sales.................................... 33
7.7 Assignability................................................ 33
7.8 Amendment; Waiver............................................ 33
7.9 Dispute Resolution........................................... 33
7.10 Severability................................................. 33
7.11 Counterparts................................................. 34
7.12 APPLICABLE LAW............................................... 34
7.13 JURISDICTION; CONSENT TO SERVICE OF PROCESS; WAIVER.......... 34
7.14 WAIVER OF JURY TRIAL......................................... 34
</TABLE>
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<PAGE>
-iii-
<PAGE>
LIST OF SCHEDULES AND EXHIBITS TO AGREEMENT
Schedules
---------
Schedule A - Contributed Business
Schedule 2.1(a) - Fee Interests
Schedule 2.1(b) - Leases
Schedule 2.1(d) - Equipment
Schedule 2.1(k) - Contributed Subsidiaries
Schedule 2.2(c) - Excluded Tradenames and Logos
Schedule 2.2(h) - Certain Excluded Assets
Schedule 2.5(a)(vii) - Assumed Indebtedness
Schedule 2.5(a)(x) - Assumed Long-Term Liabilities
Schedule 3 - Disclosure Schedule
Appendices
----------
Appendix A - Dispute Resolution Procedures
Exhibits
--------
Exhibit A - Form of Deeds for Fee Interests
Exhibit B - Form of Assignment of Lease for Leaseholds
Exhibit C - Form of Bill of Sale and Assignment
Exhibit D - Form of Trademark Assignment
Exhibit E - Form of Patent Assignment
Exhibit F - Form of Assumption Agreement
Exhibit G - Form of Master Intellectual Property Agreement
-iv-
<PAGE>
ASSET CONTRIBUTION AGREEMENT
ASSET CONTRIBUTION AGREEMENT (this "Agreement"), dated as of December 1,
1997, between Lyondell Petrochemical Company, a Delaware corporation (the
"Contributor"), Lyondell Petrochemical L.P. Inc., a Delaware corporation (the
"Contributing Partner") and Equistar Chemicals, LP, a Delaware limited
partnership (the "Partnership").
WHEREAS, the Contributor owns all of the issued and outstanding shares of
capital stock of Contributing Partner and the Contributing Partner is a partner
in the Partnership;
WHEREAS, the Contributor wishes to contribute the assets subject to certain
liabilities associated with the olefins, polyolefins and related petrochemicals
businesses described in Schedule A (the "Contributed Business") to the
Contributing Partner; and
WHEREAS, the Contributing Partner wishes to contribute such assets and
liabilities to the Partnership, and the Partnership wishes to accept such assets
and assume such liabilities, all upon the terms and conditions hereinafter set
forth; and
WHEREAS, the Partnership will consummate certain transactions and enter
into certain agreements as provided for in the Master Transaction Agreement,
dated as of July 25, 1997, between Lyondell Petrochemical Company and Millennium
Chemicals Inc., as amended (the "Master Transaction Agreement").
NOW THEREFORE, in consideration of the premises and of the mutual covenants
of the parties hereto, it is hereby agreed as follows:
SECTION 1
DEFINITIONS
The terms used in this Agreement have the following definitions or are
defined in the Sections referenced below:
"Accounts Receivable" constitute, as of the Closing Date, all uncollected
accounts receivable that have been generated by, or are attributable to, the
Contributor's operation prior to the Closing Date of the Contributed Business in
the ordinary course and in all respects in a manner consistent with the
provisions of Section 3.2 of the Master Transaction Agreement.
"Affiliate" means any Person that directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with the Person specified; provided,
<PAGE>
however, that for purposes of this Agreement: (i) Atlantic Richfield Company and
any Person controlled by it shall not be considered an Affiliate of Contributor;
and (ii) neither the Partnership nor any Person controlled by it shall be
considered an Affiliate of the Contributor. For purposes of this definition, the
term "control" shall have the meaning set forth in 17 CFR 230.405 as in effect
on the date hereof.
"Agreed Rate" means the base commercial lending rate announced by Citibank,
N.A. (or its successor) at its principal office in effect from time to time,
such interest rate to change automatically, effective as of the date of each
change in such base rate.
"Agreement" is defined in the Preamble.
"Assets" means all of the assets, rights and properties being contributed,
conveyed, assigned, transferred and delivered to the Partnership pursuant to
Section 2.1.
"Assignment and Assumption Agreements" means the Deeds, the Assignments of
Lease, the Bill of Sale and Assignment, the Trademark Assignment, the Patent
Assignment and the Assumption Agreement.
"Assignments of Lease" is defined in Section 2.3(a).
"Associated Rights" is defined in Section 2.1(c).
"Assumed Liabilities" is defined in Section 2.5(a).
"Authority" means any government or governmental or regulatory body
thereof, or political subdivision thereof, whether federal (or any commonwealth,
territory or possession thereof), state, local or foreign, or any agency,
department or instrumentality thereof, or any court or arbitrator (public or
private).
"Basic Severance" is defined in Section 2.8(b).
"Capital Spares" means the inventory of spare parts used by the Contributor
in the Contributed Business and owned by the Contributor as of the Closing Date.
"CERCLA" is defined in Section 3.16(b).
"Chemical Substance" means any (i) 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 HSE Law or defined or listed as an industrial,
toxic, deleterious, harmful, radioactive, infectious, disease-causing or
hazardous
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<PAGE>
substance, material or waste under any HSE Law, and (ii) petroleum or any
fraction thereof, asbestos or asbestos-containing material or polychlorinated
biphenyls ("PCBs").
"Closing" means the closing of the transactions contemplated by the Master
Transaction Agreement.
"Closing Date" means the date hereof.
"Closing Date Balance Sheet" is defined in Section 5.4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consent" means any consent, waiver, appraisal, authorization, exception,
registration, license or declaration of or by any Person or any Authority, or
any expiration or termination of any applicable waiting period under any Legal
Requirement, required with respect to the Contributed Business or the
Contributor or any Affiliate thereof in connection with (i) the execution and
delivery of this Agreement or any of the Related Agreements or (ii) the
consummation of the transactions contemplated hereby or thereby.
"Contracts" means contracts, maintenance and service agreements, purchase
commitments for materials and other services, advertising and promotional
agreements, leases, taxation agreements with any Authority, and other
agreements.
"Contributed Contracts" is defined in Section 2.1(f).
"Contributed Business" is defined in the Preamble.
"Contributed Intellectual Property" is defined in Section 2.1(g).
"Contributed Subsidiaries" is defined in Section 2.1(k).
"Contributor" is defined in the Preamble.
"Deeds" is defined in Section 2.3(a).
"De Minimis Claim" means any Third Party Claim for which the Liability
associated therewith is less than $25,000.
"Employee Plan" is defined in Section 3.4(a)(i).
"Encumbrance" means any lien, charge, encumbrance, security interest, title
defect, option or any other restriction or third party right.
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<PAGE>
"Environment" is defined in this Section 1 in the definition of "HSE Laws".
"Equipment" is defined in Section 2.1(d).
"Excluded Assets" is defined in Section 2.2.
"Excluded Liabilities" is defined in Section 2.6.
"Fee Interests" is defined in Section 2.1(a).
"GAAP" means United States generally accepted accounting principles, as in
effect from time to time.
"Government Licenses" means all licenses, permits or franchises issued by
any Authority relating to the operation, development, use, maintenance or
occupancy of the Facilities or any other Asset or of the Contributed Business to
extent that such licenses, permits or franchises relate principally to the
normal operation and conduct of the Contributed Business.
"HSE Claim" means (i) any actions, events, circumstances or
responsibilities (including compliance actions or requirements) that are
necessary to comply with HSE Laws but only to the extent that any of the
foregoing give rise to out of pocket costs or expenses or result in a Liability
that is required by GAAP to be reflected on the balance sheet of the applicable
party or (ii) any third party (including private parties, Authorities and
employees acting on each such party's own behalf or on the behalf of other third
parties) actions, lawsuits, claims, investigations or proceedings arising under
HSE Laws.
"HSE Laws" means any Legal Requirements or rule of common law now in effect
(including any amendments now in effect) and any current judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree, or judgment, relating to (i) 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 (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.
-4-
<PAGE>
"HSE Proceeding" is defined in Section 3.16(d).
"Indemnified Party" is defined in Section 6.3(a).
"Indemnifying Party" is defined in Section 6.3(a).
"Intellectual Property" means research material, technical information,
marketing information, patent rights, patent licenses, pending patent
applications, trade secrets, technical information, know-how, management
information systems, technology, quality control data, specifications, designs,
drawings, software, sales promotion literature and advertising materials.
"Inventory" means materials used by the Contributor in the Contributed
Business and owned by the Contributor as of the Closing Date including raw
materials, feed stocks, supplies, additives, pigments, process chemicals,
packaging materials (to the extent the Partnership's use thereof would be
consistent with Section 5.3), catalysts, work-in-process and finished goods that
relate principally to the normal operation and conduct of the Contributed
Business.
"Inventory Tax" is defined in Section 7.2(d).
"Knowledge" with respect to the Contributor means the actual knowledge of
(i) any plant manager, (ii) any officer of the Contributor having
responsibilities with respect to the Contributed Business, and (iii) any
employee reporting directly to an officer described in clause (ii), in each case
employed by the Contributor in connection with the Contributed Business.
"Leased Premises" is defined in Section 2.1(b).
"Leaseholds" is defined in Section 2.1(b).
"Leases" is defined in Section 2.1(b).
"Legal Requirement" means any law, statute, rule, ordinance, decree,
requirement, regulation, order or judgment of any Authority, including the terms
of any Government License.
"Liability" is defined in Section 6.2(a).
"Licensed Technology" means the technology licensed to the Partnership
pursuant to the Master Intellectual Property Agreement.
"Licensed Trademarks" means the trademarks licensed to the Partnership
pursuant to the Master Intellectual Property Agreement.
-5-
<PAGE>
"Lowest Cost Response" means the response required or allowed under HSE
Laws that addresses the Chemical Substances present at the lowest cost
(considered as a whole taking into consideration any negative impact such
response may have on the conduct of the Contributed Business and any potential
additional costs or liabilities that may arise as a result of such response) as
compared to any other response that is consistent with HSE Laws. Taking no
action shall constitute the Lowest Cost Response if, after investigation, taking
no action is determined to be consistent with HSE Laws. If taking no action is
not consistent with HSE Laws, the least costly non-permanent remedy (such as
mechanisms to contain or stabilize Chemical Substances, including caps, dikes,
encapsulation, leachate collection systems, etc.) shall be the Lowest Cost
Response, provided that such non-permanent remedy is consistent with HSE Laws
and less costly than the least costly permanent remedy (such as the excavation
and removal of soil).
"Master Intellectual Property Agreement" is defined in Section 2.7.
"Master Transaction Agreement" is defined in the fourth WHEREAS clause.
"Material Adverse Effect" means any adverse circumstance or consequence
that, individually or in the aggregate, has an effect that is material to the
financial condition, results of operations, assets or business of the
Contributed Business or the Assets, taken as a whole.
"Neutral" means a neutral Person acceptable to each of the appointing
parties and not affiliated with any of the parties or their Affiliates.
"Partnership" is defined in the Preamble.
"Partnership Employees" is defined in Section 2.8(a).
"Patent Assignment" is defined in Section 2.3(a).
"PCBs" is defined in this Section in the definition of "Chemical
Substance".
"Person" means any natural person or any corporation, partnership, limited
liability company, joint venture, association, trust or other entity or
organization.
"Pre-Closing Contingent Liabilities" means all Liabilities of every kind
and nature arising out of, in connection with or related to the ownership,
operation or use prior to the Closing Date of the Assets or the Contributed
Business other than the Liabilities referred to in Sections 2.5(a)(i), (ii),
(iii), (vii) and (ix).
-6-
<PAGE>
"Prepaid Expenses" means the balances in the prepaid accounts consistent
with GAAP of the Contributor or its Affiliates, as of the Closing Date, that are
associated with the Contributed Business and that will have value to the
Partnership in owning and operating the Contributed Business after the Closing
Date.
"Property Tax" is defined in Section 7.2(c).
"Related Agreements" means the Master Transaction Agreement, Tier 1 Related
Agreements (other than this Agreement) and Tier 2 Related Agreements of the
Contributor or its Affiliates, as such terms are defined in the Master
Transaction Agreement.
"Release" means 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 the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, or any other HSE Law and any noxious noise or odor
emission.
"Retained Accounts Payable" means, as of the Closing Date, all current
trade accounts payable and current accrued expenses other than those related to
employee vacation and lag-week accruals for employees that become Partnership
Employees.
"SEC Reports" means the 1996 Annual Report on Form 10-K and the 10-Q for
the first quarter of 1997 of the Contributor required to be filed with the
Securities and Exchange Commission.
"Seven Year PCCL Claims" means Third Party Claims (other than any De
Minimis Claim) related to Pre-Closing Contingent Liabilities that have been or
are asserted within seven years after the Closing Date.
"Shared Services Agreements" means the agreements between the Contributor
(or its Affiliates) and the Partnership set forth on Appendix B-2 of the Master
Transaction Agreement.
"Stores Inventory" means the inventory of spare parts, excluding Capital
Spares, that are used by the Contributor or any Affiliate thereof in the
Contributed Business and owned by the Contributor or any Affiliate thereof as of
the Closing Date and that consist of items that generally can be used for
several processes or types of equipment, including, but not limited to, such
items as pumps, motors, pipe fittings, electrical wiring, instruments, nuts and
bolts, unfabricated metals, safety items, small hand tools and other
miscellaneous repair parts or supplies.
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"Taxes" means all taxes, charges, fees, levies or other assessments imposed
by any taxing Authority, including, but not limited to, income, gross receipts,
excise, property, sales, use, transfer, payroll, license, ad valorem, value
added, withholding, social security, national insurance (or other similar
contributions or payments), franchise, severance and stamp taxes (including any
interest, fines, penalties or additions attributable to, or imposed on or with
respect to, any such taxes, charges, fees, levies or other assessments).
"Third Party Claim" means any allegation, claim, civil or criminal action,
proceeding, charge or prosecution brought by a Person other than the
Contributor, any Affiliate thereof, the Partnership, or any member of the
Millennium Group (as defined in the Master Transaction Agreement).
"Trademarks" means trade names, trademarks, trademark registrations or
trademark applications, copyrights, copyright applications or copyright
registrations or any derivative thereof or design used in connection therewith.
"Trademark Assignment" is defined in Section 2.3(a).
"Unrecorded Assets" is defined in Section 2.1(e).
"WARN" is defined in Section 2.8(f).
SECTION 2
CONTRIBUTION OF ASSETS; ASSUMPTION OF CERTAIN LIABILITIES
2.1 Transfer of Assets. On the terms and subject to the conditions set
forth in this Agreement, on the date hereof, the Contributor contributes to the
Contributing Partner and the Contributing Partner is contributing, conveying,
assigning, transferring and delivering to the Partnership, or shall cause to be
contributed, conveyed, assigned, transferred and delivered to the Partnership,
and the Partnership shall accept, acquire and assume all of the assets, rights,
and properties used or held for use in the contemplated operation and conduct of
the Contributed Business of every kind, nature, character and description,
tangible and intangible, real, personal or mixed, wherever located other than
the Excluded Assets; and which conveyance, subject to Section 2.2, shall
include, without limitation, the following:
(a) All right, title and interest of the Contributor and any Affiliate
thereof in the parcels of land described as fee property on Schedule 2.1(a),
together with all buildings, structures, fixtures and other improvements
situated thereon and all right, title and interest of the Contributor and any
Affiliate thereof under easements, privileges, rights-of-way, riparian and other
water rights, lands underlying any adjacent streets or roads, appurtenances and
licenses to the extent pertaining to or accruing to the benefit of the land (the
"Fee Interests");
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(b) All right, title and interest of the Contributor and any Affiliate
thereof under the leases and subleases, all amendments thereto and all
agreements related thereto described on Schedule 2.1(b) (the "Leases"), for the
use and occupancy of the premises described therein (the "Leased Premises"),
together with all buildings, structures, fixtures and other improvements
situated thereon and, all rights and interests of the Contributor and any
Affiliate thereof under all easements, privileges, rights-of-way, riparian and
other water rights, appurtenances and licenses pertaining to the Leases or
accruing to the benefit of the tenant under the Leases (the "Leaseholds");
(c) All right, title and interest of the Contributor and any Affiliate
thereof, if any, in lands, or real property of others, used principally in the
normal operation and conduct of the Contributed Business (the "Associated
Rights"), including, without limitation, all contracts, easements, rights-of-
way, permits, licenses and leases and other similar rights for related
equipment, power and communications cables, and other related property and
equipment used principally in the normal operation and conduct of the
Contributed Business;
(d) All of the right, title and interest of the Contributor and any
Affiliate thereof in and to the equipment, furniture, furnishings, fixtures,
machinery, Capital Spares, vehicles, tools, computers and other tangible
personal property used principally in the normal operation and conduct of the
Contributed Business including without limitation the items listed on Schedule
2.1(d), (the equipment described in this Section 2.1(d), to be referred to
collectively as the "Equipment") and all warranties and guarantees, if any,
express or implied, existing for the benefit of the Contributor or any Affiliate
thereof in connection with the Equipment to the extent assignable;
(e) Subject, to the extent applicable, to Section 5.3, all (i) customer
lists, customer credit information (to the extent neither the Contributor nor
any Affiliate thereof is bound to any confidentiality obligation with respect
thereto), customer payment histories and credit limits, vendor lists, catalogs,
and (ii) Intellectual Property to the extent used or contemplated for use
principally in the normal operation and conduct of (or to the extent under
development for use principally in the normal operation and conduct of) or the
marketing or promotion of, the Contributed Business (collectively, the
"Unrecorded Assets");
(f) All Contracts, whether or not entered into in the ordinary course of
business, that relate principally to the normal operation and conduct of the
Contributed Business, or in the case of any Contracts under which either the
Contributor or any Affiliate thereof retains rights with respect to its other
businesses, to the extent any such Contract relates to the operation of the
Contributed Business (all the foregoing excluding Government Licenses, but,
together with all agreements and instruments setting forth the Contributor's and
any of its Affiliates' rights with respect to rights-of-way, privileges,
riparian and other rights, appurtenances, licenses or franchises and in respect
of intellectual property rights, in each case that constitute Assets described
in clauses (a) through (e), of this Section 2.1 to be referred to collectively
as the "Contributed Contracts");
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(g) Any Trademarks to the extent used or contemplated to be used
principally in the normal operation and conduct of the Contributed Business (all
of the items referred to in this Section 2.1(g), together with the items
referred to in clause (ii) of Section 2.1(e), collectively the "Contributed
Intellectual Property");
(h) All Government Licenses that are transferable and as to which Consents
to transfer are obtained where required;
(i) The Inventory, Stores Inventory and Prepaid Expenses;
(j) Subject to Section 5.6, Accounts Receivable.
(k) All right, title and interest of the Contributor and any Affiliate
thereof in the subsidiaries listed on Schedule 2.1(k) (the "Contributed
Subsidiaries");
(l) All claims and rights against third parties (including, without
limitation, insurance carriers, indemnitors, suppliers and service providers) to
the extent, but only to the extent that, they relate to the Assumed Liabilities;
provided, however, that to the extent that any claims or rights of the
Contributor against any third parties are not assigned to the Partnership, and
the partnership incurs Liabilities that would create such claims or rights on
behalf of the Contributor, the Contributor shall enforce such claims or rights
for the benefit (and at the cost) of the Partnership to the extent it may
lawfully do so; and
(m) Any other asset of the Contributor or its Affiliate contributed to the
Partnership pursuant to the terms of this Agreement.
2.2 Excluded Assets. It is expressly understood and agreed that the
Assets shall not include the following (the "Excluded Assets"):
(a) Except as otherwise provided in Section 2.1(j), cash and cash
equivalents or similar type investments, such as certificates of deposit,
Treasury bills and other marketable securities;
(b) Except as may be agreed pursuant to Section 2.8(g), any assets of any
qualified or non-qualified pension or welfare plans or other deferred
compensation arrangements maintained by the Contributor or any Affiliate thereof
for employees of the Contributor or any Affiliate thereof prior to the Closing
Date;
(c) Any of the Contributor's or any Affiliate's right, title and interest
in and to (i) the names and logos set forth on Schedule 2.2(c) and any other
statutory names, trade names or trademarks, indications or descriptions of which
such names or any name similar thereto forms a part and (ii) any other trade
names, trademarks, trademark registrations or trademark applications,
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copyrights, copyright applications or copyright registrations or any derivative
thereof or design used in connection therewith that are not used principally in
the normal operation and conduct of and are not uniquely applicable to the
Contributed Business;
(d) All claims and rights against third parties (including, without
limitation, insurance carriers, indemnitors, suppliers and service providers),
to the extent they do not relate to the Assumed Liabilities;
(e) Claims for refunds of Taxes for time periods ending on or before the
Closing Date, which Taxes remain the liability of Contributor under this
Agreement;
(f) Subject to the Master Intellectual Property Agreement, any and all of
the Intellectual Property and Trademarks of the Contributor or any Affiliate
thereof to the extent not used principally in the normal operation and conduct
of or to the extent not applicable to the Contributed Business;
(g) All items sold in the ordinary course of business prior to the Closing
Date, none of which individually or in the aggregate are material to the normal
operation and conduct of the Contributed Business; and
(h) The tangible assets, intangible assets, real properties, contracts and
rights, described in Schedule 2.2(h).
2.3 Instruments of Conveyance and Assignment. On the Closing Date, the
Contributor shall:
(a) deliver or cause to be delivered to the Partnership (i) properly
executed and acknowledged warranty deeds, in substantially the form attached
hereto as Exhibit A (the "Deeds"), for all Fee Interests being conveyed
hereunder, (ii) assignments of lease for the Leases in substantially the form
attached hereto as Exhibit B, (the "Assignments of Lease"), (iii) a bill of sale
and assignment in substantially the form attached hereto as Exhibit C (the "Bill
of Sale and Assignment") conveying title to the Assets (other than the Fee
Interests and Leaseholds) and assigning the Contracts, (iv) an assignment of the
trademarks included in the Assets in substantially the form attached hereto as
Exhibit D (the "Trademark Assignment") and (v) an assignment of patent rights,
licenses and applications included in the Assets in substantially the form
attached hereto as Exhibit E (the "Patent Assignment"); and
(b) transfer to the Partnership the originals (to the extent the
Contributor or any Affiliate thereof possesses an original and retained no
rights thereunder after the Closing Date) or copies, as appropriate, of the
Contributed Contracts and the originals or copies, as appropriate, of all
current records, files and other data that relate to the Assets and that are
necessary for continuing the normal operation and conduct of the Contributed
Business by the Partnership.
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2.4 Further Assurances.
(a) On and from time to time after the Closing Date, the Contributor will
execute and deliver, or cause to be executed and delivered, such other
instruments of conveyance, assignment, transfer and delivery as the Partnership
may reasonably request in order to fulfill and implement the terms of this
Agreement, to vest in the Partnership title to the Assets, or to enable the
Partnership to realize the benefits intended to be afforded hereby.
(b) On and from time to time after the Closing Date, the Partnership will
execute and deliver, or cause to be executed and delivered, such other
instruments of assumption, conveyance, assignment, transfer, power of attorney
or assurance as the Contributor may reasonably request in order to vest in the
Partnership all of the Assumed Liabilities and to enable the Contributor to
realize the benefits intended to be afforded hereby.
(c) Notwithstanding any other provision of this Agreement to the contrary,
the Partnership and the Contributor acknowledge and agree that any Government
Licenses, Contributed Contracts or warranties which by their terms require
Consent from any other unaffiliated contracting party thereto shall not be
assigned to the Partnership unless any such Consent has been obtained prior to
the Closing Date. Following the Closing, the Partnership and the Contributor
shall cooperate with each other and use commercially reasonable efforts to
obtain those Consents that were not obtained prior to the Closing and (i) if
such Consents are obtained following the Closing, the Partnership and the
Contributor shall execute and deliver any other and further instruments of
assignment, assumption, transfer and conveyance and take such other and further
action as the Partnership may request in order to assign to the Partnership any
Government Licenses, Contributed Contracts or warranties to which such Consents
relate and (ii) pending such transfer or issuance to the Partnership, shall
provide, to the extent it may lawfully do so, the Partnership with the benefits
of any such Government Licenses, Contributed Contracts or warranties, in which
case, the Partnership shall promptly assume and discharge (or reimburse the
Contributor or its Affiliate for) all obligations and liabilities associated
with the benefits of such Government Licenses, Contributed Contracts or
warranties so made available to the Partnership. If the Contributor obtains a
Consent to assign any Government Licenses, Contributed Contract or warranties
after the Closing, each such Government Licenses, Contributed Contract or
warranties shall be deemed to be assigned to the Partnership promptly after such
Consent is obtained.
(d) Following the Closing, the Contributor, Contributing Partner and the
Partnership shall cooperate in good faith and in a commercially reasonable
manner with respect to all matters pertinent to the carrying into effect of this
Agreement and the discharge by each party of its obligations and liabilities
hereunder and thereunder, and shall furnish to each other such information,
cooperation and assistance as reasonably may be requested in connection with the
foregoing.
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2.5 Assumption of Liabilities.
(a) On the terms and subject to the conditions, including Section 6.2, set
forth in this Agreement, on the Closing Date, the debts, liabilities and
obligations of the Contributor and its Contributed Subsidiaries set forth in
this Section 2.5 shall be assumed by the Contributing Partner in connection with
the transfer of Assets to it and shall be assumed by the Partnership in
connection with the transfer of Assets to it, and the Partnership agrees to pay,
perform and discharge all such debts, liabilities and obligations when due:
(i) All obligations arising after the Closing Date under the Contracts
and Leases that are assigned to the Partnership hereunder unless and to the
extent that such obligation arises out of a violation of such Contract or
Lease prior to the Closing Date;
(ii) All obligations under purchase orders accepted by the Contributor
or its Contributed Subsidiaries in the ordinary course of business of the
Contributed Business prior to the Closing Date that are not filled as of
the Closing Date;
(iii) Current accrued expenses related to employee vacation and lag-
week accruals for employees that become Partnership Employees;
(iv) All obligations and liabilities, of every kind and nature,
without limitation, arising out of, in connection with or related to the
ownership, operation or use after the Closing Date of the Assets or the
Contributed Business;
(v) Seven Year PCCL Claims to the extent the aggregate thereof does
not exceed $7,000,000;
(vi) Third Party Claims that are related to Pre-Closing Contingent
Liabilities and that are first asserted seven years or more after the
Closing Date;
(vii) The obligations for indebtedness described on Schedule
2.5(a)(vii);
(viii) [Reserved];
(ix) All Liabilities associated with products sold after the Closing
Date regardless of when manufactured;
(x) The long-term liabilities set forth on Schedule 2.5(a)(x); and
(xi) Any other Liability specifically assumed by the Partnership
pursuant to the terms of this Agreement.
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The liabilities and obligations assumed by the Partnership pursuant to this
Section are sometimes hereinafter referred to collectively as the "Assumed
Liabilities."
(b) On the Closing Date, the Partnership shall deliver to the Contributor
an instrument of assumption of the Assumed Liabilities substantially in the form
attached hereto as Exhibit F (the "Assumption Agreement").
2.6 Excluded Liabilities. Except as otherwise expressly provided in this
Agreement (including, without limitation, Sections 6.2 and 7.2) or the
Assumption Agreement, the Partnership is assuming only the Assumed Liabilities
and is not assuming any other liability or obligation of the Contributor or any
Affiliate thereof, of whatever nature, whether presently in existence or arising
hereafter, whether known or unknown, or whether absolute or contingent, and all
such other liabilities and obligations of the Contributor and any Affiliate
thereof that are not Assumed Liabilities shall be retained by and remain
obligations and liabilities of the Contributor or such Affiliate (all such
liabilities and obligations being herein referred to as the "Excluded
Liabilities"), including the following:
(i) Any Pre-Closing Contingent Liability that is not an Assumed
Liability;
(ii) any obligation or liability relating to the Excluded Assets; and
(iii) any obligation (A) for the payment of severance benefits to
employees of the Contributor or any of its Affiliates except as set forth
in Sections 2.8(b) or (c), or (B) attributable to Contributor's or any of
its Affiliates' employment of any employee, agent or independent contractor
prior to the Closing Date.
2.7 Master Intellectual Property Agreement.
On the Closing Date, the Partnership and Contributor shall execute and
deliver a master intellectual property agreement (the "Master Intellectual
Property Agreement") in substantially the form attached hereto as Exhibit G
providing, among other things, the following:
(a) Non-exclusive, royalty-free licenses to the Partnership of any
Intellectual Property and Trademarks used, contemplated for use or that could be
used, in the Contributed Business that is not conveyed to the Partnership
pursuant to Section 2.1.
(b) Non-exclusive, royalty-free licenses to the Contributor or its
Affiliates of any Contributed Intellectual Property acquired by the Partnership
pursuant to Section 2.1 of this Agreement used, contemplated for use or that
could be used in the business of the Contributor or its Affiliates.
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(c) The assignment of the Contributed Intellectual Property to the
Partnership.
2.8 Employee Matters. If the Closing Date occurs prior to January 1,
1998, the effective employment date shall be January 1, 1998 and the Contributor
and the Partnership shall enter into an agreement to provide employee services
to the Partnership through December 31, 1997.
(a) At or prior to the Closing, the Partnership shall determine which
employees of the Contributor or any Affiliate thereof will be offered employment
by the Partnership. Any such employee that accepts such offer is herein called
a "Partnership Employee." Partnership Employees shall be employed effective on
(i) January 1, 1998, or (ii) if the Closing Date is after January 1, 1998, the
Closing Date.
(b) If, within six months after the Closing Date or in anticipation of
Closing, the Contributor or any Affiliate thereof terminates (other than for
cause) the employment of any employee of the Contributor or any Affiliate
thereof who is primarily associated with the Assets or the Contributed Business
but who does not become a Partnership Employee, then the Partnership will pay to
the Contributor an amount equal to the Basic Severance to the extent the
Contributor or any Affiliate thereof pays the Basic Severance to such employee.
"Basic Severance" means two weeks of base pay for each full year of service by
the employee with the Contributor or any Affiliate (or predecessors of either,
to the extent service therefor is credited by the Contributor), subject to a 52
week maximum and a 12 week minimum; provided, however, that with respect to any
employee who has an employment agreement that contains provisions providing for
one or more payments in the event of a change in control of the Contributor,
"Basic Severance" means up to 52 weeks of base pay notwithstanding the
employee's years of service.
(c) Any Partnership Employee whose employment is terminated by the
Partnership (other than for cause) within six months after the Closing Date
shall be entitled to receive a severance benefit from the Partnership equal to
the Basic Severance (which, for purposes of calculating service time, shall
include the employee's time of service with the Contributor, its predecessors
(to the extent service therefor is credited by the Contributor) and the
Partnership).
(d) Any employees of the Contributor that the Partnership and the
Contributor agree are necessary for the orderly transfer of the Contributed
Business to the Partnership but who will not become Partnership Employees
("Transition Employees") shall be compensated by the Contributor on terms and
conditions and for a duration to be agreed upon by the Partnership and the
Contributor. The Partnership shall reimburse the Contributor for any such
agreed upon compensation, including payroll taxes, benefit costs and workers
compensation premiums and claims, paid by the Contributor to or with respect to
any Transition Employee.
(e) If any employee of the Contributor is eligible for and receiving short
term disability benefits or sick pay as of the Closing Date and the Partnership
has offered such employee
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employment by the Partnership, that employee shall become employed by the
Partnership (and become a Partnership Employee for purposes of this Section 2.8)
upon eligibility to return to active employment with the Contributor under the
applicable conditions of the Contributor's short term disability benefits or
sick pay plan. Partnership employment shall not be effective until the
Contributor verifies that the employee has satisfied the conditions (if any) to
return to active employment. Until such time as such employee becomes a
Partnership Employee the Contributor shall continue to bear all costs and
expenses associated with such employee.
(f) Neither the Contributor nor any of its Affiliates shall, at any time
prior to 60 days after the Closing Date, effect a "plant closing" or "mass
layoff", as those terms are defined in the Worker Adjustment and Retraining
Notification Act of 1988 ("WARN"), affecting in whole or in part any facility,
site of employment, operating unit or employee of the Contributor or any of its
Affiliates without complying fully with the notice and all other applicable
requirements of WARN.
(g) In connection with the development by the Partnership of benefit plans
and programs for Partnership Employees as provided in the Master Transaction
Agreement, (i) the Contributor may direct the trustee of any of its employee
plans to transfer assets and liabilities in those employee plans associated with
the accrued benefits of Partnership Employees to a comparable Partnership
benefit plan in which the Partnership Employees participate, and (ii) the
Contributor or any of its Affiliates may direct the trustee of its grantor trust
to transfer assets and liabilities relating to any accounts for Partnership
Employees under an executive deferral plan to a trust established by the
Partnership to provide benefits under a comparable non-qualified deferred
compensation plan; provided, however, with respect to (i) and (ii) above, the
assets associated with any such plans, as of the Closing Date, are not less than
the liabilities associated therewith as determined by the Partnership and a
trust to trust transfer of assets does not result in a taxable event. In
connection with the development and implementation of such plans and programs,
the Partnership agrees, for purposes of calculating service time, to include
each employee's time of service with the Contributor, its predecessors (to the
extent service therefor is credited by the Contributor) or the Partnership.
(h) To the extent that the Partnership adopts benefit plans or policies
that contemplate the provision of post-retirement life and medical benefits to
the Partnership Employees, the Partnership shall record and recognize, in
accordance with GAAP, the associated liability for providing the post-retirement
life and medical benefits to the Partnership Employees.
2.9 Joint Contracts.
(a) Any Contributed Contracts contributed to the Partnership pursuant to
Section 2.1 that relate principally to the Contributed Business but also relate
to the business (other than the Contributed Business) of the Contributor or its
Affiliates will be made available to the Contributor and its Affiliates by the
Partnership pursuant to the Shared Services Agreements and other
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arrangements by which the Contributor and its Affiliates will enjoy the benefits
of such Contributed Contracts as they relate to their business (other than the
Contributed Business) on the same terms and conditions as the Partnership.
(b) Any Contracts that relate principally to the business (other than the
Contributed Business) of the Contributor or its Affiliates but also relate to
the Contributed Business will be made available to the Partnership by the
Contributor or its Affiliates pursuant to the Shared Services Agreements and
other arrangements by which the Partnership will enjoy the benefits of such
Contracts as they relate to the Contributed Business on the same terms and
conditions as the Contributor or its Affiliates.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTOR
Except as set forth on Schedule 3 or in the SEC Reports, the Contributor
represents and warrants to the Partnership as follows:
3.1 Due Organization; Good Standing and Power. The Contributor is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power and authority to own, lease
and operate the properties to be contributed hereunder and to conduct the
Contributed Business as now conducted by it. The Contributor has all corporate
power and authority to enter into this Agreement and the Assignment and
Assumption Agreements and to perform its obligations hereunder and thereunder.
The Contributor is duly authorized, qualified or licensed to do business as a
foreign corporation, and is in good standing, in the State of Texas and in each
of the other jurisdictions in which its right, title or interest in or to any of
the Assets held by it, or the conduct of the Contributed Business by it,
requires such authorization, qualification or licensing, except where the
failure to so qualify or to be in good standing would not reasonably be expected
to have a Material Adverse Effect.
3.2 Authorization and Validity of Agreements. The execution, delivery and
performance of this Agreement and the other Related Agreements by the
Contributor and the consummation by it of the transactions contemplated hereby
and thereby have been duly authorized by the Board of Directors of the
Contributor. Except to the extent heretofore obtained, no other corporate or
stockholder action is necessary for the authorization, execution, delivery and
performance by the Contributor of this Agreement and the other Related
Agreements and the consummation by the Contributor of the transactions
contemplated hereby or thereby. This Agreement and the other Related Agreements
have been duly executed and delivered by the Contributor and constitute legal,
valid and binding obligations of the Contributor, enforceable in accordance with
their terms, except as the same may be limited by bankruptcy, insolvency,
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reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and by general equity principles.
3.3 No Consents Required; No Conflict with Instruments to which the
Contributor is a Party. The execution, delivery and performance of this
Agreement and the other Related Agreements by the Contributor or by any
Affiliate of the Contributor that is a party thereto and the consummation by the
Contributor or any such Affiliate of the transactions contemplated thereby (i)
will not require any Consent except for such Consents the failure of which to be
obtained or made, would not in the aggregate reasonably be expected to have a
Material Adverse Effect; and (ii) will not violate (with or without the giving
of notice or the lapse of time or both), or conflict with, or result in the
breach or termination of any provision of, or constitute a default under, or
result in the acceleration of the performance of the obligations of the
Contributor or any such Affiliate under, or result in the creation of an
Encumbrance upon any Assets or a portion of the Contributed Business pursuant
to, the charter or by-laws of the Contributor or any such Affiliate, or any
indenture, mortgage, deed of trust, lease, licensing agreement, contract,
instrument or other agreement to which the Contributor or any such Affiliate is
a party or by which the Contributor or any such Affiliate or any of the Assets
held by the Contributor or any such Affiliate is bound, except for such
violations, conflicts, breaches, terminations, defaults, accelerations or
Encumbrances which would not in the aggregate reasonably be expected to have a
Material Adverse Effect.
3.4 Employee Benefits.
(a (i) Each of the Contributor's Defined Benefit and Defined
Contribution Pension Plans covering employees ("Employee Plan") is in
substantial compliance with applicable requirements prescribed by any and
all Legal Requirements, including, but not limited to the Code, except for
violations the occurrence of which would not in the aggregate reasonably be
expected to have a Material Adverse Effect. Each Employee Plan that is
intended to be qualified under Section 401(a) of the Code currently has a
favorable determination letter from the Internal Revenue Service as to that
Plan's qualification under Section 401(a) of the Code and nothing has
occurred since the date of such letter that could reasonably be expected to
cause the loss of such qualification.
(ii) The Contributor has in all material respects performed all
obligations required to be performed by it under ERISA, the Code and any
other applicable Legal Requirements and under the terms of each Employee
Plan, except such failures to perform which would not in the aggregate
reasonably be expected to have a Material Adverse Effect. The Contributor
has received no written notice of the existence of any material default or
violation by any other party of any of such Legal Requirements, terms or
requirements applicable to any of the Employee Plans.
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(iii) Other than routine claims for benefits, the Contributor has not
received any written notice of any pending material claims or lawsuits
which have been asserted or instituted against any of the Employee Plans,
the assets of the trust or funds under the Employee Plans, the sponsor or
administrator of any of the Employee Plans, or against any fiduciary of any
of the Employee Plans with respect to the operation of such Plan.
(iv) The Contributor has not received any written notice of any
pending investigation or pending enforcement action by the Pension Benefit
Guaranty Corporation, the Department of Labor, the Internal Revenue Service
or any other Authority with respect to any of the Employee Plans.
(v) All contributions required to be made under the terms of the
Contributor's Employee Plans have been timely made. No Employee Plan has
an "accumulated funding deficiency" (within the meaning of section 412 of
the Code or Section 402 of ERISA).
(b All of the Contributor's "group health plans" (within the meaning of
Code Section 5000(b)(1)) have been operated in substantial compliance with the
group health plan continuation coverage requirements of Section 4980B of the
Code and Sections 601 through 608 of ERISA, Title XXII of the Public Health
Service Act and the provisions of the Social Security Act.
(c There has been no act or omission by the Contributor that has given
rise to or may give rise to material fines, penalties, taxes, or related charges
under Section 502(c), (i) or (l) or Section 4071 of ERISA or Chapter 43 of the
Code or the imposition of a lien pursuant to Sections 401(a)(29) or 412(n) of
the Code or pursuant to ERISA.
3.5 Title to Assets; Absence of Liens and Encumbrances; Leases.
(a The Contributor has good and marketable title to all of the Fee
Interests described in the Deeds, free and clear of all Encumbrances, except (i)
those exceptions contained in the Deeds, (ii) liens for current taxes not yet
due and payable and mechanics and similar statutory liens arising in the
ordinary course of business, (iii) liens of employees and laborers for current
wages not yet due; (iv) building, zoning and health regulations of the
jurisdictions in which the Assets are located; and (v) such imperfections of
title, easements and Encumbrances, if any, as do not in the aggregate materially
detract from the value or materially interfere with the use of the Assets as
they are currently being used or as otherwise would not reasonably be expected
to have a Material Adverse Effect.
(b The Contributor is the sole lessee under the Leases and the sole party
entitled to the Leasehold interests in favor of the lessee thereunder, and the
sole owner of the improvements situated on the Leased Premises, free and clear
of all Encumbrances affecting the Leaseholds except such Encumbrances, if any,
as do not in the aggregate materially detract from the value or materially
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interfere with the use of the Assets or as otherwise would not reasonably be
expected to have a Material Adverse Effect. Neither Contributor nor any
Affiliate thereof has received from or delivered to the lessors under the
Leaseholds any written notice of termination or threat of termination of the
respective Leaseholds. True and complete copies of all written lease agreements
(including any written amendments or modifications thereof) constituting, or
evidencing the terms of, the Leaseholds have been delivered to the Partnership.
No material default or event of default on the part of the Contributor nor any
Affiliate thereof under the provisions of any of the Leaseholds, and no event
that with the giving of notice or passage of time or both would constitute such
default or event of default on the part of the Contributor, has occurred (which
default or event of default has not been cured). Neither the Contributor nor
any Affiliate thereof has received any written notice from any lessor under any
Leasehold, that any material default or event of default on the part of the
Contributor or such Affiliate as lessee under the provisions of any Leaseholds,
or that any event that with the giving of notice or passage of time or both
would constitute such a default or an event of default on the part of the
Contributor or any such Affiliate, as lessee, has occurred (which default or
event of default has not been cured). No material default or event of default
on the part of the lessor under the provisions of any of such Leaseholds, and no
event that with the giving of notice or passage of time or both would constitute
such default or event of default on the part of any such lessor, has occurred
(which default or event of default has not been cured).
(c The Contributor or an Affiliate thereof has good title to all of the
personal property purported to be owned by it, free and clear of all
Encumbrances, except for liens for Taxes not yet due and payable and such
Encumbrances, if any, that do not in the aggregate materially detract from the
value or materially interfere with the use of the Assets (as they are currently
being used) or as otherwise would not reasonably be expected to have a Material
Adverse Effect.
3.6 Title Matters; Defects in Improvements. There are no trespassers or
other adverse parties in possession on or affecting the Fee Interests or the
Leased Premises that would reasonably be expected to have a Material Adverse
Effect. Neither the Contributor nor any Affiliate thereof has granted and none
of the foregoing is party to any unrecorded options, rights of refusal, sales
contracts or other such contractual rights in favor of any third parties
relating to the Fee Interests or the Leased Premises. No written notice has
been received by the Contributor or any Affiliate thereof from any insurance
company with respect to the Fee Interests or the Leased Premises or by any board
of fire underwriters claiming any material defects or deficiencies or requiring
the performance of any repairs, replacement, alteration or other work relating
to the improvements situated thereon (in each case, which have not been cured).
3.7 Working Capital. The Contributor has operated the Contributed
Business in the ordinary course of business from March 31, 1997 to the Closing
Date such that the Inventory, Stores Inventory, Prepaid Expenses and Accounts
Receivable, as of the Closing Date, are at substantially the same level as would
have existed for the Contributor without regard to the transactions contemplated
by the Master Transaction Agreement.
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3.8 Technology and Similar Rights. The Contributor owns or is licensed to
use all of the Intellectual Property, Licensed Technology and Licensed
Trademarks, and the Intellectual Property, Licensed Technology and Licensed
Trademarks together constitute all relevant patents, pending patent
applications, invention disclosures, copyrights, software, trade secrets,
technical information, technology, know-how, processes, tradenames, trademarks,
trademark registrations or applications, copyrights, copyright applications or
registrations or any derivative thereof or design used in connection therewith
necessary for the normal operation and conduct of the Contributed Business as it
is currently operated and conducted, except where the failure to have such
ownership or licenses would not reasonably be expected to have a Material
Adverse Effect.
3.9 Government Licenses, Permits and Related Approvals. The Government
Licenses constitute all those necessary for the normal operation and conduct of
the Contributed Business as it is currently operated and conducted, except where
the failure to have such Government Licenses would not reasonably be expected to
have a Material Adverse Effect.
3.10 All Necessary Assets. The Assets together with the rights under the
Related Agreements constitute all property and other rights necessary to enable
the Partnership to operate and conduct the Contributed Business in substantially
the same manner as it is being operated and conducted on the date of this
Agreement, except in all cases where the failure of the Partnership to acquire
such property or other rights by conveyance or license would not in the
aggregate reasonably be expected to have a Material Adverse Effect.
3.11 Conduct of Business in Compliance with Regulatory and Contractual
Requirements. The Contributor, and any Affiliate thereof, is operating and
conducting the Contributed Business in compliance with all applicable Legal
Requirements, rights of concession, licenses, know-how or other proprietary
rights of others, the failure to comply with which would reasonably be expected
to have a Material Adverse Effect.
3.12 Legal Proceedings. There is no litigation, proceeding, claim,
grievance, arbitration, investigation or other action to which the Contributor
or any Affiliate thereof is a party (i) that is pending or, to the Knowledge of
the Contributor, threatened, (ii) that relates in any way to the Assets, to the
operation or conduct of the Contributed Business, or to the transactions
contemplated by this Agreement, and (iii) that upon resolution adverse to
Contributor or any of its Affiliates, could reasonably be expected to have a
Material Adverse Effect.
3.13 Consents. Except for the Consents set forth in Schedule 4.2(e) of the
Master Transaction Agreement, there are no Consents required to be obtained by
the Contributor or any of its Affiliates in connection with the transfer of the
Assets or the Contributed Business to the Partnership except to the extent the
failure to obtain such Consent would not be reasonably likely to have a Material
Adverse Effect.
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3.14 Tax Matters.
(a There are no material liens for Taxes (other than for current Taxes
not yet due and payable) upon the Assets.
(b None of the Assets directly or indirectly secures any indebtedness for
money borrowed the interest on which is tax-exempt.
3.15 [Reserved].
3.16 HSE Matters. Except as would not be reasonably likely to have a
Material Adverse Effect:
(a (i) The Fee Interests, the Leased Premises and the operations of the
Contributor and any Affiliate thereof in connection with the Contributed
Business are in compliance with all HSE Laws and (ii) to the extent arising out
of the Contributor's or any Affiliate's ownership or use of the Assets or
operation of the Contributed Business, there are no Chemical Substances held,
located, released, generated, treated, stored or disposed of, on, under or from
the Fee Interests or the Leased Premises or in, on or from any fixtures or
improvement thereon in excess of any standard prescribed or permitted by any HSE
Laws or which require corrective or other action pursuant to the provisions of
any HSE Laws.
(b Neither the Contributor nor any Affiliate has received any notice from
any federal, state, or local agency naming the Contributor or such Affiliate as
a potentially responsible party ("PRP"), or otherwise notifying the Contributor
or such Affiliate of any potential liability under either the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
("CERCLA" or "Superfund"), the Resource Conservation and Recovery Act of 1976,
as amended ("RCRA"), or any state statute, rule or local regulation imposing
liability similar to CERCLA or RCRA that relates in any way to any Chemical
Substances generated by or derived from the operations on the Fee Interests, or
the Leased Premises; nor has the Contributor nor any of its Affiliates received
any comparable claim or notice from any private party.
(c The Contributor or an Affiliate thereof, as applicable, has been and
is, in compliance with, all permits, licenses, approvals, permission, or
authorizations necessary for its operations in connection with the Contributed
Business to comply in all respects with HSE Laws.
(d (i) Neither the Contributor nor any Affiliate thereof has received
written notice of any actual, impending, or potential proceedings, allegations,
claims, losses, actions, investigations or inquiries of any kind in connection
with the Contributed Business and HSE Laws or Chemical Substances ("HSE
Proceedings") and (ii) neither the Contributor nor any Affiliate thereof has any
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Knowledge of any facts, events or occurrences that would reasonably be expected
to result in any HSE Proceedings being brought.
(e Neither the Contributor nor any Affiliate thereof is party to, or is
subject to the terms of, any consent order, consent judgment, consent decree,
court or administrative order or judgment, agreement, schedule, or decree issued
by any Authority with respect to the Contributed Business.
3.17 Investigation to Acquire Knowledge. Each of the persons covered by
the definition of "Knowledge" set forth in Section 1 has reviewed, with counsel
to the Contributor, the other representations and warranties contained in, and
the Schedules that relate to, this Section 3 to the extent that they relate to
such person's area of responsibility or expertise and has made a reasonable
inquiry as to the accuracy and completeness of such representations, warranties
and Schedules.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP
The Partnership represents and warrants to the Contributor as follows:
4.1 Due Organization; Good Standing and Power. The Partnership is a
limited partnership duly formed and validly existing under the laws of the State
of Delaware. The Partnership has all partnership power and authority to enter
into this Agreement and the other Related Agreements and to perform its
obligations hereunder and thereunder. The Partnership is duly authorized,
qualified or licensed to do business as a foreign partnership, in each of the
jurisdictions in which its right, title or interest in or to any asset, or the
conduct of its business, requires such authorization, qualification or
licensing, except where the failure to so qualify would not have a material
adverse effect on the ability of the Partnership to perform its obligations
hereunder or under the Assignment and Assumption Agreements.
4.2 Authorization and Validity of Agreement. The execution, delivery and
performance of this Agreement and the other Related Agreements by the
Partnership and the consummation by the Partnership of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
partnership action on the part of the Partnership. No other partnership action
is necessary for the authorization, execution, delivery and performance by the
Partnership of this Agreement, the other Related Agreements and the consummation
by the Partnership of the transactions contemplated hereby or thereby. This
Agreement and the other Related Agreements have been duly executed and delivered
by the Partnership and constitute legal, valid and binding obligations of the
Partnership, enforceable in accordance with their terms, except as the same may
be limited by bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights generally and by general equity
principles.
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4.3 No Consents Required; No Conflict with Instruments to which the
Partnership is a Party. The execution, delivery and performance of this
Agreement and the other Related Agreements by the Partnership and the
consummation by it of the transactions contemplated thereby (i) will not require
any Consent except for such Consents the failure of which to be obtained or
made, would not in the aggregate reasonably be expected to have a Material
Adverse Effect on the Partnership's ability to perform its obligations hereunder
or thereunder, and (ii) will not violate (with or without the giving of notice
or the lapse of time or both), conflict with, or result in the breach or
termination of any provision of, or constitute a default under, or result in the
acceleration of the performance of the obligations of the Partnership under, the
partnership agreement of the Partnership, or any indenture, mortgage, deed of
trust, lease, licensing agreement, contract, instrument or other agreement to
which the Partnership is a party or by which the Partnership or any of its
assets or properties is bound, except for such violations, conflicts, breaches,
terminations, defaults, accelerations or liens which would not in the aggregate
reasonably be expected to have a material adverse effect on the Partnership's
ability to perform its obligations hereunder or thereunder.
SECTION 5
COVENANTS SUBSEQUENT TO CLOSING DATE
5.1 Access to Information. Following the Closing Date, the Partnership
shall afford, and will cause its Affiliates to afford, to the Contributor, its
counsel, accountants and other authorized representatives, during normal
business hours, reasonable access to the books, records and other data of the
Contributed Business with respect to the period prior to the Closing Date (and
any personnel familiar therewith) to the extent that such access may be
reasonably required by the Contributor to facilitate (i) the preparation by the
Contributor of such tax returns as it may be required to file with respect to
the operations of the Assets and the Contributed Business or in connection with
any audit, amended return, claim for refund or any proceeding with respect
thereto, (ii) the investigation, litigation and final disposition of any claims
which may have been or may be made against the Contributor in connection with
the Assets and the Contributed Business, (iii) the payment of any amount in
connection with any liabilities or obligations which have not been assumed by
the Partnership under this Agreement and (iv) for any other reasonable business
purpose. For a period of ten years after the date of this Agreement, the
Partnership will not dispose of, alter or destroy any such books, records and
other data without giving 90 days' prior notice to the Contributor to permit it,
at its expense, to examine, duplicate or repossess such records, files,
documents and correspondence.
5.2 Mail or Other Communications. The Contributor authorizes and empowers
the Partnership on and after the Closing Date to receive and open all mail
received by the Partnership relating to the Contributed Business or the Assets
and to deal with the contents of such communications in any proper manner. The
Contributor shall promptly deliver to the Partnership any mail or other
communication received by it on and after the Closing Date pertaining to the
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Contributed Business or the Assets and any cash, checks or other instruments of
payment to which the Partnership is entitled. The Partnership shall promptly
deliver to the Contributor any mail or other communication received by it after
the Closing Date pertaining to the Excluded Assets or Excluded Liabilities, and
any cash, checks or other instruments of payment in respect of such.
5.3 Use of Contributor's Trade Name. Except as set forth on Schedule
2.2(d), after the Closing Date the Partnership shall be permitted to use any
items of Inventory or packaging material, any sales or promotional materials,
any forms or documents or any other printed material that bears the name
"Lyondell" or other statutory names, trade names or trademarks, indications or
descriptions of which such names or any name similar thereto forms a part until
the earlier to occur of (i) such time as inventory of such materials existing as
of the Closing Date are used, or (ii) two years after the Closing Date.
5.4 Closing Date Balance Sheet. Not later than 60 days after the Closing
Date, the Contributor shall cause Coopers & Lybrand L.L.P. to prepare and
deliver to the Contributor and the Partnership an audited balance sheet of the
Contributed Business as of the Closing Date (the "Closing Date Balance Sheet").
5.5 Payment of Retained Accounts Payable. The Contributor will retain all
accounts payable including Retained Accounts Payable; however the Partnership,
as payment agent of the Contributor, shall pay such amounts on behalf of the
Contributor on a timely basis. As soon as practicable following the end of each
month after which such Retained Accounts Payable are paid by the Partnership,
but in any event within fifteen days after the end of such month, each
Contributor will reimburse the Partnership for such payments attributable to its
Contributed Business.
5.6 Collection of Accounts Receivable. The Partnership shall take all
commercially reasonable efforts to collect the Accounts Receivable; however, to
the extent any Accounts Receivable set forth on the Closing Date Balance Sheet
are not collected within 180 days after the Closing Date by the Partnership, the
Contributor will buy such uncollected Accounts Receivable from the Partnership
at the amount set forth on the Closing Date Balance Sheet. Collections on
Accounts Receivable shall be applied on a specific identification basis. The
Partnership will report monthly in writing to Contributor on the amounts
collected during the preceding month, and shall provide an aging summary of
uncollected accounts and a detailed description of each problem account (45 or
more days overdue). On reasonable notice to the Partnership, Contributor shall
have the right to take over the collection process for any problem account.
5.7 Reimbursement for Prepaid Expenses. The Partnership and the
Contributor acknowledge that the Prepaid Expenses attributable to its
Contributed Business have been conveyed to the Partnership solely in order to
facilitate the timely and efficient transfer of the Contributed Business to the
Partnership. Consequently, the Partnership shall reimburse the Contributor for
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the Prepaid Expenses associated with its Contributed Business (other than the
prepaid expenses for "turnaround" costs) within 10 days following the receipt of
the Closing Date Balance Sheet.
SECTION 6
SURVIVAL AND INDEMNIFICATION
6.1 Survival Limitations. The representations and warranties of the
parties hereto contained in this Agreement or in any certificate or other
writing delivered pursuant hereto or in connection herewith shall survive the
Closing until the date that is 60 months after the Closing Date, except (i)
Section 3.14, which shall survive until the expiration of the applicable statute
of limitations and (ii) Section 3.5, which shall survive without limitation and
shall not be merged with the Deeds. No action can be brought with respect to
any breach of any representation or warranty (except with respect to Section
3.5) pursuant to this Agreement unless a written notice that complies with
Section 6.3 has been delivered pursuant to such Section 6.3 prior to the
expiration of the survival period applicable to such representation or warranty;
provided that upon the giving of such notice, notwithstanding any other
provision of this Agreement the representation and warranty that is the basis of
such action shall continue with respect to such action beyond the time at which
the representation and warranty would otherwise terminate.
6.2 Indemnification.
(a Subject to the other provisions of this Section 6, the Contributor
hereby agrees, to the fullest extent permitted by applicable law, to indemnify,
defend and hold harmless the Partnership and its Affiliates and their respective
officers, directors and employees from, against and in respect of any losses,
claims, damages, fines, penalties, assessments by public agencies, settlement,
cost or expenses (including costs of defense and attorneys' fees) and other
liabilities (any of the foregoing being a "Liability") incurred or suffered by
the Partnership or any of its Affiliates, arising out of, in connection with or
relating to:
(i) Any misrepresentation in or breach of the representations and
warranties of the Contributor or any of its Affiliates in this Agreement,
the Assignment and Assumption Agreements, the Master Intellectual Property
Agreement, or the Master Transaction Agreement;
(ii) Any failure of the Contributor or any of its Affiliates to
perform any of its covenants or obligations contained in this Agreement,
the Assignment and Assumption Agreements, the Master Intellectual Property
Agreement, or the Master Transaction Agreement;
(iii) Excluded Liabilities;
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(iv) Any Pre-Closing Contingent Liability that is not an Assumed
Liability; or
(v) Any action by the Contributor or its Affiliates that results in
the occurrence of a "Designated Event" as such term is defined in the
Contributor's or its Affiliates' 1989 Indenture and Medium Term Notes
described in Schedule 2.5 but only to the extent that the Partnership
incurs an economic loss directly as a result of the occurrence of the
"Designated Event" and in such case the Contributor's or its Affiliates'
indemnification obligation is limited to the amount of such economic loss;
provided, however, that the following limitations shall apply to the
Contributor's indemnification obligations in clauses (i) and (iv) above:
(A) the Contributor shall not have any indemnification obligation
under clause (i) and (iv) above for any individual Liability unless the
amount of such Liability exceeds $25,000 (the "Individual Basket") (it
being understood that all Liabilities arising from the same event,
condition or set of circumstances shall be considered as an individual
Liability for purposes of such calculation), but if the amount of such
Liability exceeds the Individual Basket, the entire amount of such
Liability, including the first $25,000 of such Liability, may be the
subject of indemnification hereunder; provided, further, that the parties
agree that the amount of Liability for which indemnification may be sought
for breach of any representation or warranty under clause (i) above shall
be calculated taking into account the Individual Basket but without regard
to any qualification or exception regarding materiality or Material Adverse
Effect qualification contained in such representation or warranty (it being
understood that such materiality or Material Adverse Effect qualifications
shall apply for purposes of determining whether there has been such a
breach in the first place, but once it has been established that there is
such a breach, the Partnership shall be entitled to indemnity relating back
to the first dollar); and
(B) to the extent any misrepresentation in or breach of the
representations and warranties of the Contributor results in a Liability of
the Partnership in excess of the Individual Basket and such Liability would
also constitute a Pre-Closing Contingent Liability, such misrepresentation
or breach shall be treated as a Pre-Closing Contingent Liability.
(b NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, TO THE FULLEST
EXTENT PERMITTED BY LAW, NEITHER THE CONTRIBUTOR NOR ANY OF ITS AGENTS,
EMPLOYEES, REPRESENTATIVES OR AFFILIATES SHALL BE LIABLE FOR CONSEQUENTIAL,
INCIDENTAL, INDIRECT OR PUNITIVE DAMAGES IN CONNECTION WITH DIRECT CLAIMS BY THE
PARTNERSHIP (I.E., A CLAIM BY THE PARTNERSHIP THAT DOES NOT SEEK REIMBURSEMENT
FOR A THIRD PARTY CLAIM
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PAID OR PAYABLE BY THE PARTNERSHIP) WITH RESPECT TO THEIR INDEMNIFICATION
OBLIGATIONS UNDER THIS AGREEMENT UNLESS ANY SUCH CLAIM ARISES OUT OF THE
FRAUDULENT ACTIONS OF THE CONTRIBUTOR. IN DETERMINING THE AMOUNT OF ANY LOSS,
LIABILITY, OR EXPENSE FOR WHICH THE PARTNERSHIP IS ENTITLED TO INDEMNIFICATION
UNDER THIS AGREEMENT, THE GROSS AMOUNT THEREOF WILL BE REDUCED (BUT NOT BELOW
ZERO) BY THE NET PRESENT VALUE OF ANY CORRELATIVE INSURANCE PROCEEDS ACTUALLY
REALIZED BY THE PARTNERSHIP UNDER POLICIES TO THE EXTENT THAT THE FUTURE PREMIUM
RATE WILL NOT BE INCREASED BY CLAIM EXPERIENCE.
(c Notwithstanding the provisions of Sections 6.2(a)(i) and 6.2(a)(iv),
it is expressly agreed that the Contributor shall not be required to indemnify
the Partnership for any Liability arising out of, in connection with or related
to any HSE Claim to the extent that the condition, event, circumstance or other
basis for the HSE Claim was exacerbated or accelerated by the Partnership. The
Partnership shall not be deemed to have exacerbated a condition, event,
circumstance or other basis for an HSE Claim by reason of the continuance
thereof after the Closing (i) under circumstances where the Partnership does not
know of its existence and has not breached any legal duty to have conducted an
investigation or inquiry that would have uncovered the matter or (ii) under
circumstances where the Partnership does know of its existence but is taking
commercially reasonable actions to cure the matter or to otherwise achieve
compliance in a commercially reasonable and prudent manner.
(d Subject to the other provisions of this Section 6, the Partnership
hereby indemnifies, to the fullest extent permitted by law, the Contributor and
its Affiliates against and agrees to hold each of them harmless from any and all
Liability incurred or suffered by the Contributor or any of its Affiliates
arising out of or relating to:
(i) Any misrepresentation in or breach of the representations and
warranties of the Partnership or the failure of the Partnership to perform
any of its covenants or obligations contained in this Agreement and the
Assignment and Assumption Agreements or the Master Intellectual Property
Agreement;
(ii) Assumed Liabilities; or
(iii) Any HSE Claim to the extent arising out of the Partnership's
exacerbation or acceleration of such HSE Claim.
(e NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, TO THE FULLEST
EXTENT PERMITTED BY LAW, NEITHER THE PARTNERSHIP NOR ANY OF ITS AGENTS,
EMPLOYEES, REPRESENTATIVES OR AFFILIATES SHALL BE LIABLE FOR CONSEQUENTIAL,
INCIDENTAL, INDIRECT OR PUNITIVE DAMAGES IN
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CONNECTION WITH DIRECT CLAIMS BY THE CONTRIBUTOR WITH RESPECT TO THEIR
INDEMNIFICATION OBLIGATIONS UNDER THIS AGREEMENT UNLESS ANY SUCH CLAIM ARISES
OUT OF THE FRAUDULENT ACTIONS OF THE PARTNERSHIP. IN DETERMINING THE AMOUNT OF
ANY LOSS, LIABILITY, OR EXPENSE FOR WHICH THE CONTRIBUTOR IS ENTITLED TO
INDEMNIFICATION UNDER THIS AGREEMENT, THE GROSS AMOUNT THEREOF WILL BE REDUCED
(BUT NOT BELOW ZERO) BY THE NET PRESENT VALUE OF ANY CORRELATIVE INSURANCE
PROCEEDS ACTUALLY REALIZED BY THE CONTRIBUTOR UNDER POLICIES TO THE EXTENT THE
FUTURE PREMIUM RATE WILL NOT BE INCREASED BY CLAIM EXPERIENCE.
(f The rights provided to the Partnership pursuant to this Section 6, as
limited by and subject to the provisions of this Section 6, shall be the
Partnership's sole remedy for breach of representation and warranty by or
covenant or obligation of the Contributor under this Agreement, the Assignment
and Assumption Agreements and the Master Intellectual Property Agreement. The
rights provided to the Contributor pursuant to this Section 6, as limited by and
subject to the provisions of this Section 6, shall be the Contributor's sole
remedy for breach of representation and warranty by or covenant of obligation of
the Partnership under this Agreement, the Assignment and Assumption Agreements
and the Master Intellectual Property Agreement.
6.3 Procedures.
(a Any Person seeking indemnification under Section 6.2 (the "Indemnified
Party") agrees to give prompt written notice to the party against whom indemnity
is sought (the "Indemnifying Party") of the assertion of any claim that does not
involve a Third Party Claim, which notice shall describe in reasonable detail
the nature of the claim, an estimate of the amount of damages attributable to
such claim to the extent feasible and the basis of the Indemnified Party's
request for indemnification under this Agreement. If the Indemnifying Party
disputes such claim and such dispute is not resolved by the parties, such
dispute shall be resolved in accordance with Section 7.9.
(b If an Indemnified Party is notified of a Third Party Claim which may
give rise to a claim for indemnification against any Indemnifying Party under
this Section, then the Indemnified Party shall promptly notify each Indemnifying
Party thereof in writing (including copies of all papers served with respect to
such Third Party Claim), which notice shall describe in reasonable detail the
nature of the Third Party Claim, an estimate of the amount of damages
attributable to the Third Party Claim to the extent feasible and the basis of
the Indemnified Party's request for indemnification under this Agreement;
provided that any failure to timely give such notice shall not relieve the
Indemnifying Party of any of its obligations under this Section 6 except to the
extent that such failure prejudices or impairs, in any material respect, any of
the rights or obligations of the Indemnifying Party.
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(c Any Indemnifying Party may, and at the request of the Indemnified
Party shall, participate in and control the defense of the Third Party Claim
with counsel of its choice reasonably satisfactory to the Indemnified Party.
The Indemnified Party shall have the right to employ separate counsel in any
such action and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of the Indemnified Party unless (i) the
employment thereof has been specifically authorized in writing by the
Indemnifying Party, (ii) the Indemnifying Party failed to assume the defense and
employ counsel or failed to diligently prosecute or settle the Third Party Claim
or (iii) there shall exist or develop a conflict that would ethically prohibit
counsel to the Indemnifying Party from representing the Indemnified Party. If
requested by the Indemnifying Party, the Indemnified Party agrees to cooperate
with the Indemnifying Party and its counsel in contesting any Third Party Claim
that the Indemnifying Party elects to contest, including, without limitation, by
making any counterclaim against the person or entity asserting the Third Party
Claim or any cross-complaint against any person or entity, in each case only if
and to the extent that any such counterclaim or cross-complaint arises from the
same actions or facts giving rise to the Third Party Claim. The Indemnifying
Party shall be the sole judge of the acceptability of any compromise or
settlement of any claim, litigation or proceeding in respect of which indemnity
may be sought hereunder, provided that the Indemnifying Party will give the
Indemnified Party reasonable prior written notice of any such proposed
settlement or compromise and will not consent to the entry of any judgment or
enter into any settlement with respect to any Third Party Claim without the
prior written consent of the Indemnified Party, which shall not be unreasonably
withheld. The Indemnifying Party (if the Indemnified Party is entitled to
indemnification hereunder) shall reimburse the Indemnified Party for its
reasonable out of pocket costs incurred with respect to such cooperation.
(d If the Indemnifying Party fails to assume the defense of a Third Party
Claim within a reasonable period after receipt of written notice pursuant to the
first sentence of subparagraph (c), or if the Indemnifying Party assumes the
defense of the Indemnified Party pursuant to subparagraph (c) but fails
diligently to prosecute or settle the Third Party Claim, then the Indemnified
Party shall have the right to defend, at the sole cost and expense of the
Indemnifying Party (if the Indemnified Party is entitled to indemnification
hereunder), the Third Party Claim by all appropriate proceedings, which
proceedings shall be promptly and vigorously prosecuted by the Indemnified Party
to a final conclusion or settled. The Indemnified Party shall have full control
of such defense and proceedings; provided that the Indemnified Party shall not
settle such Third Party Claim without the written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld. The Indemnifying Party
may participate in, but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this Section, and the Indemnifying Party shall
bear its own costs and expenses with respect to such participation.
(e Notwithstanding the other provisions of this Section 6.3, if the
Indemnifying Party disputes its potential liability to the Indemnified Party
under this Section 6.3 and if such dispute is resolved in favor of the
Indemnifying Party, the Indemnifying Party shall not be required to bear the
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costs and expenses of the Indemnified Party's defense pursuant to this Section
6.3 or of the Indemnifying Party's participation therein at the Indemnified
Party's request, and the Indemnified Party shall reimburse the Indemnifying
Party in full for all costs and expenses of the litigation concerning such
dispute. If a dispute over potential liability is resolved in favor of the
Indemnified Party, the Indemnifying Party shall reimburse the Indemnified Party
in full for all costs of the litigation concerning such dispute.
(f After it has been determined, by acknowledgment, agreement, or ruling
of court of law, that an Indemnifying Party is liable to the Indemnified Party
under this Section 6, the Indemnifying Party shall pay or cause to be paid to
the Indemnified Party the amount of the Liability within ten business days of
receipt by the Indemnifying Party of a notice reasonably itemizing the amount of
the Liability but only to the extent actually paid or suffered by the
Indemnified Party.
(g In the event a Third Party Claim is brought in which the liability as
between the Partnership and the Contributor is alleged to be joint (it being
agreed that any Third Party Claim related to a Pre-Closing Contingent Liability
shall be deemed joint) or in which the entitlement to indemnification under this
Section 6 has not been determined, the Partnership and the Contributor shall
cooperate in the joint defense of such Third Party Claim and shall offer to each
other such assistance as may reasonably be requested in order to ensure the
proper and adequate defense of any such matter. Such joint defense shall be
under the general management and supervision of the party which is expected to
bear the greater share of the liability, unless otherwise agreed; provided,
however, that neither party shall settle or compromise any such joint defense
matter without the consent of the other, which consent shall not be unreasonably
withheld or delayed. Any uninsured costs of such joint defense shall be borne
as the parties may agree, provided, however, that in the absence of such
agreement, the defense costs shall be borne by the party incurring such costs;
provided, further, that, if it is determined that one party was entitled to
indemnification under this Section 6, the other party shall reimburse the party
entitled to indemnification for all of its costs incurred in connection with
such defense.
6.4 Subrogation. In the event of any payment by an Indemnifying Party to
an Indemnified Party in connection with any Liability, the Indemnifying Party
shall be subrogated to and shall stand in the place of the Indemnified Party as
to any events or circumstances in respect of which the Indemnified Party may
have any right or claim against any third party relating to such event or
indemnification. The Indemnified Party shall cooperate with the Indemnifying
Party in any reasonable manner in prosecuting any subrogated claim.
6.5 Claims for HSE Work. Notwithstanding the other provisions of this
Section 6, in the case of any assertion, claim or demand requiring the
performance of investigatory, removal or remedial work with respect to
(environmental conditions, HSE Laws or Chemical Substances for which the
Partnership may seek indemnification, the Partnership shall have the right to
conduct and control such work provided (i) it uses its good faith, commercially
reasonable efforts to achieve the
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<PAGE>
Lowest Cost Response and (ii) it provides the Contributor with the opportunity
to: (A) review and comment upon any work plans for any remedial action prior to
finalization and implementation; (B) attend meetings with regulators concerning
the remedial action; and (C) have a representative present during the
performance of any remedial action.
6.6 EXTENT OF INDEMNIFICATION. WITHOUT LIMITING OR ENLARGING THE SCOPE OF
THE INDEMNIFICATION, RELEASE AND ASSUMPTION OBLIGATIONS SET FORTH HEREIN, TO THE
FULLEST EXTENT PERMITTED BY LAW, AN INDEMNIFIED PARTY SHALL BE ENTITLED TO
INDEMNIFICATION HEREUNDER IN ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF
WHETHER THE INDEMNIFIABLE LOSS GIVING RISE TO ANY SUCH INDEMNIFICATION
OBLIGATION IS THE RESULT OF THE SOLE, GROSS, ACTIVE, PASSIVE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF ANY LAW
OF OR BY ANY SUCH INDEMNIFIED PARTY. THE PARTIES AGREE THAT THIS STATEMENT
CONSTITUTES A CONSPICUOUS LEGEND.
SECTION 7
MISCELLANEOUS
7.1 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 provisions of this Agreement and not as an aid in construction:
(ii) no consideration shall be given to the fact or presumption that any of the
parties 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 gender; and (vii) each exhibit, appendix,
attachment and schedule to this Agreement is a part of this Agreement.
7.2 Payment of Certain Expenses and Taxes.
(a Subject to the further provisions of this Section 7.2, the Contributor
shall be responsible for all Taxes attributable to the Contributor's ownership
or use of the Assets or operation of the Contributed Business prior to the
Closing and the Partnership shall be responsible for all Taxes attributable to
the Partnership's ownership or use of the Assets or operation of the Contributed
Business after the Closing. The Contributor shall be responsible for any
liability of the Partnership pursuant to Texas Tax Code Section 111.020
(including interest, penalties and attorneys' fees in connection therewith) with
respect to any amounts owed or owing by the Contributor under Title 2, Texas Tax
Code.
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<PAGE>
(b All sales, transfer, or other similar taxes incurred in connection
with the transfer of the Assets shall be borne by the Partnership. The
Partnership, the Contributor and the Contributing Partner shall cooperate fully
with each other after the Closing in connection with (i) the preparation and
filing of any tax return, exemption certificate, or other filing in connection
with such taxes, and (ii) any audit examination by any taxing Authority of the
tax returns, exemption certificates, or other filings referred to above.
(c All real property taxes, personal property taxes, ad valorem taxes,
and other similar taxes (or payments in lieu of such taxes) assessed on any of
the Assets in the tax period in which the Closing Date occurs (other than the
Inventory Taxes referred to in Section 7.2(d) below) ("Property Taxes") shall be
prorated between the Partnership and the Contributor as of the Closing.
(d All real property taxes, personal property taxes, ad valorem taxes,
and other similar taxes (or payments in lieu of such taxes) assessed on the
Inventory or Stores Inventory in the tax period in which the Closing Date occurs
("Inventory Tax") shall be payable by the Contributor.
(e The Partnership shall pay any title or recordation fees in connection
with the transfer of the Assets. The Partnership shall also pay for any title
insurance policies or surveys of the Fee Interests that are requested or ordered
by the Partnership.
(f After the Closing, the Contributor receiving each Property Tax or
Inventory Tax bill or notice applicable to the Assets for the period in which
the Closing Date occurred shall promptly notify the Partnership and shall pay
each such tax bill prior to the last day such taxes may be paid without penalty
or interest. The Partnership shall promptly on receipt of a written request
(accompanied by appropriate supporting documentation) reimburse the paying party
with respect to the Partnership's share of such amount so paid as provided under
this Agreement. The Contributor and the Partnership shall cooperate fully with
each other on and after Closing with respect to any Property Tax assessment or
valuation (or protest in connection therewith) by any taxing Authority with
respect to the tax period in which the Closing Date occurs.
(g If either party receives a refund of any Taxes for which the other is
liable or responsible under this Agreement, the party receiving such refund
shall, within 30 days after the receipt of such refund, remit it to the party
who is liable.
(h Notwithstanding any other provision of this Agreement, the obligations
of the parties set forth in this Section 7.2 shall be unconditional and absolute
and shall remain in effect until audit, assessment and collection of any such
taxes are barred by the applicable statute of limitations.
7.3 Notices. All notices, requests, demands and other communications
which 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
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<PAGE>
by telecopier facsimile with proof of confirmation from the transmitting
machine, or (ii) delivered by courier or other hand delivery, as follows:
(a) If to the Contributor:
Lyondell Petrochemical Company
1221 McKinney Street
Houston, Texas 77010
Attention: Jeffrey R. Pendergraft
Telecopy Number: (713) 652-4538
(b) If to the Contributing Partner:
Lyondell Petrochemical L.P. Inc.
1221 McKinney Street
Houston, Texas 77010
Attention: Jeffrey R. Pendergraft
Telecopy Number: (713) 652-4538
(c) If to the Partnership:
Equistar Chemicals, LP
1221 McKinney Street
Houston, Texas 77010
Attention: Gerald A. O'Brien
Telecopy Number: (713) 309-4718
or to such other address or telecopy number as either party shall have specified
by notice in writing to the other party. All such notices, requests, demands
and communications shall be deemed to be effective upon receipt.
7.4 [Reserved].
7.5 Binding Effect; Benefit. Subject to Section 7.7, this Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective permitted successors and assigns. Nothing in this Agreement,
expressed or implied, is intended to confer on any Person other than the parties
hereto or their respective permitted successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
7.6 Occasional and Bulk Sales. To the extent applicable, the Partnership
and the Contributor each agree to waive, to the fullest extent permitted by law,
compliance by the other with the provisions of the Bulk Sales Law of any
jurisdiction.
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<PAGE>
7.7 Assignability. Neither this Agreement nor any of the rights or
obligations hereunder shall be assignable (by operation of law or otherwise) by
the Contributor or the Contributing Partner without the prior written consent of
the Partnership or shall be assignable (by operation of law or otherwise) by the
Partnership (except to a wholly-owned subsidiary thereof) without the prior
written consent of the Contributor. Any assignment or purported assignment in
violation of this Section shall be null and void.
7.8 Amendment; Waiver. This Agreement may be amended, supplemented or
otherwise modified only by a written instrument executed by the parties hereto.
No waiver by any party of any of the provisions hereof shall be effective unless
explicitly set forth in writing and executed by the party so waiving. Subject
to the agreements and obligations of the Partnership hereunder or under
applicable Legal Requirements, no investigations by the Partnership heretofore
or hereafter made shall affect the representations and warranties of the
Contributor, and, except as otherwise provided in Section 6.1, such
representations and warranties shall survive any such investigation. The waiver
by any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach.
7.9 Dispute Resolution. All disputes under this Agreement shall be
resolved in accordance with the Dispute Resolution Procedures set forth in
Appendix A.
7.10 Severability. In the event that any provisions 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 Contributor, the Contributing
Partner or the Partnership, be deemed severed from this Agreement and every
other provision of this Agreement shall remain in full force and effect.
7.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
7.12 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE EXCLUDING CONFLICTS OF LAW
PRINCIPLES OF SUCH JURISDICTION EXCEPT TO THE EXTENT SUCH MATTERS ARE
MANDATORILY SUBJECT TO THE LAWS OF ANOTHER JURISDICTION PURSUANT TO THE LAWS OF
SUCH OTHER JURISDICTION.
7.13 JURISDICTION; CONSENT TO SERVICE OF PROCESS; WAIVER. ANY JUDICIAL
PROCEEDING BROUGHT AGAINST ANY PARTY TO THIS AGREEMENT OR ANY DISPUTE UNDER OR
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY MATTER RELATED HERETO
SHALL BE BROUGHT IN THE
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<PAGE>
FEDERAL OR STATE COURTS OF THE STATE OF DELAWARE, AND, BY EXECUTION AND DELIVERY
OF THIS AGREEMENT, EACH OF THE PARTIES TO THIS AGREEMENT 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
EXCEPT TO THE EXTENT THIS AGREEMENT RELATES TO THE CONVEYANCE OR ASSIGNMENT OF
ANY INTEREST IN REAL ESTATE OR THE CREATION, PERFECTION, PRIORITY OR FORECLOSURE
OF ANY LIEN ON ANY INTEREST IN REAL ESTATE IN WHICH CASE, SUCH COURTS
JURISDICTION SHALL BE NON-EXCLUSIVE. EACH OF THE PARTIES TO THIS AGREEMENT SHALL
APPOINT THE CORPORATION TRUST COMPANY, 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 DELAWARE BY
ENTERING INTO AN AGREEMENT AS OF THE DATE OF THIS AGREEMENT WITH THE AGENT TO
SUCH EFFECT. 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 DELAWARE FOR ANY PURPOSE EXCEPT AS PROVIDED ABOVE AND
SHALL NOT BE DEEMED TO CONFER RIGHTS ON ANY PERSON OTHER THAN THE PARTIES
HERETO. EACH PARTY HEREBY WAIVES ANY OBJECTION IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS.
7.14 WAIVER OF JURY TRIAL. THE PARTNERSHIP, THE CONTRIBUTING PARTNER AND
THE CONTRIBUTOR HEREBY KNOWINGLY AND INTENTIONALLY, IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
LYONDELL PETROCHEMICAL COMPANY,
a Delaware corporation.
By: /s/ Dan F. Smith
---------------------------------
Name: Dan F. Smith
Title: President and Chief Executive Officer
LYONDELL PETROCHEMICAL L.P. INC.,
a Delaware corporation.
By: /s/ Dan F. Smith
---------------------------------
Name: Dan F. Smith
Title: President
EQUISTAR CHEMICALS, LP,
a Delaware limited partnership
By: /s/ Debra L. Starnes
----------------------------------
Name: Debra L. Starnes
Title: Senior Vice President
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<PAGE>
SCHEDULE A
Lyondell will contribute to the Partnership the Contributed Business,
which consists of the production, distribution and sale of petrochemicals and
polymers. Its facilities are located in Channelview, Matagorda County, Mont
Belvieu, Pasadena and Victoria, Texas.
A more complete description of the businesses which are owned and
operated by Lyondell is included in Lyondell's Annual Report on Form 10-K for
the year ended December 31, 1996 and Lyondell's Quarterly Reports on Form 10-Q
for the quarters ended March 31, 1997 and June 30, 1997.
<PAGE>
Schedule 2.1(a)
Fee Interests
The following are deeds that are to be transferred to the Partnership for
Fee Interests:
BAYPORT FACILITY
9802 Fairmont Parkway
Pasadena, TX 77505
Harris County
CHANNELVIEW FACILITY
8280 Sheldon Road
Channelview, TX 77530
Harris County
MATAGORDA FACILITY
Highway 60
Bay City, TX 77414
Matagorda County
MONT BELVIEU FACILITY
11815 Highway 146
Mont Belvieu, TX 77580
Chambers County
<PAGE>
Schedule 2.1(b)
Leases
The following are leases that are to be assigned to the Partnership for
Leaseholds:
ALVIN FACILITY
FM 2004, P. O. Box 4000
Alvin, TX 77511
Brazoria County
CHANNELVIEW FACILITY
8280 Sheldon Road
Channelview, TX 77530
Harris County
CHICAGO FACILITY
One Pierce Place #250W
Itasca, IL 60143
Dupage County
PHILADELPHIA FACILITY
1400 Morris Drive
Wayne, PA 19087
Collin County
PLANO FACILITY
2300 W. Plano Parkway #K1106
Plano, TX
Collin County
VICTORIA FACILITY
Old Bloomington Highway
Victoria, TX 75075
Victoria County
<PAGE>
Schedule 2.1(d)
Equipment
The equipment set forth in the Equipment Listing dated July 31, 1997,
including all additions and deletions up to December 1, 1997, copies of which
have been initialed by representatives of the Contributor and the Partnership.
<PAGE>
Schedule 2.1(k)
Contributed Subsidiaries
(i) Lyondell Mont Belvieu Corporation
(ii) Lyondell Petrochemical de Mexico, Inc.
(iii) Lyondell Transportation Company
<PAGE>
Schedule 2.2(h)
Certain Excluded Assets
(i) Lyondell's interest in and assets associated with the methanol business
of Lyondell Methanol Company L.P. and the related hydrogen purification and
sales; (ii) certain technology rights (ARCO Technology Licensing & Immunity From
Suit Agreements & prod flex technology (including Lyondell improvements))*;
(iii) mainframe leases (computers & equipment); (iv) mainframe owned assets
(hardware & software); (v) assets exclusively with Lyondell's ongoing corporate
operations, including equipment, records, computer hardware and software and
other personal property and fixtures; (vi) Outstanding claims related to Mt.
Belvieu valve failure in 1996 and Colonial Pipeline fire in 1995; (vii)
Lyondell's interest in the following subsidiaries: Lyondell Refining Company,
Lyondell General Methanol Company, Lyondell Limited Methanol Company, Lyondell
Petrochemical L.P., Inc., Lyondell Petrochemical G.P. Inc. and Lyondell FSC,
Inc.; and (viii) the assets of Lyondell (or its Affiliates) that are covered by
a Shared Services Agreement in which the service is to be provided by Lyondell
or its Affiliates to the Partnership.
*To be licensed to the Partnership pursuant to Master Intellectual Property
Agreement.
<PAGE>
Schedule 2.2(c)
Excluded names, logos, tradenames, trademarks, etc.
(i) all marks with "Lyondell", including Lyondell.com and all rights to "LYO";
(ii) Synergist Logo;
<PAGE>
Schedule 2.5(a)(vii)
Assumed Indebtedness
PUBLIC DEBT
- -----------
1989 Indenture $150,000,000 Due June 1999
1992 Indenture $100,000,000 Due March 2002
1996 Indenture $150,000,000 Due February 2006
$150,000,000 Due February 2026
MEDIUM TERM NOTES
$195,000,000 Due Jan. 1998-March 2005
<PAGE>
Schedule 2.5(a)(x)
Assumed Long-term Liabilities
The following liabilities related to (i) the operations of the Contributed
Business or (ii) employees who will become employees of the Partnership:
Post-retirement benefits other than those related to Defined Benefit
Pension Plans and Defined Contribution Plans.
<PAGE>
Schedule 3
Disclosure Schedule
The Contributor makes no exceptions to the representations and warranties
made by it in Section 3 of this Agreement except for the following exception to
its representations made in Section 3.4 of this Agreement:
The Contributor has received a letter from the Pension Benefit
Guaranty Corporation (the "PBGC") dated October 31, 1997 expressing a concern
that the actions contemplated by the Agreement would increase the risk to the
PBGC relating to the Lyondell Retirement Plan for Non-Represented Employees. In
that letter, the PBGC noted that it could seek to involuntarily terminate the
Plan prior to the Closing Date if it determined that the transaction would cause
the risk to the PBGC to increase unreasonably. The letter went on to state that
this measure would be viewed as a last resort and that the PBGC would prefer to
enter into a consensual agreement to protect the Plan.
The Contributor has provided the PBGC with information explaining the
transaction pursuant to a Confidentiality Agreement with the PBGC. In addition,
the Contributor has met with representatives at the PBGC regarding the
transaction and those representatives have suggested possible consensual
arrangements that could be acceptable to the PBGC in lieu of any attempt to
terminate the Plan.
<PAGE>
Appendix A
Dispute Resolution Procedures
(1) Binding and Exclusive Means. The dispute resolution provisions set
forth in this Appendix A shall be the binding and exclusive means to resolve all
disputes arising under this Agreement (each a "Dispute").
(2) Standards and Criteria. In resolving any Dispute, the standards and
criteria for resolving such dispute shall, unless the Contributor and the
Partnership in their discretion jointly stipulate otherwise, be as set forth in
Appendix 1 to this Appendix A.
(3) ADR and Binding Arbitration Procedures. If a Dispute arises, the
following procedures shall be implemented:
(a) The Indemnifying Party may at any time invoke the dispute resolution
procedures set forth in this Appendix A as to any Dispute by providing written
notice of such action to the Indemnified Party, who within five Business Days
after such notice shall schedule a meeting to be held in Houston, Texas between
the parties. The meeting shall occur within 10 Business Days after notice of
the meeting is delivered to the Indemnifying Party. The meeting shall be
attended by representatives of each party having decision-making authority
regarding the Dispute as well as the dispute resolution process and who shall
attempt in a commercially reasonable manner to negotiate a resolution of the
Dispute.
(b) The representatives of the parties shall cooperate in a commercially
reasonable manner and shall explore whether techniques such as mediation,
minitrials, mock trials or other techniques of alternative dispute resolution
might be useful. In the event that a technique of alternative dispute
resolution is so agreed upon, a specific timetable and completion date for its
implementation shall also be agreed upon. The representatives will continue to
meet and discuss settlement until the date (the "Interim Decision Date") that is
the earliest to occur of the following events: (i) an agreement shall be reached
by the parties resolving the Dispute; (ii) one of the parties shall determine
and notify the other party in writing that no agreement resolving the Dispute is
likely to be reached; (iii) if a technique of alternative dispute resolution is
agreed upon, the completion date therefor shall occur without the parties having
resolved the Dispute; or (iv) if another technique of alternative dispute
resolution is not agreed upon, two full meeting days (or such other time period
as may be agreed upon) shall expire without the parties having resolved the
Dispute.
(c) If, as of the Interim Decision Date, the parties have not succeeded in
negotiating a resolution of the dispute pursuant to subsection (b), the parties
shall proceed under subsection (d).
<PAGE>
(d) The parties shall jointly appoint a Neutral. If the parties have been
unable to agree upon such appointment within 30 days after the Interim Decision
Date, then such Neutral, upon the application of either of the parties shall be
appointed within 10 days of the filing of such application by the Center for
Public Resources, or if such appointment is not so made promptly then promptly
thereafter by the American Arbitration Association in Philadelphia,
Pennsylvania, or if such appointment is not so made promptly then promptly
thereafter by the senior United States District Court judge sitting in
Wilmington, Delaware. The fees of the Neutral shall be paid equally by the
parties except that the Neutral shall have discretion to award fees.
(e) In consultation with the Neutral, the parties shall agree upon a
binding schedule and procedure (which procedure may have been previously
discussed under subsection (b)) to be used as a means to resolve or to attempt
to resolve Dispute, with the Neutral making the decision as to the schedule
and/or procedure if the parties have been unable to agree on any of such matters
within 20 days after the initial selection of the Neutral. The parties agree to
participate in a commercially reasonable manner in the procedure to its
conclusion as determined by the Neutral. If the parties are not successful in
resolving the Dispute through the procedure described above, then the parties
agree that (i) the Neutral shall act as the arbitrator in a binding arbitration
in accordance with the American Arbitration Association rules and shall render a
decision and (ii) judgment upon the decision rendered by the Neutral may be
entered in any court having jurisdiction.
(4) Continuation of Business. Notwithstanding the existence of any Dispute
or the pendency of any procedures pursuant to this Appendix A, the parties agree
and undertake that all payments not in dispute shall continue to be made and all
obligations not in dispute shall continue to be performed.
<PAGE>
Appendix 1
(a) First priority shall be given to maximizing the consistency of the
resolution of the Dispute with the satisfaction of all express obligations of
the parties and their Affiliates as set forth in the Agreement.
(b) Second priority shall be given to resolution of the Dispute in a manner
which best achieves the objectives of the business activities and arrangements
under the Agreement and permits the parties to realize the benefits intended to
be afforded thereby.
(c) Third priority shall be given to such other matters, if any, as the
parties or the Neutral shall determine to be appropriate under the
circumstances.
<PAGE>
EXHIBIT 10.11(a)
FIRST AMENDMENT TO LYONDELL ASSET CONTRIBUTION AGREEMENT
This First Amendment to Lyondell Asset Contribution Agreement (this "First
Amendment"), dated as of May 15, 1998, is entered into by and among Lyondell
Petrochemical Company, a Delaware corporation (the "Contributor"), Lyondell
Petrochemical L.P. Inc., a Delaware corporation (the "Contributing Partner") and
Equistar Chemicals, LP, a Delaware limited partnership (the "Partnership").
RECITALS
A. The Contributor, the Contributing Partner and the Partnership are
parties to that certain Asset Contribution Agreement dated as of December 1,
1997 (the "1997 Asset Contribution Agreement");
B. Pursuant to that certain Master Transaction Agreement, dated as of May
15, 1998, by and among the Contributor, the Partnership, Occidental Petroleum
Corporation ("OPC") and Millennium Chemicals Inc, certain affiliates of OPC
shall become partners in the Partnership as of the date hereof; and
C. The Contributor, the Contributing Partner and the Partnership desire to
amend the 1997 Asset Contribution Agreement on the terms set forth herein.
AGREEMENT
NOW THEREFORE, in consideration of the premises and of the mutual covenants
of the parties hereto, it is hereby agreed that the 1997 Asset Contribution
Agreement is amended as follows:
A. Capitalized terms used herein and not otherwise defined herein shall
have the meanings given such terms in the 1997 Asset Contribution Agreement.
B. The following definition shall be added to Section 1 of the 1997 Asset
Contribution Agreement:
"1998 MTA" shall mean that certain Master Transaction Agreement, dated as
of May 15, 1998, by and among the Contributor, the Partnership, Occidental
Petroleum Corporation and Millennium Chemicals Inc.
C. The definition of "Third Party Claim" as set forth in Section 1 of the
1997 Asset Contribution Agreement shall be amended and restated as follows:
"Third Party Claim" means any allegation, claim, civil or criminal action,
proceeding, charge or prosecution brought by a Person other than a Contributor,
any Affiliate thereof, the Partnership,
<PAGE>
any member of the Millennium Group (as defined in the 1998 MTA), any member of
the Lyondell Group (as defined in the 1998 MTA) or any member of the Occidental
Group (as defined in the 1998 MTA).
D. Subsection 6.2(a)(i) of the 1997 Asset Contribution Agreement shall be
amended and restated as follows:
(i) Any misrepresentation in or breach of the representations and
warranties of the Contributor or any of its Affiliates in this Agreement,
the Assignment and Assumption Agreements, the Master Intellectual Property
Agreement, or the Master Transaction Agreement, provided that any Liability
arising out of, in connection with or relating to any breach of the
warranties in any Assignment and Assumption Agreement that is not a breach
of the warranties in this Agreement shall not be indemnified against
pursuant to this Section 6;
E. Subsection 6.2(b) of the 1997 Asset Contribution Agreement shall be
amended and restated as follows:
(b) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, TO THE
FULLEST EXTENT PERMITTED BY LAW, NEITHER THE CONTRIBUTOR NOR ANY OF ITS
AGENTS, EMPLOYEES, REPRESENTATIVES OR AFFILIATES SHALL BE LIABLE FOR
CONSEQUENTIAL, INCIDENTAL, INDIRECT OR PUNITIVE DAMAGES IN CONNECTION WITH
DIRECT CLAIMS BY AN INDEMNIFIED PARTY (I.E., A CLAIM BY AN INDEMNIFIED
PARTY THAT DOES NOT SEEK REIMBURSEMENT FOR A THIRD PARTY CLAIM PAID OR
PAYABLE BY SUCH INDEMNIFIED PARTY) WITH RESPECT TO THEIR INDEMNIFICATION
OBLIGATIONS UNDER THIS AGREEMENT UNLESS ANY SUCH CLAIM ARISES OUT OF THE
FRAUDULENT ACTIONS OF THE CONTRIBUTOR. IN DETERMINING THE AMOUNT OF ANY
LOSS, LIABILITY, OR EXPENSE FOR WHICH AN INDEMNIFIED PARTY IS ENTITLED TO
INDEMNIFICATION UNDER THIS AGREEMENT, THE GROSS AMOUNT THEREOF WILL BE
REDUCED (BUT NOT BELOW ZERO) BY THE NET PRESENT VALUE OF ANY CORRELATIVE
INSURANCE PROCEEDS ACTUALLY REALIZED BY SUCH INDEMNIFIED PARTY UNDER
POLICIES TO THE EXTENT THAT THE FUTURE PREMIUM RATE WILL NOT BE INCREASED
BY CLAIM EXPERIENCE RELATING TO SUCH LOSS, LIABILITY OR EXPENSE.
F. Subsection 6.2(e) of the 1997 Asset Contribution Agreement shall be
amended and restated as follows:
(e) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, TO THE
FULLEST EXTENT PERMITTED BY LAW, NEITHER THE PARTNERSHIP NOR ANY OF ITS
AGENTS, EMPLOYEES, REPRESENTATIVES OR
<PAGE>
AFFILIATES SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, INDIRECT OR
PUNITIVE DAMAGES IN CONNECTION WITH DIRECT CLAIMS BY AN INDEMNIFIED PARTY
(I.E., A CLAIM BY AN INDEMNIFIED PARTY THAT DOES NOT SEEK REIMBURSEMENT FOR
A THIRD PARTY CLAIM PAID OR PAYABLE BY SUCH INDEMNIFIED PARTY) WITH RESPECT
TO THEIR INDEMNIFICATION OBLIGATIONS UNDER THIS AGREEMENT UNLESS ANY SUCH
CLAIM ARISES OUT OF THE FRAUDULENT ACTIONS OF THE PARTNERSHIP. IN
DETERMINING THE AMOUNT OF ANY LOSS, LIABILITY, OR EXPENSE FOR WHICH AN
INDEMNIFIED PARTY IS ENTITLED TO INDEMNIFICATION UNDER THIS AGREEMENT, THE
GROSS AMOUNT THEREOF WILL BE REDUCED (BUT NOT BELOW ZERO) BY THE NET
PRESENT VALUE OF ANY CORRELATIVE INSURANCE PROCEEDS ACTUALLY REALIZED BY
SUCH INDEMNIFIED PARTY UNDER POLICIES TO THE EXTENT THE FUTURE PREMIUM RATE
WILL NOT BE INCREASED BY CLAIM EXPERIENCE RELATING TO SUCH LOSS, LIABILITY
OR EXPENSE.
G. Appendix A to the 1997 Asset Contribution Agreement shall be amended
and restated in its entirety in the form attached hereto as Exhibit A.
H. Except as amended by this First Amendment, all the terms and provisions
of the 1997 Asset Contribution Agreement shall remain in full force and effect.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this First
Amendment as of the date first above written.
LYONDELL PETROCHEMICAL COMPANY,
a Delaware corporation.
By: /s/ Dan F. Smith
---------------------------------
Name: Dan F. Smith
Title: President and Chief Executive Officer
LYONDELL PETROCHEMICAL L.P. INC.,
a Delaware corporation.
By: /s/ Dan F. Smith
---------------------------------
Name: Dan F. Smith
-------------------------------
Title: President and Chief Executive Officer
EQUISTAR CHEMICALS, LP,
a Delaware limited partnership
By: /s/ Eugene R. Allspach
---------------------------------
Name: Eugene R. Allspach
Title: President and Chief Operating Officer
[Signature Page to First Amendment to Lyondell Asset Contribution Agreement]
<PAGE>
EXHIBIT A
Appendix A
Dispute Resolution Procedures
(1) Binding and Exclusive Means. The dispute resolution provisions set
forth in this Appendix A shall be the binding and exclusive means to resolve all
disputes arising under this Agreement (each a "Dispute").
(2) Standards and Criteria. In resolving any Dispute, the standards and
criteria for resolving such dispute shall, unless the Contributors and the
Partnership in their discretion jointly stipulate otherwise, be as set forth in
Appendix 1 to this Appendix A.
(3) ADR and Binding Arbitration Procedures. If a Dispute arises, the
following procedures shall be implemented:
(a) Any party to this Agreement may at any time invoke the dispute
resolution procedures set forth in this Appendix A as to any Dispute by
providing written notice of such action to the other party or parties to the
Dispute, who within five Business Days after such notice shall schedule a
meeting to be held in Houston, Texas between the parties. The meeting shall
occur within 10 Business Days after notice of the meeting is delivered to the
other party or parties. The meeting shall be attended by representatives of
each party having decision-making authority regarding the Dispute as well as the
dispute resolution process and who shall attempt in a commercially reasonable
manner to negotiate a resolution of the Dispute.
(b) The representatives of the parties shall cooperate in a commercially
reasonable manner and shall explore whether techniques such as mediation,
minitrials, mock trials or other techniques of alternative dispute resolution
might be useful. In the event that a technique of alternative dispute
resolution is so agreed upon, a specific timetable and completion date for its
implementation shall also be agreed upon. The representatives will continue to
meet and discuss settlement until the date (the "Interim Decision Date") that is
the earliest to occur of the following events: (i) an agreement shall be reached
by the parties resolving the Dispute; (ii) one of the parties shall determine
and notify the other party in writing that no agreement resolving the Dispute is
likely to be reached; (iii) if a technique of alternative dispute resolution is
agreed upon, the completion date therefor shall occur without the parties having
resolved the Dispute; or (iv) if another technique of alternative dispute
resolution is not agreed upon, two full meeting days (or such other time period
as may be agreed upon) shall expire without the parties having resolved the
Dispute.
<PAGE>
(c) If, as of the Interim Decision Date, the parties have not succeeded in
negotiating a resolution of the dispute pursuant to subsection (b), the parties
shall proceed under subsections (d), (e) and (f).
(d) After satisfying the requirements above, such Dispute shall be
submitted to mandatory and binding arbitration at the election of any party
involved in the Dispute (the "Disputing Party"). The arbitration shall be
subject to the Federal Arbitration Act as supplemented by the conditions set
forth in this Appendix. The arbitration shall be conducted in accordance with
the Commercial Arbitration Rules of the American Arbitration Association in
effect on the date the notice of arbitration is served, other than as
specifically modified herein. In the absence of an agreement to the contrary,
the arbitration shall be held in Houston, Texas. The Arbitrator (as defined
below) will allow reasonable discovery in the forms permitted by the Federal
Rules of Civil Procedure, to the extent consistent with the purpose of the
arbitration. During the pendency of the Dispute, each party shall make
available to the Arbitrator and the other parties all books, records and other
information within its control requested by the other parties or the Arbitrator
subject to the confidentiality provisions contained herein, and provided that no
such access shall waive or preclude any objection to such production based on
any privilege recognized by law. Recognizing the express desire of the parties
for an expeditious means of dispute resolution, the Arbitrator may limit the
scope of discovery between the parties as may be reasonable under the
circumstances. In deciding the substance of the parties' claims, the laws of
the State of Delaware shall govern the construction, interpretation and effect
of this Agreement (including this Appendix) without giving effect to any
conflict of law principles. The arbitration hearing shall be commenced promptly
and conducted expeditiously, with each party involved in the Dispute being
allocated an equal amount of time for the presentation of its case. Unless
otherwise agreed to by the parties, the arbitration hearing shall be conducted
on consecutive days. Time is of the essence in the arbitration proceeding, and
the Arbitrator shall have the right and authority to issue monetary sanctions
against any of the parties if, upon a showing of good cause, that party is
unreasonably delaying the proceeding. To the fullest extent permitted by law,
the arbitration proceedings and award shall be maintained in confidence by the
Arbitrator and the parties.
(e) The Disputing Party shall notify the American Arbitration Association
("AAA") and the other parties involved in the Dispute in writing describing in
reasonable detail the nature of the Dispute (the "Dispute Notice"). The
arbitrator (the "Arbitrator") shall be selected within 15 days of the date of
the Dispute Notice by all of the parties from the members of a panel of
arbitrators of the AAA or, if the AAA fails or refuses to provide a list of
potential arbitrators, of the Center for Public Resources and shall be
experienced in commercial arbitration. In the event that the parties are unable
to agree on the selection of the Arbitrator, the AAA shall select the
Arbitrator, using the criteria set forth in this Appendix, within 30 days of the
date of the Dispute Notice. In the event that the Arbitrator is unable to
serve, his or her replacement will be selected in the same manner as the
Arbitrator to be replaced. The Arbitrator shall be neutral. The Arbitrator
shall have the authority to assess the costs and expenses of the arbitration
proceeding (including the arbitrators', and attorneys' fees and expenses)
against any or all parties.
<PAGE>
(f) The Arbitrator shall decide all Disputes and all substantive and
procedural issues related thereto, and shall enforce this Agreement in
accordance with its terms. Without limiting the generality of the previous
sentence, the Arbitrator shall have the authority to issue injunctive relief;
however, the Arbitrator shall not have any power or authority to (i) award
consequential, incidental, indirect or punitive damages or (ii) amend this
Agreement. The Arbitrator shall render the arbitration award, in writing,
within 20 days following the completion of the arbitration hearing, and shall
set forth the reasons for the award. In the event that the Arbitrator awards
monetary damages in favor of either party, the Arbitrator must certify in the
award that no indirect, consequential, incidental, indirect or punitive damages
are included in such award. If the Arbitrator's decision results in a monetary
award, the interest to be granted on such award, if any, and the rate of such
interest shall be determined by the Arbitrator in his or her discretion. The
arbitration award shall be final and binding on the parties, and judgment
thereon may be entered in any court of competent jurisdiction, and may not be
appealed except to the extent permitted by the Federal Arbitration Act.
(4) Continuation of Business. Notwithstanding the existence of any Dispute
or the pendency of any procedures pursuant to this Appendix A, the parties agree
and undertake that all payments not in dispute shall continue to be made and all
obligations not in dispute shall continue to be performed.
<PAGE>
Appendix 1
(a) First priority shall be given to maximizing the consistency of the
resolution of the Dispute with the satisfaction of all express obligations of
the parties and their Affiliates as set forth in the Agreement.
(b) Second priority shall be given to resolution of the Dispute in a manner
which best achieves the objectives of the business activities and arrangements
under the Agreement and permits the parties to realize the benefits intended to
be afforded thereby.
(c) Third priority shall be given to such other matters, if any, as the
parties or the Arbitrator shall determine to be appropriate under the
circumstances.
<PAGE>
EXHIBIT 10.12
CONFORMED COPY
ASSET CONTRIBUTION AGREEMENT
AMONG
MILLENNIUM PETROCHEMICALS INC.,
MILLENNIUM PETROCHEMICALS LP LLC
AND
EQUISTAR CHEMICALS, LP
DATED: DECEMBER 1, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1 DEFINITIONS...................................................... 1
SECTION 2 CONTRIBUTION OF ASSETS; ASSUMPTION OF CERTAIN LIABILITIES........ 8
2.1 Transfer of Assets............................................... 8
2.2 Excluded Assets.................................................. 10
2.3 Instruments of Conveyance and Assignment......................... 11
2.4 Further Assurances............................................... 11
2.5 Assumption of Liabilities........................................ 12
2.6 Excluded Liabilities............................................. 13
2.7 Master Intellectual Property Agreement........................... 14
2.8 Employee Matters................................................. 14
2.9 Joint Contracts.................................................. 16
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTOR................ 17
3.1 Due Organization; Good Standing and Power........................ 17
3.2 Authorization and Validity of Agreements......................... 17
3.3 No Consents Required; No Conflict with Instruments to which the
Contributor is a Party......................................... 17
3.4 Employee Benefits................................................ 18
3.5 Title to Assets; Absence of Liens and Encumbrances; Leases....... 19
3.6 Title Matters; Defects in Improvements........................... 20
3.7 Working Capital.................................................. 20
3.8 Technology and Similar Rights.................................... 20
3.9 Government Licenses, Permits and Related Approvals............... 20
3.10 All Necessary Assets............................................. 20
3.11 Conduct of Business in Compliance with Regulatory and
Contractual Requirements......................................... 21
3.12 Legal Proceedings................................................ 21
3.13 Consents......................................................... 21
3.14 Tax Matters...................................................... 21
3.15 [Reserved]....................................................... 21
3.16 HSE Matters...................................................... 21
3.17 Investigation to Acquire Knowledge............................... 22
SECTION 4 REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP................ 22
4.1 Due Organization; Good Standing and Power........................ 22
4.2 Authorization and Validity of Agreement.......................... 23
4.3 No Consents Required; No Conflict with Instruments to which the
Partnership is a Party........................................... 23
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<PAGE>
SECTION 5 COVENANTS SUBSEQUENT TO CLOSING DATE............................. 23
5.1 Access to Information............................................ 23
5.2 Mail or Other Communications..................................... 24
5.3 Use of Contributor's Trade Name.................................. 24
5.4 Closing Date Balance Sheet....................................... 24
5.5 Payment of Retained Accounts Payable............................. 24
5.6 Collection of Accounts Receivable................................ 24
5.7 Reimbursement for Prepaid Expenses............................... 25
SECTION 6 SURVIVAL AND INDEMNIFICATION..................................... 25
6.1 Survival Limitations............................................. 25
6.2 Indemnification.................................................. 25
6.3 Procedures....................................................... 28
6.4 Subrogation...................................................... 30
6.5 Claims for HSE Work.............................................. 30
6.6 EXTENT OF INDEMNIFICATION........................................ 31
SECTION 7 MISCELLANEOUS.................................................... 31
7.1 Construction..................................................... 31
7.2 Payment of Certain Expenses and Taxes............................ 31
7.3 Notices.......................................................... 32
7.4 [Reserved]....................................................... 33
7.5 Binding Effect; Benefit.......................................... 33
7.6 Occasional and Bulk Sales........................................ 33
7.7 Assignability.................................................... 34
7.8 Amendment; Waiver................................................ 34
7.9 Dispute Resolution............................................... 34
7.10 Severability..................................................... 34
7.11 Counterparts..................................................... 34
7.12 APPLICABLE LAW................................................... 34
7.13 JURISDICTION; CONSENT TO SERVICE OF PROCESS; WAIVER.............. 34
7.14 WAIVER OF JURY TRIAL............................................. 35
-ii-
<PAGE>
LIST OF SCHEDULES AND EXHIBITS TO AGREEMENT
Schedules
Schedule A - Contributed Business
Schedule 2.1(a) - Fee Interests
Schedule 2.1(b) - Leases
Schedule 2.1(d) - Equipment
Schedule 2.1(k) - Contributed Subsidiaries
Schedule 2.2(c) - Excluded Tradenames and Logos
Schedule 2.2(h) - Certain Excluded Assets
Schedule 2.5(a)(vii) - Assumed Indebtedness
Schedule 2.5(a)(x) - Assumed Long-Term Liabilities
Schedule 3 - Disclosure Schedule
Appendices
Appendix A - Dispute Resolution Procedures
Exhibits
Exhibit A - Form of Deeds for Fee Interests
Exhibit B - Form of Assignment of Lease for Leaseholds
Exhibit C - Form of Bill of Sale and Assignment
Exhibit D - Form of Trademark Assignment
Exhibit E - Form of Patent Assignment
Exhibit F - Form of Assumption Agreement
Exhibit G - Form of Master Intellectual Property Agreement
-iii-
<PAGE>
ASSET CONTRIBUTION AGREEMENT
ASSET CONTRIBUTION AGREEMENT (this "Agreement"), dated as of December 1,
1997, between Millennium Petrochemicals Inc., a Virginia corporation (the
"Contributor"), Millennium Petrochemicals LP LLC, a Delaware limited liability
company (the "Contributing Partner") and Equistar Chemicals, LP, a Delaware
limited partnership (the "Partnership").
WHEREAS, the Contributor owns all of the issued and outstanding shares of
capital stock of Contributing Partner and the Contributing Partner is a partner
in the Partnership;
WHEREAS, the Contributor wishes to contribute the assets subject to certain
liabilities associated with the olefins, polyolefins and related petrochemicals
businesses described in Schedule A (the "Contributed Business") to the
Contributing Partner; and
WHEREAS, the Contributing Partner wishes to contribute such assets and
liabilities to the Partnership, and the Partnership wishes to accept such assets
and assume such liabilities, all upon the terms and conditions hereinafter set
forth; and
WHEREAS, the Partnership will consummate certain transactions and enter
into certain agreements as provided for in the Master Transaction Agreement,
dated as of July 25, 1997, between Lyondell Petrochemical Company and Millennium
Chemicals Inc., as amended (the "Master Transaction Agreement").
NOW THEREFORE, in consideration of the premises and of the mutual covenants
of the parties hereto, it is hereby agreed as follows:
SECTION 1
DEFINITIONS
The terms used in this Agreement have the following definitions or are
defined in the Sections referenced below:
"Accounts Receivable" constitute, as of the Closing Date, all uncollected
accounts receivable that have been generated by, or are attributable to, the
Contributor's operation prior to the Closing Date of the Contributed Business in
the ordinary course and in all respects in a manner consistent with the
provisions of Section 3.2 of the Master Transaction Agreement.
"Affiliate" means any Person that directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with the Person specified; provided, however, that for purposes of this
Agreement (i) Suburban Propane Partners, L.P. and any Persons
<PAGE>
controlled by it shall not be considered an Affiliate of Contributor; and (ii)
neither the Partnership nor any Person controlled by it shall be considered an
Affiliate of the Contributor. For purposes of this definition, the term
"control" shall have the meaning set forth in 17 CFR 230.405 as in effect on the
date hereof.
"Agreed Rate" means the base commercial lending rate announced by Citibank,
N.A. (or its successor) at its principal office in effect from time to time,
such interest rate to change automatically, effective as of the date of each
change in such base rate.
"Agreement" is defined in the Preamble.
"Assets" means all of the assets, rights and properties being contributed,
conveyed, assigned, transferred and delivered to the Partnership pursuant to
Section 2.1.
"Assignment and Assumption Agreements" means the Deeds, the Assignments of
Lease, the Bill of Sale and Assignment, the Trademark Assignment, the Patent
Assignment and the Assumption Agreement.
"Assignments of Lease" is defined in Section 2.3(a).
"Associated Rights" is defined in Section 2.1(c).
"Assumed Liabilities" is defined in Section 2.5(a).
"Assumed Plan" means the Pension Plan for Eligible Hourly Represented
Employees of Quantum Chemical Corporation.
"Authority" means any government or governmental or regulatory body
thereof, or political subdivision thereof, whether federal (or any commonwealth,
territory or possession thereof), state, local or foreign, or any agency,
department or instrumentality thereof, or any court or arbitrator (public or
private).
"Basic Severance" is defined in Section 2.8(b).
"Capital Spares" means the inventory of spare parts used by the Contributor
in the Contributed Business and owned by the Contributor as of the Closing Date.
"CERCLA" is defined in Section 3.16(b).
"Chemical Substance" means any (i) 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 HSE Law or defined or listed as an industrial,
toxic, deleterious, harmful, radioactive, infectious, disease-causing or
hazardous
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<PAGE>
substance, material or waste under any HSE Law, and (ii) petroleum or
any fraction thereof, asbestos or asbestos-containing material or
polychlorinated biphenyls ("PCBs").
"Closing" means the closing of the transactions contemplated by the Master
Transaction Agreement.
"Closing Date" means the date hereof.
"Closing Date Balance Sheet" is defined in Section 5.4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confirmed Accounts Receivable" is defined in Section 5.6.
"Consent" means any consent, waiver, appraisal, authorization, exception,
registration, license or declaration of or by any Person or any Authority, or
any expiration or termination of any applicable waiting period under any Legal
Requirement, required with respect to the Contributed Business or the
Contributor or any Affiliate thereof in connection with (i) the execution and
delivery of this Agreement or any of the Related Agreements or (ii) the
consummation of the transactions contemplated hereby or thereby.
"Contracts" means contracts, maintenance and service agreements, purchase
commitments for materials and other services, advertising and promotional
agreements, leases, taxation agreements with any Authority, and other
agreements.
"Contributed Contracts" is defined in Section 2.1(f).
"Contributed Business" is defined in the Preamble.
"Contributed Intellectual Property" is defined in Section 2.1(g).
"Contributed Subsidiaries" is defined in Section 2.1(k).
"Contributor" is defined in the Preamble.
"Deeds" is defined in Section 2.3(a).
"De Minimis Claim" means any Third Party Claim for which the Liability
associated therewith is less than $25,000.
"Employee Plan" is defined in Section 3.4(a)(i).
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<PAGE>
"Encumbrance" means any lien, charge, encumbrance, security interest, title
defect, option or any other restriction or third party right.
"Environment" is defined in this Section 1 in the definition of "HSE Laws".
"Equipment" is defined in Section 2.1(d).
"Excluded Assets" is defined in Section 2.2.
"Excluded Liabilities" is defined in Section 2.6.
"Fee Interests" is defined in Section 2.1(a).
"GAAP" means United States generally accepted accounting principles, as in
effect from time to time.
"Government Licenses" means all licenses, permits or franchises issued by
any Authority relating to the operation, development, use, maintenance or
occupancy of the Facilities or any other Asset or of the Contributed Business to
extent that such licenses, permits or franchises relate principally to the
normal operation and conduct of the Contributed Business.
"HSE Claim" means (i) any actions, events, circumstances or
responsibilities (including compliance actions or requirements) that are
necessary to comply with HSE Laws but only to the extent that any of the
foregoing give rise to out of pocket costs or expenses or result in a Liability
that is required by GAAP to be reflected on the balance sheet of the applicable
party or (ii) any third party (including private parties, Authorities and
employees acting on each such party's own behalf or on the behalf of other third
parties) actions, lawsuits, claims, investigations or proceedings arising under
HSE Laws.
"HSE Laws" means any Legal Requirements or rule of common law now in effect
(including any amendments now in effect) and any current judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree, or judgment, relating to (i) 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 (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.
-4-
<PAGE>
"HSE Proceeding" is defined in Section 3.16(d).
"Indemnified Party" is defined in Section 6.3(a).
"Indemnifying Party" is defined in Section 6.3(a).
"Intellectual Property" means research material, technical information,
marketing information, patent rights, patent licenses, pending patent
applications, trade secrets, technical information, know-how, management
information systems, technology, quality control data, specifications, designs,
drawings, software, sales promotion literature and advertising materials.
"Inventory" means materials used by the Contributor in the Contributed
Business and owned by the Contributor as of the Closing Date including raw
materials, feed stocks, supplies, additives, pigments, process chemicals,
packaging materials (to the extent the Partnership's use thereof would be
consistent with Section 5.3), catalysts, work-in-process and finished goods that
relate principally to the normal operation and conduct of the Contributed
Business.
"Inventory Tax" is defined in Section 7.2(d).
"Knowledge" with respect to the Contributor means the actual knowledge of
(i) any plant manager, (ii) any officer of the Contributor having
responsibilities with respect to the Contributed Business, and (iii) any
employee reporting directly to an officer described in clause (ii), in each case
employed by the Contributor in connection with the Contributed Business.
"Leased Premises" is defined in Section 2.1(b).
"Leaseholds" is defined in Section 2.1(b).
"Leases" is defined in Section 2.1(b).
"Legal Requirement" means any law, statute, rule, ordinance, decree,
requirement, regulation, order or judgment of any Authority, including the terms
of any Government License.
"Liability" is defined in Section 6.2(a).
"Licensed Technology" means the technology licensed to the Partnership
pursuant to the Master Intellectual Property Agreement.
"Licensed Trademarks" means the trademarks licensed to the Partnership
pursuant to the Master Intellectual Property Agreement.
"Lowest Cost Response" means the response required or allowed under HSE
Laws that addresses the Chemical Substances present at the lowest cost
(considered as a whole taking into
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<PAGE>
consideration any negative impact such response may have on the conduct of the
Contributed Business and any potential additional costs or liabilities that may
arise as a result of such response) as compared to any other response that is
consistent with HSE Laws. Taking no action shall constitute the Lowest Cost
Response if, after investigation, taking no action is determined to be
consistent with HSE Laws. If taking no action is not consistent with HSE Laws,
the least costly non-permanent remedy (such as mechanisms to contain or
stabilize Chemical Substances, including caps, dikes, encapsulation, leachate
collection systems, etc.) shall be the Lowest Cost Response, provided that such
non-permanent remedy is consistent with HSE Laws and less costly than the least
costly permanent remedy (such as the excavation and removal of soil).
"Master Intellectual Property Agreement" is defined in Section 2.7.
"Master Transaction Agreement" is defined in the fourth WHEREAS clause.
"Material Adverse Effect" means any adverse circumstance or consequence
that, individually or in the aggregate, has an effect that is material to the
financial condition, results of operations, assets or business of the
Contributed Business or the Assets, taken as a whole.
"Neutral" means a neutral Person acceptable to each of the appointing
parties and not affiliated with any of the parties or their Affiliates.
"Partnership" is defined in the Preamble.
"Partnership Employees" is defined in Section 2.8(a).
"Patent Assignment" is defined in Section 2.3(a).
"PCBs" is defined in this Section in the definition of "Chemical
Substance".
"Person" means any natural person or any corporation, partnership, limited
liability company, joint venture, association, trust or other entity or
organization.
"Pre-Closing Contingent Liabilities" means all Liabilities of every kind
and nature arising out of, in connection with or related to the ownership,
operation or use prior to the Closing Date of the Assets or the Contributed
Business other than the Liabilities referred to in Sections 2.5(a)(i), (ii),
(iii), (vii), (viii) and (ix).
"Prepaid Expenses" means the balances in the prepaid accounts consistent
with GAAP of the Contributor or its Affiliates, as of the Closing Date, that are
associated with the Contributed Business and that will have value to the
Partnership in owning and operating the Contributed Business after the Closing
Date.
"Property Tax" is defined in Section 7.2(c).
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<PAGE>
"Related Agreements" means the Master Transaction Agreement, Tier 1 Related
Agreements (other than this Agreement) and Tier 2 Related Agreements of the
Contributor or its Affiliates, as such terms are defined in the Master
Transaction Agreement.
"Release" means 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 the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, or any other HSE Law and any noxious noise or odor
emission.
"Retained Accounts Payable" means, as of the Closing Date, all current
trade accounts payable and current accrued expenses other than those related to
(A) employee vacation accruals for employees that become Partnership Employees
and (B) the current portion of the deferred maintenance.
"SEC Reports" means the 1996 Annual Report on Form 10-K and the 10-Q for
the first quarter of 1997 of the Contributor's parent company required to be
filed with the Securities and Exchange Commission.
"Seven Year PCCL Claims" means Third Party Claims (other than any De
Minimis Claim) related to Pre-Closing Contingent Liabilities that have been or
are asserted within seven years after the Closing Date.
"Shared Services Agreements" means the agreements between the Contributor
(or its Affiliates) and the Partnership set forth on Appendix B-2 of the Master
Transaction Agreement.
"Stores Inventory" means the inventory of spare parts, excluding Capital
Spares, that are used by the Contributor or any Affiliate thereof in the
Contributed Business and owned by the Contributor or any Affiliate thereof as of
the Closing Date and that consist of items that generally can be used for
several processes or types of equipment, including, but not limited to, such
items as pumps, motors, pipe fittings, electrical wiring, instruments, nuts and
bolts, unfabricated metals, safety items, small hand tools and other
miscellaneous repair parts or supplies.
"Taxes" means all taxes, charges, fees, levies or other assessments imposed
by any taxing Authority, including, but not limited to, income, gross receipts,
excise, property, sales, use, transfer, payroll, license, ad valorem, value
added, withholding, social security, national insurance (or other similar
contributions or payments), franchise, severance and stamp taxes (including any
interest, fines, penalties or additions attributable to, or imposed on or with
respect to, any such taxes, charges, fees, levies or other assessments).
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"Third Party Claim" means any allegation, claim, civil or criminal action,
proceeding, charge or prosecution brought by a Person other than the
Contributor, any Affiliate thereof, the Partnership, or any member of the
Lyondell Group (as defined in the Master Transaction Agreement).
"Trademarks" means trade names, trademarks, trademark registrations or
trademark applications, copyrights, copyright applications or copyright
registrations or any derivative thereof or design used in connection therewith.
"Trademark Assignment" is defined in Section 2.3(a).
"Unrecorded Assets" is defined in Section 2.1(e).
"WARN" is defined in Section 2.8(f).
SECTION 2
CONTRIBUTION OF ASSETS; ASSUMPTION OF CERTAIN LIABILITIES
2.1 Transfer of Assets. On the terms and subject to the conditions set
forth in this Agreement, on the date hereof, the Contributor contributes to the
Contributing Partner and the Contributing Partner is contributing, conveying,
assigning, transferring and delivering to the Partnership, or shall cause to be
contributed, conveyed, assigned, transferred and delivered to the Partnership,
and the Partnership shall accept, acquire and assume all of the assets, rights,
and properties used or held for use in the contemplated operation and conduct of
the Contributed Business of every kind, nature, character and description,
tangible and intangible, real, personal or mixed, wherever located other than
the Excluded Assets; and which conveyance, subject to Section 2.2, shall
include, without limitation, the following:
(a) All right, title and interest of the Contributor and any Affiliate
thereof in the parcels of land described as fee property on Schedule 2.1(a),
together with all buildings, structures, fixtures and other improvements
situated thereon and all right, title and interest of the Contributor and any
Affiliate thereof under easements, privileges, rights-of-way, riparian and other
water rights, lands underlying any adjacent streets or roads, appurtenances and
licenses to the extent pertaining to or accruing to the benefit of the land (the
"Fee Interests");
(b) All right, title and interest of the Contributor and any Affiliate
thereof under the leases and subleases, all amendments thereto and all
agreements related thereto described on Schedule 2.1(b) (the "Leases"), for the
use and occupancy of the premises described therein (the "Leased Premises"),
together with all buildings, structures, fixtures and other improvements
situated thereon and, all rights and interests of the Contributor and any
Affiliate thereof under all easements, privileges, rights-of-way, riparian and
other water rights, appurtenances and licenses pertaining to the Leases or
accruing to the benefit of the tenant under the Leases (the "Leaseholds");
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(c) All right, title and interest of the Contributor and any Affiliate
thereof, if any, in lands, or real property of others, used principally in the
normal operation and conduct of the Contributed Business (the "Associated
Rights"), including, without limitation, all contracts, easements, rights-of-
way, permits, licenses and leases and other similar rights for related
equipment, power and communications cables, and other related property and
equipment used principally in the normal operation and conduct of the
Contributed Business;
(d) All of the right, title and interest of the Contributor and any
Affiliate thereof in and to the equipment, furniture, furnishings, fixtures,
machinery, Capital Spares, vehicles, tools, computers and other tangible
personal property used principally in the normal operation and conduct of the
Contributed Business including without limitation the items listed on Schedule
2.1(d), (the equipment described in this Section 2.1(d), to be referred to
collectively as the "Equipment") and all warranties and guarantees, if any,
express or implied, existing for the benefit of the Contributor or any Affiliate
thereof in connection with the Equipment to the extent assignable;
(e) Subject, to the extent applicable, to Section 5.3, all (i) customer
lists, customer credit information (to the extent neither the Contributor nor
any Affiliate thereof is bound to any confidentiality obligation with respect
thereto), customer payment histories and credit limits, vendor lists, catalogs,
and (ii) Intellectual Property to the extent used or contemplated for use
principally in the normal operation and conduct of (or to the extent under
development for use principally in the normal operation and conduct of) or the
marketing or promotion of, the Contributed Business (collectively, the
"Unrecorded Assets");
(f) All Contracts, whether or not entered into in the ordinary course of
business, that relate principally to the normal operation and conduct of the
Contributed Business, or in the case of any Contracts under which either the
Contributor or any Affiliate thereof retains rights with respect to its other
businesses, to the extent any such Contract relates to the operation of the
Contributed Business (all the foregoing excluding Government Licenses, but,
together with all agreements and instruments setting forth the Contributor's and
any of its Affiliates' rights with respect to rights-of-way, privileges,
riparian and other rights, appurtenances, licenses or franchises and in respect
of intellectual property rights, in each case that constitute Assets described
in clauses (a) through (e), of this Section 2.1 to be referred to collectively
as the "Contributed Contracts");
(g) Any Trademarks to the extent used or contemplated to be used
principally in the normal operation and conduct of the Contributed Business (all
of the items referred to in this Section 2.1(g), together with the items
referred to in clause (ii) of Section 2.1(e), collectively the "Contributed
Intellectual Property");
(h) All Government Licenses that are transferable and as to which
Consents to transfer are obtained where required;
(i) The Inventory, Stores Inventory and Prepaid Expenses;
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(j) [Reserved]
(k) All right, title and interest of the Contributor and any Affiliate
thereof in the subsidiaries listed on Schedule 2.1(k) (the "Contributed
Subsidiaries");
(l) All claims and rights against third parties (including, without
limitation, insurance carriers, indemnitors, suppliers and service providers) to
the extent, but only to the extent that, they relate to the Assumed Liabilities;
provided, however, that to the extent that any claims or rights of the
Contributor against any third parties are not assigned to the Partnership, and
the partnership incurs Liabilities that would create such claims or rights on
behalf of the Contributor, the Contributor shall enforce such claims or rights
for the benefit (and at the cost) of the Partnership to the extent it may
lawfully do so; and
(m) Any other asset of the Contributor or its Affiliate contributed to
the Partnership pursuant to the terms of this Agreement.
2.2 Excluded Assets. It is expressly understood and agreed that the
Assets shall not include the following (the "Excluded Assets"):
(a) Except as otherwise provided in Section 2.1(j), cash and cash
equivalents or similar type investments, such as certificates of deposit,
Treasury bills and other marketable securities;
(b) Except for the Assumed Plan transferred as provided under Section
2.8(g) or as may be agreed pursuant to Section 2.8(g), any assets of any
qualified or non-qualified pension or welfare plans or other deferred
compensation arrangements maintained by the Contributor or any Affiliate thereof
for employees of the Contributor or any Affiliate thereof prior to the Closing
Date;
(c) Any of the Contributor's or any Affiliate's right, title and interest
in and to (i) the names and logos set forth on Schedule 2.2(c) and any other
statutory names, trade names or trademarks, indications or descriptions of which
such names or any name similar thereto forms a part and (ii) any other trade
names, trademarks, trademark registrations or trademark applications,
copyrights, copyright applications or copyright registrations or any derivative
thereof or design used in connection therewith that are not used principally in
the normal operation and conduct of and are not uniquely applicable to the
Contributed Business;
(d) All claims and rights against third parties (including, without
limitation, insurance carriers, indemnitors, suppliers and service providers),
to the extent they do not relate to the Assumed Liabilities;
(e) Claims for refunds of Taxes for time periods ending on or before the
Closing Date, which Taxes remain the liability of Contributor under this
Agreement;
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(f) Subject to the Master Intellectual Property Agreement, any and all of
the Intellectual Property and Trademarks of the Contributor or any Affiliate
thereof to the extent not used principally in the normal operation and conduct
of or to the extent not applicable to the Contributed Business;
(g) All items sold in the ordinary course of business prior to the
Closing Date, none of which individually or in the aggregate are material to the
normal operation and conduct of the Contributed Business; and
(h) The tangible assets, intangible assets, real properties, contracts
and rights, described in Schedule 2.2(h).
2.3 Instruments of Conveyance and Assignment. On the Closing Date, the
Contributor shall:
(a) deliver or cause to be delivered to the Partnership (i) properly
executed and acknowledged warranty deeds, in substantially the form attached
hereto as Exhibit A (the "Deeds"), for all Fee Interests being conveyed
hereunder, (ii) assignments of lease for the Leases in substantially the form
attached hereto as Exhibit B, (the "Assignments of Lease"), (iii) a bill of sale
and assignment in substantially the form attached hereto as Exhibit C (the "Bill
of Sale and Assignment") conveying title to the Assets (other than the Fee
Interests and Leaseholds) and assigning the Contracts, (iv) an assignment of the
trademarks included in the Assets in substantially the form attached hereto as
Exhibit D (the "Trademark Assignment") and (v) an assignment of patent rights,
licenses and applications included in the Assets in substantially the form
attached hereto as Exhibit E (the "Patent Assignment"); and
(b) transfer to the Partnership the originals (to the extent the
Contributor or any Affiliate thereof possesses an original and retained no
rights thereunder after the Closing Date) or copies, as appropriate, of the
Contributed Contracts and the originals or copies, as appropriate, of all
current records, files and other data that relate to the Assets and that are
necessary for continuing the normal operation and conduct of the Contributed
Business by the Partnership.
2.4 Further Assurances.
(a) On and from time to time after the Closing Date, the Contributor will
execute and deliver, or cause to be executed and delivered, such other
instruments of conveyance, assignment, transfer and delivery as the Partnership
may reasonably request in order to fulfill and implement the terms of this
Agreement, to vest in the Partnership title to the Assets, or to enable the
Partnership to realize the benefits intended to be afforded hereby.
(b) On and from time to time after the Closing Date, the Partnership will
execute and deliver, or cause to be executed and delivered, such other
instruments of assumption, conveyance, assignment, transfer, power of attorney
or assurance as the Contributor may reasonably request
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in order to vest in the Partnership all of the Assumed Liabilities and to enable
the Contributor to realize the benefits intended to be afforded hereby.
(c) Notwithstanding any other provision of this Agreement to the
contrary, the Partnership and the Contributor acknowledge and agree that any
Government Licenses, Contributed Contracts or warranties which by their terms
require Consent from any other unaffiliated contracting party thereto shall not
be assigned to the Partnership unless any such Consent has been obtained prior
to the Closing Date. Following the Closing, the Partnership and the Contributor
shall cooperate with each other and use commercially reasonable efforts to
obtain those Consents that were not obtained prior to the Closing and (i) if
such Consents are obtained following the Closing, the Partnership and the
Contributor shall execute and deliver any other and further instruments of
assignment, assumption, transfer and conveyance and take such other and further
action as the Partnership may request in order to assign to the Partnership any
Government Licenses, Contributed Contracts or warranties to which such Consents
relate and (ii) pending such transfer or issuance to the Partnership, shall
provide, to the extent it may lawfully do so, the Partnership with the benefits
of any such Government Licenses, Contributed Contracts or warranties, in which
case, the Partnership shall promptly assume and discharge (or reimburse the
Contributor or its Affiliate for) all obligations and liabilities associated
with the benefits of such Government Licenses, Contributed Contracts or
warranties so made available to the Partnership. If the Contributor obtains a
Consent to assign any Government Licenses, Contributed Contract or warranties
after the Closing, each such Government Licenses, Contributed Contract or
warranties shall be deemed to be assigned to the Partnership promptly after such
Consent is obtained.
(d) Following the Closing, the Contributor, Contributing Partner and the
Partnership shall cooperate in good faith and in a commercially reasonable
manner with respect to all matters pertinent to the carrying into effect of this
Agreement and the discharge by each party of its obligations and liabilities
hereunder and thereunder, and shall furnish to each other such information,
cooperation and assistance as reasonably may be requested in connection with the
foregoing.
2.5 Assumption of Liabilities.
(a) On the terms and subject to the conditions, including Section 6.2,
set forth in this Agreement, on the Closing Date, the debts, liabilities and
obligations of the Contributor and its Contributed Subsidiaries set forth in
this Section 2.5 shall be assumed by the Contributing Partner in connection with
the transfer of Assets to it and shall be assumed by the Partnership in
connection with the transfer of Assets to it, and the Partnership agrees to pay,
perform and discharge all such debts, liabilities and obligations when due:
(i) All obligations arising after the Closing Date under the
Contracts and Leases that are assigned to the Partnership hereunder unless
and to the extent that such obligation arises out of a violation of such
Contract or Lease prior to the Closing Date;
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(ii) All obligations under purchase orders accepted by the
Contributor or its Contributed Subsidiaries in the ordinary course of
business of the Contributed Business prior to the Closing Date that are not
filled as of the Closing Date;
(iii) Current accrued expenses related to (A) employee vacation
accruals for employees that become Partnership Employees and (B) the
current portion of the deferred maintenance;
(iv) All obligations and liabilities, of every kind and nature,
without limitation, arising out of, in connection with or related to the
ownership, operation or use after the Closing Date of the Assets or the
Contributed Business;
(v) Seven Year PCCL Claims to the extent the aggregate thereof does
not exceed $7,000,000;
(vi) Third Party Claims that are related to Pre-Closing Contingent
Liabilities and that are first asserted seven years or more after the
Closing Date;
(vii) The obligations for indebtedness described on Schedule
2.5(a)(vii);
(viii)Subject to Section 2.8(g), all Liabilities associated with the
Assumed Plan;
(ix) All Liabilities associated with products sold after the Closing
Date regardless of when manufactured;
(x) The long-term liabilities set forth on Schedule 2.5(a)(x); and
(xi) Any other Liability specifically assumed by the Partnership
pursuant to the terms of this Agreement.
The liabilities and obligations assumed by the Partnership pursuant to this
Section are sometimes hereinafter referred to collectively as the "Assumed
Liabilities."
(b) On the Closing Date, the Partnership shall deliver to the Contributor
an instrument of assumption of the Assumed Liabilities substantially in the form
attached hereto as Exhibit F (the "Assumption Agreement").
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2.6 Excluded Liabilities. Except as otherwise expressly provided in this
Agreement (including, without limitation, Sections 6.2 and 7.2) or the
Assumption Agreement, the Partnership is assuming only the Assumed Liabilities
and is not assuming any other liability or obligation of the Contributor or any
Affiliate thereof, of whatever nature, whether presently in existence or arising
hereafter, whether known or unknown, or whether absolute or contingent, and all
such other liabilities and obligations of the Contributor and any Affiliate
thereof that are not Assumed Liabilities shall be retained by and remain
obligations and liabilities of the Contributor or such Affiliate (all such
liabilities and obligations being herein referred to as the "Excluded
Liabilities"), including the following:
(i) Any Pre-Closing Contingent Liability that is not an Assumed
Liability;
(ii) any obligation or liability relating to the Excluded Assets;
and
(iii) any obligation (A) for the payment of severance benefits to
employees of the Contributor or any of its Affiliates except as set forth
in Sections 2.8(b) or (c), or (B) attributable to Contributor's or any of
its Affiliates' employment of any employee, agent or independent contractor
prior to the Closing Date.
2.7 Master Intellectual Property Agreement.
On the Closing Date, the Partnership and Contributor shall execute and
deliver a master intellectual property agreement (the "Master Intellectual
Property Agreement") in substantially the form attached hereto as Exhibit G
providing, among other things, the following:
(a) Non-exclusive, royalty-free licenses to the Partnership of any
Intellectual Property and Trademarks used, contemplated for use or that could be
used, in the Contributed Business that is not conveyed to the Partnership
pursuant to Section 2.1.
(b) Non-exclusive, royalty-free licenses to the Contributor or its
Affiliates of any Contributed Intellectual Property acquired by the Partnership
pursuant to Section 2.1 of this Agreement used, contemplated for use or that
could be used in the business of the Contributor or its Affiliates.
(c) The assignment of the Contributed Intellectual Property to the
Partnership.
2.8 Employee Matters. If the Closing Date occurs prior to January 1,
1998, the effective employment date shall be January 1, 1998 and the Contributor
and the Partnership shall enter into an agreement to provide employee services
to the Partnership through December 31, 1997.
(a) At or prior to the Closing, the Partnership shall determine which
employees of the Contributor or any Affiliate thereof will be offered employment
by the Partnership. Any such employee that accepts such offer is herein called
a "Partnership Employee." Partnership Employees
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shall be employed effective on (i) January 1, 1998, or (ii) if the Closing Date
is after January 1, 1998, the Closing Date.
(b) If, within six months after the Closing Date or in anticipation of
Closing, the Contributor or any Affiliate thereof terminates (other than for
cause) the employment of any employee of the Contributor or any Affiliate
thereof who is primarily associated with the Assets or the Contributed Business
but who does not become a Partnership Employee, then the Partnership will pay to
the Contributor an amount equal to the Basic Severance to the extent the
Contributor or any Affiliate thereof pays the Basic Severance to such employee.
"Basic Severance" means two weeks of base pay for each full year of service by
the employee with the Contributor or any Affiliate (or predecessors of either,
to the extent service therefor is credited by the Contributor), subject to a 52
week maximum and a 12 week minimum; provided, however, that with respect to any
employee who has an employment agreement that contains provisions providing for
one or more payments in the event of a change in control of the Contributor,
"Basic Severance" means up to 52 weeks of base pay notwithstanding the
employee's years of service.
(c) Any Partnership Employee whose employment is terminated by the
Partnership (other than for cause) within six months after the Closing Date
shall be entitled to receive a severance benefit from the Partnership equal to
the Basic Severance (which, for purposes of calculating service time, shall
include the employee's time of service with the Contributor, its predecessors
(to the extent service therefor is credited by the Contributor) and the
Partnership).
(d) Any employees of the Contributor that the Partnership and the
Contributor agree are necessary for the orderly transfer of the Contributed
Business to the Partnership but who will not become Partnership Employees
("Transition Employees") shall be compensated by the Contributor on terms and
conditions and for a duration to be agreed upon by the Partnership and the
Contributor. The Partnership shall reimburse the Contributor for any such
agreed upon compensation, including payroll taxes, benefit costs and workers
compensation premiums and claims, paid by the Contributor to or with respect to
any Transition Employee.
(e) If any employee of the Contributor is eligible for and receiving
short term disability benefits or sick pay as of the Closing Date and the
Partnership has offered such employee employment by the Partnership, that
employee shall become employed by the Partnership (and become a Partnership
Employee for purposes of this Section 2.8) upon eligibility to return to active
employment with the Contributor under the applicable conditions of the
Contributor's short term disability benefits or sick pay plan. Partnership
employment shall not be effective until the Contributor verifies that the
employee has satisfied the conditions (if any) to return to active employment.
Until such time as such employee becomes a Partnership Employee the Contributor
shall continue to bear all costs and expenses associated with such employee.
(f) Neither the Contributor nor any of its Affiliates shall, at any time
prior to 60 days after the Closing Date, effect a "plant closing" or "mass
layoff", as those terms are defined in the Worker Adjustment and Retraining
Notification Act of 1988 ("WARN"), affecting in whole or in
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part any facility, site of employment, operating unit or employee of the
Contributor or any of its Affiliates without complying fully with the notice and
all other applicable requirements of WARN.
(g) In connection with the development by the Partnership of benefit
plans and programs for Partnership Employees as provided in the Master
Transaction Agreement, (i) the Contributor may direct the trustee of any of its
employee plans to transfer assets and liabilities in those employee plans
associated with the accrued benefits of Partnership Employees to a comparable
Partnership benefit plan in which the Partnership Employees participate, and
(ii) the Contributor or any of its Affiliates may direct the trustee of its
grantor trust to transfer assets and liabilities relating to any accounts for
Partnership Employees under an executive deferral plan to a trust established by
the Partnership to provide benefits under a comparable non-qualified deferred
compensation plan; provided, however, with respect to (i) and (ii) above, the
assets associated with any such plans, as of the Closing Date, are not less than
the liabilities associated therewith as determined by the Partnership and a
trust to trust transfer of assets does not result in a taxable event. In
connection with the development and implementation of such plans and programs,
the Partnership agrees, for purposes of calculating service time, to include
each employee's time of service with the Contributor, its predecessors (to the
extent service therefor is credited by the Contributor) or the Partnership. The
Partnership will accept sponsorship of the Assumed Plan as soon as practicable
after the Closing Date and the Contributor shall make all necessary governmental
filings in connection therewith on a timely basis. In connection with the
transfer of the sponsorship of the Assumed Plan, the Partnership may require
such representations concerning the Assumed Plan as the Partnership reasonably
determines are necessary, including, that the assets are not less than the
liabilities and no Consents from the union are necessary for such transfer.
(h) To the extent that the Partnership adopts benefit plans or policies
that contemplate the provision of post-retirement life and medical benefits to
the Partnership Employees, the Partnership shall record and recognize, in
accordance with GAAP, the associated liability for providing the post-retirement
life and medical benefits to the Partnership Employees.
2.9 Joint Contracts.
(a) Any Contributed Contracts contributed to the Partnership pursuant to
Section 2.1 that relate principally to the Contributed Business but also relate
to the business (other than the Contributed Business) of the Contributor or its
Affiliates will be made available to the Contributor and its Affiliates by the
Partnership pursuant to the Shared Services Agreements and other arrangements by
which the Contributor and its Affiliates will enjoy the benefits of such
Contributed Contracts as they relate to their business (other than the
Contributed Business) on the same terms and conditions as the Partnership.
(b) Any Contracts that relate principally to the business (other than the
Contributed Business) of the Contributor or its Affiliates but also relate to
the Contributed Business will be made available to the Partnership by the
Contributor or its Affiliates pursuant to the Shared Services Agreements and
other arrangements by which the Partnership will enjoy the benefits of such
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Contracts as they relate to the Contributed Business on the same terms and
conditions as the Contributor or its Affiliates.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTOR
Except as set forth on Schedule 3 or in the SEC Reports, the Contributor
represents and warrants to the Partnership as follows:
3.1 Due Organization; Good Standing and Power. The Contributor is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Virginia and has the corporate power and authority to
own, lease and operate the properties to be contributed hereunder and to conduct
the Contributed Business as now conducted by it. The Contributor has all
corporate power and authority to enter into this Agreement and the Assignment
and Assumption Agreements and to perform its obligations hereunder and
thereunder. The Contributor is duly authorized, qualified or licensed to do
business as a foreign corporation, and is in good standing, in the State of
Texas and in each of the other jurisdictions in which its right, title or
interest in or to any of the Assets held by it, or the conduct of the
Contributed Business by it, requires such authorization, qualification or
licensing, except where the failure to so qualify or to be in good standing
would not reasonably be expected to have a Material Adverse Effect.
3.2 Authorization and Validity of Agreements. The execution, delivery and
performance of this Agreement and the other Related Agreements by the
Contributor and the consummation by it of the transactions contemplated hereby
and thereby have been duly authorized by the Board of Directors of the
Contributor. Except to the extent heretofore obtained, no other corporate or
stockholder action is necessary for the authorization, execution, delivery and
performance by the Contributor of this Agreement and the other Related
Agreements and the consummation by the Contributor of the transactions
contemplated hereby or thereby. This Agreement and the other Related Agreements
have been duly executed and delivered by the Contributor and constitute legal,
valid and binding obligations of the Contributor, enforceable in accordance with
their terms, except as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and by general equity principles.
3.3 No Consents Required; No Conflict with Instruments to which the
Contributor is a Party. The execution, delivery and performance of this
Agreement and the other Related Agreements by the Contributor or by any
Affiliate of the Contributor that is a party thereto and the consummation by the
Contributor or any such Affiliate of the transactions contemplated thereby (i)
will not require any Consent except for such Consents the failure of which to be
obtained or made, would not in the aggregate reasonably be expected to have a
Material Adverse Effect; and (ii) will not violate (with or without the giving
of notice or the lapse of time or both), or conflict with, or result in the
breach or termination of any provision of, or constitute a default under, or
result in the
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acceleration of the performance of the obligations of the Contributor or any
such Affiliate under, or result in the creation of an Encumbrance upon any
Assets or a portion of the Contributed Business pursuant to, the charter or by-
laws of the Contributor or any such Affiliate, or any indenture, mortgage, deed
of trust, lease, licensing agreement, contract, instrument or other agreement to
which the Contributor or any such Affiliate is a party or by which the
Contributor or any such Affiliate or any of the Assets held by the Contributor
or any such Affiliate is bound, except for such violations, conflicts, breaches,
terminations, defaults, accelerations or Encumbrances which would not in the
aggregate reasonably be expected to have a Material Adverse Effect.
3.4 Employee Benefits.
(a) (i) Each of the Contributor's Defined Benefit and Defined
Contribution Pension Plans covering employees ("Employee Plan") is in
substantial compliance with applicable requirements prescribed by any and
all Legal Requirements, including, but not limited to the Code, except for
violations the occurrence of which would not in the aggregate reasonably be
expected to have a Material Adverse Effect. Each Employee Plan that is
intended to be qualified under Section 401(a) of the Code currently has a
favorable determination letter from the Internal Revenue Service as to that
Plan's qualification under Section 401(a) of the Code and nothing has
occurred since the date of such letter that could reasonably be expected to
cause the loss of such qualification.
(ii) The Contributor has in all material respects performed all
obligations required to be performed by it under ERISA, the Code and any
other applicable Legal Requirements and under the terms of each Employee
Plan, except such failures to perform which would not in the aggregate
reasonably be expected to have a Material Adverse Effect. The Contributor
has received no written notice of the existence of any material default or
violation by any other party of any of such Legal Requirements, terms or
requirements applicable to any of the Employee Plans.
(iii) Other than routine claims for benefits, the Contributor has not
received any written notice of any pending material claims or lawsuits
which have been asserted or instituted against any of the Employee Plans,
the assets of the trust or funds under the Employee Plans, the sponsor or
administrator of any of the Employee Plans, or against any fiduciary of any
of the Employee Plans with respect to the operation of such Plan.
(iv) The Contributor has not received any written notice of any
pending investigation or pending enforcement action by the Pension Benefit
Guaranty Corporation, the Department of Labor, the Internal Revenue Service
or any other Authority with respect to any of the Employee Plans.
(v) All contributions required to be made under the terms of the
Contributor's Employee Plans have been timely made. No Employee Plan has
an "accumulated funding deficiency" (within the meaning of section 412 of
the Code or Section 402 of ERISA).
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(b) All of the Contributor's Agroup health plans' (within the meaning of
Code Section 5000(b)(1)) have been operated in substantial compliance with the
group health plan continuation coverage requirements of Section 4980B of the
Code and Sections 601 through 608 of ERISA, Title XXII of the Public Health
Service Act and the provisions of the Social Security Act.
(c) There has been no act or omission by the Contributor that has given
rise to or may give rise to material fines, penalties, taxes, or related charges
under Section 502(c), (i) or (l) or Section 4071 of ERISA or Chapter 43 of the
Code or the imposition of a lien pursuant to Sections 401(a)(29) or 412(n) of
the Code or pursuant to ERISA.
3.5 Title to Assets; Absence of Liens and Encumbrances; Leases.
(a) The Contributor has good and marketable title to all of the Fee
Interests described in the Deeds, free and clear of all Encumbrances, except (i)
those exceptions contained in the Deeds, (ii) liens for current taxes not yet
due and payable and mechanics and similar statutory liens arising in the
ordinary course of business, (iii) liens of employees and laborers for current
wages not yet due; (iv) building, zoning and health regulations of the
jurisdictions in which the Assets are located; and (v) such imperfections of
title, easements and Encumbrances, if any, as do not in the aggregate materially
detract from the value or materially interfere with the use of the Assets as
they are currently being used or as otherwise would not reasonably be expected
to have a Material Adverse Effect.
(b) The Contributor is the sole lessee under the Leases and the sole
party entitled to the Leasehold interests in favor of the lessee thereunder, and
the sole owner of the improvements situated on the Leased Premises, free and
clear of all Encumbrances affecting the Leaseholds except such Encumbrances, if
any, as do not in the aggregate materially detract from the value or materially
interfere with the use of the Assets or as otherwise would not reasonably be
expected to have a Material Adverse Effect. Neither Contributor nor any
Affiliate thereof has received from or delivered to the lessors under the
Leaseholds any written notice of termination or threat of termination of the
respective Leaseholds. True and complete copies of all written lease agreements
(including any written amendments or modifications thereof) constituting, or
evidencing the terms of, the Leaseholds have been delivered to the Partnership.
No material default or event of default on the part of the Contributor nor any
Affiliate thereof under the provisions of any of the Leaseholds, and no event
that with the giving of notice or passage of time or both would constitute such
default or event of default on the part of the Contributor, has occurred (which
default or event of default has not been cured). Neither the Contributor nor any
Affiliate thereof has received any written notice from any lessor under any
Leasehold, that any material default or event of default on the part of the
Contributor or such Affiliate as lessee under the provisions of any Leaseholds,
or that any event that with the giving of notice or passage of time or both
would constitute such a default or an event of default on the part of the
Contributor or any such Affiliate, as lessee, has occurred (which default or
event of default has not been cured). No material default or event of default on
the part of the lessor under the provisions of any of such Leaseholds, and no
event that with the giving of notice
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or passage of time or both would constitute such default or event of default on
the part of any such lessor, has occurred (which default or event of default has
not been cured).
(c) The Contributor or an Affiliate thereof has good title to all of the
personal property purported to be owned by it, free and clear of all
Encumbrances, except for liens for Taxes not yet due and payable and such
Encumbrances, if any, that do not in the aggregate materially detract from the
value or materially interfere with the use of the Assets (as they are currently
being used) or as otherwise would not reasonably be expected to have a Material
Adverse Effect.
3.6 Title Matters; Defects in Improvements. There are no trespassers or
other adverse parties in possession on or affecting the Fee Interests or the
Leased Premises that would reasonably be expected to have a Material Adverse
Effect. Neither the Contributor nor any Affiliate thereof has granted and none
of the foregoing is party to any unrecorded options, rights of refusal, sales
contracts or other such contractual rights in favor of any third parties
relating to the Fee Interests or the Leased Premises. No written notice has
been received by the Contributor or any Affiliate thereof from any insurance
company with respect to the Fee Interests or the Leased Premises or by any board
of fire underwriters claiming any material defects or deficiencies or requiring
the performance of any repairs, replacement, alteration or other work relating
to the improvements situated thereon (in each case, which have not been cured).
3.7 Working Capital. The Contributor has operated the Contributed
Business in the ordinary course of business from March 31, 1997 to the Closing
Date such that the Inventory, Stores Inventory, Prepaid Expenses and Accounts
Receivable, as of the Closing Date, are at substantially the same level as would
have existed for the Contributor without regard to the transactions contemplated
by the Master Transaction Agreement.
3.8 Technology and Similar Rights. The Contributor owns or is licensed to
use all of the Intellectual Property, Licensed Technology and Licensed
Trademarks, and the Intellectual Property, Licensed Technology and Licensed
Trademarks together constitute all relevant patents, pending patent
applications, invention disclosures, copyrights, software, trade secrets,
technical information, technology, know-how, processes, tradenames, trademarks,
trademark registrations or applications, copyrights, copyright applications or
registrations or any derivative thereof or design used in connection therewith
necessary for the normal operation and conduct of the Contributed Business as it
is currently operated and conducted, except where the failure to have such
ownership or licenses would not reasonably be expected to have a Material
Adverse Effect.
3.9 Government Licenses, Permits and Related Approvals. The Government
Licenses constitute all those necessary for the normal operation and conduct of
the Contributed Business as it is currently operated and conducted, except where
the failure to have such Government Licenses would not reasonably be expected to
have a Material Adverse Effect.
3.10 All Necessary Assets. The Assets together with the rights under the
Related Agreements constitute all property and other rights necessary to enable
the Partnership to operate
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and conduct the Contributed Business in substantially the same manner as it is
being operated and conducted on the date of this Agreement, except in all cases
where the failure of the Partnership to acquire such property or other rights by
conveyance or license would not in the aggregate reasonably be expected to have
a Material Adverse Effect.
3.11 Conduct of Business in Compliance with Regulatory and Contractual
Requirements. The Contributor, and any Affiliate thereof, is operating and
conducting the Contributed Business in compliance with all applicable Legal
Requirements, rights of concession, licenses, know-how or other proprietary
rights of others, the failure to comply with which would reasonably be expected
to have a Material Adverse Effect.
3.12 Legal Proceedings. There is no litigation, proceeding, claim,
grievance, arbitration, investigation or other action to which the Contributor
or any Affiliate thereof is a party (i) that is pending or, to the Knowledge of
the Contributor, threatened, (ii) that relates in any way to the Assets, to the
operation or conduct of the Contributed Business, or to the transactions
contemplated by this Agreement, and (iii) that upon resolution adverse to
Contributor or any of its Affiliates, could reasonably be expected to have a
Material Adverse Effect.
3.13 Consents. Except for the Consents set forth in Schedule 4.3(e) of the
Master Transaction Agreement, there are no Consents required to be obtained by
the Contributor or any of its Affiliates in connection with the transfer of the
Assets or the Contributed Business to the Partnership except to the extent the
failure to obtain such Consent would not be reasonably likely to have a Material
Adverse Effect.
3.14 Tax Matters.
(a) There are no material liens for Taxes (other than for current Taxes
not yet due and payable) upon the Assets.
(b) None of the Assets directly or indirectly secures any indebtedness
for money borrowed the interest on which is tax-exempt.
3.15 [Reserved].
3.16 HSE Matters. Except as would not be reasonably likely to have a
Material Adverse Effect:
(a) (i) The Fee Interests, the Leased Premises and the operations of
the Contributor and any Affiliate thereof in connection with the Contributed
Business are in compliance with all HSE Laws and (ii) to the extent arising out
of the Contributor's or any Affiliate's ownership or use of the Assets or
operation of the Contributed Business, there are no Chemical Substances held,
located, released, generated, treated, stored or disposed of, on, under or from
the Fee Interests or the Leased Premises or in, on or from any fixtures or
improvement thereon in excess of any standard
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prescribed or permitted by any HSE Laws or which require corrective or other
action pursuant to the provisions of any HSE Laws.
(b) Neither the Contributor nor any Affiliate has received any notice
from any federal, state, or local agency naming the Contributor or such
Affiliate as a potentially responsible party ("PRP"), or otherwise notifying the
Contributor or such Affiliate of any potential liability under either the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, ("CERCLA" or "Superfund"), the Resource Conservation and Recovery Act
of 1976, as amended ("RCRA"), or any state statute, rule or local regulation
imposing liability similar to CERCLA or RCRA that relates in any way to any
Chemical Substances generated by or derived from the operations on the Fee
Interests, or the Leased Premises; nor has the Contributor nor any of its
Affiliates received any comparable claim or notice from any private party.
(c) The Contributor or an Affiliate thereof, as applicable, has been and
is, in compliance with, all permits, licenses, approvals, permission, or
authorizations necessary for its operations in connection with the Contributed
Business to comply in all respects with HSE Laws.
(d) (i) Neither the Contributor nor any Affiliate thereof has received
written notice of any actual, impending, or potential proceedings, allegations,
claims, losses, actions, investigations or inquiries of any kind in connection
with the Contributed Business and HSE Laws or Chemical Substances ("HSE
Proceedings") and (ii) neither the Contributor nor any Affiliate thereof has any
Knowledge of any facts, events or occurrences that would reasonably be expected
to result in any HSE Proceedings being brought.
(e) Neither the Contributor nor any Affiliate thereof is party to, or is
subject to the terms of, any consent order, consent judgment, consent decree,
court or administrative order or judgment, agreement, schedule, or decree issued
by any Authority with respect to the Contributed Business.
3.17 Investigation to Acquire Knowledge. Each of the persons covered by
the definition of "Knowledge" set forth in Section 1 has reviewed, with counsel
to the Contributor, the other representations and warranties contained in, and
the Schedules that relate to, this Section 3 to the extent that they relate to
such person's area of responsibility or expertise and has made a reasonable
inquiry as to the accuracy and completeness of such representations, warranties
and Schedules.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP
The Partnership represents and warrants to the Contributor as follows:
4.1 Due Organization; Good Standing and Power. The Partnership is a
limited partnership duly formed and validly existing under the laws of the State
of Delaware. The Partnership has all partnership power and authority to enter
into this Agreement and the other
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Related Agreements and to perform its obligations hereunder and thereunder. The
Partnership is duly authorized, qualified or licensed to do business as a
foreign partnership, in each of the jurisdictions in which its right, title or
interest in or to any asset, or the conduct of its business, requires such
authorization, qualification or licensing, except where the failure to so
qualify would not have a material adverse effect on the ability of the
Partnership to perform its obligations hereunder or under the Assignment and
Assumption Agreements.
4.2 Authorization and Validity of Agreement. The execution, delivery and
performance of this Agreement and the other Related Agreements by the
Partnership and the consummation by the Partnership of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
partnership action on the part of the Partnership. No other partnership action
is necessary for the authorization, execution, delivery and performance by the
Partnership of this Agreement, the other Related Agreements and the consummation
by the Partnership of the transactions contemplated hereby or thereby. This
Agreement and the other Related Agreements have been duly executed and delivered
by the Partnership and constitute legal, valid and binding obligations of the
Partnership, enforceable in accordance with their terms, except as the same may
be limited by bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights generally and by general equity
principles.
4.3 No Consents Required; No Conflict with Instruments to which the
Partnership is a Party. The execution, delivery and performance of this
Agreement and the other Related Agreements by the Partnership and the
consummation by it of the transactions contemplated thereby (i) will not require
any Consent except for such Consents the failure of which to be obtained or
made, would not in the aggregate reasonably be expected to have a Material
Adverse Effect on the Partnership's ability to perform its obligations hereunder
or thereunder, and (ii) will not violate (with or without the giving of notice
or the lapse of time or both), conflict with, or result in the breach or
termination of any provision of, or constitute a default under, or result in the
acceleration of the performance of the obligations of the Partnership under, the
partnership agreement of the Partnership, or any indenture, mortgage, deed of
trust, lease, licensing agreement, contract, instrument or other agreement to
which the Partnership is a party or by which the Partnership or any of its
assets or properties is bound, except for such violations, conflicts, breaches,
terminations, defaults, accelerations or liens which would not in the aggregate
reasonably be expected to have a material adverse effect on the Partnership's
ability to perform its obligations hereunder or thereunder.
SECTION 5
COVENANTS SUBSEQUENT TO CLOSING DATE
5.1 Access to Information. Following the Closing Date, the Partnership
shall afford, and will cause its Affiliates to afford, to the Contributor, its
counsel, accountants and other authorized representatives, during normal
business hours, reasonable access to the books, records and other data of the
Contributed Business with respect to the period prior to the Closing Date (and
any personnel
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familiar therewith) to the extent that such access may be reasonably required by
the Contributor to facilitate (i) the preparation by the Contributor of such tax
returns as it may be required to file with respect to the operations of the
Assets and the Contributed Business or in connection with any audit, amended
return, claim for refund or any proceeding with respect thereto, (ii) the
investigation, litigation and final disposition of any claims which may have
been or may be made against the Contributor in connection with the Assets and
the Contributed Business, (iii) the payment of any amount in connection with any
liabilities or obligations which have not been assumed by the Partnership under
this Agreement and (iv) for any other reasonable business purpose. For a period
of ten years after the date of this Agreement, the Partnership will not dispose
of, alter or destroy any such books, records and other data without giving 90
days' prior notice to the Contributor to permit it, at its expense, to examine,
duplicate or repossess such records, files, documents and correspondence.
5.2 Mail or Other Communications. The Contributor authorizes and empowers
the Partnership on and after the Closing Date to receive and open all mail
received by the Partnership relating to the Contributed Business or the Assets
and to deal with the contents of such communications in any proper manner. The
Contributor shall promptly deliver to the Partnership any mail or other
communication received by it on and after the Closing Date pertaining to the
Contributed Business or the Assets and any cash, checks or other instruments of
payment to which the Partnership is entitled. The Partnership shall promptly
deliver to the Contributor any mail or other communication received by it after
the Closing Date pertaining to the Excluded Assets or Excluded Liabilities, and
any cash, checks or other instruments of payment in respect of such.
5.3 Use of Contributor's Trade Name. Except as set forth on Schedule
2.2(d), after the Closing Date the Partnership shall be permitted to use any
items of Inventory or packaging material, any sales or promotional materials,
any forms or documents or any other printed material that bear any of the names
"Millennium" or "Quantum" or other statutory names, trade names or trademarks,
indications or descriptions of which such names or any name similar thereto
forms a part until the earlier to occur of (i) such time as inventory of such
materials existing as of the Closing Date are used, or (ii) two years after the
Closing Date.
5.4 Closing Date Balance Sheet. Not later than 60 days after the Closing
Date, the Contributor shall cause Price Waterhouse LLP to prepare and deliver to
the Contributor and the Partnership an audited balance sheet of the Contributed
Business as of the Closing Date (the "Closing Date Balance Sheet").
5.5 Payment of Retained Accounts Payable. The Contributor will retain all
accounts payable including Retained Accounts Payable; however the Partnership,
as payment agent of the Contributor, shall pay such amounts on behalf of the
Contributor on a timely basis. As soon as practicable following the end of each
month after which such Retained Accounts Payable are paid by the Partnership,
but in any event within fifteen days after the end of such month, each
Contributor will reimburse the Partnership for such payments attributable to its
Contributed Business.
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5.6 Collection of Accounts Receivable. The Partnership, as collecting
agent for the Contributor, shall take all commercially reasonable efforts to
collect the Accounts Receivable. As soon as practicable after such Accounts
Receivable are collected, but in any event within fifteen days after the end of
each month, the Partnership shall remit such collections to the Contributor. If
the Accounts Receivable as of the Closing Date as set forth in the Closing Date
Balance Sheet (the "Confirmed Accounts Receivable") are less than $250 million,
then in addition to the foregoing, the Partnership shall pay the Contributor the
difference between $250 million and the Confirmed Accounts Receivable within 10
days after the receipt of the Closing Date Balance Sheet. If the Confirmed
Accounts Receivable are more than $250 million, the Contributor shall pay the
Partnership the difference between $250 million and the Confirmed Accounts
Receivable. Collections on Accounts Receivable shall be applied on a specific
identification basis. The Partnership will report monthly in writing to
Contributor on the amounts collected during the preceding month, and shall
provide an aging summary of uncollected accounts and a detailed description of
each problem account (45 or more days overdue). On reasonable notice to the
Partnership, Contributor shall have the right to take over the collection
process for any problem account.
5.7 Reimbursement for Prepaid Expenses. The Partnership and the
Contributor acknowledge that the Prepaid Expenses attributable to its
Contributed Business have been conveyed to the Partnership solely in order to
facilitate the timely and efficient transfer of the Contributed Business to the
Partnership. Consequently, the Partnership shall reimburse the Contributor for
the Prepaid Expenses associated with its Contributed Business (other than the
prepaid expenses for "turnaround" costs) within 10 days following the receipt of
the Closing Date Balance Sheet.
SECTION 6
SURVIVAL AND INDEMNIFICATION
6.1 Survival Limitations. The representations and warranties of the
parties hereto contained in this Agreement or in any certificate or other
writing delivered pursuant hereto or in connection herewith shall survive the
Closing until the date that is 60 months after the Closing Date, except (i)
Section 3.14, which shall survive until the expiration of the applicable statute
of limitations and (ii) Section 3.5, which shall survive without limitation and
shall not be merged with the Deeds. No action can be brought with respect to
any breach of any representation or warranty (except with respect to Section
3.5) pursuant to this Agreement unless a written notice that complies with
Section 6.3 has been delivered pursuant to such Section 6.3 prior to the
expiration of the survival period applicable to such representation or warranty;
provided that upon the giving of such notice, notwithstanding any other
provision of this Agreement the representation and warranty that is the basis of
such action shall continue with respect to such action beyond the time at which
the representation and warranty would otherwise terminate.
6.2 Indemnification.
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(a) Subject to the other provisions of this Section 6, the Contributor
hereby agrees, to the fullest extent permitted by applicable law, to indemnify,
defend and hold harmless the Partnership and its Affiliates and their respective
officers, directors and employees from, against and in respect of any losses,
claims, damages, fines, penalties, assessments by public agencies, settlement,
cost or expenses (including costs of defense and attorneys' fees) and other
liabilities (any of the foregoing being a "Liability") incurred or suffered by
the Partnership or any of its Affiliates, arising out of, in connection with or
relating to:
(i) Any misrepresentation in or breach of the representations and
warranties of the Contributor or any of its Affiliates in this Agreement,
the Assignment and Assumption Agreements, the Master Intellectual Property
Agreement, or the Master Transaction Agreement;
(ii) Any failure of the Contributor or any of its Affiliates to
perform any of its covenants or obligations contained in this Agreement,
the Assignment and Assumption Agreements, the Master Intellectual Property
Agreement, or the Master Transaction Agreement;
(iii) Excluded Liabilities; or
(iv) Any Pre-Closing Contingent Liability that is not an Assumed
Liability;
provided, however, that the following limitations shall apply to the
Contributor's indemnification obligations in clauses (i) and (iv) above:
(A) the Contributor shall not have any indemnification obligation
under clause (i) and (iv) above for any individual Liability unless the
amount of such Liability exceeds $25,000 (the "Individual Basket") (it
being understood that all Liabilities arising from the same event,
condition or set of circumstances shall be considered as an individual
Liability for purposes of such calculation), but if the amount of such
Liability exceeds the Individual Basket, the entire amount of such
Liability, including the first $25,000 of such Liability, may be the
subject of indemnification hereunder; provided, further, that the parties
agree that the amount of Liability for which indemnification may be sought
for breach of any representation or warranty under clause (i) above shall
be calculated taking into account the Individual Basket but without regard
to any qualification or exception regarding materiality or Material Adverse
Effect qualification contained in such representation or warranty (it being
understood that such materiality or Material Adverse Effect qualifications
shall apply for purposes of determining whether there has been such a
breach in the first place, but once it has been established that there is
such a breach, the Partnership shall be entitled to indemnity relating back
to the first dollar); and
(B) to the extent any misrepresentation in or breach of the
representations and warranties of the Contributor results in a Liability of
the Partnership in excess of the
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Individual Basket and such Liability would also constitute a Pre-Closing
Contingent Liability, such misrepresentation or breach shall be treated as
a Pre-Closing Contingent Liability.
(b) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, TO THE FULLEST
EXTENT PERMITTED BY LAW, NEITHER THE CONTRIBUTOR NOR ANY OF ITS AGENTS,
EMPLOYEES, REPRESENTATIVES OR AFFILIATES SHALL BE LIABLE FOR CONSEQUENTIAL,
INCIDENTAL, INDIRECT OR PUNITIVE DAMAGES IN CONNECTION WITH DIRECT CLAIMS BY THE
PARTNERSHIP (I.E., A CLAIM BY THE PARTNERSHIP THAT DOES NOT SEEK REIMBURSEMENT
FOR A THIRD PARTY CLAIM PAID OR PAYABLE BY THE PARTNERSHIP) WITH RESPECT TO
THEIR INDEMNIFICATION OBLIGATIONS UNDER THIS AGREEMENT UNLESS ANY SUCH CLAIM
ARISES OUT OF THE FRAUDULENT ACTIONS OF THE CONTRIBUTOR. IN DETERMINING THE
AMOUNT OF ANY LOSS, LIABILITY, OR EXPENSE FOR WHICH THE PARTNERSHIP IS ENTITLED
TO INDEMNIFICATION UNDER THIS AGREEMENT, THE GROSS AMOUNT THEREOF WILL BE
REDUCED (BUT NOT BELOW ZERO) BY THE NET PRESENT VALUE OF ANY CORRELATIVE
INSURANCE PROCEEDS ACTUALLY REALIZED BY THE PARTNERSHIP UNDER POLICIES TO THE
EXTENT THAT THE FUTURE PREMIUM RATE WILL NOT BE INCREASED BY CLAIM EXPERIENCE.
(c) Notwithstanding the provisions of Sections 6.2(a)(i) and 6.2(a)(iv),
it is expressly agreed that the Contributor shall not be required to indemnify
the Partnership for any Liability arising out of, in connection with or related
to any HSE Claim to the extent that the condition, event, circumstance or other
basis for the HSE Claim was exacerbated or accelerated by the Partnership. The
Partnership shall not be deemed to have exacerbated a condition, event,
circumstance or other basis for an HSE Claim by reason of the continuance
thereof after the Closing (i) under circumstances where the Partnership does not
know of its existence and has not breached any legal duty to have conducted an
investigation or inquiry that would have uncovered the matter or (ii) under
circumstances where the Partnership does know of its existence but is taking
commercially reasonable actions to cure the matter or to otherwise achieve
compliance in a commercially reasonable and prudent manner.
(d) Subject to the other provisions of this Section 6, the Partnership
hereby indemnifies, to the fullest extent permitted by law, the Contributor and
its Affiliates against and agrees to hold each of them harmless from any and all
Liability incurred or suffered by the Contributor or any of its Affiliates
arising out of or relating to:
(i) Any misrepresentation in or breach of the representations and
warranties of the Partnership or the failure of the Partnership to perform
any of its covenants or obligations contained in this Agreement and the
Assignment and Assumption Agreements or the Master Intellectual Property
Agreement;
(ii) Assumed Liabilities; or
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(iii) Any HSE Claim to the extent arising out of the Partnership's
exacerbation or acceleration of such HSE Claim.
(e) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, TO THE FULLEST
EXTENT PERMITTED BY LAW, NEITHER THE PARTNERSHIP NOR ANY OF ITS AGENTS,
EMPLOYEES, REPRESENTATIVES OR AFFILIATES SHALL BE LIABLE FOR CONSEQUENTIAL,
INCIDENTAL, INDIRECT OR PUNITIVE DAMAGES IN CONNECTION WITH DIRECT CLAIMS BY THE
CONTRIBUTOR WITH RESPECT TO THEIR INDEMNIFICATION OBLIGATIONS UNDER THIS
AGREEMENT UNLESS ANY SUCH CLAIM ARISES OUT OF THE FRAUDULENT ACTIONS OF THE
PARTNERSHIP. IN DETERMINING THE AMOUNT OF ANY LOSS, LIABILITY, OR EXPENSE FOR
WHICH THE CONTRIBUTOR IS ENTITLED TO INDEMNIFICATION UNDER THIS AGREEMENT, THE
GROSS AMOUNT THEREOF WILL BE REDUCED (BUT NOT BELOW ZERO) BY THE NET PRESENT
VALUE OF ANY CORRELATIVE INSURANCE PROCEEDS ACTUALLY REALIZED BY THE CONTRIBUTOR
UNDER POLICIES TO THE EXTENT THE FUTURE PREMIUM RATE WILL NOT BE INCREASED BY
CLAIM EXPERIENCE.
(f) The rights provided to the Partnership pursuant to this Section 6, as
limited by and subject to the provisions of this Section 6, shall be the
Partnership's sole remedy for breach of representation and warranty by or
covenant or obligation of the Contributor under this Agreement, the Assignment
and Assumption Agreements and the Master Intellectual Property Agreement. The
rights provided to the Contributor pursuant to this Section 6, as limited by and
subject to the provisions of this Section 6, shall be the Contributor's sole
remedy for breach of representation and warranty by or covenant of obligation of
the Partnership under this Agreement, the Assignment and Assumption Agreements
and the Master Intellectual Property Agreement.
6.3 Procedures.
(a) Any Person seeking indemnification under Section 6.2 (the
"Indemnified Party") agrees to give prompt written notice to the party against
whom indemnity is sought (the "Indemnifying Party") of the assertion of any
claim that does not involve a Third Party Claim, which notice shall describe in
reasonable detail the nature of the claim, an estimate of the amount of damages
attributable to such claim to the extent feasible and the basis of the
Indemnified Party's request for indemnification under this Agreement. If the
Indemnifying Party disputes such claim and such dispute is not resolved by the
parties, such dispute shall be resolved in accordance with Section 7.9.
(b) If an Indemnified Party is notified of a Third Party Claim which may
give rise to a claim for indemnification against any Indemnifying Party under
this Section, then the Indemnified Party shall promptly notify each Indemnifying
Party thereof in writing (including copies of all papers served with respect to
such Third Party Claim), which notice shall describe in reasonable detail the
nature of the Third Party Claim, an estimate of the amount of damages
attributable to the Third Party
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Claim to the extent feasible and the basis of the Indemnified Party's request
for indemnification under this Agreement; provided that any failure to timely
give such notice shall not relieve the Indemnifying Party of any of its
obligations under this Section 6 except to the extent that such failure
prejudices or impairs, in any material respect, any of the rights or obligations
of the Indemnifying Party.
(c) Any Indemnifying Party may, and at the request of the Indemnified
Party shall, participate in and control the defense of the Third Party Claim
with counsel of its choice reasonably satisfactory to the Indemnified Party.
The Indemnified Party shall have the right to employ separate counsel in any
such action and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of the Indemnified Party unless (i) the
employment thereof has been specifically authorized in writing by the
Indemnifying Party, (ii) the Indemnifying Party failed to assume the defense and
employ counsel or failed to diligently prosecute or settle the Third Party Claim
or (iii) there shall exist or develop a conflict that would ethically prohibit
counsel to the Indemnifying Party from representing the Indemnified Party. If
requested by the Indemnifying Party, the Indemnified Party agrees to cooperate
with the Indemnifying Party and its counsel in contesting any Third Party Claim
that the Indemnifying Party elects to contest, including, without limitation, by
making any counterclaim against the person or entity asserting the Third Party
Claim or any cross-complaint against any person or entity, in each case only if
and to the extent that any such counterclaim or cross-complaint arises from the
same actions or facts giving rise to the Third Party Claim. The Indemnifying
Party shall be the sole judge of the acceptability of any compromise or
settlement of any claim, litigation or proceeding in respect of which indemnity
may be sought hereunder, provided that the Indemnifying Party will give the
Indemnified Party reasonable prior written notice of any such proposed
settlement or compromise and will not consent to the entry of any judgment or
enter into any settlement with respect to any Third Party Claim without the
prior written consent of the Indemnified Party, which shall not be unreasonably
withheld. The Indemnifying Party (if the Indemnified Party is entitled to
indemnification hereunder) shall reimburse the Indemnified Party for its
reasonable out of pocket costs incurred with respect to such cooperation.
(d) If the Indemnifying Party fails to assume the defense of a Third
Party Claim within a reasonable period after receipt of written notice pursuant
to the first sentence of subparagraph (c), or if the Indemnifying Party assumes
the defense of the Indemnified Party pursuant to subparagraph (c) but fails
diligently to prosecute or settle the Third Party Claim, then the Indemnified
Party shall have the right to defend, at the sole cost and expense of the
Indemnifying Party (if the Indemnified Party is entitled to indemnification
hereunder), the Third Party Claim by all appropriate proceedings, which
proceedings shall be promptly and vigorously prosecuted by the Indemnified Party
to a final conclusion or settled. The Indemnified Party shall have full control
of such defense and proceedings; provided that the Indemnified Party shall not
settle such Third Party Claim without the written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld. The Indemnifying Party
may participate in, but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this Section, and the Indemnifying Party shall
bear its own costs and expenses with respect to such participation.
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(e) Notwithstanding the other provisions of this Section 6.3, if the
Indemnifying Party disputes its potential liability to the Indemnified Party
under this Section 6.3 and if such dispute is resolved in favor of the
Indemnifying Party, the Indemnifying Party shall not be required to bear the
costs and expenses of the Indemnified Party's defense pursuant to this Section
6.3 or of the Indemnifying Party's participation therein at the Indemnified
Party's request, and the Indemnified Party shall reimburse the Indemnifying
Party in full for all costs and expenses of the litigation concerning such
dispute. If a dispute over potential liability is resolved in favor of the
Indemnified Party, the Indemnifying Party shall reimburse the Indemnified Party
in full for all costs of the litigation concerning such dispute.
(f) After it has been determined, by acknowledgment, agreement, or ruling
of court of law, that an Indemnifying Party is liable to the Indemnified Party
under this Section 6, the Indemnifying Party shall pay or cause to be paid to
the Indemnified Party the amount of the Liability within ten business days of
receipt by the Indemnifying Party of a notice reasonably itemizing the amount of
the Liability but only to the extent actually paid or suffered by the
Indemnified Party.
(g) In the event a Third Party Claim is brought in which the liability as
between the Partnership and the Contributor is alleged to be joint (it being
agreed that any Third Party Claim related to a Pre-Closing Contingent Liability
shall be deemed joint) or in which the entitlement to indemnification under this
Section 6 has not been determined, the Partnership and the Contributor shall
cooperate in the joint defense of such Third Party Claim and shall offer to each
other such assistance as may reasonably be requested in order to ensure the
proper and adequate defense of any such matter. Such joint defense shall be
under the general management and supervision of the party which is expected to
bear the greater share of the liability, unless otherwise agreed; provided,
however, that neither party shall settle or compromise any such joint defense
matter without the consent of the other, which consent shall not be unreasonably
withheld or delayed. Any uninsured costs of such joint defense shall be borne
as the parties may agree, provided, however, that in the absence of such
agreement, the defense costs shall be borne by the party incurring such costs;
provided, further, that, if it is determined that one party was entitled to
indemnification under this Section 6, the other party shall reimburse the party
entitled to indemnification for all of its costs incurred in connection with
such defense.
6.4 Subrogation. In the event of any payment by an Indemnifying Party to
an Indemnified Party in connection with any Liability, the Indemnifying Party
shall be subrogated to and shall stand in the place of the Indemnified Party as
to any events or circumstances in respect of which the Indemnified Party may
have any right or claim against any third party relating to such event or
indemnification. The Indemnified Party shall cooperate with the Indemnifying
Party in any reasonable manner in prosecuting any subrogated claim.
6.5 Claims for HSE Work. Notwithstanding the other provisions of this
Section 6, in the case of any assertion, claim or demand requiring the
performance of investigatory, removal or remedial work with respect to
(environmental conditions, HSE Laws or Chemical Substances for which the
Partnership may seek indemnification, the Partnership shall have the right to
conduct and
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control such work provided (i) it uses its good faith, commercially reasonable
efforts to achieve the Lowest Cost Response and (ii) it provides the Contributor
with the opportunity to: (A) review and comment upon any work plans for any
remedial action prior to finalization and implementation; (B) attend meetings
with regulators concerning the remedial action; and (C) have a representative
present during the performance of any remedial action.
6.6 EXTENT OF INDEMNIFICATION. WITHOUT LIMITING OR ENLARGING THE SCOPE OF
THE INDEMNIFICATION, RELEASE AND ASSUMPTION OBLIGATIONS SET FORTH HEREIN, TO THE
FULLEST EXTENT PERMITTED BY LAW, AN INDEMNIFIED PARTY SHALL BE ENTITLED TO
INDEMNIFICATION HEREUNDER IN ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF
WHETHER THE INDEMNIFIABLE LOSS GIVING RISE TO ANY SUCH INDEMNIFICATION
OBLIGATION IS THE RESULT OF THE SOLE, GROSS, ACTIVE, PASSIVE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF ANY LAW
OF OR BY ANY SUCH INDEMNIFIED PARTY. THE PARTIES AGREE THAT THIS STATEMENT
CONSTITUTES A CONSPICUOUS LEGEND.
SECTION 7
MISCELLANEOUS
7.1 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 provisions of this Agreement and not as an aid in construction:
(ii) no consideration shall be given to the fact or presumption that any of the
parties 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 gender; and (vii) each exhibit, appendix,
attachment and schedule to this Agreement is a part of this Agreement.
7.2 Payment of Certain Expenses and Taxes.
(a) Subject to the further provisions of this Section 7.2, the
Contributor shall be responsible for all Taxes attributable to the Contributor's
ownership or use of the Assets or operation of the Contributed Business prior to
the Closing and the Partnership shall be responsible for all Taxes attributable
to the Partnership's ownership or use of the Assets or operation of the
Contributed Business after the Closing. The Contributor shall be responsible for
any liability of the Partnership pursuant to Texas Tax Code Section 111.020
(including interest, penalties and attorneys' fees in connection therewith) with
respect to any amounts owed or owing by the Contributor under Title 2, Texas Tax
Code.
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<PAGE>
(b) All sales, transfer, or other similar taxes incurred in connection
with the transfer of the Assets shall be borne by the Partnership. The
Partnership, the Contributor and the Contributing Partner shall cooperate fully
with each other after the Closing in connection with (i) the preparation and
filing of any tax return, exemption certificate, or other filing in connection
with such taxes, and (ii) any audit examination by any taxing Authority of the
tax returns, exemption certificates, or other filings referred to above.
(c) All real property taxes, personal property taxes, ad valorem taxes,
and other similar taxes (or payments in lieu of such taxes) assessed on any of
the Assets in the tax period in which the Closing Date occurs (other than the
Inventory Taxes referred to in Section 7.2(d) below) ("Property Taxes") shall be
prorated between the Partnership and the Contributor as of the Closing.
(d) All real property taxes, personal property taxes, ad valorem taxes,
and other similar taxes (or payments in lieu of such taxes) assessed on the
Inventory or Stores Inventory in the tax period in which the Closing Date occurs
("Inventory Tax") shall be payable by the Contributor.
(e) The Partnership shall pay any title or recordation fees in connection
with the transfer of the Assets. The Partnership shall also pay for any title
insurance policies or surveys of the Fee Interests that are requested or ordered
by the Partnership.
(f) After the Closing, the Contributor receiving each Property Tax or
Inventory Tax bill or notice applicable to the Assets for the period in which
the Closing Date occurred shall promptly notify the Partnership and shall pay
each such tax bill prior to the last day such taxes may be paid without penalty
or interest. The Partnership shall promptly on receipt of a written request
(accompanied by appropriate supporting documentation) reimburse the paying party
with respect to the Partnership's share of such amount so paid as provided under
this Agreement. The Contributor and the Partnership shall cooperate fully with
each other on and after Closing with respect to any Property Tax assessment or
valuation (or protest in connection therewith) by any taxing Authority with
respect to the tax period in which the Closing Date occurs.
(g) If either party receives a refund of any Taxes for which the other is
liable or responsible under this Agreement, the party receiving such refund
shall, within 30 days after the receipt of such refund, remit it to the party
who is liable.
(h) Notwithstanding any other provision of this Agreement, the
obligations of the parties set forth in this Section 7.2 shall be unconditional
and absolute and shall remain in effect until audit, assessment and collection
of any such taxes are barred by the applicable statute of limitations.
7.3 Notices. All notices, requests, demands and other communications
which 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 with
proof of confirmation from the transmitting machine, or (ii) delivered by
courier or other hand delivery, as follows:
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<PAGE>
(a) If to the Contributor:
Millennium Petrochemicals Inc.
c/o Millennium Chemicals Inc.
99 Wood Avenue South
Iselin, New Jersey 08830
Attention: George H. Hempstead, III
Telecopy Number: (908) 603-6857
(b) If to the Contributing Partner:
Millennium Petrochemicals LLC LP
c/o Millennium Chemicals Inc.
99 Wood Avenue South
Iselin, New Jersey 08830
Attention: George H. Hempstead, III
Telecopy Number: (908) 603-6857
(c) If to the Partnership:
Equistar Chemicals, LP
1221 McKinney Street
Houston, Texas 77010
Attention: Gerald A. O'Brien
Telecopy Number: (713) 309-4718
or to such other address or telecopy number as either party shall have specified
by notice in writing to the other party. All such notices, requests, demands
and communications shall be deemed to be effective upon receipt.
7.4 [Reserved].
7.5 Binding Effect; Benefit. Subject to Section 7.7, this Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective permitted successors and assigns. Nothing in this Agreement,
expressed or implied, is intended to confer on any Person other than the parties
hereto or their respective permitted successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
7.6 Occasional and Bulk Sales. To the extent applicable, the Partnership
and the Contributor each agree to waive, to the fullest extent permitted by law,
compliance by the other with the provisions of the Bulk Sales Law of any
jurisdiction.
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<PAGE>
7.7 Assignability. Neither this Agreement nor any of the rights or
obligations hereunder shall be assignable (by operation of law or otherwise) by
the Contributor or the Contributing Partner without the prior written consent of
the Partnership or shall be assignable (by operation of law or otherwise) by the
Partnership (except to a wholly-owned subsidiary thereof) without the prior
written consent of the Contributor. Any assignment or purported assignment in
violation of this Section shall be null and void.
7.8 Amendment; Waiver. This Agreement may be amended, supplemented or
otherwise modified only by a written instrument executed by the parties hereto.
No waiver by any party of any of the provisions hereof shall be effective unless
explicitly set forth in writing and executed by the party so waiving. Subject
to the agreements and obligations of the Partnership hereunder or under
applicable Legal Requirements, no investigations by the Partnership heretofore
or hereafter made shall affect the representations and warranties of the
Contributor, and, except as otherwise provided in Section 6.1, such
representations and warranties shall survive any such investigation. The waiver
by any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach.
7.9 Dispute Resolution. All disputes under this Agreement shall be
resolved in accordance with the Dispute Resolution Procedures set forth in
Appendix A.
7.10 Severability. In the event that any provisions 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 Contributor, the Contributing
Partner or the Partnership, be deemed severed from this Agreement and every
other provision of this Agreement shall remain in full force and effect.
7.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
7.12 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE EXCLUDING CONFLICTS OF LAW
PRINCIPLES OF SUCH JURISDICTION EXCEPT TO THE EXTENT SUCH MATTERS ARE
MANDATORILY SUBJECT TO THE LAWS OF ANOTHER JURISDICTION PURSUANT TO THE LAWS OF
SUCH OTHER JURISDICTION.
7.13 JURISDICTION; CONSENT TO SERVICE OF PROCESS; WAIVER. ANY JUDICIAL
PROCEEDING BROUGHT AGAINST ANY PARTY TO THIS AGREEMENT 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 DELAWARE, AND,
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES TO THIS
AGREEMENT ACCEPTS THE EXCLUSIVE JURISDICTION OF SUCH COURTS AND IRREVOCABLY
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<PAGE>
AGREES TO BE BOUND BY ANY JUDGMENT (AS FINALLY ADJUDICATED) RENDERED THEREBY IN
CONNECTION WITH THIS AGREEMENT EXCEPT TO THE EXTENT THIS AGREEMENT RELATES TO
THE CONVEYANCE OR ASSIGNMENT OF ANY INTEREST IN REAL ESTATE OR THE CREATION,
PERFECTION, PRIORITY OR FORECLOSURE OF ANY LIEN ON ANY INTEREST IN REAL ESTATE
IN WHICH CASE, SUCH COURTS JURISDICTION SHALL BE NON-EXCLUSIVE. EACH OF THE
PARTIES TO THIS AGREEMENT SHALL APPOINT THE CORPORATION TRUST COMPANY, 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 DELAWARE BY ENTERING INTO AN AGREEMENT AS OF THE DATE OF
THIS AGREEMENT WITH THE AGENT TO SUCH EFFECT. 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 DELAWARE FOR
ANY PURPOSE EXCEPT AS PROVIDED ABOVE AND SHALL NOT BE DEEMED TO CONFER RIGHTS ON
ANY PERSON OTHER THAN THE PARTIES HERETO. EACH PARTY HEREBY WAIVES ANY
OBJECTION IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE
OR FORUM NON CONVENIENS.
7.14 WAIVER OF JURY TRIAL. THE PARTNERSHIP, THE CONTRIBUTING PARTNER AND
THE CONTRIBUTOR HEREBY KNOWINGLY AND INTENTIONALLY, IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
MILLENNIUM PETROCHEMICALS INC.,
a Virginia corporation.
By: /s/ George H. Hempstead, III
--------------------------------
Name: George H. Hempstead, III
Title: Vice President
MILLENNIUM PETROCHEMICALS LP LLC,
a Delaware limited liability company.
By: MILLENNIUM PETROCHEMICALS INC.,
a Virginia corporation, Manager.
By: /s/ George H. Hempstead, III
--------------------------------
Name: George H. Hempstead, III
Title: Vice President
EQUISTAR CHEMICALS, LP,
a Delaware limited partnership.
By: /s/ Debra L. Starnes
--------------------------------
Name: Debra L. Starnes
Title: Senior Vice President
<PAGE>
SCHEDULE A
Millennium Petrochemicals will contribute to the Partnership the
Contributed Business, which consists of the production, distribution and sale of
ethylene, polyethylene and related products, polypropylene and other performance
polymers and ethyl alcohol. Its plants are located in Clinton, Iowa; Crockett,
Texas; LaPorte, Texas; Port Arthur, Texas; Chocolate Bayou, Texas; Tuscola,
Illinois; Morris, Illinois; Fairport Harbor, Ohio; Heath, Ohio; Newark, New
Jersey and Anaheim, California, and its research facilities are located in
Cincinnati, Ohio and Morris, Illinois.
A more complete description of these businesses which are owned and
operated by Millennium Petrochemicals is included in Millennium's Annual Report
on Form 10-K for the year ended December 31, 1996 and Millennium's Quarterly
Reports on Form 10-Q for the quarters ended March 31, 1997.
<PAGE>
Schedule 2.1(a)
Fee Interests
ANAHEIM PLANT MORRIS PLANT
1045 North Kemp Street 8805 N. Tabler Road
P.O. Box 150 Morris, IL 60450
Anaheim, CA 92801 Grundy County
Orange County
CHOCOLATE BAYOU PLANT MORRIS PRC
P.O. Box 4000 8935 N. Tabler Road
(2 Miles South of FM 2917 Morris, IL 60450
on FM 2004) Grundy County
Alvin, TX 77511
Brazoria County
CLINTON PLANT NEWARK PLANT
Highway 30 West 300 Doremus
P.O. Box 2919 Newark, NJ 07105
Clinton, IA 52733 Essex County
Clinton County
CROCKETT PLANT PORT ARTHUR PLANT
Highway US 287 & FM 2160 Highway 73 East
P.O. Box 1038 P.O. Box 848
Latexo, TX 75849 Port Arthur, TX 77640
Austin County Jefferson County
HEATH PLANT TUSCOLA PLANT
1855 James Parkway 625 East U.S. Highway 36
Heath, OH 43056 Tuscola, IL 61953
Licking County Champaign & Douglas Counties
LA PORTE COMPLEX ALLEN RESEARCH CENTER
1515 Miller Cut-Off Road 11514 Northlake Drive
P.O. Drawer D Cincinnati, OH 45249
LaPorte, TX 77571 Hamilton County
Harris County
<PAGE>
Schedule 2.1(b)
Leases
PLANT PROPERTY Cleveland, OH 44127
FAIRPORT HARBOR PLANT SALES OFFICES
110 Third Street
Fairport Harbor, OH 44077 ATLANTA SALES OFFICE
EBC Office Center
TUSCOLA PLANT - WASTEWATER TREATMENT 3675 Crestwood Parkway, Suite 400
625 East U.S. Highway 36 Duluth, GA 30136
Tuscola, IL 61953
c/o Blaine Benner PENNSYLVANIA SALES OFFICE/1/
2171 Holiday Drive 705 Hyde Park
Tuscola, IL 77095 Doylestown, PA 18901
CLINTON PLANT - DAC FACILITIES CHICAGO SALES OFFICE
Highway US 287 & FM 2160 473 Dunham Road, Suite 212
P.O. Box 1038 St. Charles, IL 60174
Latexo, TX 75849
c/o Public Works Department CALIFORNIA SALES OFFICE
City Hall 18101 Von Karman Ave., Suite 350
611 South Third Street Irvine, CA 92612
Clinton, IA 52732
HYDROCARBONS OFFICE
LAPORTE COMPLEX - METERING STATION 1155 Dairy Ashford Road, Suite 208
1515 Miller Cut-Off Road Houston, TX 77079
LaPorte, TX 77571
c/o Shell Pipeline Corporation DISTRIBUTION CENTERS
Two Shell Plaza
Houston, TX 77252 A&R Transport Inc.
San Bernadino, CA
TUSCOLA PLANT - ANTENNA
625 East U.S. Highway 36 Dameo Regional Distribution Center
Tuscola, IL 61953 568 Central Avenue
c/o Trunkline Gas Company Bridgewater, NJ 08807
3000 Bissonnet Ave.
Houston, TX 77001 Excel Logistics
501 West Schrock Road
WAREHOUSE Westerville, OH 43081
Kealy Trucking Seapac, Inc.
6707 Bessezner Ave. 4000 Cedar Blvd.
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<PAGE>
Baytown, TX 77522
Seapac, Inc.
4601 Welcome All Road
Atlanta, GA 30349
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<PAGE>
__________________
/1/ Lease assigned to Dr. Christine DiCello; 7012 Hyde Park;
Doylestown, PA 18901
Schedule 2.1(d)
Equipment
The equipment set forth in the Equipment Listing dated September 30, 1997,
including all additions and deletions up to December 1, 1997, copies of which
have been initialed by representatives of the Contributor and the Partnership.
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<PAGE>
Schedule 2.1(k)
Contributed Subsidiaries
Quantum Pipeline Company
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<PAGE>
Schedule 2.2(c)
Excluded names, logos, tradenames, trademarks, etc.
All trade names, marks or logos containing or associated with any of the
following:
MILLENNIUM
MILLENNIUM logotype
"M in oval design" logotype
QUANTUM
QUANTUM logotype
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<PAGE>
Schedule 2.2(h)
Certain Excluded Assets
(i) Millennium's corporate office and data center located in Cincinnati,
Ohio and all equipment, personal property and fixtures associated therewith;
(ii) the cafeteria/conference center adjacent to Millennium's office and data
center in Cincinnati, Ohio and all equipment, personal property and fixtures
associated therewith; (iii) assets associated with the ongoing corporate
operations of Millennium Petrochemicals and its direct and indirect corporate
parents, including equipment, records, computer hardware and software and other
personal property and fixtures; (iv) assets associated with the businesses
described under the headings "Millennium Petrochemicals--Acetyls and Ethyl
Alcohol--Acetic Acid and VAM" and "--Methanol" in its 1996 Annual Report on Form
10-K, as such businesses are being conducted on the date of this Agreement (the
"Acetyls Business") and located within the boundaries of the Acetic Acid, VAM
and Methanol (including Syngas) production facilities at Millennium
Petrochemicals' LaPorte, Texas facility, as such boundaries are established by
agreement between Millennium Petrochemicals Inc. and Lyondell Petrochemical
Company before the Closing Date (the "Boundaries"); including without limitation
the waste water treatment plant and the barge dock at Millennium Petrochemicals'
LaPorte, Texas facility and associated equipment; (v) assets used or held for
use in the operation and conduct of the Acetyls Business as such businesses are
being conducted on the date of this Agreement and not either (y) located within
the Boundaries or (z) provided to Millennium Petrochemicals under a Shared
Services Agreement; (vi) outstanding claims related to Millennium Petrochemicals
v. M.W. Kellogg Co., (vii) all subsidiaries of Millennium Petrochemicals other
than Quantum Pipeline Company, including without limitation CUE Insurance
Limited, DR Insurance Company, Millennium Plastics Inc., Millennium Polymers
Inc., Millennium Chemicals Export Ltd., Millennium Petrochemicals Canada, Ltd.,
NDCC International II Inc., USI Chemicals International, Inc., Quantum UK
Limited, Millennium Petrochemicals Europe B.V., and Suburban Propane GP, Inc.;
(viii) Millennium Petrochemical's interest in Suburban Propane Partners, L.P.
and any entities controlled by it; (ix) Millennium Petrochemical's former
research laboratories on Section Road, Cincinnati, Ohio, (x) the unimproved real
estate at Millennium Petrochemicals' LaPorte, Texas facility proximate to the
real estate retained by Millennium Petrochemicals under (iv) above, more
particularly described in the Letter Agreement concerning Expansion Land of even
date herewith between the Partnership and Contributor (xi) Accounts Receivable
of the Contributor as of the Closing Date, (xii) the assets of Millennium (or
its Affiliates) that are covered by a Shared Service Agreement in which the
service is to be provided by Millennium (or its Affiliates) to the Partnership
and (xiii) the real estate at Millennium Petrochemicals' LaPorte, Texas facility
leased to Amoco pursuant to a long term lease for Amoco's PAO facility.
<PAGE>
Schedule 2.5(a)(vii)
Assumed Indebtedness
The Millennium Debt as defined in the Master Transaction Agreement
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<PAGE>
Schedule 2.5(a)(x)
Assumed Long-term Liabilities
The following liabilities related to (i) the operations of the Contributed
Business or (ii) employees who will become employees of the Partnership:
Unfunded health care and life insurance Post-retirement benefits
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<PAGE>
Schedule 3
Disclosure Schedule
The Contributor makes no exceptions to the representations and warranties
made by it in Section 3 of this Agreement except for the following exception to
its representations made in Section 3.4 of this Agreement:
Millennium Chemicals Inc. ("Millennium") has received a letter from the
Pension Benefit Guaranty Corporation (the "PBGC") dated September 10, 1997
expressing a concern that the actions contemplated by the Agreement would
increase the risk to the PBGC relating to the Millennium Defined Benefit Plans.
In that letter, the PBGC noted that it could seek to involuntarily terminate the
Plan prior to the Closing Date if it determined that the transaction would cause
the risk to the PBGC to increase unreasonably. The letter went on to state that
this measure would be viewed as a last resort and that the PBGC would prefer to
enter into a consensual agreement to protect the Plan.
Millennium has provided the PBGC with information explaining the
transaction pursuant to a Confidentiality Agreement with the PBGC. In addition,
Millennium has spoken with representatives at the PBGC regarding the transaction
and the PBGC and Millennium have executed an agreement for which, in
consideration of Millennium agreeing to certain covenants, the PBGC agreed to
forbear from instituting proceedings to terminate the Plans.
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<PAGE>
Appendix A
Dispute Resolution Procedures
(1) Binding and Exclusive Means. The dispute resolution provisions set
forth in this Appendix A shall be the binding and exclusive means to resolve all
disputes arising under this Agreement (each a "Dispute").
(2) Standards and Criteria. In resolving any Dispute, the standards and
criteria for resolving such dispute shall, unless the Contributor and the
Partnership in their discretion jointly stipulate otherwise, be as set forth in
Appendix 1 to this Appendix A.
(3) ADR and Binding Arbitration Procedures. If a Dispute arises, the
following procedures shall be implemented:
(a) The Indemnifying Party may at any time invoke the dispute resolution
procedures set forth in this Appendix A as to any Dispute by providing written
notice of such action to the Indemnified Party, who within five Business Days
after such notice shall schedule a meeting to be held in Houston, Texas between
the parties. The meeting shall occur within 10 Business Days after notice of
the meeting is delivered to the Indemnifying Party. The meeting shall be
attended by representatives of each party having decision-making authority
regarding the Dispute as well as the dispute resolution process and who shall
attempt in a commercially reasonable manner to negotiate a resolution of the
Dispute.
(b) The representatives of the parties shall cooperate in a commercially
reasonable manner and shall explore whether techniques such as mediation,
minitrials, mock trials or other techniques of alternative dispute resolution
might be useful. In the event that a technique of alternative dispute
resolution is so agreed upon, a specific timetable and completion date for its
implementation shall also be agreed upon. The representatives will continue to
meet and discuss settlement until the date (the "Interim Decision Date") that is
the earliest to occur of the following events: (i) an agreement shall be reached
by the parties resolving the Dispute; (ii) one of the parties shall determine
and notify the other party in writing that no agreement resolving the Dispute is
likely to be reached; (iii) if a technique of alternative dispute resolution is
agreed upon, the completion date therefor shall occur without the parties having
resolved the Dispute; or (iv) if another technique of alternative dispute
resolution is not agreed upon, two full meeting days (or such other time period
as may be agreed upon) shall expire without the parties having resolved the
Dispute.
(c) If, as of the Interim Decision Date, the parties have not succeeded in
negotiating a resolution of the dispute pursuant to subsection (b), the parties
shall proceed under subsection (d).
(d) The parties shall jointly appoint a Neutral. If the parties have been
unable to agree upon such appointment within 30 days after the Interim Decision
Date, then such Neutral, upon the
<PAGE>
application of either of the parties shall be appointed within 10 days of the
filing of such application by the Center for Public Resources, or if such
appointment is not so made promptly then promptly thereafter by the American
Arbitration Association in Philadelphia, Pennsylvania, or if such appointment is
not so made promptly then promptly thereafter by the senior United States
District Court judge sitting in Wilmington, Delaware. The fees of the Neutral
shall be paid equally by the parties except that the Neutral shall have
discretion to award fees.
(e) In consultation with the Neutral, the parties shall agree upon a
binding schedule and procedure (which procedure may have been previously
discussed under subsection (b)) to be used as a means to resolve or to attempt
to resolve Dispute, with the Neutral making the decision as to the schedule
and/or procedure if the parties have been unable to agree on any of such matters
within 20 days after the initial selection of the Neutral. The parties agree to
participate in a commercially reasonable manner in the procedure to its
conclusion as determined by the Neutral. If the parties are not successful in
resolving the Dispute through the procedure described above, then the parties
agree that (i) the Neutral shall act as the arbitrator in a binding arbitration
in accordance with the American Arbitration Association rules and shall render a
decision and (ii) judgment upon the decision rendered by the Neutral may be
entered in any court having jurisdiction.
(4) Continuation of Business. Notwithstanding the existence of any Dispute
or the pendency of any procedures pursuant to this Appendix A, the parties agree
and undertake that all payments not in dispute shall continue to be made and all
obligations not in dispute shall continue to be performed.
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<PAGE>
Appendix 1
(a) First priority shall be given to maximizing the consistency of the
resolution of the Dispute with the satisfaction of all express obligations of
the parties and their Affiliates as set forth in the Agreement.
(b) Second priority shall be given to resolution of the Dispute in a
manner which best achieves the objectives of the business activities and
arrangements under the Agreement and permits the parties to realize the benefits
intended to be afforded thereby.
(c) Third priority shall be given to such other matters, if any, as the
parties or the Neutral shall determine to be appropriate under the
circumstances.
-3-
<PAGE>
EXHIBIT 10.12(a)
FIRST AMENDMENT TO MILLENNIUM ASSET CONTRIBUTION AGREEMENT
This First Amendment to Millennium Asset Contribution Agreement (this
"First Amendment"), dated as of May 15, 1998, is entered into by and among
Millennium Petrochemicals Inc., a Virginia corporation (the "Contributor"),
Millennium Petrochemicals LP LLC, a Delaware limited liability company (the
"Contributing Partner") and Equistar Chemicals, LP, a Delaware limited
partnership (the "Partnership").
RECITALS
A. The Contributor, the Contributing Partner and the Partnership are
parties to that certain Asset Contribution Agreement dated as of December 1,
1997 (the "1997 Asset Contribution Agreement");
B. Pursuant to that certain Master Transaction Agreement, dated as of May
15, 1998, by and among Millennium Chemicals Inc., the Partnership, Occidental
Petroleum Corporation ("OPC") and Lyondell Petrochemical Company, certain
affiliates of OPC shall become partners in the Partnership as of the date
hereof; and
C. The Contributor, the Contributing Partner and the Partnership desire to
amend the 1997 Asset Contribution Agreement on the terms set forth herein.
AGREEMENT
NOW THEREFORE, in consideration of the premises and of the mutual covenants
of the parties hereto, it is hereby agreed that the 1997 Asset Contribution
Agreement is amended as follows:
A. Capitalized terms used herein and not otherwise defined herein shall
have the meanings given such terms in the 1997 Asset Contribution Agreement.
B. The following definition shall be added to Section 1 of the 1997 Asset
Contribution Agreement:
"1998 MTA" shall mean that certain Master Transaction Agreement, dated as
of May 15, 1998, by and among Millennium Chemicals Inc., the Partnership,
Occidental Petroleum Corporation and Lyondell Petrochemical Company.
C. The definition of "Third Party Claim" as set forth in Section 1 of the
1997 Asset Contribution Agreement shall be amended and restated as follows:
"Third Party Claim" means any allegation, claim, civil or criminal action,
proceeding, charge or prosecution brought by a Person other than a Contributor,
any Affiliate thereof, the Partnership,
<PAGE>
any member of the Millennium Group (as defined in the 1998 MTA), any member of
the Lyondell Group (as defined in the 1998 MTA) or any member of the Occidental
Group (as defined in the 1998 MTA).
D. Subsection 6.2(a)(i) of the 1997 Asset Contribution Agreement shall be
amended and restated as follows:
(i) Any misrepresentation in or breach of the representations and
warranties of the Contributor or any of its Affiliates in this Agreement,
the Assignment and Assumption Agreements, the Master Intellectual Property
Agreement, or the Master Transaction Agreement, provided that any Liability
arising out of, in connection with or relating to any breach of the
warranties in any Assignment and Assumption Agreement that is not a breach
of the warranties in this Agreement shall not be indemnified against
pursuant to this Section 6;
E. Subsection 6.2(b) of the 1997 Asset Contribution Agreement shall be
amended and restated as follows:
(b) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, TO THE
FULLEST EXTENT PERMITTED BY LAW, NEITHER THE CONTRIBUTOR NOR ANY OF ITS
AGENTS, EMPLOYEES, REPRESENTATIVES OR AFFILIATES SHALL BE LIABLE FOR
CONSEQUENTIAL, INCIDENTAL, INDIRECT OR PUNITIVE DAMAGES IN CONNECTION WITH
DIRECT CLAIMS BY AN INDEMNIFIED PARTY (I.E., A CLAIM BY AN INDEMNIFIED
PARTY THAT DOES NOT SEEK REIMBURSEMENT FOR A THIRD PARTY CLAIM PAID OR
PAYABLE BY SUCH INDEMNIFIED PARTY) WITH RESPECT TO THEIR INDEMNIFICATION
OBLIGATIONS UNDER THIS AGREEMENT UNLESS ANY SUCH CLAIM ARISES OUT OF THE
FRAUDULENT ACTIONS OF THE CONTRIBUTOR. IN DETERMINING THE AMOUNT OF ANY
LOSS, LIABILITY, OR EXPENSE FOR WHICH AN INDEMNIFIED PARTY IS ENTITLED TO
INDEMNIFICATION UNDER THIS AGREEMENT, THE GROSS AMOUNT THEREOF WILL BE
REDUCED (BUT NOT BELOW ZERO) BY THE NET PRESENT VALUE OF ANY CORRELATIVE
INSURANCE PROCEEDS ACTUALLY REALIZED BY SUCH INDEMNIFIED PARTY UNDER
POLICIES TO THE EXTENT THAT THE FUTURE PREMIUM RATE WILL NOT BE INCREASED
BY CLAIM EXPERIENCE RELATING TO SUCH LOSS, LIABILITY OR EXPENSE.
F. Subsection 6.2(e) of the 1997 Asset Contribution Agreement shall be
amended and restated as follows:
(e) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, TO THE
FULLEST EXTENT PERMITTED BY LAW, NEITHER THE PARTNERSHIP NOR ANY OF ITS
AGENTS, EMPLOYEES, REPRESENTATIVES OR AFFILIATES SHALL BE LIABLE FOR
CONSEQUENTIAL, INCIDENTAL, INDIRECT
<PAGE>
OR PUNITIVE DAMAGES IN CONNECTION WITH DIRECT CLAIMS BY AN INDEMNIFIED
PARTY (I.E., A CLAIM BY AN INDEMNIFIED PARTY THAT DOES NOT SEEK
REIMBURSEMENT FOR A THIRD PARTY CLAIM PAID OR PAYABLE BY SUCH INDEMNIFIED
PARTY) WITH RESPECT TO THEIR INDEMNIFICATION OBLIGATIONS UNDER THIS
AGREEMENT UNLESS ANY SUCH CLAIM ARISES OUT OF THE FRAUDULENT ACTIONS OF THE
PARTNERSHIP. IN DETERMINING THE AMOUNT OF ANY LOSS, LIABILITY, OR EXPENSE
FOR WHICH AN INDEMNIFIED PARTY IS ENTITLED TO INDEMNIFICATION UNDER THIS
AGREEMENT, THE GROSS AMOUNT THEREOF WILL BE REDUCED (BUT NOT BELOW ZERO) BY
THE NET PRESENT VALUE OF ANY CORRELATIVE INSURANCE PROCEEDS ACTUALLY
REALIZED BY SUCH INDEMNIFIED PARTY UNDER POLICIES TO THE EXTENT THE FUTURE
PREMIUM RATE WILL NOT BE INCREASED BY CLAIM EXPERIENCE RELATING TO SUCH
LOSS, LIABILITY OR EXPENSE.
G. Appendix A to the 1997 Asset Contribution Agreement shall be amended
and restated in its entirety in the form attached hereto as Exhibit A.
H. Except as amended by this First Amendment, all the terms and provisions
of the 1997 Asset Contribution Agreement shall remain in full force and effect.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this First
Amendment as of the date first above written.
MILLENNIUM PETROCHEMICALS INC.,
a Virginia corporation.
By: /s/ George H. Hempstead
----------------------------------
Name: George H. Hempstead
Title: Senior Vice President
MILLENNIUM PETROCHEMICALS LP LLC,
a Delaware limited liability company.
By: /s/ George H. Hempstead
----------------------------------
Name: George H. Hempstead
Title: Senior Vice President
EQUISTAR CHEMICALS, LP,
a Delaware limited partnership
By: /s/ Eugene A. Allspach
----------------------------------
Name: Eugene A. Allspach
Title: President and Chief Operating Officer
[Signature Page to First Amendment To Millennium Asset Contribution Agreement]
<PAGE>
EXHIBIT A
Appendix A
Dispute Resolution Procedures
(1) Binding and Exclusive Means. The dispute resolution provisions set
forth in this Appendix A shall be the binding and exclusive means to resolve all
disputes arising under this Agreement (each a "Dispute").
(2) Standards and Criteria. In resolving any Dispute, the standards and
criteria for resolving such dispute shall, unless the Contributors and the
Partnership in their discretion jointly stipulate otherwise, be as set forth in
Appendix 1 to this Appendix A.
(3) ADR and Binding Arbitration Procedures. If a Dispute arises, the
following procedures shall be implemented:
(a) Any party to this Agreement may at any time invoke the dispute
resolution procedures set forth in this Appendix A as to any Dispute by
providing written notice of such action to the other party or parties to the
Dispute, who within five Business Days after such notice shall schedule a
meeting to be held in Houston, Texas between the parties. The meeting shall
occur within 10 Business Days after notice of the meeting is delivered to the
other party or parties. The meeting shall be attended by representatives of
each party having decision-making authority regarding the Dispute as well as the
dispute resolution process and who shall attempt in a commercially reasonable
manner to negotiate a resolution of the Dispute.
(b) The representatives of the parties shall cooperate in a commercially
reasonable manner and shall explore whether techniques such as mediation,
minitrials, mock trials or other techniques of alternative dispute resolution
might be useful. In the event that a technique of alternative dispute
resolution is so agreed upon, a specific timetable and completion date for its
implementation shall also be agreed upon. The representatives will continue to
meet and discuss settlement until the date (the "Interim Decision Date") that is
the earliest to occur of the following events: (i) an agreement shall be reached
by the parties resolving the Dispute; (ii) one of the parties shall determine
and notify the other party in writing that no agreement resolving the Dispute is
likely to be reached; (iii) if a technique of alternative dispute resolution is
agreed upon, the completion date therefor shall occur without the parties having
resolved the Dispute; or (iv) if another technique of alternative dispute
resolution is not agreed upon, two full meeting days (or such other time period
as may be agreed upon) shall expire without the parties having resolved the
Dispute.
<PAGE>
(c) If, as of the Interim Decision Date, the parties have not succeeded in
negotiating a resolution of the dispute pursuant to subsection (b), the parties
shall proceed under subsections (d), (e) and (f).
(d) After satisfying the requirements above, such Dispute shall be
submitted to mandatory and binding arbitration at the election of any party
involved in the Dispute (the "Disputing Party"). The arbitration shall be
subject to the Federal Arbitration Act as supplemented by the conditions set
forth in this Appendix. The arbitration shall be conducted in accordance with
the Commercial Arbitration Rules of the American Arbitration Association in
effect on the date the notice of arbitration is served, other than as
specifically modified herein. In the absence of an agreement to the contrary,
the arbitration shall be held in Houston, Texas. The Arbitrator (as defined
below) will allow reasonable discovery in the forms permitted by the Federal
Rules of Civil Procedure, to the extent consistent with the purpose of the
arbitration. During the pendency of the Dispute, each party shall make
available to the Arbitrator and the other parties all books, records and other
information within its control requested by the other parties or the Arbitrator
subject to the confidentiality provisions contained herein, and provided that no
such access shall waive or preclude any objection to such production based on
any privilege recognized by law. Recognizing the express desire of the parties
for an expeditious means of dispute resolution, the Arbitrator may limit the
scope of discovery between the parties as may be reasonable under the
circumstances. In deciding the substance of the parties' claims, the laws of
the State of Delaware shall govern the construction, interpretation and effect
of this Agreement (including this Appendix) without giving effect to any
conflict of law principles. The arbitration hearing shall be commenced promptly
and conducted expeditiously, with each party involved in the Dispute being
allocated an equal amount of time for the presentation of its case. Unless
otherwise agreed to by the parties, the arbitration hearing shall be conducted
on consecutive days. Time is of the essence in the arbitration proceeding, and
the Arbitrator shall have the right and authority to issue monetary sanctions
against any of the parties if, upon a showing of good cause, that party is
unreasonably delaying the proceeding. To the fullest extent permitted by law,
the arbitration proceedings and award shall be maintained in confidence by the
Arbitrator and the parties.
(e) The Disputing Party shall notify the American Arbitration Association
("AAA") and the other parties involved in the Dispute in writing describing in
reasonable detail the nature of the Dispute (the "Dispute Notice"). The
arbitrator (the "Arbitrator") shall be selected within 15 days of the date of
the Dispute Notice by all of the parties from the members of a panel of
arbitrators of the AAA or, if the AAA fails or refuses to provide a list of
potential arbitrators, of the Center for Public Resources and shall be
experienced in commercial arbitration. In the event that the parties are unable
to agree on the selection of the Arbitrator, the AAA shall select the
Arbitrator, using the criteria set forth in this Appendix, within 30 days of the
date of the Dispute Notice. In the event that the Arbitrator is unable to serve,
his or her replacement will be selected in the same manner as the Arbitrator to
be replaced. The Arbitrator shall be neutral. The Arbitrator shall have the
authority to assess the costs and expenses of the arbitration proceeding
(including the arbitrators', and attorneys' fees and expenses) against any or
all parties.
<PAGE>
(f) The Arbitrator shall decide all Disputes and all substantive and
procedural issues related thereto, and shall enforce this Agreement in
accordance with its terms. Without limiting the generality of the previous
sentence, the Arbitrator shall have the authority to issue injunctive relief;
however, the Arbitrator shall not have any power or authority to (i) award
consequential, incidental, indirect or punitive damages or (ii) amend this
Agreement. The Arbitrator shall render the arbitration award, in writing,
within 20 days following the completion of the arbitration hearing, and shall
set forth the reasons for the award. In the event that the Arbitrator awards
monetary damages in favor of either party, the Arbitrator must certify in the
award that no indirect, consequential, incidental, indirect or punitive damages
are included in such award. If the Arbitrator's decision results in a monetary
award, the interest to be granted on such award, if any, and the rate of such
interest shall be determined by the Arbitrator in his or her discretion. The
arbitration award shall be final and binding on the parties, and judgment
thereon may be entered in any court of competent jurisdiction, and may not be
appealed except to the extent permitted by the Federal Arbitration Act.
(4) Continuation of Business. Notwithstanding the existence of any Dispute
or the pendency of any procedures pursuant to this Appendix A, the parties agree
and undertake that all payments not in dispute shall continue to be made and all
obligations not in dispute shall continue to be performed.
<PAGE>
Appendix 1
(a) First priority shall be given to maximizing the consistency of the
resolution of the Dispute with the satisfaction of all express obligations of
the parties and their Affiliates as set forth in the Agreement.
(b) Second priority shall be given to resolution of the Dispute in a manner
which best achieves the objectives of the business activities and arrangements
under the Agreement and permits the parties to realize the benefits intended to
be afforded thereby.
(c) Third priority shall be given to such other matters, if any, as the
parties or the Arbitrator shall determine to be appropriate under the
circumstances.
<PAGE>
EXHIBIT 10.13
CONFORMED COPY
MASTER TRANSACTION AGREEMENT
AMONG
EQUISTAR CHEMICALS, LP,
OCCIDENTAL PETROLEUM
CORPORATION,
LYONDELL PETROCHEMICAL COMPANY
AND
MILLENNIUM CHEMICALS INC.
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 1 RELATED AGREEMENTS AND CLOSING............................................ 2
1.1 Tier 1 Related Agreements................................................. 2
1.2 Tier 2 Related Agreements................................................. 2
1.3 Closing Date.............................................................. 2
1.4 Partnership Long-term Debt................................................ 2
1.5 Closing Transactions...................................................... 2
SECTION 2 REPRESENTATIONS AND WARRANTIES............................................ 3
2.1 Representations and Warranties of the Partnership......................... 3
2.2 Representations and Warranties of Occidental.............................. 8
2.3 Representations and Warranties of Lyondell................................ 11
2.4 Representations and Warranties of Millennium.............................. 13
SECTION 3 ADDITIONAL AGREEMENTS..................................................... 15
3.1 Access to Information..................................................... 15
3.2 Conduct of the Occidental Subject Business Pending the Closing Date....... 15
3.3 Conduct of the Partnership Subject Business Pending the Closing Date...... 17
3.4 Further Actions........................................................... 18
3.5 Notifications............................................................. 20
3.6 Employee Matters.......................................................... 20
3.7 Partnership Unanimous Consent Items....................................... 20
SECTION 4 CONDITIONS TO CLOSING..................................................... 21
4.1 Conditions Precedent to Obligations of All Parties........................ 21
(a) No Injunction, etc................................................... 21
(b) Tier 2 Related Agreements............................................ 21
(c) Government Licenses and Consents..................................... 21
(d) HSR Act.............................................................. 21
4.2 Conditions Precedent to Obligations of the Partnership.................... 21
(a) Accuracy of Representations and Warranties........................... 22
(b) Performance of Agreements............................................ 22
(c) No Material Adverse Change........................................... 22
(d) Officer's Certificates............................................... 22
4.3 Conditions Precedent to Obligations of Occidental......................... 22
(a) Accuracy of Representations and Warranties........................... 22
(b) Performance of Agreements............................................ 22
(c) No Material Adverse Change........................................... 23
(d) Board of Directors Approval.......................................... 23
(e) Officer's Certificates............................................... 23
(f) Third Party Consents................................................. 23
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
SECTION 5 TERMINATION AND WAIVER..................................................... 23
5.1 General.................................................................... 23
5.2 Effect of Termination...................................................... 24
SECTION 6 MISCELLANEOUS.............................................................. 24
6.1 Successors and Assigns..................................................... 24
6.2 Benefits of Agreement Restricted to Parties................................ 24
6.3 Notices.................................................................... 24
6.4 Severability............................................................... 25
6.5 Press Releases............................................................. 25
6.6 Confidentiality Agreement.................................................. 26
6.7 Construction............................................................... 26
6.8 Counterparts............................................................... 26
6.9 Governing Law.............................................................. 26
6.10 Transaction Costs.......................................................... 26
6.11 Amendment.................................................................. 27
6.12 Jurisdiction; Consent to Service of Process; Waiver........................ 27
6.13 Waiver of Jury Trial....................................................... 28
6.14 Action by the Partnership.................................................. 28
</TABLE>
APPENDICES
Appendix A Definitions
Appendix B List of Related Agreements
SCHEDULES
Schedule 2.1 Exceptions to Representations and Warranties of the Partnership
Schedule 2.2 Exceptions to Representations and Warranties of Occidental
Schedule 2.3 Exceptions to Representations and Warranties of Lyondell
Schedule 2.4 Exceptions to Representations and Warranties of Millennium
Schedule 4.3(f) Occidental Consents
Schedule 6.10 Certain Expenses
-ii-
<PAGE>
EXHIBITS
Exhibit A Form of Amended and Restated Agreement of Limited Partnership
Exhibit B Form of Occidental Contribution Agreement
Exhibit C Form of Amended and Restated Parent Agreement
Exhibit D Form of Sales Agreement (Ethylene)
-iii-
<PAGE>
MASTER TRANSACTION AGREEMENT
This Master Transaction Agreement (this "Agreement") dated May 15, 1998 is
entered into by and among Equistar Chemicals, LP, a Delaware limited partnership
(the "Partnership"), Occidental Petroleum Corporation, a Delaware corporation
("Occidental"), Lyondell Petrochemical Company, a Delaware corporation
("Lyondell"), and Millennium Chemicals Inc., a Delaware corporation
("Millennium").
The definitions of capitalized terms used in this Agreement, including the
appendices hereto, are set forth in Appendix A hereto.
WHEREAS, Lyondell and Millennium entered into the Master Transaction
Agreement dated July 25, 1997, as amended, which contemplated, among other
things, the formation of the Partnership;
WHEREAS, the Initial Partners entered into the Limited Partnership
Agreement of the Partnership dated October 10, 1997 and the Certificate of
Limited Partnership with respect to the Partnership became effective October 17,
1997;
WHEREAS, the Partnership commenced operations December 1, 1997 upon its
acquisition of the Subject Businesses of Lyondell and Millennium Petrochemicals
Inc., a Virginia corporation and an indirect wholly owned subsidiary of
Millennium ("Millennium Petrochemicals");
WHEREAS, Lyondell and Millennium, the respective ultimate parent entities
of the Initial Partners, desire to admit to the Partnership (i) PDG Chemical
Inc., a Delaware corporation and an indirect, wholly owned subsidiary of
Occidental ("PDG Chemical"), as a general partner, and (ii) Occidental Petrochem
Partner 1, Inc., a Delaware corporation and a wholly owned Subsidiary ("OCC
Sub") of Occidental Chemical Corporation, a New York corporation ("OCC"), and
Occidental Petrochem Partner 2, Inc., a Delaware corporation and a wholly owned
Subsidiary ("Oxy CH Sub") of Oxy CH Corporation, a California corporation ("Oxy
CH"), as limited partners, upon the transfer to the Partnership of the Subject
Business to be contributed by the Occidental Partners, each a wholly owned
Subsidiary of Occidental;
WHEREAS, upon the terms and subject to the conditions set forth herein, the
Occidental Partners will contribute their Subject Business to the Partnership
through a merger, a partnership interest transfer and certain asset transfers,
the Partnership will issue Units to the Occidental Partners and the Occidental
Partners will become partners in the Partnership, and certain other agreements
will be entered into as provided for herein; and
WHEREAS, the Parties have made all applicable filings under the HSR Act
with respect to the transactions contemplated hereby and have received
confirmation from the Federal Trade Commission of the early termination of the
applicable waiting period under the HSR Act;
<PAGE>
WHEREAS, the parties who have executed this Agreement (the "Parties") wish
to make certain representations and warranties to one another and provide for
the coordination of the closing of all the transactions contemplated by this
Agreement (the "Closing");
NOW, THEREFORE, in consideration of the premises and the mutual covenants
of the Parties set forth herein, it is hereby agreed as follows:
SECTION 1
RELATED AGREEMENTS AND CLOSING
------------------------------
1.1 Tier 1 Related Agreements. The Tier 1 Related Agreements are
-------------------------
designated as such on Appendix B. Forms of each of the Tier 1 Related
Agreements (including forms of certain of the exhibits and versions of certain
of the schedules thereto current as of the dates indicated therein) are attached
as Exhibits to this Agreement. On the terms and subject to the conditions set
forth herein, the Parties shall cause each such agreement to be executed and
delivered by the appropriate parties thereto at the Closing in substantially the
form attached hereto with such changes as may be agreed to by the Parties in
good faith.
1.2 Tier 2 Related Agreements. The Tier 2 Related Agreements are
-------------------------
designated as such on Appendix B. The forms of each of the Tier 2 Related
Agreements shall be negotiated by the Parties prior to the Closing in good
faith. On the terms and subject to the conditions set forth herein, the Parties
shall cause such agreements to be executed and delivered in such forms by the
appropriate parties thereto at the Closing.
1.3 Closing Date. Provided that the conditions precedent set forth in
------------
Section 4 of this Agreement shall have been satisfied or waived, the Closing
shall be held at a mutually agreeable location on the date hereof or on such
other date as may be agreed to in writing by the Parties (the "Closing Date").
The Closing shall be deemed to occur at 4:00 a.m. Houston, Texas time on the
Closing Date.
1.4 Partnership Long-term Debt. At or immediately subsequent to the
--------------------------
Closing Date, the Partnership's long-term debt shall consist of: (i) borrowings
under a bank credit agreement or agreements providing for maximum borrowings in
the amount of $1.25 billion (inclusive of any amounts to be used for working
capital purposes); (ii) Lyondell Assumed Debt (as defined in the Initial Master
Transaction Agreement) in the amount of $745 million and (iii) Occidental
Assumed Debt in the amount of $205 million; provided, however, that the amount
-------- -------
of the credit agreement or agreements described in (i) above may be adjusted to
such greater amount as may be reasonably satisfactory to the Partnership and
Occidental.
1.5 Closing Transactions. As contemplated by this Agreement and by the
--------------------
Occidental Contribution Agreement and the Amended and Restated Partnership
Agreement, as applicable, on the Closing Date:
-2-
<PAGE>
(a) OCC will contribute or cause to be contributed certain assets to
OCC Sub which will simultaneously contribute such assets to the
Partnership, subject to the assumption by the Partnership of certain
liabilities;
(b) OCC Sub will assign a lease for certain assets to the Partnership;
(c) Oxy CH will contribute all of the issued and outstanding capital
stock of Oxy Petrochemicals to Oxy CH Sub;
(d) Oxy Petrochemicals Inc., a wholly owned direct Subsidiary of Oxy
CH Sub ("Oxy Petrochemicals") and the Partnership will merge, with the
Partnership as the surviving entity;
(e) PDG Chemical will contribute or cause to be contributed certain
assets to the Partnership, subject to the assumption by the Partnership of
certain liabilities;
(f) the Partnership will (i) issue Units to the Occidental Partners
(pursuant to asset contributions, partnership interest transfer or the
merger, as the case may be) and the Occidental Partners will be admitted as
partners of the Partnership and (ii) issue Units to Lyondell LP, Lyondell
GP, Millennium LP and Millennium GP;
(g) OCC will agree to guarantee (with the form and terms thereof to be
substantially in the form attached to that certain letter agreement, of
even date, by and between OCC and the Partnership) $419,700,000 of
indebtedness of the Partnership; and
(h) the Partnership shall deliver (i) a note to Oxy CH Sub obligating
the Partnership to pay $419,700,000 plus interest in accordance with the
terms described therein and (ii) a note to Millennium LP obligating the
Partnership to pay $75 million plus interest in accordance with the terms
described therein.
SECTION 2
REPRESENTATIONS AND WARRANTIES
------------------------------
2.1 Representations and Warranties of the Partnership. Except as set
-------------------------------------------------
forth on Schedule 2.1, the Partnership represents and warrants to each other
Party as follows:
(a) Organization, Good Standing and Power. The Partnership (i) is a
-------------------------------------
limited partnership duly organized, validly existing and in good standing
under the laws of the state of Delaware and has the power and authority
under its constituent documents to own, lease and operate its assets and to
conduct its Subject Business now being conducted by it, (ii) is duly
authorized, qualified or licensed to do business as a foreign limited
partnership in, and is in good standing in, each of the jurisdictions in
which its right, title or interest in or to any of the assets held by it
requires such authorization, qualification or licensing, except where the
failure to be so authorized, qualified, licensed or in good standing would
not be
-3-
<PAGE>
reasonably likely to have a Material Adverse Effect with respect to its Subject
Business, and (iii) has, and in the case of the Related Agreements to be
executed by it at or prior to the Closing, will have, all requisite corporate
power and authority, or power and authority under its constituent documents, to
enter into this Agreement and, as applicable, the Related Agreements to which it
is or will be a party and to perform its obligations hereunder and thereunder.
(b) Authorization and Validity of Agreements.
----------------------------------------
(i) The execution, delivery and performance by the Partnership
of this Agreement and the consummation by it of the transactions
contemplated hereby have been duly authorized and approved by all
necessary corporate or similar action on its part. This Agreement has
been duly and validly executed and delivered by the Partnership and is
its legal, valid and binding obligation, enforceable against it in
accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
laws related to or affecting creditors' rights generally and by
general equity principles.
(ii) The execution, delivery and performance by the Partnership
of the Related Agreements to which it will be a party and the
consummation by it of the transactions contemplated thereby will be,
as of the Closing, duly authorized and approved by all necessary
action on its part. At the Closing, each of the Related Agreements to
which the Partnership will be a party will be duly and validly
executed and delivered by the Partnership and will be upon execution
and delivery a legal, valid and binding obligation, enforceable
against it in accordance with its terms, except as the same may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws related to or affecting creditors' rights
generally and by general equity principles.
(c) Lack of Conflicts. Except with respect to the HSR Act as set
-----------------
forth in Section 4.1(d), each of the execution, delivery and performance by
the Partnership of this Agreement and the Related Agreements to which it is
or will be a party and the consummation by it of the transactions
contemplated hereby and thereby does not and, as of the Closing, will not
(i) violate (with or without the giving of notice or the lapse of time or
both) any Legal Requirement applicable to it or its Subsidiaries, other
than those that would not be reasonably likely to have a Material Adverse
Effect with respect to its Subject Business, (ii) conflict with, or result
in the breach of, any provision of the charter or by-laws or similar
governing or organizational documents of it or its Subsidiaries, (iii)
result in the creation of any Encumbrance upon any of their assets, other
than those contemplated by this Agreement or any of the Related Agreements,
or those that would not be reasonably likely to have a Material Adverse
Effect with respect to its Subject Business, or (iv) violate, conflict with
or result in the breach or termination of or otherwise give any other
Person the right to terminate, or constitute a default, event of default or
an event which with notice, lapse of time or both, would constitute a
default or event of default under the terms of, any contract, indenture,
lease, mortgage, Government License or other agreement or instrument to
which
-4-
<PAGE>
it or any of its Subsidiaries is a party or by which the properties
or businesses of it or any of its Subsidiaries are bound, except for
violations, conflicts, breaches, terminations and defaults that would not
be reasonably likely to have a Material Adverse Effect with respect to its
Subject Business.
(d) Certain Fees. Neither the Partnership nor any of its Affiliates
------------
nor any of its officers, directors or employees, on behalf of it or such
Affiliates, has employed any broker or finder or incurred any other
liability for any financial advisory fees, brokerage fees, commissions or
finders' fees in connection with the transactions contemplated hereby.
(e) Financial Statements. The Partnership's audited financial
--------------------
statements as of and for the year ended December 31, 1997 and any unaudited
quarterly financial statements prepared pursuant to Section 5.4 of the
Partnership Agreement since December 31, 1997 (in each case including any
notes thereto), were prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis ("GAAP")
throughout the periods indicated (except as may be indicated in the notes
thereto and except that unaudited or quarterly financial statements do not
contain all GAAP notes to such financial statements) and each fairly
presents the consolidated (or combined, as applicable) financial position,
results of operations and changes in partners' equity and cash flows of the
Partnership and its subsidiaries as at the respective dates thereof and for
the respective periods indicated therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments).
(f) Absence of Certain Changes. Since December 31, 1997, (i) the
--------------------------
Partnership and its Affiliates have not incurred any material liabilities
or obligations, fixed, contingent, accrued or otherwise, (A) that relate to
or are allocable to its Subject Business and that have had or are
reasonably likely to have a Material Adverse Effect with respect to its
Subject Business, or (B) that would cause the long-term debt of the
Partnership immediately prior to the Closing to exceed the aggregate of
$1.745 billion and any amounts borrowed under the Partnership's bank credit
facility for working capital, (ii) the Partnership and its Affiliates have
conducted its Subject Business in all material respects in the ordinary
course, and (iii) no event, occurrence or other matter has occurred that is
reasonably likely to have a Material Adverse Effect with respect to its
Subject Business, provided that this determination shall be made without
regard to any change in general economic or political conditions or any
change in raw materials prices, product prices, industry capacity or other
matter of industry-wide application that affects its Subject Business and
Occidental's Subject Business in a substantially similar way.
(g) Partnership Documents. The Partnership has provided to Occidental
---------------------
a true and correct copy of the Partnership Agreement, as amended to date.
The Partnership has provided to Occidental true and correct copies of (i)
all minutes of meetings of the Partnership Governance Committee held to
date and such minutes accurately reflect all actions, approvals and
authorizations (including with respect to the Strategic Plan) by or of the
Partnership Governance Committee, (ii) the Strategic Plan and (iii) the
current annual budget of the Partnership.
-5-
<PAGE>
(h) Partnership Interests. Without giving effect to this Agreement or
---------------------
the transactions contemplated hereby, Lyondell LP, Lyondell GP, Millennium
LP and Millennium GP are the only Partners in the Partnership and the only
holders of Units, in the denominations set forth in the Partnership
Agreement. Without giving effect to this Agreement or the transactions
contemplated hereby, there are no outstanding subscriptions, options,
convertible securities, warrants or calls of any kind issued or granted by,
or binding upon, the Partnership to purchase or otherwise acquire or to
sell or otherwise dispose of any security of or equity interest in the
Partnership.
(i) Conduct of the Partnership Subject Business since December 1,
-------------------------------------------------------------
1997. Except as required or contemplated by approvals or authorizations
----
(including the Strategic Plan) by or of the Partnership Governance
Committee, since the contribution of their Subject Assets to the
Partnership by Lyondell and Millennium on December 1, 1997, the Partnership
has:
(i) maintained its books, accounts and records relating to its
Subject Business in the usual, regular and ordinary manner,
complied in all material respects with all Legal Requirements and
contractual obligations applicable to its Subject Business or to
the conduct of its Subject Business and performed all of its
material obligations relating to its Subject Business;
(ii) not (A) modified or changed in any material respect any of its
assets or disposed of any material asset except for (1)
inventory, equipment, supplies and other assets sold or otherwise
disposed of in the ordinary course of business and (2) any assets
that in the ordinary course of business were replaced with
substantially similar assets, (B) except in the ordinary course
of business, (x) entered into any contract, commitment or
agreement material to the operation of its Subject Business or
use of its assets or, except as expressly contemplated by or
required pursuant to their respective terms, modified or changed
in any material respect any obligation under any such contract,
commitment or agreement, (y) modified or changed in any material
respect any obligation under its Government Licenses, (z)
modified or changed in any material respect the manner in which
the products produced by its Subject Business are marketed and
sold, or (C) entered into interest rate protection or other
hedging agreements (except for hydrocarbon hedging agreements
entered into in the ordinary course and expiring prior to
December 31, 1998) relating to its Subject Business; provided,
that, for purposes of (A) and (B), "material" shall mean a change
or modification that was subject to the unanimous voting
requirement of Section 6.7 of the Partnership Agreement; and
(iii) not waived any material claims or rights relating to its
Subject Business.
(j) Employee Benefits.
-----------------
-6-
<PAGE>
(i) Each of the Partnership's Defined Benefit and Defined
Contribution Pension Plans covering employees ("Employee Plan") is in
substantial compliance with applicable requirements prescribed by any and
all Legal Requirements, including, but not limited to the Code, except for
violations the occurrence of which would not in the aggregate reasonably be
expected to have a Material Adverse Effect with respect to its Subject
Business;
(ii) The Partnership has in all material respects performed all
obligations required to be performed by it under ERISA, the Code and any
other applicable Legal Requirements and under the terms of each Employee
Plan, except such failures to perform which would not in the aggregate
reasonably be expected to have a Material Adverse Effect with respect to
its Subject Business. The Partnership has received no written notice of
the existence of any material default or violation by any other party of
any of such Legal Requirements, terms or requirements applicable to any of
the Employee Plans;
(iii) Other than routine claims for benefits, the Partnership has not
received any written notice of any pending material claims or lawsuits
which have been asserted or instituted against any of the Employee Plans,
the assets of the trust or funds under the Employee Plans, the sponsor or
administrator of any of the Employee Plans, or against any fiduciary of any
of the Employee Plans with respect to the operation of such Plan;
(iv) The Partnership has not received any written notice of any
pending investigation or pending enforcement action by the Pension Benefit
Guaranty Corporation, the Department of Labor, the Internal Revenue Service
or any other Authority with respect to any of the Employee Plans;
(v) All contributions required to be made under the terms of the
Partnership's Employee Plans have been timely made. No Employee Plan has
an "accumulated funding deficiency" (within the meaning of Section 412 of
the Code or Section 302 of ERISA);
(vi) All of the Partnership's "group health plans" (within the
meaning of Code Section 5000(b)(1)) have been operated in substantial
compliance with the group health plan continuation coverage requirements of
Section 4980B of the Code and Sections 601 through 608 of ERISA, Title XXII
of the Public Health Service Act and the provisions of the Social Security
Act;
(vii) There has been no act or omission by the Partnership that has
given rise to or may give rise to material fines, penalties, taxes, or
related charges under Section 502(c), (i) or (l) or Section 4071 of ERISA
or Chapter 43 of the Code or the imposition of a lien pursuant to Sections
401(a)(29) or 412(n) of the Code or pursuant to ERISA;
-7-
<PAGE>
(viii) Except with respect to the transactions contemplated by this
Agreement, no "reportable event" within the meaning of Section
4043 of ERISA, or prohibited transaction within the meaning of
Section 406 of ERISA, has occurred with respect to any
Employee Plan which would reasonably be expected to have a
Material Adverse Effect; and
(ix) No Employee Plan is a "multiemployer plan" as such term is
defined in section 3(37) of ERISA. No Employee Plan is a plan
maintained by more than one employer (a so-called "multiple
employer plan") for purposes of section 413(c) of the Code or
otherwise.
(k) Conduct of Business in Compliance with Regulatory and
-----------------------------------------------------
Contractual Requirements. The Partnership and each Affiliate thereof is
------------------------
operating and conducting its Subject Business in compliance with all
applicable Legal Requirements, rights of concession, licenses, know-how or
other proprietary rights of others, the failure to comply with which would
reasonably be expected to have a Material Adverse Effect with respect to
its Subject Business.
(l) Legal Proceedings. There is no litigation, proceeding, claim,
-----------------
grievance, arbitration, investigation or other action to which the
Partnership or any Affiliate thereof is a party (including proceedings or
claims by or before the National Labor Relations Board, the Equal
Employment Opportunity Commission, the Department of Labor or any other
Authority) (i) that is pending or, to the Knowledge of the Partnership,
threatened, (ii) that relates in any way to the operation or conduct of its
Subject Business, or to the transactions contemplated by this Agreement,
and (iii) that upon resolution adverse to Partnership or any Affiliate,
could reasonably be expected to have a Material Adverse Effect with respect
to its Subject Business.
(m) Initial Asset Contributions. To the Partnership's Knowledge,
---------------------------
there is no basis for a claim by the Partnership against Lyondell or
Millennium Petrochemicals for breach of representation or warranty of any
of their respective representations and warranties set forth in the
Lyondell Asset Contribution Agreement or the Millennium Asset Contribution
Agreement.
2.2 Representations and Warranties of Occidental. Except as set forth on
--------------------------------------------
Schedule 2.2, Occidental represents and warrants to each other Party as follows:
(a) Organization, Good Standing and Power. Occidental and each
-------------------------------------
member of its Group (i) is a corporation, duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority to own, lease and
operate its assets and, if applicable, to conduct the Subject Business now
being conducted by it and to be conducted by it as of the Closing, (ii) is
duly authorized, qualified or licensed to do business as a foreign
corporation in, and is in good standing in, each of the jurisdictions in
which its right, title or interest in or to any of the assets held by it or
the Subject Business conducted by it, if applicable, requires such
authorization, qualification or
-8-
<PAGE>
licensing, except where the failure to be so authorized, qualified,
licensed or in good standing would not be reasonably likely to have a
Material Adverse Effect with respect to its Subject Business, and (iii)
has, and in the case of the Related Agreements to be executed by it at or
prior to the Closing, will have, all requisite corporate power and
authority to enter into this Agreement and, as applicable, the Related
Agreements to which it is or will be a party and to perform its
obligations hereunder and thereunder.
(b) Authorization and Validity of Agreements. Assuming the approval
----------------------------------------
of Occidental's board of directors referred to in Section 4.3(d):
(i) The execution, delivery and performance by Occidental of this
Agreement and the consummation by it of the transactions contemplated
hereby have been duly authorized and approved by all necessary
corporate or similar action on its part. This Agreement has been duly
and validly executed and delivered by Occidental and is its legal,
valid and binding obligation, enforceable against it in accordance
with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws
related to or affecting creditors' rights generally and by general
equity principles.
(ii) The execution, delivery and performance by Occidental and each
member of its Group of the Related Agreements to which it or any
member of its Group will be a party and the consummation by it and its
Group of the transactions contemplated thereby will be, as of the
Closing, duly authorized and approved by all necessary corporate or
similar action on its or their part. At the Closing, each of the
Related Agreements to which Occidental or any member of its Group will
be a party will be duly and validly executed and delivered by
Occidental or member and will be upon execution and delivery a legal,
valid and binding obligation, enforceable against it or such member in
accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
laws related to or affecting creditors' rights generally and by
general equity principles.
(c) Lack of Conflicts. Assuming satisfaction of the condition in
-----------------
Section 4.1(c) and receipt of the Consents contemplated by Schedule 4.3(f),
and except with respect to the HSR Act as set forth in Section 4.1(d), each
of the execution, delivery and performance by Occidental and each member of
its Group of this Agreement and the Related Agreements to which any of them
is or will be a party and the consummation by them of the transactions
contemplated hereby and thereby does not and, as of the Closing, will not
(i) violate (with or without the giving of notice or the lapse of time or
both) any Legal Requirement applicable to any of them or any of their
Subsidiaries, other than those that would not be reasonably likely to have
a Material Adverse Effect with respect to its Subject Business, (ii)
conflict with, or result in the breach of, any provision of the charter or
by-laws or similar governing or organizational documents of any of them or
any of their Subsidiaries, (iii) result in the creation of any Encumbrance
upon any of their assets, other than those contemplated by this Agreement
or any of the Related Agreements, or those that would not be reasonably
-9-
<PAGE>
likely to have a Material Adverse Effect with respect to its Subject
Business, or (iv) violate, conflict with or result in the breach or
termination of or otherwise give any other Person the right to terminate,
or constitute a default, event of default or an event which with notice,
lapse of time or both, would constitute a default or event of default under
the terms of, any contract, indenture, lease, mortgage, Government License
or other agreement or instrument to which any of them or any of their
Subsidiaries is a party or by which the properties or businesses of any of
them or any of their Subsidiaries are bound, except for violations,
conflicts, breaches, terminations and defaults that would not be reasonably
likely to have a Material Adverse Effect with respect to its Subject
Business.
(d) Certain Fees. Neither Occidental nor any of its Affiliates nor
------------
any of its officers, directors or employees, on behalf of it or such
Affiliates, has employed any broker or finder or incurred any other
liability for any financial advisory fees, brokerage fees, commissions or
finders' fees in connection with the transactions contemplated hereby.
(e) SEC Reports; Financial Statements.
---------------------------------
(i) Occidental has filed all material forms, reports and documents
required to be filed by it with the SEC since December 31, 1996 (its
"SEC Reports"). Occidental's SEC Reports were prepared in all
material respects in accordance with the requirements of the
Securities Act, or the Exchange Act, as the case may be, and the rules
and regulations thereunder, and none of Occidental's SEC Reports, as
of the date they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
(ii) The financial statements (including any notes thereto)
contained in Occidental's SEC Reports were prepared in accordance with
GAAP throughout the periods indicated (except as may be indicated in
the notes thereto and except that financial statements included with
quarterly reports on Form 10-Q do not contain all GAAP notes to such
financial statements) and each fairly presents the consolidated (or
combined, as applicable) financial position, results of operations and
changes in stockholders' equity and cash flows of Occidental and its
subsidiaries as at the respective dates thereof and for the respective
periods indicated therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments).
(f) Absence of Certain Changes. Since December 31, 1996, (i)
--------------------------
Occidental and its Affiliates have not incurred any material liabilities or
obligations, fixed, contingent, accrued or otherwise, that relate to or are
allocable to its Subject Business and that have had or are reasonably
likely to have a Material Adverse Effect with respect to its Subject
Business, (ii) Occidental and its Affiliates have conducted its Subject
Business in all material respects in the ordinary course, consistent with
past practice, and (iii) no event, occurrence or other matter has occurred
that is reasonably likely to have a Material Adverse Effect with
-10-
<PAGE>
respect to the Subject Business of Occidental, provided that this
determination shall be made without regard to any change in general
economic or political conditions or any change in raw materials prices,
product prices, industry capacity or other matter of industry-wide
application that affects the Partnership's Subject Business and
Occidental's Subject Business in a substantially similar way.
2.3 Representations and Warranties of Lyondell. Except as set forth on
------------------------------------------
Schedule 2.3, Lyondell represents and warrants to each other Party as follows:
(a) Organization, Good Standing and Power. Lyondell and each member
-------------------------------------
of its Group (i) is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the corporate
power and authority to own, lease and operate its assets, (ii) is duly
authorized, qualified or licensed to do business as a foreign corporation
or other organization in, and is in good standing in, each of the
jurisdictions in which its right, title or interest in or to any of the
assets held by it requires such authorization, qualification or licensing,
except where the failure to be so authorized, qualified, licensed or in
good standing would not be reasonably likely to have a Material Adverse
Effect with respect to the Partnership's Subject Business, and (iii) has,
and in the case of the Related Agreements to be executed by it at or prior
to the Closing, will have, all requisite corporate power and authority, or
power and authority under its constituent documents, to enter into this
Agreement and, as applicable, the Related Agreements to which it is or will
be a party and to perform its obligations hereunder and thereunder.
(b) Authorization and Validity of Agreements.
----------------------------------------
(i) The execution, delivery and performance by Lyondell of this
Agreement and the consummation by it of the transactions contemplated
hereby have been duly authorized and approved by all necessary
corporate or similar action on its part. This Agreement has been duly
and validly executed and delivered by Lyondell and is its legal, valid
and binding obligation, enforceable against it in accordance with its
terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws related to or
affecting creditors' rights generally and by general equity
principles.
(ii) The execution, delivery and performance by Lyondell and each
member of its Group of the Related Agreements to which it or any
member of its Group will be a party and the consummation by it and its
Group of the transactions contemplated thereby will be, as of the
Closing, duly authorized and approved by all necessary corporate or
similar action on its or their part. At the Closing, each of the
Related Agreements to which Lyondell or any member of its Group will
be a party will be duly and validly executed and delivered by Lyondell
or member and will be upon execution and delivery a legal, valid and
binding obligation, enforceable against it or such member in
accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization,
-11-
<PAGE>
moratorium or other laws related to or affecting creditors' rights
generally and by general equity principles.
(c) Lack of Conflicts. Except with respect to the HSR Act as set
-----------------
forth in Section 4.1(d), each of the execution, delivery and performance by
Lyondell and each member of its Group of this Agreement and the Related
Agreements to which any of them is or will be a party and the consummation
by them of the transactions contemplated hereby and thereby does not and,
as of the Closing, will not (i) violate (with or without the giving of
notice or the lapse of time or both) any Legal Requirement applicable to
any of them or any of their Subsidiaries, other than those that would not
be reasonably likely to have a Material Adverse Effect with respect to
Lyondell, (ii) conflict with, or result in the breach of, any provision of
the charter or by-laws or similar governing or organizational documents of
any of them or any of their Subsidiaries, (iii) result in the creation of
any Encumbrance upon any of their assets, other than those contemplated by
this Agreement or any of the Related Agreements, or those that would not be
reasonably likely to have a Material Adverse Effect with respect to
Lyondell, or (iv) violate, conflict with or result in the breach or
termination of or otherwise give any other Person the right to terminate,
or constitute a default, event of default or an event which with notice,
lapse of time or both, would constitute a default or event of default under
the terms of, any contract, indenture, lease, mortgage, Government License
or other agreement or instrument to which any of them or any of their
Subsidiaries is a party or by which the properties or businesses of any of
them or any of their Subsidiaries are bound, except for violations,
conflicts, breaches, terminations and defaults that would not be reasonably
likely to have a Material Adverse Effect with respect to Lyondell.
(d) Certain Fees. Neither Lyondell nor any of its Affiliates nor any
------------
of its officers, directors or employees, on behalf of it or such
Affiliates, has employed any broker or finder or incurred any other
liability for any financial advisory fees, brokerage fees, commissions or
finders' fees in connection with the transactions contemplated hereby.
(e) Joint Proxy Statement. The Joint Proxy Statement was prepared in
---------------------
all material respects in accordance with the requirements of the Securities
Act, or the Exchange Act, as the case may be, and the rules and regulations
thereunder, and, as of the date of the Stockholders' Meetings and insofar
as it relates to the Subject Business of Lyondell, did not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
(f) Title to Lyondell Units. Without giving effect to this Agreement
-----------------------
or the transactions contemplated hereby, Lyondell LP and Lyondell GP each
owns the number of Units set forth in Section 2.1 of the Partnership
Agreement opposite its name. Except as contemplated by this Agreement,
there are no outstanding subscriptions, options, convertible securities,
warrants or calls of any kind issued or granted by, or binding upon, the
Partnership or any member of the Lyondell Group to purchase or otherwise
acquire or to sell or otherwise dispose of any security of or equity
interest in the Partnership.
-12-
<PAGE>
2.4 Representations and Warranties of Millennium. Except as set forth on
--------------------------------------------
Schedule 2.4, Millennium represents and warrants to each other Party as follows:
(a) Organization, Good Standing and Power. Millennium and each
-------------------------------------
member of its Group (i) is a corporation or a limited liability company
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and has the corporate
power and authority or power under its constituent documents to own, lease
and operate its assets, (ii) is duly authorized, qualified or licensed to
do business as a foreign corporation or other organization in, and is in
good standing in, each of the jurisdictions in which its right, title or
interest in or to any of the assets held by it requires such authorization,
qualification or licensing, except where the failure to be so authorized,
qualified, licensed or in good standing would not be reasonably likely to
have a Material Adverse Effect with respect to the Partnership's Subject
Business, and (iii) has, and in the case of the Related Agreements to be
executed by it at or prior to the Closing, will have, all requisite
corporate power and authority, or power and authority under its constituent
documents, to enter into this Agreement and, as applicable, the Related
Agreements to which it is or will be a party and to perform its obligations
hereunder and thereunder.
(b) Authorization and Validity of Agreements.
----------------------------------------
(i) The execution, delivery and performance by Millennium of this
Agreement and the consummation by it of the transactions contemplated
hereby have been duly authorized and approved by all necessary
corporate or similar action on its part. This Agreement has been duly
and validly executed and delivered by Millennium and is its legal,
valid and binding obligation, enforceable against it in accordance
with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws
related to or affecting creditors' rights generally and by general
equity principles.
(ii) The execution, delivery and performance by Millennium and
each member of its Group of the Related Agreements to which it or any
member of its Group will be a party and the consummation by it and its
Group of the transactions contemplated thereby will be, as of the
Closing, duly authorized and approved by all necessary corporate or
similar action on its or their part. At the Closing, each of the
Related Agreements to which Millennium or any member of its Group will
be a party will be duly and validly executed and delivered by
Millennium or member and will be upon execution and delivery a legal,
valid and binding obligation, enforceable against it or such member in
accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
laws related to or affecting creditors' rights generally and by
general equity principles.
(c) Lack of Conflicts. Except with respect to the HSR Act as set
-----------------
forth in Section 4.1(d), each of the execution, delivery and performance by
Millennium and each member of its Group of this Agreement and the Related
Agreements to which any of them
-13-
<PAGE>
is or will be a party and the consummation by them of the transactions
contemplated hereby and thereby does not and, as of the Closing, will not
(i) violate (with or without the giving of notice or the lapse of time or
both) any Legal Requirement applicable to any of them or any of their
Subsidiaries, other than those that would not be reasonably likely to have
a Material Adverse Effect with respect to Millennium, (ii) conflict with,
or result in the breach of, any provision of the charter or by-laws of any
of them or any of their Subsidiaries, (iii) result in the creation of any
Encumbrance upon any of their assets, other than those contemplated by this
Agreement or any of the Related Agreements, or those that would not be
reasonably likely to have a Material Adverse Effect with respect to
Millennium, or (iv) violate, conflict with or result in the breach or
termination of or otherwise give any other Person the right to terminate,
or constitute a default, event of default or an event which with notice,
lapse of time or both, would constitute a default or event of default under
the terms of, any contract, indenture, lease, mortgage, Government License
or other agreement or instrument to which any of them or any of their
Subsidiaries is a party or by which the properties or businesses of any of
them or any of their Subsidiaries are bound, except for violations,
conflicts, breaches, terminations and defaults that would not be reasonably
likely to have a Material Adverse Effect with respect to Millennium.
(d) Certain Fees. Neither Millennium nor any of its Affiliates nor any
------------
of its officers, directors or employees, on behalf of it or such
Affiliates, has employed any broker or finder or incurred any other
liability for any financial advisory fees, brokerage fees, commissions or
finders' fees in connection with the transactions contemplated hereby.
(e) Joint Proxy Statement. The Joint Proxy Statement was prepared in
---------------------
all material respects in accordance with the requirements of the Securities
Act, or the Exchange Act, as the case may be, and the rules and regulations
thereunder, and, as of the date of the Stockholders' Meetings and insofar
as it relates to the Subject Business of Millennium, did not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
(f) Title to Millennium Units. Without giving effect to this Agreement
-------------------------
or the transactions contemplated hereby, Millennium LP and Millennium GP
each owns the number of Units set forth in Section 2.1 of the Partnership
Agreement opposite its name. Except as contemplated by this Agreement,
there are no outstanding subscriptions, options, convertible securities,
warrants or calls of any kind issued or granted by, or binding upon, the
Partnership or any member of the Millennium Group to purchase or otherwise
acquire or to sell or otherwise dispose of any security of or equity
interest in the Partnership.
SECTION 3
ADDITIONAL AGREEMENTS
3.1 Access to Information. Each of Occidental and the Partnership agrees
---------------------
that, during the period commencing on the date hereof and ending at the Closing,
(i) it will give or cause to be
-14-
<PAGE>
given to any other Party and its representatives reasonable access during normal
business hours to the offices, plants, properties, books and records relating to
its Subject Business as such other Party may reasonably request, (ii) it will
furnish or cause to be furnished to any other Party, such financial and
operating data and any other information with respect to the business and
properties of its Subject Business as such other Party may reasonably request
(provided such data and information need only be furnished to the extent it was
prepared in the ordinary course) and (iii) any other Party and its
representatives shall be entitled to reasonable access during normal business
hours to the representatives, officers, employees and contractors of such Party
who are involved in its Subject Business as such other Party may reasonably
request; provided, that Lyondell and Millennium also agree to the
--------
foregoing provisions to the extent that any of the foregoing remain in their
possession and have not been transferred to the Partnership; provided,
--------
further that, after consultation, to the extent permissible, with such other
- -------
Party, such Party may restrict access and provision of information to the extent
it reasonably believes necessary to (w) comply with existing confidentiality
agreements with third parties (provided that, upon such other Party's reasonable
request, it shall use its commercially reasonable efforts to secure waivers of
any such confidentiality agreements), (x) ensure compliance with antitrust laws,
(y) preserve the secrecy of confidential information to the extent not related
to its Subject Business and (z) preserve legal privilege; and provided,
--------
further that any access or information obtained by any Party and its
- -------
representatives in accordance with this Section 3.1 and otherwise in connection
with the consummation of the transactions contemplated by this Agreement and the
Related Agreements shall be subject to the terms and conditions of the
Confidentiality Agreement.
3.2 Conduct of the Occidental Subject Business Pending the Closing Date.
-------------------------------------------------------------------
Occidental agrees that, except as required or contemplated by this Agreement or
otherwise consented to or approved in writing by the Partnership, during the
period commencing on the date hereof and ending on the Closing Date, it will and
will cause its Affiliates to:
(a) use its commercially reasonable efforts to operate and maintain
its Subject Business in all material respects only in the usual, regular
and ordinary manner consistent with past practice (including undertaking
scheduled or necessary "turnarounds" or other maintenance work and
including offsite storage, treatment and disposal of chemical substances
generated prior to the Closing) and, to the extent consistent with such
operation and maintenance, use commercially reasonable efforts to preserve
the present business organization of its Subject Business intact, keep
available the services of, and good relations with, the present employees
and preserve present relationships with all persons having business
dealings with its Subject Business, except in each case for such matters
that, individually and in the aggregate, do not and are not reasonably
likely to have a Material Adverse Effect on its Subject Business;
(b) maintain its books, accounts and records relating to its Subject
Business in the usual, regular and ordinary manner, on a basis consistent
with past practice, comply in all material respects with all Legal
Requirements and contractual obligations applicable to its Subject Business
or to the conduct of its Subject Business and perform all of its material
obligations relating to its Subject Business;
-15-
<PAGE>
(c) not (i) modify or change in any material respect any of its
Contributed Assets or dispose of any material Contributed Asset except for
(A) inventory, equipment, supplies and other Contributed Assets sold or
otherwise disposed of in the ordinary course of business and (B) any
Contributed Assets that in the ordinary course of business are replaced
with substantially similar Contributed Assets, (ii) except in the ordinary
course of business after consultation with the Partnership, (x) enter into
any contract, commitment or agreement that would be material to the
operation of its Subject Business or use of the Contributed Assets or,
except as expressly contemplated by this Agreement or expressly
contemplated by or required pursuant to their respective terms, modify or
change in any material respect any obligation under any such contract,
commitment or agreement, (y) modify or change in any material respect any
obligation under its Government Licenses, (z) modify or change in any
material respect the manner in which the products produced by its Subject
Business are marketed and sold, or (iii) enter into interest rate
protection or other hedging agreements (except for hydrocarbon hedging
agreements entered into in the ordinary course and expiring prior to
December 31, 1998) relating to its Subject Business;
(d) not waive any material claims or rights relating to its Subject
Business;
(e) after obtaining Knowledge thereof, give notice to the Partnership
of any claim or litigation (threatened or instituted) or any other event or
occurrence which could reasonably be expected to have a Material Adverse
Effect on its Contributed Assets or Subject Business, other than the types
of events, occurrences or other matters referred to in the proviso set
forth in Section 2.2(f)(iii);
(f) not take any action that is reasonably likely to result in its
representations and warranties in Section 2 hereof, or in the form of
Occidental Contribution Agreement, not being true in all material respects
as of the Closing Date; and
(g) not agree, whether in writing or otherwise, to take any action it
has agreed pursuant to this Section 3.2 not to take;
provided, however, that notwithstanding anything to the contrary contained in
- -------- -------
this Section 3.2, prior to the Closing Date the Occidental Group and the
Partnership will act independently of each other in making decisions as to the
research and development, raw materials, manufacturing, pricing, marketing and
distribution of their products. It is acknowledged by the Parties that the
Originator Receivables Sale Agreement dated as of October 27, 1998, by and among
Occidental Receivables Inc., OCC and other parties, has been terminated with
respect to Oxy Petrochemicals.
3.3 Conduct of the Partnership Subject Business Pending the Closing Date.
--------------------------------------------------------------------
The Partnership agrees that, except as required or contemplated by approvals or
authorizations (including the Strategic Plan) by or of the Partnership
Governance Committee prior to the date hereof or by this Agreement (including,
without limitation, Schedule 3.3 hereto) or otherwise consented to or approved
in writing by Occidental, during the period commencing on the date hereof and
ending on the Closing Date, it will and will cause its Affiliates to:
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<PAGE>
(a) use its commercially reasonable efforts to operate and maintain
its Subject Business in all material respects only in a usual, regular and
ordinary manner consistent with the Strategic Plan (including undertaking
scheduled or necessary "turnarounds" or other maintenance work and
including offsite storage, treatment and disposal of chemical substances
generated prior to the Closing) and, to the extent consistent with such
operation and maintenance, use commercially reasonable efforts to preserve
the present business organization of its Subject Business intact, keep
available the services of, and good relations with, the present employees
and preserve present relationships with all persons having business
dealings with its Subject Business, except in each case for such matters
that, individually and in the aggregate, do not and are not reasonably
likely to have a Material Adverse Effect on its Subject Business;
(b) maintain its books, accounts and records relating to its Subject
Business in the usual, regular and ordinary manner, comply in all material
respects with all Legal Requirements and contractual obligations applicable
to its Subject Business or to the conduct of its Subject Business and
perform all of its material obligations relating to its Subject Business;
(c) not (i) modify or change in any material respect any of its assets
or dispose of any material asset except for (A) inventory, equipment,
supplies and other assets sold or otherwise disposed of in the ordinary
course of business and (B) any assets that in the ordinary course of
business are replaced with substantially similar assets, (ii) except in the
ordinary course of business after consultation with Occidental, (x) enter
into any contract, commitment or agreement that would be material to the
operation of its Subject Business or use of its assets or, except as
expressly contemplated by this Agreement or expressly contemplated by or
required pursuant to their respective terms, modify or change in any
material respect any obligation under any such contract, commitment or
agreement, (y) modify or change in any material respect any obligation
under its Government Licenses, (z) modify or change in any material respect
the manner in which the products produced by its Subject Business are
marketed and sold, or (iii) enter into interest rate protection or other
hedging agreements (except for hydrocarbon hedging agreements entered into
in the ordinary course and expiring prior to December 31, 1998) relating to
its Subject Business; provided, that, for purposes of (i) and (ii),
"material" shall mean a change or modification that is subject to the
unanimous voting requirement of Section 6.7 of the Partnership Agreement;
(d) not waive any material claims or rights relating to its Subject
Business;
(e) after obtaining Knowledge thereof, give notice to Occidental of
any claim or litigation (threatened or instituted) or any other event or
occurrence which could reasonably be expected to have a Material Adverse
Effect on its assets or Subject Business, other than the types of events,
occurrences or other matters referred to in the proviso set forth in
Section 2.1(f)(iii);
(f) not take any action that is reasonably likely to result in its
representations and warranties in Section 2 hereof not being true in all
material respects as of the Closing Date;
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<PAGE>
(g) not to make any distributions that are not in compliance with
Section 3.1 of the Partnership Agreement; and
(h) not agree, whether in writing or otherwise, to take any action it
has agreed pursuant to this Section 3.3 not to take;
provided, however, that notwithstanding anything to the contrary contained in
- -------- -------
this Section 3.3, prior to the Closing Date the Occidental Group and the
Partnership will act independently of each other in making decisions as to the
research and development, raw materials, manufacturing, pricing, marketing and
distribution of their products.
3.4 Further Actions.
---------------
(a) Each Party will use its commercially reasonable efforts to take,
or cause to be taken, all other action and do, or cause to be done, all
other things necessary, proper or appropriate to resolve the objections, if
any, as may be asserted by any Authority with respect to the transactions
contemplated hereby under any antitrust laws or regulations; provided that
no Party shall be required to take any action that could have any material
adverse effect on its or its Affiliates' business, operations, prospects,
assets, condition (financial or otherwise) or results of operations or that
would, or would be reasonably likely to, materially frustrate the financial
or other business benefits reasonably expected to be derived by any Party
from the transactions contemplated by this Agreement.
(b) Subject to the terms and conditions hereof, each Party agrees to
act in good faith and to use its commercially reasonable efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement and under the Related
Agreements to be entered into by such Party or its Affiliates at Closing,
and to confirm that such transactions have been accomplished, including
without limitation, using all commercially reasonable efforts: (i) to
obtain and effect prior to the Closing Date all necessary Consents and
Filings; and (ii) to, in the case of Occidental, obtain prior to the
Closing Date all Government Licenses or consents to the transfer of any
Government Licenses that are transferable by it or its Affiliates necessary
to consummate the transactions contemplated hereby and by the Related
Agreements and to allow for the prudent and uninterrupted operation of the
Subject Business by the Partnership after the Closing. Each Party shall
furnish to the other Party and its Affiliates such necessary information
and assistance as the other may reasonably request in connection with its
preparation of any such Filings or other materials required in connection
with the foregoing.
(c) Occidental shall use its commercially reasonable efforts to
procure all Consents that are necessary to transfer its Subject Business to
the Partnership. Notwithstanding any other provision of this Agreement to
the contrary, the Parties hereto acknowledge and agree that at the Closing
Occidental or any Occidental Partner, as applicable, will not assign to the
Partnership any Contract or warranties which by their terms require Consent
from any other contracting party thereto unless any such Consent has been
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<PAGE>
obtained prior to the Closing Date. Before the Closing, the other Parties
and the Partnership will use their commercially reasonable efforts and
cooperate with Occidental and the Occidental Partners (together, the
"Contracting Party") in obtaining any necessary Consents to the assignment
of the Contracts, including, without limitation, by furnishing to the
Contracting Party or other parties to any Contract summary financial
information and other information with respect to the Partnership
reasonably requested by the Contracting Party or such other parties and
taking any such other actions (which, subject to any provisions to the
contrary included in any Related Agreement, shall not include the
incurrence of any expense not otherwise required to be incurred) as the
Contracting Party or such other parties may reasonably request for the
purpose of obtaining any releases, waivers or terminations as the
Contracting Party may reasonably request on behalf of itself or any
Affiliate. No representation is made by the Contracting Party with respect
to whether any Consent to assign a Contract will be obtainable, and in no
event shall the initial capital contributions be subject to reduction as a
result of any Contract not being assigned to the Partnership at the Closing
by virtue of the necessary Consent not being obtained. Following the
Closing, the Partnership, Occidental and the Occidental Partners shall
cooperate with each other and use commercially reasonable efforts to obtain
those Consents that were not obtained prior to the Closing and (i) if such
Consents are obtained following the Closing, Occidental and the Occidental
Partners shall execute and deliver any other and further instruments of
assignment, assumption, transfer and conveyance and take such other and
further action as the Partnership may request in order to assign to the
Partnership any Contract or warranties to which such Consents relate and
(ii) pending such transfer or issuance to the Partnership, shall provide,
to the extent it may lawfully do so, the Partnership with the benefits of
any such Contracts, in which case, as provided for in the Occidental
Contribution Agreement, the Partnership shall promptly assume and discharge
(or reimburse Occidental or its Affiliate for) all obligations and
liabilities associated with the benefits of such Contracts so made
available to the Partnership.
(d) Occidental shall keep each other Party fully informed from time to
time as any other Party shall reasonably request as to the status of all
Consents being sought by Occidental or a Occidental Partner pursuant to
Section 3.4(c).
(e) Each Party shall furnish to the other Party such information,
cooperation and assistance as reasonably may be requested in connection
with the foregoing.
(f) Each Party shall negotiate and otherwise act in good faith to
complete, execute and deliver the Related Agreements at the Closing and to
effect the Closing at the earliest practicable date.
3.5 Notifications. Each Party shall notify the other Parties and keep
-------------
them advised as to (i) any litigation or administrative proceeding that is
either pending or, to its Knowledge, threatened against such Party which
challenges the transactions contemplated hereby; (ii) in the case of the
Partnership or Occidental, any material damage to or destruction of its Subject
Business and (iii) any fact of which such Party has Knowledge that indicates
that any condition to Closing is reasonably likely not to be satisfied in a
timely fashion.
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<PAGE>
3.6 Employee Matters.
----------------
(a) Substantially all employees of Occidental, OCC, Oxy Petrochemicals
or one of the Occidental Partners who are associated primarily with
Occidental's Subject Business shall be offered employment with the
Partnership pursuant to the terms of the Occidental Contribution Agreement.
(b) The Partnership shall provide benefits to such employees who
become employees of the Partnership under the benefit plans and programs of
the Partnership upon employment with the Partnership, subject to the more
specific provisions of the Occidental Contribution Agreement.
(c) No provision of this Agreement shall require OCC, Oxy
Petrochemicals or any of the Occidental Partners to fail to comply with the
terms of any current collective bargaining agreement.
3.7 Partnership Unanimous Consent Items. No action that requires the
-----------------------------------
consent of Representatives of both Lyondell and Millennium pursuant to Section
6.7 of the Partnership Agreement shall be taken prior to the Closing without the
consent of Occidental (other than actions regarding this Agreement and the
transactions contemplated hereby).
SECTION 4
CONDITIONS TO CLOSING
4.1 Conditions Precedent to Obligations of All Parties. The respective
--------------------------------------------------
obligations of the Parties to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction on or prior to the Closing Date
of each of the following conditions:
(a) No Injunction, etc. No preliminary or permanent injunction or
-------------------
other order issued by any federal or state court of competent jurisdiction
in the United States or by any United States federal or state governmental
or regulatory body or any statute, rule, regulation or executive order
promulgated or enacted by any United States federal or state governmental
authority shall be in effect which materially restrains, enjoins or
otherwise prohibits (i) the transactions contemplated hereby; (ii) the
ownership by the Partnership (including enjoyment of any rights relating
thereto) of its Subject Business or Occidental's Subject Business at and
after the Closing; or (iii) the operation by the Partnership of its Subject
Business or Occidental's Subject Business at and after the Closing; and no
Proceeding seeking any such injunction or order shall be pending; provided,
--------
that before any determination is made to the effect that this condition has
not been satisfied, each Party shall each use commercially reasonable
efforts to have such order or injunction lifted, vacated or dismissed.
(b) Tier 2 Related Agreements. The Parties shall have reached
-------------------------
agreement with respect to definitive execution forms of the Tier 2 Related
Agreements in accordance with Section 1.2.
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<PAGE>
(c) Government Licenses and Consents. Occidental shall have obtained
--------------------------------
and effected all Government Licenses and Consents required from any
Authority for the consummation of the transactions contemplated hereunder
and under the Related Agreements to be entered into at the Closing and
required to allow for the prudent and uninterrupted operation of its
Subject Business by the Partnership after the Closing in a manner
consistent with past practices, except for those Government Licenses and
Consents, the absence of which is not, in the aggregate, reasonably likely
to have a Material Adverse Effect with respect to Occidental's Subject
Business.
(d) HSR Act. The waiting period applicable to the Closing under the
-------
HSR Act shall have expired or been terminated, and no consent, approval,
permit or authorization in connection therewith shall impose terms or
conditions that would have, or would be reasonably likely to have, a
material adverse effect on any Party (assuming the Closing has taken place)
or that would, or would be reasonably likely to, materially frustrate the
financial or other business benefits reasonably expected to be derived by
any Party from the transactions contemplated by this Agreement.
4.2 Conditions Precedent to Obligations of the Partnership. The
------------------------------------------------------
obligations of the Partnership under this Agreement are subject to the
satisfaction (or waiver by the Partnership) on or prior to the Closing Date of
each of the following conditions:
(a) Accuracy of Representations and Warranties. Notwithstanding any
------------------------------------------
investigation, inspection or evaluation conducted or notice or Knowledge
obtained by any member of the Equistar Group, all representations and
warranties of members of the Occidental Group contained in this Agreement
and the Related Agreements that contain qualifications and exceptions
relating to materiality or Material Adverse Effect shall be true and
correct on and as of the Closing Date, and all other representations and
warranties of the members of such Group contained in such agreements shall
be true and correct in all material respects as of the Closing Date.
(b) Performance of Agreements. Occidental and its Affiliates shall
-------------------------
in all material respects have performed and complied with all obligations
and agreements contained in this Agreement, and executed all agreements and
documents (including the Tier 1 Related Agreements and the Tier 2 Related
Agreements) to be performed, complied with or executed by it or them on or
prior to the Closing Date.
(c) No Material Adverse Change. After the date of this Agreement, no
--------------------------
event, occurrence or other matter shall have occurred that is reasonably
likely to have a Material Adverse Effect with respect to Occidental's
Subject Business, provided that this determination shall be made without
regard to any change in general economic or political conditions or any
change in raw materials prices, product prices, industry capacity or other
matter of industry-wide application that affects the Partnership's Subject
Business and Occidental's Subject Business in a substantially similar way.
-21-
<PAGE>
(d) Officer's Certificates. The Partnership shall have received a
----------------------
certificate, dated the Closing Date, signed by the President or a Vice
President of Occidental to the effect that, to the Knowledge of Occidental,
the conditions specified in the above paragraphs have been fulfilled.
4.3 Conditions Precedent to Obligations of Occidental. The obligations of
-------------------------------------------------
Occidental under this Agreement are subject to the satisfaction (or waiver by
Occidental) on or prior to the Closing Date of each of the following conditions:
(a) Accuracy of Representations and Warranties. Notwithstanding any
------------------------------------------
investigation, inspection or evaluation conducted or notice or Knowledge
obtained by any member of the Occidental Group, all representations and
warranties of the Partnership and of members of the Lyondell Group and the
Millennium Group contained in this Agreement and the Related Agreements
that contain qualifications and exceptions relating to materiality or
Material Adverse Effect shall be true and correct on and as of the Closing
Date, and all other representations and warranties of such Persons
contained in such agreements shall be true and correct in all material
respects as of the Closing Date.
(b) Performance of Agreements. Each of the Partnership, Lyondell and
-------------------------
its Affiliates and Millennium and its Affiliates shall in all material
respects have performed and complied with all obligations and agreements
contained in this Agreement, and executed all agreements and documents
(including the Tier 1 Related Agreements and the Tier 2 Related Agreements)
to be performed, complied with or executed by it or them on or prior to the
Closing Date.
(c) No Material Adverse Change. After the date of this Agreement, no
--------------------------
event, occurrence or other matter shall have occurred that is reasonably
likely to have a Material Adverse Effect with respect to the Partnership's
Subject Business, provided that this determination shall be made without
regard to any change in general economic or political conditions or any
change in raw materials prices, product prices, industry capacity or other
matter of industry-wide application that affects the Partnership's Subject
Business and Occidental's Subject Business in a substantially similar way.
(d) Board of Directors Approval. This Agreement and the Tier 1
---------------------------
Related Agreements, and the transactions contemplated by such agreements,
shall have been duly authorized and approved by Occidental's board of
directors.
(e) Officer's Certificates. Occidental shall have received
----------------------
certificates, dated the Closing Date, signed by the President or a Vice
President of each of the Partnership, Lyondell and Millennium to the effect
that, to the Knowledge of such Party, the conditions specified in the above
paragraphs have been fulfilled; provided, that, with respect to the
-------- ----
conditions set forth in Sections 4.3(a) and 4.3(b), such certificates shall
only concern the accuracy of representations and warranties and performance
of agreements of the Partnership, the Lyondell Group and the Millennium
Group, respectively.
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<PAGE>
(f) Third Party Consents. All Consents of any third party listed on
--------------------
Schedule 4.3(f) shall have been obtained.
SECTION 5
TERMINATION AND WAIVER
5.1 General. This Agreement may be terminated and the transactions
-------
contemplated herein and in the Related Agreements may be abandoned at any time
prior to the Closing:
(a) by the written consent of the Parties;
(b) by the Partnership, by notice to Occidental, if there has been a
material misrepresentation or a breach of an agreement by Occidental in
this Agreement that (i) if such misrepresentation or breach existed on the
Closing Date, would constitute a failure to satisfy the conditions to
Closing set forth in Section 4.2(b) and (ii) has not been cured and cannot
reasonably be cured within 30 days after all other conditions to Closing
have been satisfied;
(c) by Occidental, by notice to the Partnership, if there has been a
material misrepresentation or a breach of an agreement by any of the
Partnership, Lyondell or Millennium in this Agreement that (i) if such
misrepresentation or breach existed on the Closing Date, would constitute a
failure to satisfy the conditions to Closing set forth in Section 4.3(b)
and (ii) has not been cured and cannot reasonably be cured within 30 days
after all other conditions to Closing have been satisfied;
(d) by any Party, by notice to each other Party, if after the date
hereof and prior to the Closing any final, non-appealable order or
injunction shall be issued by any federal or state court of competent
jurisdiction in the United States or by any United States Authority, or any
Legal Requirement shall be promulgated or enacted by any United States
Authority, that would have the effect of prohibiting or making unlawful the
performance of this Agreement, the execution, delivery or performance of
any Related Agreement or the consummation of the Closing; and
(e) by any Party, by notice to each other Party, in the event that,
for any reason, the Closing does not occur on or before December 31, 1998;
provided, however, that if the Closing does not occur due to the act or
-------- -------
omission of one of the Parties, that Party may not terminate this Agreement
pursuant to the provisions of this Section 5.1(e).
5.2 Effect of Termination. In the event of any termination of this
---------------------
Agreement as provided above, this Agreement shall forthwith become wholly void
and of no further force and effect and there shall be no liability on the part
of any Party, its Subsidiaries or their respective officers or directors;
provided, however, that upon any such termination the obligations of the Parties
- -------- -------
with respect to this Section 5, expenses under Section 6.10 and confidentiality
under Section 6.6 shall remain in full force and effect; and provided, further,
-------- -------
that nothing herein will relieve any party from liability for damages for any
breach of this Agreement.
-23-
<PAGE>
SECTION 6
MISCELLANEOUS
6.1 Successors and Assigns. Except as may be expressly provided herein,
----------------------
this Agreement shall be binding upon and inure to the benefit of the successors
of all of the Parties. No Party may otherwise assign or delegate any of its
rights or obligations under this Agreement without the prior written consent of
all of the other Parties, which consent shall be in the sole and absolute
discretion of each such Party. Any purported assignment or delegation without
such consent shall be void and ineffective.
6.2 Benefits of Agreement Restricted to Parties. This Agreement is made
-------------------------------------------
solely for the benefit of the Parties, and no other Person (including employees)
shall have any right, claim or cause of action under or by virtue of this
Agreement.
6.3 Notices. All notices, requests 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 with proof of
confirmation from the transmitting machine or (ii) delivered by commercial
courier or other hand delivery, as follows:
Equistar Chemicals, LP: Occidental Petroleum Corporation:
Gerald A. O'Brien 10889 Wilshire Boulevard
Vice President and Secretary Los Angeles, California 90024
Equistar Chemicals, LP Attention: President
1221 McKinney Street Telecopy Number: (310) 443-6977
Houston, Texas 77010
Telecopy Number: (713) 309-4718
with a copy to: with a copy to:
Baker & Botts, L.L.P. Occidental Petroleum Corporation
910 Louisiana Street 10889 Wilshire Boulevard
Houston, Texas 77002 Los Angeles, California 90024
Attention: Stephen A. Massad Attention: General Counsel
Telecopy Number: (713) 229-1522 Telecopy Number: (310) 443-6333
Lyondell Petrochemical Company: Millennium Chemicals Inc.:
Kerry A. Galvin George H. Hempstead, III
Chief Corporate Counsel and Senior Vice President,
Corporate Secretary Law and Administration and Secretary
Lyondell Petrochemical Company Millennium Chemicals Inc.
1221 McKinney Street 99 Wood Avenue South
Houston, Texas 77010 Iselin, New Jersey 08830
Telecopy Number: (713) 309-4718 Telecopy Number: 908-603-6857
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<PAGE>
6.4 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 of the Parties, be deemed
severed from this Agreement and every other provision of this Agreement shall
remain in full force and effect.
6.5 Press Releases. Unless otherwise mutually agreed, no Party shall make
--------------
or authorize any public release of information regarding the matters
contemplated by, or any provisions or terms of, this Agreement or the Related
Agreements, and Occidental shall not make or authorize any public release of
information regarding the Partnership, except (i) that a press release or press
releases in mutually agreed upon form or forms shall be issued by the Parties as
promptly as is practicable following the execution of this Agreement, (ii) that
the Parties may, after consultation with each other, communicate with employees,
customers, suppliers, stockholders, lenders, lessors, and other particular
groups as may be necessary or appropriate and not inconsistent with the prompt
consummation of the transactions contemplated by this Agreement and (iii) after
consultation with each other, as required by law or stock exchange rule or as
necessary for the assertion or enforcement of contractual rights.
6.6 Confidentiality Agreement. Lyondell, on behalf of the Partnership,
-------------------------
and Occidental have heretofore entered into the Confidentiality Agreement
relating to the exchange between Lyondell and the Partnership, on the one hand,
and Occidental and the Occidental Partners, on the other hand, of certain
confidential information related or otherwise pertinent to the transactions
contemplated by this Agreement. Nothing in this Agreement shall be construed as
impairing or otherwise limiting the obligations assumed pursuant to the
Confidentiality Agreement by the parties thereto. The Confidentiality Agreement
shall remain in full force and effect in accordance with its terms until the
earlier of Closing or its expiration date. The Partnership and Millennium shall
be bound by, and shall be entitled to the benefits of, such Confidentiality
Agreement to the same extent as if they were parties thereto.
6.7 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 provisions of this Agreement and not as an aid in construction;
(ii) no consideration shall be given to the fact or presumption that any of the
Parties 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; (vii) each exhibit, appendix,
attachment and schedule to this Agreement is a part of this Agreement; and
(viii) any reference herein or in any schedule hereto to any agreements entered
into prior to the date hereof shall include any amendments or supplements made
thereto.
6.8 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.
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<PAGE>
6.9 Governing Law. The laws of the State of Delaware shall govern the
-------------
construction, interpretation and effect of this Agreement without giving effect
to any conflicts of law principles.
6.1 Transaction Costs.
-----------------
(a) Subject to subsection (b) and Section 2.8 of the Occidental
--------------
Contribution Agreement, and except as provided on Schedule 6.10, all
reasonable out-of-pocket costs, fees and expenses incurred at any time by
any Party in connection with the negotiation, execution and delivery of
this Agreement, the satisfaction of the conditions to Closing under this
Agreement and the consummation of the transactions contemplated hereby
shall be reimbursed by the Partnership (if the cost, fee or expense was
incurred by a Party other than the Partnership) and if incurred or
reimbursed by the Partnership shall be shared by Lyondell, Millennium and
Occidental pro rata in accordance with the relative interests to be held by
their Subsidiaries in the Partnership after Closing; provided, however,
-------- -------
that if any one expense item or series of directly related expenses exceeds
$5 million, all of such expense or expenses in excess of such $5 million
shall be paid by the Party incurring such expense.
(b) Notwithstanding the foregoing, each Party shall be solely
responsible for and bear all of its own respective costs, fees and expenses
if this Agreement is terminated and the Closing does not occur.
6.1 Amendment. All waivers, modifications, amendments or alterations of
---------
this Agreement shall require the written approval of each of the Parties.
Except as provided in the preceding sentence, no action taken pursuant to this
Agreement, including any investigation by or on behalf of any Party, shall be
deemed to constitute a waiver by the Party taking such action of compliance with
any representations, warranties, covenants or agreements contained herein and in
any documents delivered or to be delivered pursuant to this Agreement and in
connection with the Closing hereunder. The waiver by any Party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach.
6.1 Jurisdiction; Consent to Service of Process; Waiver. ANY JUDICIAL
---------------------------------------------------
PROCEEDING BROUGHT AGAINST ANY PARTY TO THIS AGREEMENT 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 DELAWARE, AND,
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES TO THIS
AGREEMENT 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 PARTIES TO THIS AGREEMENT SHALL
APPOINT THE CORPORATION TRUST COMPANY, 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 DELAWARE, AND
EACH OF THE PARTIES TO THIS AGREEMENT SHALL MAINTAIN THE APPOINTMENT OF SUCH
AGENT (OR A SUBSTITUTE AGENT) FROM THE DATE HEREOF UNTIL THE EARLIER OF THE
CLOSING DATE OR THE TERMINATION OF THIS
-26-
<PAGE>
AGREEMENT AND SATISFACTION OF ALL OBLIGATIONS HEREUNDER. 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 DELAWARE
FOR ANY PURPOSE EXCEPT AS PROVIDED ABOVE AND SHALL NOT BE DEEMED TO CONFER
RIGHTS ON ANY PERSON OTHER THAN THE PARTIES HERETO. EACH PARTY HEREBY WAIVES ANY
OBJECTION IT MAY HAVE BASED ON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR
FORUM NON-CONVENIENS.
- --------------------
6.1 Waiver of Jury Trial. EACH PARTY HEREBY KNOWINGLY AND INTENTIONALLY,
--------------------
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
6.1 Action by the Partnership. Any determination (including as to the
-------------------------
satisfaction of any and all conditions precedent to the obligations of the
Partnership set forth in Section 4.2 of this Agreement), consent, approval,
waiver, other action or right to be made, given, taken or exercised by the
Partnership pursuant to or as contemplated by this Agreement shall be subject to
the Partnership Governance Committee unanimous voting requirements set forth in
Section 6.7 of the Partnership Agreement; provided, however, that the
-------- -------
Partnership's exercise of its right of termination set forth in Section 5.1(b)
of this Agreement shall only require the approval of either two or more
Representatives of Lyondell or two or more Representatives of Millennium, acting
separately.
[SIGNATURE PAGES FOLLOW]
-27-
<PAGE>
IN WITNESS WHEREOF, this Master Transaction Agreement has been executed on
behalf of each of the Parties, by their respective officers thereunto duly
authorized, effective as of the date first written above.
EQUISTAR CHEMICALS, LP
By: /s/ Eugene R. Allspach
---------------------------------------------
Name: Eugene R. Allspach
Title: President and Chief Operating Officer
OCCIDENTAL PETROLEUM CORPORATION
By: /s/ S.P. Dominick, Jr.
---------------------------------------------
Name: S.P. Dominick, Jr.
Title: Vice President and Controller
LYONDELL PETROCHEMICAL COMPANY
By: /s/ Dan F. Smith
---------------------------------------------
Name: Dan F. Smith
Title: Chief Executive Officer
MILLENNIUM CHEMICALS INC.
By: /s/ George H. Hempstead, III
---------------------------------------------
Name: George H. Hempstead, III
Title: Senior Vice President
[Signature Page to Master Transaction Agreement]
-28-
<PAGE>
APPENDIX A
TO
MASTER TRANSACTION AGREEMENT
DEFINITIONS
-----------
"Affiliate" shall mean any Person that, directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with the Person specified; provided, however, that for purposes of this
-------- -------
Agreement (i) Canadian Occidental Petroleum Ltd. and any entities controlled by
it shall not be considered an Affiliate of the Occidental Group, (ii) Suburban
Propane Partners, L.P. and any entities controlled by it shall not be considered
an Affiliate of the Millennium Group, (iii) neither the Partnership nor any
entity controlled by it shall be considered an Affiliate of the Occidental
Group, the Lyondell Group or the Millennium Group, (iv) no member of the
Occidental Group, the Lyondell Group or the Millennium Group shall be considered
an Affiliate of the Partnership and (v) the Partnership shall not be considered
an Affiliate of any member of the Occidental Group, the Lyondell Group or the
Millennium Group. For purposes of this definition, the term "control" shall
have the meaning set forth in 17 CFR 230.405, as in effect on the date hereof.
"Agreement" shall mean this Master Transaction Agreement entered into between
the Parties as of the date hereof.
"Amended and Restated Partnership Agreement" shall mean that certain Amended and
Restated Partnership Agreement of the Partnership to be executed and delivered
at the Closing in substantially the form attached hereto as Exhibit A.
"Assumed Liabilities" shall have the meaning assigned to such term in the
Occidental Contribution Agreement.
"Authority" shall mean any government or governmental or regulatory body
thereof, or political subdivision thereof, whether federal, state, local or
foreign, or any agency, department or instrumentality thereof, or any court or
arbitrator (public or private).
"Business Day" shall mean any day other than a Saturday, Sunday or other day on
which banks are closed in New York City, New York.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Closing" shall have the meaning set forth in the seventh WHEREAS clause of this
Agreement.
"Closing Date" shall have the meaning set forth in Section 1.3.
"Confidentiality Agreement" shall mean that certain Confidentiality Agreement
dated December 11, 1997 between Lyondell and Occidental.
A-1
<PAGE>
"Consent" shall mean any consent, waiver, approval, authorization, exemption,
registration, license or declaration of or by any other Person or any Authority,
or any expiration or termination of any applicable waiting period under any
Legal Requirement, required with respect to any Party or any party to the
Related Agreements in connection with (i) the execution and delivery of this
Agreement or any of the Related Agreements or (ii) the consummation of any of
the transactions provided for hereby or thereby.
"Contracts" shall have the meaning assigned to such term in the Occidental
Contribution Agreement.
"Contributed Assets" shall have the meaning assigned to the term "Assets" in the
Occidental Contribution Agreement.
"Encumbrance" shall mean any lien, charge, encumbrance, security interest, title
defect, option or any other restriction or third-party right.
"ERISA" shall mean the Employee Retirement Income Security Act, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Equistar Group" shall mean the Partnership, the Initial Partners, Lyondell,
Millennium and Millennium Petrochemicals.
"Filing" shall mean any filing with any Person or any Authority required with
respect to any Party in connection with (i) the execution and delivery of this
Agreement or any of the Related Agreements or (ii) the consummation of any of
the transactions provided for hereby or thereby.
"GAAP" shall have the meaning set forth in Section 2.1(e).
"Government License" shall have the meaning assigned to such term in the
Occidental Contribution Agreement.
"Group" shall mean the Equistar Group, the Occidental Group, the Lyondell Group
or the Millennium Group, as appropriate.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Initial Master Transaction Agreement" shall mean the Master Transaction
Agreement dated July 25, 1997, between Lyondell and Millennium, as amended.
"Initial Partners" shall mean Lyondell LP, Lyondell GP, Millennium LP and
Millennium GP.
"Joint Proxy Statement" shall mean the Joint Proxy Statement of Lyondell and
Millennium dated October 17, 1997.
A-2
<PAGE>
"Knowledge" shall mean with respect to any Party the actual knowledge of (i) any
current plant manager, (ii) any current officer of such Party having
responsibilities with respect to an applicable Subject Business or the
transactions contemplated in this Agreement, (iii) in the case of Occidental,
any current officer of OCC, Oxy Petrochemicals or of an Occidental Partner
having responsibilities with respect to Occidental's Subject Business or the
transactions contemplated in this Agreement, and (iv) any current employee
reporting directly to an officer described in clause (ii) or (iii).
"Legal Requirement" shall mean any law, statute, rule, ordinance, decree,
regulation, requirement, order or judgment of any Authority including the terms
of any Government License.
"Lyondell" shall have the meaning set forth in the first paragraph of this
Agreement.
"Lyondell Asset Contribution Agreement" shall mean that certain Asset
Contribution Agreement dated December 1, 1997, to which Lyondell and the
Partnership are parties.
"Lyondell GP" shall mean Lyondell Petrochemical G.P. Inc., a Delaware
corporation and a wholly owned Subsidiary of Lyondell.
"Lyondell Group" shall mean Lyondell, Lyondell LP and Lyondell GP.
"Lyondell LP" shall mean Lyondell Petrochemical L.P. Inc., a Delaware
corporation and a wholly owned Subsidiary of Lyondell.
"Lyondell Note" shall mean that certain promissory note in the aggregate
principal amount of $345 million dated December 1, 1997 payable to the
Partnership by Lyondell LP.
"Material Adverse Effect" shall mean any adverse circumstance or consequence
that, individually or in the aggregate, has an effect that is material to the
financial condition, results of operations, assets or business of the applicable
Party or Subject Business (taken as a whole), as the case may be.
"Millennium" shall have the meaning set forth in the first paragraph of this
Agreement.
"Millennium Asset Contribution Agreement" shall mean that certain Asset
Contribution Agreement dated December 1, 1997, to which Millennium
Petrochemicals and the Partnership are parties.
"Millennium GP" shall mean Millennium GP LLC, a Delaware limited liability
company and an indirect, wholly owned Subsidiary of Millennium.
"Millennium Group" shall mean Millennium, Millennium Petrochemicals, Millennium
LP and Millennium GP.
"Millennium LP" shall mean Millennium LP LLC, a Delaware limited liability
company and an indirect, wholly owned Subsidiary of Millennium.
A-3
<PAGE>
"Millennium Petrochemicals" shall have the meaning set forth in the third
WHEREAS clause of this Agreement.
"Occidental" shall have the meaning set forth in the first paragraph of this
Agreement.
"Occidental Contribution Agreement" shall mean that certain Agreement and Plan
of Merger and Asset Contribution between the Occidental Partners, Oxy
Petrochemicals and the Partnership to be executed and delivered at the Closing
in substantially the form attached hereto as Exhibit B.
"Occidental Assumed Debt" shall mean the Lease Intended for Security, dated
December 18, 1991, among OCC, the institutions listed on Schedule I thereto,
Norwest Bank Minnesota, National Association, as Agent and Chemical Bank and the
Bank of Nova Scotia, as Information Agents, and having an amount outstanding as
of the date of this Agreement of $205 million.
"Occidental Group" shall mean Occidental, OCC, Oxy CH, and the Occidental
Partners and, prior to the Closing, Oxy Petrochemicals.
"Occidental Partners" shall mean PDG Chemical, OCC Sub and Oxy CH Sub.
"OCC" shall have the meaning set forth in the fourth WHEREAS clause of this
Agreement.
"OCC Sub" shall have the meaning set forth in the fourth WHEREAS clause.
"Oxy CH" shall have the meaning set forth in the fourth WHEREAS clause of this
Agreement.
"Oxy CH Sub" shall have the meaning set forth in the fourth WHEREAS clause of
this Agreement.
"Oxy Petrochemicals" shall have the meaning set forth in Section 1.5(d).
"Parties" shall have the meaning set forth in the seventh WHEREAS clause of this
Agreement.
"Partnership" shall have the meaning set forth in the first paragraph of this
Agreement.
"Partnership Agreement" shall mean the Agreement of Limited Partnership of the
Partnership dated October 10, 1997.
"Partnership Governance Committee" shall mean the "Partnership Governance
Committee" as defined in the Partnership Agreement.
"PDG Chemical" shall have the meaning set forth in the fourth WHEREAS clause of
this Agreement.
"Person" shall mean any natural person, corporation, partnership, limited
liability company, joint venture, association, trust or other entity or
organization.
A-4
<PAGE>
"Proceeding" shall mean any action, suit, claim or legal, administrative or
arbitration proceeding or governmental investigation to which any Party or an
Affiliate is a party.
"Related Agreements" shall mean the Tier 1 Related Agreements and the Tier 2
Related Agreements.
"Representatives" shall mean the "Representatives," as defined in the
Partnership Agreement.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Reports" shall have the meaning set forth in Section 2.2.(e).
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Stockholders' Meetings" shall mean the special stockholders meetings of each of
Lyondell and Millennium held November 20, 1997.
"Strategic Plan" shall mean the Five-Year Strategic Plan adopted by the
Partnership Governance Committee, as amended and modified prior to the date
hereof pursuant to action of the Partnership Governance Committee, as set forth
in minutes of their meetings.
"Subject Business" shall mean (i) in the case of Occidental, the "Contributed
Business" as defined in the Occidental Contribution Agreement, including the
Contributed Assets and the Assumed Liabilities related thereto; (ii) in the case
of each of Lyondell and Millennium, their respective "Contributed Businesses" as
defined in their respective Asset Contribution Agreements dated December 1,
1997; and (iii) in the case of the Partnership, the business of the Partnership,
which consists substantially of the Subject Business of Lyondell and Millennium.
"Subsidiary" shall mean, with respect to any Party, any Person of which such
Party, either directly or indirectly, owns 50% or more of the equity or voting
interests, except, in the case of Lyondell, Lyondell-CITGO Refining Company Ltd.
and Equistar Chemicals, LP.
"Tier 1 Related Agreements" shall mean those agreements so designated on
Appendix B, forms of each of which (including forms of the exhibits and certain
of the schedules thereto current as of the dates indicated therein), are
attached hereto as Exhibits.
"Tier 2 Related Agreements" shall mean those agreements so designated on
Appendix B (including Appendix B-2), descriptions of certain terms of which are
included thereon.
"Unit" shall mean a unit representing a partnership interest in the Partnership.
A-5
<PAGE>
APPENDIX B
TO
MASTER TRANSACTION AGREEMENT
LIST OF RELATED AGREEMENTS
--------------------------
Tier 1 Related Agreements
- -------------------------
1. Amended and Restated Agreement of Limited Partnership
2. Agreement and Plan of Merger and Asset Contribution among the
Occidental Partners, Oxy Petrochemicals and the Partnership
3. Amended and Restated Parent Agreement
4. Sales Agreement (Ethylene)
Tier 2 Related Agreements
- -------------------------
1. Agreements the form of which is an exhibit to the Occidental Agreement
and Plan of Merger and Contribution.
2. Operating Agreement by and between the Partnership and OCC.
3. Tolling Processing Agreement by and between the Partnership and OCC.
4. Amended and Restated Indemnity Agreement among OCC, PDG Chemical, Oxy
Petrochemicals, OCC Sub, Oxy CH Sub, Lyondell GP, Lyondell LP,
Millennium GP, Millennium LP and Millennium America Inc., a Delaware
corporation, amending and restating the Indemnity Agreement, dated
December 1, 1997.
5. Agreement between OCC and the Partnership obligating OCC to provide a
guarantee for the collection of $419,700,000 of Partnership debt and
obligating the Partnership to extend or refinance such debt for a term
at least equivalent to the term of such guarantee.
6. Agreement between OCC and the Partnership obligating the Partnership
to prepay or restructure the Occidental Assumed Debt within an agreed
period of time.
7. Promissory Note for $419,700,000 of the Partnership payable to Oxy CH
Sub.
8. Promissory Note for $75 million of the Partnership payable to
Millennium LP.
B-1
<PAGE>
9. Agreement for Assumption of Lease Intended for Security dated December
18, 1991 ($205 million).
10. Assignment and Assumption Agreement related to Lease Intended for
Security dated March 28,1994 (Pitney Bowes).
11. Agreement regarding termination of Lyondell guaranty of certain
Partnership railcar leases.
12. Sublease by OCC to the Partnership related to 1990 railcar lease.
13. Sublease by Oxy Petrochemicals to the Partnership related to 1995
railcar lease.
14. Tax Indemnity Agreement between OCC and the Partnership related to the
1990 railcar sublease.
15. Tax Indemnity Agreement between Oxy Petrochemicals and the
Partnership
related to the 1995 railcar sublease.
16. Master Arbitration Amendment to Related Agreements.
17. First Amendment to Lyondell Asset Contribution Agreement.
18. First Amendment to Millennium Asset Contribution Agreement.
19. Transition Services Agreement between the Partnership and OCC.
20. Pipeline Acquisition Agreement between OCC and the Partnership related
to the Cyclohexane pipeline.
B-2
<PAGE>
SCHEDULE 2.1
TO
MASTER TRANSACTION AGREEMENT
EXCEPTIONS TO REPRESENTATIONS
AND WARRANTIES OF THE PARTNERSHIP
---------------------------------
None.
<PAGE>
SCHEDULE 2.2
TO
MASTER TRANSACTION AGREEMENT
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES OF OCCIDENTAL
----------------------------------------------------------
None.
<PAGE>
SCHEDULE 2.3
TO
MASTER TRANSACTION AGREEMENT
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES OF LYONDELL
--------------------------------------------------------
None.
<PAGE>
SCHEDULE 2.4
TO
MASTER TRANSACTION AGREEMENT
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES OF MILLENNIUM
----------------------------------------------------------
None.
<PAGE>
SCHEDULE 3.3
TO
MASTER TRANSACTION AGREEMENT
SELECTED CAPITAL PROJECTS AND CEILING EXPENDITURES
--------------------------------------------------
See Attached.
<PAGE>
SCHEDULE 4.3(F)
TO
MASTER TRANSACTION AGREEMENT
THIRD PARTY CONSENTS AS CONDITIONS PRECEDENT TO CLOSING
-------------------------------------------------------
(OCCIDENTAL)
Any consent required in connection with the following:
1. Lease Intended for Security, dated as of December 18, 1991, among
Occidental Chemical Corporation, as Lessee, The Institutions Listed on
Schedule I thereto, as Lessors, Norwest Bank Minnesota, N.A., as Agent and
Chemical Bank and The Bank of Nova Scotia, as Information Agents, as
amended.
2. Lease Intended for Security, dated as of March 28, 1994, between Occidental
Chemical Corporation as Lessee and Pitney Bowes Credit Corporation, as
Lessor.
3. Partnership Agreement, dated as of April 30, 1987, by and among PDG
Acquisition Company, E. I. du Pont de Nemours and Company and PPG Chemicals
Inc., as amended.
4. Lease Agreement, dated as of April 30, 1987 between PPG Industries, Inc.
and PD Glycol.
<PAGE>
SCHEDULE 6.10
TO
TO MASTER TRANSACTION AGREEMENT
CERTAIN EXPENSES
----------------
Each Party shall bear (i) all investment banking fees and disbursements
incurred by it and (ii) all costs, fees and expenses incurred by it in
connection with obtaining consents or waivers from holders of indebtedness for
borrowed money of such Party or its Affiliates.
Costs incurred pursuant to that certain joint retention letter agreement
between Arnold & Porter, Occidental Chemical Corporation and Equistar Chemicals,
LP dated December 17, 1997 shall be borne by the parties as provided for
therein.
<PAGE>
EXHIBIT A
TO
MASTER TRANSACTION AGREEMENT
FORM OF AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
Filed as a separate exhibit with this registration statement. See exhibit 3.3.
<PAGE>
EXHIBIT B
TO
MASTER TRANSACTION AGREEMENT
FORM OF OCCIDENTAL CONTRIBUTION AGREEMENT
Filed as a separate exhibit with this registration statement. See exhibit 10.14.
<PAGE>
EXHIBIT C
TO
MASTER TRANSACTION AGREEMENT
FORM OF AMENDED AND RESTATED PARENT AGREEMENT
Filed as a separate exhibit with this registration statement. See exhibit 10.15.
<PAGE>
EXHIBIT D
TO
MASTER TRANSACTION AGREEMENT
FORM OF SALES AGREEMENT (ETHYLENE)
Filed as a separate exhibit with this registration statement. See exhibit 10.16.
<PAGE>
EXHIBIT 10.14
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
AND
ASSET CONTRIBUTION
AMONG
OCCIDENTAL PETROCHEM PARTNER 1, INC.,
OCCIDENTAL PETROCHEM PARTNER 2, INC.,
OXY PETROCHEMICALS INC.,
PDG CHEMICAL INC.
AND
EQUISTAR CHEMICALS, LP
DATED: MAY 15, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1 THE MERGER............................................................................................ 2
1.1 The Merger............................................................................................ 2
1.2 Effects of the Merger................................................................................. 2
1.3 Closing; Effective Time............................................................................... 2
1.4 Certificate of Limited Partnership; Partnership Agreement; Partnership Governance Committee.......... 3
1.5 Conversion of Certificates............................................................................ 3
1.6 Exchange of Certificates.............................................................................. 3
1.7 Transfer of Excluded Assets........................................................................... 4
1.8 Assumption of Excluded Liabilities.................................................................... 4
1.9 Transfer of Oxy Petrochemicals Assets................................................................. 4
SECTION 2 CONTRIBUTION OF ASSETS; ASSUMPTION OF CERTAIN LIABILITIES............................................. 5
2.1 Transfer of Assets.................................................................................... 5
2.2 Excluded Assets....................................................................................... 6
2.3 Instruments of Conveyance and Assignment.............................................................. 7
2.4 Further Assurances.................................................................................... 8
2.5 Assumption of Liabilities............................................................................. 9
2.6 Excluded Liabilities.................................................................................. 10
2.7 Master Intellectual Property Agreement................................................................ 11
2.8 Employee Matters...................................................................................... 11
2.9 Joint Contracts....................................................................................... 17
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTORS.................................................... 18
3.1 Due Organization; Good Standing and Power............................................................. 18
3.2 Authorization and Validity of Agreements.............................................................. 18
3.3 No Consents Required; No Conflict with Instruments to which a Contributor is a Party.................. 18
3.4 Employee Benefits..................................................................................... 19
3.5 Title to Assets; Absence of Liens and Encumbrances; Leases............................................ 20
3.6 Title Matters; Defects in Improvements................................................................ 21
3.7 Working Capital....................................................................................... 21
3.8 Technology and Similar Rights......................................................................... 21
3.9 Government Licenses, Permits and Related Approvals.................................................... 22
3.10 All Necessary Assets.................................................................................. 22
3.11 Conduct of Business in Compliance with Regulatory and Contractual Requirements........................ 22
3.12 Legal Proceedings..................................................................................... 22
3.13 [Reserved]............................................................................................ 22
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
3.14 Tax Matters.............................................................................. 22
3.15 [Reserved]............................................................................... 22
3.16 HSE Matters.............................................................................. 22
3.17 Investigation to Acquire Knowledge....................................................... 23
SECTION 3A ADDITIONAL REPRESENTATIONS AND WARRANTIES OF OXY CH SUB.................................. 24
3A.1 Capitalization........................................................................... 24
3A.2 Ownership of Common Stock................................................................ 24
3A.3 No Undisclosed Liabilities............................................................... 24
SECTION 4 REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP........................................ 24
4.1 Due Organization; Good Standing and Power................................................ 24
4.2 Authorization and Validity of Agreement.................................................. 25
4.3 No Consents Required; No Conflict with Instruments to which the Partnership is a Party... 25
SECTION 5 COVENANTS SUBSEQUENT TO CLOSING DATE..................................................... 25
5.1 Access to Information.................................................................... 25
5.2 Mail or Other Communications............................................................. 26
5.3 Use of Trade Name........................................................................ 26
5.4 Closing Date Balance Sheet............................................................... 26
5.5 [Reserved]............................................................................... 26
5.6 Collection of Accounts Receivable........................................................ 26
5.7 Reimbursement for Prepaid Expenses....................................................... 27
SECTION 6 SURVIVAL AND INDEMNIFICATION............................................................. 27
6.1 Survival Limitations..................................................................... 27
6.2 Indemnification.......................................................................... 27
6.3 Procedures............................................................................... 30
6.4 Subrogation.............................................................................. 32
6.5 Claims for HSE Work...................................................................... 32
6.6 EXTENT OF INDEMNIFICATION................................................................ 33
SECTION 7 MISCELLANEOUS............................................................................ 33
7.1 Construction............................................................................. 33
7.2 Payment of Certain Expenses and Taxes.................................................... 33
7.3 Notices.................................................................................. 34
7.4 [Reserved]............................................................................... 35
7.5 Binding Effect; Benefit.................................................................. 35
7.6 Occasional and Bulk Sales................................................................ 35
7.7 Assignability............................................................................ 35
7.8 Amendment; Waiver........................................................................ 36
7.9 Dispute Resolution....................................................................... 36
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
7.10 Severability...................................................... 36
7.11 Counterparts...................................................... 36
7.12 APPLICABLE LAW.................................................... 36
7.13 JURISDICTION; CONSENT TO SERVICE OF PROCESS; WAIVER............... 36
7.14 WAIVER OF JURY TRIAL.............................................. 37
SECTION 8 DEFINITIONS....................................................... 37
</TABLE>
<PAGE>
LIST OF SCHEDULES AND EXHIBITS TO AGREEMENT
-------------------------------------------
Schedules
---------
Schedule A - Contributed Business
Schedule 2.1(a) - Fee Interests
Schedule 2.1(b) - Leases
Schedule 2.1(d) - Equipment
Schedule 2.1(k) - Contributed Subsidiaries
Schedule 2.2(c) - Excluded Tradenames and Logos
Schedule 2.2(h) - Certain Excluded Assets
Schedule 2.5(a)(vii) - Assumed Indebtedness
Schedule 2.5(a)(x) - Assumed Long-Term Liabilities
Schedule 2.8(b) - Basic Severance
Schedule 3 - Disclosure Schedule
Appendices
----------
Appendix A - Dispute Resolution Procedures
Exhibits
--------
Exhibit A - Form of Assignment of Lease and Act of Exchange
Exhibit B - Form of Assignment of Leases
Exhibit C - Form of Bill of Sale and Assignment
Exhibit D - Form of Trademark License
Exhibit E - Form of Patent Assignment
Exhibit F - Form of Partnership Assumption Agreement
Exhibit G - Form of Master Intellectual Property Agreement
Exhibit H - Form of Assignment of Partnership Interests
Exhibit I - Form of Assignment of Excluded Assets of Oxy
Petrochemicals
Exhibit J - Form of Oxy CH Sub Assumption Agreement
Exhibit K - Form of $419,700,000 Promissory Note
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
AND
---
ASSET CONTRIBUTION
------------------
This AGREEMENT AND PLAN OF MERGER AND ASSET CONTRIBUTION (this
"Agreement"), dated as of May 15, 1998, is entered into among Occidental
Petrochem Partner 1, Inc., a Delaware corporation ("Occidental Chemical Sub"),
Occidental Petrochem Partner 2, Inc., a Delaware corporation ("Oxy CH Sub"),
Oxy Petrochemicals Inc., a Delaware corporation ("Oxy Petrochemicals"), PDG
Chemical Inc., a Delaware corporation ("PDG Chemical"), and Equistar Chemicals,
LP, a Delaware limited partnership (the "Partnership").
The definitions of capitalized terms used in this Agreement, including the
appendices hereto, are set forth in Section 8 hereof.
---------
WHEREAS, Oxy Petrochemicals is a direct wholly owned subsidiary of Oxy CH
Sub, Oxy CH Sub is a direct wholly owned subsidiary of Oxy CH Corporation, a
California corporation ("Oxy CH") and Oxy CH is a wholly owned indirect
subsidiary of Occidental Petroleum Corporation, a Delaware corporation
("Occidental").
WHEREAS, the Partnership, Occidental, Lyondell Petrochemical Company and
Millennium Chemicals, Inc. are parties to that certain Master Transaction
Agreement of even date (the "Master Transaction Agreement").
WHEREAS, Occidental Chemical Sub, PDG Chemical and Oxy CH Sub will be
admitted as partners in the Partnership upon the Closing pursuant to an Amended
and Restated Agreement of Limited Partnership of the Partnership.
WHEREAS, Occidental Chemical Sub wishes to contribute certain assets and a
lease of certain other assets, in each case subject to certain liabilities
associated with the olefins, polyolefins and related petrochemicals businesses
to the Partnership, and the Partnership wishes to accept such assets and lease
and assume such liabilities, all upon the terms and conditions hereinafter set
forth.
WHEREAS, PDG Chemical wishes to contribute all of its right, title and
interest in and to PD Glycol, a Texas limited partnership ("PD Gylcol"), and the
Partnership wishes to accept such right, title and interest, all upon the terms
and conditions hereinafter set forth. Occidental Chemical Sub and PDG Chemical,
collectively or individually as the context may require, are referred to herein
as the "Asset Contributors."
WHEREAS, the respective Boards of Directors of Oxy Petrochemicals and Oxy
CH Sub and the Partnership Governance Committee of the Partnership deem it
advisable and in the best interest of their respective entities that Oxy
Petrochemicals merge with and into the Partnership (the "Merger"), upon the
terms and conditions of this Agreement, and the applicable provisions of the
<PAGE>
laws of the State of Delaware. The Asset Contributors and Oxy Petrochemicals,
collectively or individually as the context may require, are referred to herein
as the "Contributors."
WHEREAS, upon the Closing, the Partnership will consummate certain
transactions and enter into certain agreements as provided for in the Master
Transaction Agreement.
NOW THEREFORE, in consideration of the premises and of the mutual covenants
of the parties hereto, it is hereby agreed as follows:
SECTION 1
THE MERGER
----------
1.1 The Merger. Upon the terms and subject to the conditions of this
----------
Agreement and in accordance with the provisions of the DGCL, at the Effective
Time, Oxy Petrochemicals shall be merged with and into the Partnership, and the
separate corporate existence of Oxy Petrochemicals shall cease and the
Partnership shall continue as the surviving entity (hereinafter sometimes
referred to as the "Surviving Partnership") under the laws of the State of
Delaware under the name of "Equistar Chemicals, LP".
1.2 Effects of the Merger. The Merger shall have the effects provided
---------------------
therefor by the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time:
(a) All of the assets, properties, rights, privileges, powers and
franchises of a public as well as a private nature of Oxy Petrochemicals of
every kind, nature, character and description, tangible and intangible, real,
personal or mixed, wherever located shall be taken and deemed to be transferred
to, and vested in, the Surviving Partnership without further act or deed; and
all such assets, properties, rights, privileges, powers and franchises and all
and every other interest shall be thereafter the property of the Surviving
Partnership, as such interests were the property of Oxy Petrochemicals.
(b) The Surviving Partnership shall be subject to all of the restrictions,
disabilities and duties of Oxy Petrochemicals and the debts, liabilities and
duties of Oxy Petrochemicals shall attach to the Surviving Partnership and the
Surviving Partnership agrees to pay, perform and discharge all such debts,
liabilities and duties when due.
1.3 Closing; Effective Time.
-----------------------
(a) The consummation of the transactions contemplated by Sections 1 and 2
hereof is referred to as the "Closing." Subject to the terms and conditions
hereof, the Closing shall take place at the office of Baker & Botts, L.L.P., One
Shell Plaza, 910 Louisiana, Houston Texas 77002-4995, at 10:00 a.m. local time
on the date hereof (the "Closing Date"), or (ii) such other place or date as
may be agreed to by the Partnership and Oxy CH Sub.
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<PAGE>
(b) Subject to the terms and provisions of this Agreement, there shall be
filed with the Secretary of State of the State of Delaware (the "Secretary of
State"), on the Closing Date, a certificate of merger with respect to the Merger
in such form as required by, and executed in accordance with, the applicable
provisions of the DGCL. Such certificate of merger shall designate that the
Merger shall become effective as of the time (the "Effective Time") that such
certificate of merger is so filed with the Secretary of State.
1.4 Certificate of Limited Partnership; Partnership Agreement;
-----------------------------------------------------------
Partnership Governance Committee. The certificate of limited partnership of the
- --------------------------------
Surviving Partnership from and after the Effective Time shall be the Amended
Certificate of Limited Partnership filed contemporaneously with the filing of
the certificate of merger referenced herein, continuing until thereafter amended
in accordance with the provisions provided by the DRULPA. The partnership
agreement of the Surviving Partnership from and after the Effective Time shall
be the Amended and Restated Agreement of Limited Partnership executed and
delivered on the Closing Date, continuing until thereafter amended in accordance
with the terms therein and as provided by the DRULPA. The Partnership
Governance Committee of the Partnership as of the Closing Date shall be
designated in accordance with such Amended and Restated Agreement of Limited
Partnership.
1.5 Conversion of Certificates. As of the Effective Time, by virtue of
--------------------------
the Merger and without any action on the part of any Party or the holder of any
of the following securities, the following shall occur:
(a) Oxy Petrochemicals Common Stock. The aggregate of all of the
-------------------------------
common stock, par value $300.00, of Oxy Petrochemicals (the "Oxy Petrochemicals
Common Stock") shall be converted into the right to receive (i) Oxy CH Sub's
limited partnership interest in the Partnership as set forth in the Amended and
Restated Agreement of Limited Partnership of the Partnership and (ii) a
promissory note of the Partnership in the form of Exhibit K. All such shares of
Oxy Petrochemicals Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such shares shall cease to have any rights
with respect thereto, except the right to receive the limited partnership
interest and note to be issued pursuant to this Section 1.5(a) with respect
thereto upon the surrender of such certificate in accordance with Section 1.6,
without interest.
(b) Cancellation of Other Capital Stock of Oxy Petrochemicals. All
---------------------------------------------------------
shares of capital stock of Oxy Petrochemicals that are owned directly or
indirectly by Oxy Petrochemicals shall be canceled and no stock or other
consideration shall be delivered in exchange therefor.
1.6 Exchange of Certificates.
------------------------
(a) Oxy Petrochemicals Common Stock. At the Closing, Oxy CH Sub shall
-------------------------------
deliver to the Partnership, subject to the terms of this Agreement, all
certificates representing each share of Oxy Petrochemicals Common Stock together
with duly executed stock powers endorsed to the Partnership or other assignments
or instruments of conveyance and transfer, in form and substance satisfactory to
the Partnership and its counsel, as shall be effective to vest in the
Partnership at the
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<PAGE>
Effective Time, all of Oxy CH Sub's right, title and interest in and to such
shares of Oxy Petrochemicals Common Stock. Until surrendered to the Partnership
pursuant to this Section 1.6, each such certificate shall, at and after the
Effective Time, represent for all purposes only the right to receive the
consideration provided for in Section 1.5(a). The certificates representing
shares of Oxy Petrochemicals Common Stock so surrendered shall be canceled as of
the Effective Time.
(b) No Further Ownership Rights in Capital Stock of Oxy Petrochemicals.
------------------------------------------------------------------
The limited partnership interest in the Partnership and the note delivered upon
the surrender for exchange of shares of Oxy Petrochemicals in accordance with
the terms hereof shall be deemed to have been delivered in full satisfaction of
all rights pertaining to such securities, and following the Effective Time, no
Person shall have any further rights to, or ownership in, shares of capital
stock of Oxy Petrochemicals. There shall be no further registration of
transfers on the stock transfer books of Oxy Petrochemicals of the shares of
capital stock of Oxy Petrochemicals which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, any certificates for shares
of the capital stock of Oxy Petrochemicals are presented to the Surviving
Partnership for any reason, such certificates shall be canceled.
(c) No Liability. Notwithstanding anything to the contrary in this Section
------------
1, neither the Surviving Partnership nor any other party shall be liable to a
holder of shares of any of the capital stock of Oxy Petrochemicals for any
amount paid to a public official pursuant to and in compliance with any
applicable abandoned property, escheat or similar law.
1.7 Transfer of Excluded Assets. It is expressly understood that,
---------------------------
immediately prior to the Effective Time, any and all assets of Oxy
Petrochemicals included in the Excluded Assets pursuant to Section 2.2 shall
have been contributed, conveyed, assigned or transferred by Oxy Petrochemicals
to Oxy CH Sub pursuant to an assignment in the form attached as Exhibit I (the
"Excluded Asset Assignment") and shall not be part of the assets deemed
transferred to the Partnership pursuant to the Merger.
1.8 Assumption of Excluded Liabilities. It is expressly understood that,
----------------------------------
immediately prior to the Effective Time, any and all obligations and liabilities
of Oxy Petrochemicals included in the Excluded Liabilities pursuant to Section
2.6 shall be assumed by Oxy CH Sub pursuant to an assumption agreement in the
form attached as Exhibit J ("Oxy CH Sub Assumption Agreement").
1.9 Transfer of Oxy Petrochemicals Assets. Notwithstanding that pursuant
-------------------------------------
to Section 1.2, title to the Assets of Oxy Petrochemicals shall be deemed
transferred from Oxy Petrochemicals to the Partnership as of the Effective Time,
as between the parties hereto, the benefits and burdens associated with
ownership of such Assets shall be deemed to have been transferred effective as
of the Asset Transfer Effective Time.
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<PAGE>
SECTION 2
CONTRIBUTION OF ASSETS; ASSUMPTION OF CERTAIN LIABILITIES
---------------------------------------------------------
2.1 Transfer of Assets. On the terms and subject to the conditions set
------------------
forth in this Agreement, on the date hereof and effective as of the Asset
Transfer Effective Time, each Asset Contributor is contributing, conveying,
assigning, transferring and delivering to the Partnership, or shall cause to be
contributed, conveyed, assigned, transferred and delivered to the Partnership,
and the Partnership shall accept, acquire and assume all of the assets, rights,
and properties used or held for use in the contemplated operation and conduct of
the Contributed Business of every kind, nature, character and description,
tangible and intangible, real, personal or mixed, whether held by such Asset
Contributor or an Affiliate thereof, wherever located other than the Excluded
Assets (provided that the assets of Oxy Petrochemicals are being transferred to
the Partnership pursuant to the Merger); and which conveyance, subject to
Section 2.2, shall include, without limitation, the following:
(a) All right, title and interest of such Asset Contributor and any
Affiliate thereof in the Fee Interests;
(b) All right, title and interest of such Asset Contributor and any
Affiliate thereof under the Leaseholds;
(c) All right, title and interest of such Asset Contributor and any
Affiliate thereof, if any, in the Associated Rights, including, without
limitation, all contracts, easements, rights-of-way, permits, licenses and
leases and other similar rights for related equipment, power and communications
cables, and other related property and equipment used principally in the normal
operation and conduct of the Contributed Business;
(d) All of the right, title and interest of such Asset Contributor and any
Affiliate thereof in the Equipment and all warranties and guarantees, if any,
express or implied, existing for the benefit of such Asset Contributor or any
Affiliate thereof in connection with the Equipment to the extent assignable;
(e) Subject, to the extent applicable, to Section 5.3, all of the right,
title and interest of such Asset Contributor and any Affiliate thereof in the
Unrecorded Assets;
(f) All of the right, title and interest of such Asset Contributor and any
Affiliate thereof in any Contributed Contracts;
(g) Any right, title and interest of such Asset Contributor in any
Trademarks to the extent used or contemplated to be used principally in the
normal operation and conduct of the Contributed Business;
(h) All Government Licenses that are transferable and as to which Consents
to transfer are obtained where required;
-5-
<PAGE>
(i) The Inventory, Stores Inventory and Prepaid Expenses;
(j) Subject to Section 5.6, Accounts Receivable together with any reserve
or allowance for doubtful accounts, returned products or potential price
adjustment;
(k) All right, title and interest of such Asset Contributor and any
Affiliate thereof in the subsidiaries listed on Schedule 2.1(k) (the
"Contributed Subsidiaries");
(l) All claims and rights against third parties (including, without
limitation, insurance carriers, indemnitors, suppliers and service providers) to
the extent, but only to the extent that, they relate to the Assumed Liabilities;
provided, however, that to the extent that any claims or rights of such Asset
Contributor against any third parties are not assigned to the Partnership, and
the partnership incurs Liabilities that would create such claims or rights on
behalf of such Asset Contributor, such Asset Contributor shall enforce such
claims or rights for the benefit (and at the cost) of the Partnership to the
extent it may lawfully do so, except that the Asset Contributor shall not be
required to enforce insurance claims against fronting, captive or
retrospectively rated policies which would ultimately result in such claims
being ultimately borne, directly or indirectly, by the Asset Contributor;
(m) A fifty percent (50%) interest in PD Glycol, a Texas limited
partnership;
(n) Any claims of the Contributors against Union Pacific for service delays
related to the Contributed Business; and
(o) Any other asset of such Asset Contributor or its Affiliate contributed
to the Partnership pursuant to the terms of this Agreement.
2.2 Excluded Assets. It is expressly understood and agreed that the
---------------
Assets shall not include the following (the "Excluded Assets"):
(a) Except as otherwise provided in Section 2.1(j), cash and cash
equivalents or similar type investments, such as certificates of deposit,
Treasury bills and other marketable securities;
(b) Except as may be agreed pursuant to Section 2.8(g), any assets of any
qualified or non-qualified pension or welfare plans or other deferred
compensation arrangements maintained by any Contributor or any Affiliate thereof
for employees of such Contributor or any Affiliate thereof prior to the Closing
Date;
(c) Any of the Contributors' or any Affiliates' right, title and interest
in and to (i) the names and logos set forth on Schedule 2.2(c) and any other
statutory names, trade names or trademarks, indications or descriptions of which
such names or any name similar thereto forms a part and (ii) any other trade
names, trademarks, trademark registrations or trademark applications,
copyrights, copyright applications or copyright registrations or any derivative
thereof or design used
-6-
<PAGE>
in connection therewith that are not used principally in the normal operation
and conduct of and are not uniquely applicable to the Contributed Business;
(d) All claims and rights against third parties (including, without
limitation, insurance carriers, indemnitors, suppliers and service providers),
to the extent they do not relate to the Assumed Liabilities;
(e) Claims for refunds of Taxes for time periods ending on or before the
Closing Date, which Taxes remain the liability of the Contributor under this
Agreement;
(f) Subject to the Master Intellectual Property Agreement, any and all of
the Intellectual Property and Trademarks of a Contributor or any Affiliate
thereof to the extent not used principally in the normal operation and conduct
of or to the extent not applicable to the Contributed Business;
(g) All items sold in the ordinary course of business prior to the Closing
Date, none of which individually or in the aggregate are material to the normal
operation and conduct of the Contributed Business;
(h) The tangible assets, intangible assets, real properties, contracts and
rights, described in Schedule 2.2(h);
(i) All assets of Oxy Petrochemicals not used or held for use in the
contemplated operation and conduct of the Contributed Business;
(j) Any claims of the Contributors against Union Pacific for service delays
not related to the Contributed Business; and
(k) The Lake Charles Leased Assets.
2.3 Instruments of Conveyance and Assignment. On the Closing Date:
----------------------------------------
(a) Occidental Chemical Sub shall deliver or cause to be delivered to the
Partnership, as needed, (i) an Assignment of Lease and Act of Exchange for the
Lake Charles Lease being assigned pursuant to this Section 2 in substantially
the form attached hereto as Exhibit A ("Assignment of Lake Charles Lease"), (ii)
an assignment of leases for such other Leases being assigned pursuant to this
Section 2 in substantially the form attached hereto as Exhibit B (the
"Assignment of Leases"), (iii) a bill of sale and assignment in substantially
the form attached hereto as Exhibit C (the "Bill of Sale and Assignment")
conveying title to the Assets (other than the Fee Interests, Leaseholds and Lake
Charles Leased Assets) being conveyed pursuant to this Section 2 and assigning
the Contracts of such Asset Contributor or its Affiliates, (iv) a license of
certain trademarks in substantially the form attached hereto as Exhibit D (the
"Trademark License") and (v) an assignment of patent rights, licenses and
applications included in the Assets conveyed pursuant to this Section 2 in
substantially the form attached hereto as Exhibit E (the "Patent Assignment");
and
-7-
<PAGE>
(b) Each Asset Contributor shall transfer to the Partnership the originals
(to the extent such Contributor or any Affiliate thereof possesses an original
and retained no rights thereunder after the Closing Date) or copies, as
appropriate, of the Contributed Contracts and the originals or copies, as
appropriate, of all current records, files and other data that relate to the
Assets and that are necessary for continuing the normal operation and conduct of
the Contributed Business by the Partnership.
(c) PDG Chemical shall deliver or cause to be delivered to the Partnership
an assignment of partnership interests in substantially the form attached hereto
as Exhibit H ("Assignment of Partnership Interests").
2.4 Further Assurances.
------------------
(a) On and from time to time after the Closing Date, each Asset Contributor
and Oxy CH Sub will execute and deliver, or cause to be executed and delivered,
such other instruments of conveyance, assignment, transfer and delivery as the
Partnership may reasonably request in order to fulfill and implement the terms
of this Agreement, to vest in the Partnership title to the Assets, to confirm
the assumption of Excluded Liabilities or to enable the Partnership to continue
the normal operation and conduct of the Contributed Business and otherwise to
realize the benefits intended to be afforded hereby.
(b) On and from time to time after the Closing Date, the Partnership will
execute and deliver, or cause to be executed and delivered, such other
instruments of assumption, conveyance, assignment, transfer, power of attorney
or assurance as the Asset Contributors and Oxy CH Sub may reasonably request in
order to fulfill and implement the terms of this Agreement, to vest in the
Partnership all of the Assumed Liabilities, to confirm the transfer of Excluded
Assets or to enable the Asset Contributors and Oxy CH Sub to realize the
benefits intended to be afforded hereby.
(c) Notwithstanding any other provision of this Agreement to the contrary,
the Partnership and each Asset Contributor acknowledge and agree that any
Government Licenses, Contributed Contracts, warranties or other Assets related
to the Contributed Business and required to be conveyed pursuant to this
Agreement which by their terms require Consent from any other unaffiliated
contracting party thereto shall not be assigned to the Partnership unless any
such Consent has been obtained prior to the Closing Date. Following the
Closing, the Partnership and each Asset Contributor shall cooperate with each
other and use commercially reasonable efforts to obtain those Consents that were
not obtained prior to the Closing and (i) if such Consents are obtained
following the Closing, the Partnership and the Asset Contributors shall execute
and deliver any other and further instruments of assignment, assumption,
transfer and conveyance and take such other and further action as the
Partnership may reasonably request in order to vest in the Partnership any
Government Licenses, Contributed Contracts, warranties or other Assets to which
such Consents relate and (ii) pending such transfer or issuance to the
Partnership, shall provide, to the extent it may lawfully do so, the Partnership
with the benefits of any such Government Licenses, Contributed Contracts,
warranties or other Assets, in which case, the Partnership shall promptly assume
and discharge (or reimburse the Asset Contributors or their Affiliates for) all
obligations and liabilities
-8-
<PAGE>
associated with the benefits of such Government Licenses, Contributed Contracts,
warranties or other Assets so made available to the Partnership. If an Asset
Contributor obtains a Consent to assign any Government Licenses, Contributed
Contracts, warranties or other Assets related to the Contributed Businesses and
required to be conveyed pursuant to this Agreement after the Closing, each such
Government License, Contributed Contract, warranty or other Asset shall be
deemed to be assigned to the Partnership promptly after such Consent is
obtained.
(d) Following the Closing, the Asset Contributors , Oxy CH Sub and the
Partnership shall cooperate in good faith and in a commercially reasonable
manner with respect to all matters pertinent to the carrying into effect of this
Agreement and the discharge by each party of its obligations and liabilities
hereunder and thereunder, and shall furnish to each other such information,
cooperation and assistance as reasonably may be requested in connection with the
foregoing, including any and all financial information necessary for the
Partnership's operation of the Contributed Business or required for financial
reporting or other purposes.
2.5 Assumption of Liabilities.
-------------------------
(a) On the terms and subject to the conditions, including Sections 1.2,
2.8 and 6.2, set forth in this Agreement, on the Closing Date, the debts,
liabilities and obligations of each Contributor and its Contributed Subsidiaries
set forth in this Section 2.5 shall be assumed by the Partnership in connection
with the transfer of Assets to it, and the Partnership agrees to pay, perform
and discharge all such debts, liabilities and obligations when due:
(i) All obligations arising on or after the Closing Date under the
Lake Charles Lease, the Contributed Contracts and Leases that are assigned
to the Partnership hereunder unless and to the extent that such obligation
arises out of a violation of such Lake Charles Lease, Contributed Contract
or Lease prior to the Closing Date;
(ii) All obligations under purchase orders accepted by a Contributor
or its Contributed Subsidiaries in the ordinary course of business of the
Contributed Business prior to the Closing Date that are not filled as of
the Closing Date;
(iii) Trade Accounts Payable;
(iv) All obligations and liabilities, of every kind and nature,
without limitation, arising out of, in connection with or related to the
ownership, operation or use on or after the Closing Date of the Assets or
the Contributed Business;
(v) Seven Year PCCL Claims to the extent the aggregate thereof
borne by the Partnership does not exceed $7,000,000;
(vi) Third Party Claims that are related to Pre-Closing Contingent
Liabilities and that are first asserted seven years or more after the
Closing Date;
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<PAGE>
(vii) The obligations for indebtedness described on Schedule
2.5(a)(vii);
(viii) [RESERVED];
(ix) All Liabilities associated with products sold after the Closing
Date regardless of when manufactured;
(x) The long-term liabilities set forth on Schedule 2.5(a)(x); and
(xi) Any other Liability specifically assumed by the Partnership
pursuant to the terms of this Agreement.
The liabilities and obligations assumed by the Partnership pursuant to this
Section are sometimes hereinafter referred to collectively as the "Assumed
Liabilities."
(b) On the Closing Date, the Partnership shall deliver to each Asset
Contributor an instrument of assumption of the Assumed Liabilities substantially
in the form attached hereto as Exhibit F (the "Partnership Assumption
Agreement").
2.6 Excluded Liabilities. Each Contributor or Affiliate thereof, as
--------------------
applicable, shall remain liable for (or, in the case of Oxy Petrochemicals, Oxy
CH Sub shall assume in accordance with Section 1.8), and each Asset Contributor
and Oxy CH shall indemnify and hold harmless the Partnership in accordance with
Section 6.2 against, any liability or obligation of such Contributor or
Affiliate thereof, of whatever nature, whether presently in existence or arising
hereafter, whether known or unknown, or whether absolute or contingent, that
does not constitute an Assumed Liability (all such liabilities and obligations
being herein referred to as the "Excluded Liabilities"), including the
following:
(i) Any Pre-Closing Contingent Liability that is not an Assumed
Liability;
(ii) any obligation or liability relating to the Excluded Assets;
(iii) any obligation (A) for the payment of severance benefits to
employees of a Contributor or any of its Affiliates except as set forth in
Sections 2.8(b) or (c), (B) attributable to a Contributor's or any of its
Affiliates' employment of any employee, agent or independent contractor
prior to the Expiration Date or (C) any obligation or liability assumed by
the Contributors pursuant to Section 2.8; and
(iv) all Taxes imposed on Oxy Petrochemicals or any of its
Affiliates that would not be assumed by the Partnership if Oxy
Petrochemicals were contributing its Assets to the Partnership and
remaining in existence as a member of its current affiliated group.
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<PAGE>
2.7 Master Intellectual Property Agreement. On the Closing Date, the
--------------------------------------
Partnership and Occidental Chemical Corporation, a New York corporation ("OCC"),
shall execute and deliver a master intellectual property agreement (the "Master
Intellectual Property Agreement") in substantially the form attached hereto as
Exhibit G providing, among other things, the following:
(a) Non-exclusive, royalty-free licenses to the Partnership of any
Intellectual Property used, contemplated for use or that could be used, in the
Contributed Business that is not conveyed to the Partnership pursuant to Section
1.2 or 2.1.
(b) Non-exclusive, royalty-free licenses to OCC or its Affiliates of any
Contributed Intellectual Property acquired by the Partnership pursuant to
Section 1.2 or 2.1 of this Agreement used, contemplated for use or that could be
used in the business of OCC or its Affiliates.
(c) The assignment of the Contributed Intellectual Property to the
Partnership.
2.8 Employee Matters.
----------------
(a) "Employees" shall mean all employees of a Contributor or an Affiliate
whose work relates primarily to the Assets or the Contributed Business and who
are immediately prior to the Closing in the active employment of a Contributor
or an Affiliate. A true and complete list of names; positions; salaries or
hourly wage rates, as applicable; years of service, and the last bonus of the
Employees shall be provided by a Contributor or its designee to the Partnership
from time to time up to the Closing. In accordance with and subject to Section
3.6 of the Master Transaction Agreement, as of the Expiration Date, the
Partnership shall offer employment to certain Employees who are immediately
prior to the Expiration Date in the active employment of a Contributor or an
Affiliate pursuant to a schedule prepared by the Contributors prior to the
Closing Date and agreed to by the Partnership. The Partnership agrees that no
Employee will fail to receive an offer of employment from the Partnership unless
the Contributor or Affiliate employing such Employee has given its approval,
which approval shall not be unreasonably withheld. Any such Employee that
accepts such offer is herein called a "Partnership Employee." Partnership
Employees shall be employed effective as of the Expiration Date, except as
otherwise provided in Section 2.8(e). The Contributors agree that, from the
Expiration Date until December 31, 1998, the Contributors, Occidental or an
Affiliate shall provide payroll services and benefit plan administration for
Partnership Employees, subject to the terms of any agreement for transition
services between the Partnership and OCC.
(b) Except with respect to employees of a Contributor or any Affiliate
thereof located in Occidental's Dallas, Texas facility ("Non-Plant Employees"),
if, within six months after the Expiration Date or in anticipation of the
Expiration Date, a Contributor or any Affiliate thereof terminates (other than
for cause) the employment of any Employee who does not become a Partnership
Employee, then the Partnership will pay to such Contributor an amount, not to
exceed the Basic Severance, to the extent such Contributor or any Affiliate
thereof pays severance to such employee under any plan or policy of the
Contributor or Affiliate. "Basic Severance" means a severance payment according
to the severance pay formula as set forth in Schedule 2.8(b). The
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<PAGE>
Contributors shall remain responsible for all severance and other compensation
or payment to Non-Plant Employees who do not become Partnership Employees and
for bonus or other executive compensation, if any, to plant employees covered by
Occidental's bonus or executive compensation programs. The Contributors shall
pay bonus or executive compensation payable to Partnership Employees on a pro-
rata basis determined based on the Partnership Employee's months of employment
with a Contributor prior to the Expiration Date.
(c) Any Partnership Employee whose employment is terminated by the
Partnership (other than for cause) within six months after the Expiration Date
shall be entitled to receive a severance benefit from the Partnership equal to
the Basic Severance (which, for purposes of calculating service time, shall
include the employee's time of service with a Contributor, its predecessors or
Affiliates (to the extent service therefor would have been credited by a
Contributor) and the Partnership).
(d) Any employees of a Contributor that the Partnership and such
Contributor agree are necessary for the orderly transfer of the Contributed
Business to the Partnership but who will not become Partnership Employees
("Transition Employees") shall be compensated by such Contributor on terms and
conditions and for a duration to be agreed upon by the Partnership and such
Contributor. The Partnership shall reimburse such Contributor for any such
agreed upon compensation, including payroll taxes, benefit costs and workers
compensation premiums and claims, paid by such Contributor to or with respect to
any Transition Employee.
(e) If, as of the Expiration Date, any Employee is eligible for and
receiving short term disability benefits or sick pay, or is on leave of absence,
and the Partnership has offered such Employee employment by the Partnership,
that Employee shall become employed by the Partnership (and become a Partnership
Employee for purposes of this Section 2.8) upon eligibility to return to active
employment with such Contributor under the applicable conditions of the short
term disability benefits or sick pay plan of the Contributor, or upon return
from leave of absence. Partnership employment shall not be effective until the
employing Contributor verifies that the Employee has satisfied the conditions
(if any) to return to active employment. Until such time as such Employee
becomes a Partnership Employee such Contributor shall continue to bear all costs
and expenses associated with such Employee.
(f) None of the Contributors nor any of their Affiliates shall, at any time
prior to 60 days after the Expiration Date, effect a "plant closing" or "mass
layoff", as those terms are defined in the Worker Adjustment and Retraining
Notification Act of 1988 ("WARN"), affecting in whole or in part any facility,
site of employment, operating unit or employee of the Contributors or any of
their Affiliates without complying fully with the notice and all other
applicable requirements of WARN. With regard to the Contributed Business, the
Partnership shall not at any time prior to 60 days after the Expiration Date,
effectuate a "plant closing" or a "mass layoff", as those terms are defined in
WARN, affecting in whole or in part, any facility, site of employment or
operating unit, or any Employees without complying fully with the notice and all
other applicable requirements of that Act.
(g) In connection with the provision by the Partnership of benefit plans
and programs for Partnership Employees as provided in the Master Transaction
Agreement,
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<PAGE>
(i) The Partnership shall recognize all service credited for the
Partnership Employees or any other employee of Contributors or their
Affiliates directly transferred to the Partnership after the Expiration
Date on the records of a Contributor (or its Affiliate) for purposes of
eligibility for benefits and vesting under the Partnership's benefit plans
and programs and calculation of benefits under the Partnership's benefit
plans and programs, other than the Partnership's defined benefit pension
plan. For purposes of this Section 2.8(g)(i), an employee shall be
directly transferred if the person is employed by the Contributors or their
Affiliates immediately prior to his or her employment with the Partnership
and if such employment with the Partnership is the result of an agreement
between the Partnership and the Contributors or their Affiliates. The
Partnership shall not recognize service credited on a Contributor's records
for benefit accrual under the Partnership's defined benefit pension plan
and only actual periods of service with the Partnership shall be credited
for such benefit accrual purposes;
(ii) As of the Expiration Date, to the extent a Contributor (or its
Affiliate) is not otherwise required to vest Partnership Employees as plan
participants, the Contributors shall cause each Partnership Employee to
become fully vested in his interests in the Occidental Petroleum
Corporation Savings Plan (the "PSA"), the Occidental Chemical Corporation
Savings and Investment Plan (the "SIP") and the Occidental Petroleum
Corporation Retirement Plan (the "PRA") (hereinafter collectively referred
to as "Occidental's Qualified Plans");
(iii) As of the Expiration Date, the Partnership shall provide each
Partnership Employee who was not covered by a collective bargaining
agreement immediately prior to the Closing Date (a "Non-Union Employee")
with "Partnership Benefit Plans", which shall mean the benefit plans and
programs under (a) all employee plans applicable to employees of the
Partnership in similar jobs, other than any employee plan that provides
benefits under section 401(k) of the Code ("Partnership 401(k) Plan"), and
(b) a plan sponsored by the Partnership that is substantially identical to
the PSA (the "Mirror Plan"); provided, however that the Mirror Plan will
-------- -------
(w) provide for a level of matching contributions and forms of distribution
identical to that provided by the Partnership 401(k) Plan (except as
required by law for benefits transferred from the PSA and SIP), (x) not
offer investment in guaranteed investment contracts, (y) not offer new
investments in Occidental common stock and (z) not offer investments in
Occidental common stock after September 30, 1998. From and after the
Expiration Date, each Non-Union Employee shall be eligible to participate
in such Partnership Benefit Plans in accordance with the terms and
conditions thereof; provided, however, that from and after January 1, 1999
-------- -------
such Non-Union Employee shall commence participation in the Partnership
401(k) Plan and shall no longer be entitled to contributions under the
Mirror Plan. Under such Partnership Benefit Plans which are Employee
Welfare Benefit Plans, Non-Union Employees and their eligible dependents,
if a participant in any health, long term disability or life insurance
plans, as applicable, of a Contributor or its Affiliates immediately prior
to the Expiration Date, (a) shall participate in such Partnership Benefit
Plans as of the Expiration Date, and (b) shall be deemed to satisfy any
pre-existing condition limitations under group medical, dental, life
insurance or disability plans that shall
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be provided after the Expiration Date. In addition, subject to the
agreement of the third-party administrator, amounts paid by such Non-Union
Employees towards deductibles and co-payment limitations under the health
plans of a Contributor or its Affiliates shall be counted toward meeting
any similar deductible and copayment limitations under the health plans
that shall be provided under the Partnership Benefit Plans.
(iv) The Contributors shall, or shall cause its Affiliates, as
appropriate to, and the Partnership shall take all necessary and reasonable
steps to prevent a loan default under the PSA and the SIP (collectively the
"Contributors' 401(k) Plans"), including the following: (a) the
Contributors shall, or shall cause its Affiliates, as appropriate, to allow
Partnership Employees to repay their loans under the Contributors' 401(k)
Plans during any period during which the Contributors or its Affiliates
provide payroll services, and (b) the Contributors shall cause Occidental
to agree and the Partnership agrees to take the necessary and reasonable
steps to provide for a plan to plan transfer (as such transfer is defined
in Section 414(l) of the Code) of account balances (including outstanding
loans) of Partnership Employees from the Contributor's 401(k) Plans to the
appropriate Partnership's 401(k) Plan. Notwithstanding the foregoing, any
steps which in the sole discretion of the Contributors or its Affiliates
jeopardizes the tax-qualified status of any of its Employee Plans shall be
deemed unreasonable.
(v) From and after the Expiration Date, Non-Union Employees shall be
entitled to retain and take any paid vacation days accrued but not taken
under a Contributor's vacation policy for the period from January 1, 1998
through the Expiration Date. Upon or promptly after the Expiration Date,
the Contributor shall pay any Banked Vacation and Carryover Vacation.
"Banked Vacation" shall mean vacation time accrued on the Contributor's
records as payable to any Partnership Employee who is a Non-Union Employee
for which vacation time has not been taken for the period prior to January
1, 1982, 1986 or 1988, as appropriate for such Partnership Employee.
"Carryover Vacation" shall mean vacation time which (a) is not Banked
Vacation; (b) has been accrued on the Contributor's records as payable and
approved by designated personnel for any Partnership Employee who is a Non-
Union Employee; and (c) such vacation time has not been taken prior to the
Expiration Date and which was earned for any period prior to January 1,
1998.
(h) Subject to the representations in Section 3.4 hereof, as soon as
possible after the Expiration Date the Contributor and the Partnership shall
take all actions necessary to cause (i) the Contributor to cease to be the plan
sponsor of the Cain Pension Plan ("Cain Plan") and the PDG Chemical Inc. Pension
Plan ("PDG Plan"), (ii) the Partnership to become the plan sponsor of the Cain
Plan and the PDG Plan and to assume all present and future obligations and
liabilities of the Contributor with respect to such plan, and (iii) the
Partnership shall recognize service with Occidental or its Affiliates for early
retirement eligibility purposes under the Cain Plan and the PDG Plan. From and
after the Expiration Date until the instruction to liquidate assets from the
Contributor's master trust for the purpose of transferring assets to the
Partnership's trust, assets relating to the Cain Plan and the PDG Plan shall be
invested at the discretion of the fiduciaries of such plans, in the normal
course, subject to all applicable laws and plan and trust provisions. Any
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earnings or losses on such assets after the Expiration Date shall be based on
the return of the Contributor's trust as determined by the Contributor's
trustee. After liquidation of assets until the date of transfer of the assets of
the Cain Plan and PDG Plan, earnings or losses on such assets shall be based on
the Short Term Investment Fund ("STIF") rate of The Northern Trust Company, the
trustee of such plans.
(i) As of the Expiration Date, the Partnership Employees shall cease to
accrue service credit, except as expressly provided in this Section 2.8, under
any and all of the Employee Welfare Benefit Plans of the Contributors or its
Affiliates, under any and all of the Employee Pension Benefit Plans of the
Contributor or its Affiliates, and any and all non-ERISA plans or programs of
the Contributor or its Affiliates, in which participation had been available to
such Employees prior to the Expiration Date. The Contributors agree that, with
respect to any Partnership Employee directly transferred from the Partnership to
employment with the Contributors or their Affiliates, they will recognize all
service credited for such Partnership Employee on the records of the Partnership
for purposes of eligibility for benefits and vesting under the benefit plans and
programs of the Contributors and their Affiliates and calculation of benefits
under the benefit plans and programs of the Contributors and their Affiliates,
other than the defined benefit pension plan of the Contributors and their
Affiliates. For purposes of this Section 2.8(i), an employee shall be directly
transferred if the person is employed by the Partnership immediately prior to
his or her employment with the Contributors or their Affiliates and if such
employment with the Contributors or their Affiliates is the result of an
agreement between the Partnership and the Contributors or their Affiliates.
(j) The Contributors or their Affiliates shall retain the sole
responsibility for, and shall continue to pay, all hospital, medical, and health
care continuation coverage benefits as described in section 4980B of the Code,
life insurance, disability, other welfare plan expenses and benefits (including
all benefits under the Employee Plans), and worker's compensation for employees
of the Contributors (including each Employee) and their covered dependents,
including "qualified beneficiaries" within the meaning of section 607(3) of
ERISA, with respect to claims incurred prior to the Expiration Date. In
addition, the Contributors or their Affiliates shall retain sole responsibility
for the payment of any claim for medical benefits, health care continuation
coverage benefits as described in section 4980B of the Code, life insurance or
other welfare benefits by, or any other item of compensation or benefits payable
under any Contributor Employee Welfare Benefit Plan to (i) any employee of the
Contributor on and after the Expiration Date, (ii) any former employee of the
Contributor who retired, died, became long-term disabled or otherwise terminated
employment prior to the Expiration Date, and (iii) any "qualified beneficiary"
of a Partnership Employee with respect to whom a "qualifying event" (as such
terms are defined in sections 603 and 607 of ERISA) has occurred prior to the
Expiration Date. Except as set forth above, expenses and benefits relating to
such types of claims incurred by Partnership Employees and their covered
dependents on or after the Expiration Date shall be the sole responsibility of
the Partnership to the extent covered under the terms of its benefit plans. For
the purposes of this Section 2.8(j), a claim is deemed incurred when the
services giving rise to the claim were performed.
(k) The Contributors and the Partnership agree that they will satisfy their
respective obligations, if any, under the National Labor Relations Act regarding
union represented employees
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<PAGE>
of the Contributor at the Beaumont, Texas, PD Glycol Plant. Further, the
Partnership will recognize the Oil, Chemical and Atomic Workers International
Union and its Local No. 4-243, Production and Maintenance Group, at the
Beaumont, Texas, PD Glycol Plant.
(l) Except as otherwise specified in this Section 2.8, in the event that a
Contributor or its Affiliates terminates any of its employees other than the
Employees at any time prior to the Expiration Date, the Contributor shall be
solely responsible for any liability with respect to such termination, including
liability for all severance benefit payments to such employees pursuant to its
severance plan and any costs associated with violation of any applicable
Authority. Notwithstanding the foregoing, the Partnership hereby agrees to
indemnify the Contributors and their Affiliates and to defend and hold the
Contributors and their Affiliates harmless from and against any claims, losses,
expenses, obligations, and liabilities (including cost of defense and reasonable
attorney's fees) asserted against and imposed on the Contributors and their
Affiliates and arising out of or otherwise in respect of the following: (i) the
Partnership's termination of any Partnership Employee's employment with the
Partnership; (ii) any failure by the Partnership to comply with its obligations
hereunder or otherwise with respect to any Partnership Employee; (iii) any suit
or claim of violation brought against the Contributors or their Affiliates under
WARN for any actions taken by the Partnership after the Expiration Date with
regard to the Partnership Employees at any facility, site of employment or
operating unit affected by this Agreement; or (iv) all claims by any Partnership
Employee after the Expiration Date whom the Partnership or its Affiliates
actually or constructively terminates or by any spouse, dependent, estate or
other beneficiary of such Employee, and (v) from any claims or charges by or
relating to Employee concerning wrongful termination, discrimination,
harassment, or violation of (a) the Fair Labor Standards Act, (b) the Labor
Management Relations Act, (c) WARN, (d) the Americans With Disabilities Act, (e)
ERISA, (f) the Consolidated Omnibus Budget Reconciliation Act of 1985, (g) the
National Labor Relations Act, (h) the Family and Medical Leave Act, (i) the
Health Insurance Portability and Accountability Act, (j) Title VII of the Civil
Rights Act of 1964, (k) the Age Discrimination in Employment Act, or (l) any and
all applicable state and local laws relating to employees or labor relations,
all as attributable to the conduct of the Partnership or its Affiliates with
respect to such Employee relating to the period subsequent to the Expiration
Date. The Partnership hereby agrees to indemnify the Contributors and their
Affiliates and to defend and hold Contributors and their Affiliates harmless
from and against fifty percent of any claims, losses, expenses, obligations and
liabilities (including cost of defense and reasonable attorney's fees) asserted
against and imposed on the Contributors and their Affiliates and arising out of
the Partnership's and Contributor's joint selection of the Employees offered
employment by the Partnership.
(m) Nothing expressed or implied in this Agreement shall confer upon any
Employee, or any legal representative thereof, any rights or remedies, including
any right to employment, whether directly or as a third party beneficiary, or
continued employment for any specified period, of any nature or kind whatsoever.
(n) Except as otherwise specified in this Section 2.8, the Contributors
agree to indemnify the Partnership and to defend and hold the Partnership and
its Affiliates harmless from and against claims, losses, expenses, obligations,
and liabilities (including costs of defense and reasonable
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<PAGE>
attorney's fees) arising out of or otherwise in respect of the following (i) any
Contributor employee benefit plans, or claims of employees or former employees
of the Contributor or of any spouse, dependent, estate, or other beneficiary of
such employees or former employees that in any case arose prior to the
Expiration Date, including, without limitation, any such liability or obligation
which may arise under Section 2.8(j) and from (ii) any claims or charges
relating to wrongful termination, discrimination, harassment, or violation of
(a) the Fair Labor Standards Act, (b) the Labor Management Relations Act, (c)
WARN, (d) the Americans With Disabilities Act, (e) ERISA, (f) the Consolidated
Omnibus Budget Reconciliation Act of 1985, (g) the National Labor Relations Act,
(h) the Family and Medical Leave Act, (i) the Health Insurance Portability and
Accountability Act, (j) Title VII of the Civil Rights Act of 1964, (k) the Age
Discrimination in Employment Act, or (l) any and all applicable state and local
laws relating to employees or labor relations, all as attributable to the
conduct of the Contributor or its Affiliates with respect to (A) any employees
or former employees of the Contributor who do not become Partnership Employees
relating to the periods both before and after the Expiration Date, and (B) the
Employees, relating to the period prior to the Expiration Date.
(o) Representatives of the Partnership shall be entitled to meet with the
Employees at mutually agreeable times prior to the Expiration Date to explain
and answer questions about the conditions, policies and benefits of employment
by Partnership after the Expiration Date. The Contributors shall cooperate with
the Partnership until Expiration Date in communicating to such Employees any
additional information concerning employment after the Expiration Date which
such Employees may seek, or which the Partnership may desire to provide, and
during normal business hours shall allow additional meetings by representatives
of the Partnership with such Employees upon the reasonable request of the
Partnership. In addition, the Contributor and the Partnership agree to furnish
each other with appropriate records for each of the Employees as may be
necessary to assist in proper benefit administration.
(p) The indemnity provisions of this Section shall be subject to the
requirements of Section 6.3 of this Agreement.
2.9 Joint Contracts.
---------------
(a) Any Contributed Contracts contributed to the Partnership pursuant to
Section 1.2 or 2.1 that relate principally to the Contributed Business but also
relate to the business (other than the Contributed Business) of an Asset
Contributor or its Affiliates will be made available to the appropriate Asset
Contributor and its Affiliates by the Partnership pursuant to arrangements by
which such Asset Contributor and its Affiliates will enjoy the benefits of such
Contributed Contracts as they relate to their business (other than the
Contributed Business) on the same terms and conditions as the Partnership.
(b) Any Contracts that relate principally to the business (other than the
Contributed Business) of an Asset Contributor or its Affiliates but also relate
to the Contributed Business will be made available to the Partnership by such
Asset Contributor or its Affiliates pursuant to other
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<PAGE>
arrangements by which the Partnership will enjoy the benefits of such Contracts
as they relate to the Contributed Business on the same terms and conditions as
such Asset Contributor or its Affiliates.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTORS
--------------------------------------------------
Except as set forth on Schedule 3 or in the SEC Reports, each Contributor
and Oxy CH Sub represent and warrant to the Partnership as follows:
3.1 Due Organization; Good Standing and Power. Each Contributor and Oxy
-----------------------------------------
CH Sub are corporations duly organized, validly existing and in good standing
under the laws of its state of organization and each Contributor has the
requisite power and authority to own, lease and operate the properties to be
contributed hereunder and to conduct the Contributed Business as now conducted
by it. Each Contributor and Oxy CH Sub has all requisite power and authority to
enter into this Agreement and the Assignment and Assumption Agreements and to
perform its obligations hereunder and thereunder. Each Contributor is duly
authorized, qualified or licensed to do business as a foreign corporation and is
in good standing, in the State of Texas and in each of the other jurisdictions
in which its right, title or interest in or to any of the Assets held by it, or
the conduct of the Contributed Business by it, requires such authorization,
qualification or licensing, except where the failure to so qualify or to be in
good standing would not reasonably be expected to have a Material Adverse
Effect.
3.2 Authorization and Validity of Agreements. The execution, delivery and
----------------------------------------
performance of this Agreement and the other Related Agreements by each
Contributor and Oxy CH Sub and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors of such Person. Except to the extent heretofore obtained, no other
corporate action or action by stockholders is necessary for the authorization,
execution, delivery and performance by a Contributor and Oxy CH Sub of this
Agreement and the other Related Agreements and the consummation by any such
Person of the transactions contemplated hereby or thereby. This Agreement and
the other Related Agreements have been duly executed and delivered by each
Contributor and Oxy CH Sub and constitute legal, valid and binding obligations
of such Person, enforceable in accordance with their terms, except as the same
may be limited by bankruptcy, insolvency, reorganization, moratorium and other
laws relating to or affecting creditors' rights generally and by general equity
principles.
3.3 No Consents Required; No Conflict with Instruments to which a
-------------------------------------------------------------
Contributor is a Party. The execution, delivery and performance of this
- ----------------------
Agreement and the other Related Agreements by the Contributors, Oxy CH Sub and
any of their Affiliates that is a party thereto and the consummation by each
such Person or any such Affiliate of the transactions contemplated thereby (i)
will not require any Consent except for such Consents the failure of which to be
obtained or made, would not in the aggregate reasonably be expected to have a
Material Adverse Effect; and (ii) will not violate (with or without the giving
of notice or the lapse of time or both), or conflict with, or result in the
breach or termination of any provision of, or constitute a default under, or
result in the acceleration of the performance of the obligations of such Person,
or result in the creation of an
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<PAGE>
Encumbrance upon any Assets or a portion of the Contributed Business pursuant
to, the charter or by-laws of such Person, or any indenture, mortgage, deed of
trust, lease, licensing agreement, contract, instrument or other agreement to
which such Person is a party or by which such Person or any of the Assets held
by such Person is bound, except for such violations, conflicts, breaches,
terminations, defaults, accelerations or Encumbrances which would not in the
aggregate reasonably be expected to have a Material Adverse Effect.
3.4 Employee Benefits.
-----------------
(a) (i) Each of the Contributor's Defined Benefit and Defined
Contribution Pension Plans covering employees ("Employee Plan") is in
substantial compliance with applicable requirements prescribed by any and
all Legal Requirements, including, but not limited to the Code, except for
violations the occurrence of which would not in the aggregate reasonably be
expected to have a Material Adverse Effect. Each Employee Plan that is
intended to be qualified under Section 401(a) of the Code currently has a
favorable determination letter from the Internal Revenue Service as to that
Plan's qualification under Section 401(a) of the Code and nothing has
occurred since the date of such letter that could reasonably be expected to
cause the loss of such qualification.
(ii) Each Contributor has in all material respects performed all
obligations required to be performed by it under ERISA, the Code and any
other applicable Legal Requirements and under the terms of each Employee
Plan, except such failures to perform which would not in the aggregate
reasonably be expected to have a Material Adverse Effect. No Contributor
has received any written notice of the existence of any material default or
violation by any other party of any of such Legal Requirements, terms or
requirements applicable to any of the Employee Plans.
(iii) Other than routine claims for benefits, no Contributor has
received any written notice of any pending material claims or lawsuits
which have been asserted or instituted against any of the Employee Plans,
the assets of the trust or funds under the Employee Plans, the sponsor or
administrator of any of the Employee Plans, or against any fiduciary of any
of the Employee Plans with respect to the operation of such Plan.
(iv) No Contributor has received any written notice of any pending
investigation or pending enforcement action by the Pension Benefit Guaranty
Corporation, the Department of Labor, the Internal Revenue Service or any
other Authority with respect to any of the Employee Plans.
(v) All contributions required to be made under the terms of each
Contributor's Employee Plans have been timely made. No Employee Plan has
an "accumulated funding deficiency" (within the meaning of section 412 of
the Code or Section 302 of ERISA).
(b) Each Contributor's "group health plans" (within the meaning of Code
Section 5000(b)(1)) have been operated in substantial compliance with the group
health plan continuation
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coverage requirements of Section 4980B of the Code and Sections 601 through 608
of ERISA, Title XXII of the Public Health Service Act and the provisions of the
Social Security Act.
(c) There has been no act or omission by a Contributor that has given rise
to or may give rise to material fines, penalties, taxes, or related charges
under Section 502(c), (i) or (l) or Section 4071 of ERISA or Chapter 43 of the
Code or the imposition of a lien pursuant to Sections 401(a)(29) or 412(n) of
the Code or pursuant to ERISA.
3.5 Title to Assets; Absence of Liens and Encumbrances; Leases.
----------------------------------------------------------
(a) Each Contributor has good and marketable title to all of its Fee
Interests, free and clear of all Encumbrances, except (i) any prior
reservations, easements and other matters of record to the extent valid,
subsisting and affecting the Assets, (ii) any prior unrecorded easements for
which improvements have been constructed in such a manner as to be apparent to
the Partnership from inspection of the Assets to the extent valid, subsisting
and affecting the Assets, (iii) liens for current taxes not yet due and payable
and mechanics and similar statutory liens arising in the ordinary course of
business, (iv) liens of employees and laborers for current wages not yet due,
(v) building, zoning and health regulations of the jurisdictions in which the
Assets are located; and (vi) such imperfections of title, easements and
Encumbrances, if any, as do not in the aggregate materially detract from the
value or materially interfere with the use of the Assets as they are currently
being used or as otherwise would not reasonably be expected to have a Material
Adverse Effect.
(b) Each Contributor is the sole lessee under its Leases and the sole party
entitled to its Leasehold interests in favor of the lessee thereunder, and the
sole owner or, in the case of OCC Sub, the sole lessee, of the improvements
(other than fixtures) situated on its Leased Premises, free and clear of all
Encumbrances affecting its Leaseholds except (i) any prior reservations,
easements and other matters of record to the extent valid, subsisting and
affecting the Assets, (ii) any prior unrecorded easements for which improvements
have been constructed in such a manner as to be apparent to the Partnership from
inspection of the Assets to the extent valid, subsisting and affecting the
Assets, (iii) liens for current taxes not yet due and payable and mechanics and
similar statutory liens arising in the ordinary course of business, (iv) liens
of employees and laborers for current wages not yet due, (v) building, zoning
and health regulations of the jurisdictions in which the Assets are located; and
(vi) such imperfections of title, easements and such Encumbrances, if any, as do
not in the aggregate materially detract from the value or materially interfere
with the use of the Assets or as otherwise would not reasonably be expected to
have a Material Adverse Effect. No Contributor or any Affiliate thereof has
received from or delivered to the lessors under such Leaseholds any written
notice of termination or threat of termination of such respective Leaseholds.
True and complete copies of all written lease agreements (including any written
amendments or modifications thereof) constituting, or evidencing the terms of,
such Leaseholds have been delivered or made available to the Partnership. No
material default or event of default on the part of a Contributor or any
Affiliate thereof under the provisions of any of such Leaseholds, and no event
that with the giving of notice or passage of time or both would constitute such
default or event of default on the part of such Contributor, has occurred (which
default or event of default has not been cured). No Contributor or any
Affiliate thereof has received any written notice from any lessor under any
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Leasehold, that any material default or event of default on the part of such
Contributor or such Affiliate as lessee under the provisions of any Leaseholds,
or that any event that with the giving of notice or passage of time or both
would constitute such a default or an event of default on the part of such
Contributor or any such Affiliate, as lessee, has occurred (which default or
event of default has not been cured). No material default or event of default
on the part of the lessor under the provisions of any of such Leaseholds, and no
event that with the giving of notice or passage of time or both would constitute
such default or event of default on the part of any such lessor, has occurred
(which default or event of default has not been cured).
(c) Each Contributor or an Affiliate thereof has good title to all of the
personal property constituting Assets purported to be owned by it, free and
clear of all Encumbrances, except for liens for Taxes not yet due and payable
and such Encumbrances, if any, that do not in the aggregate materially detract
from the value or materially interfere with the use of the Assets (as they are
currently being used) or as otherwise would not reasonably be expected to have a
Material Adverse Effect.
3.6 Title Matters; Defects in Improvements. There are no trespassers or
--------------------------------------
other adverse parties in possession on or affecting the Fee Interests or the
Leased Premises of a Contributor or any Affiliate thereof that would reasonably
be expected to have a Material Adverse Effect. No Contributor or any Affiliate
thereof has granted and none of the foregoing is party to any unrecorded
options, rights of refusal, sales contracts or other such contractual rights in
favor of any third parties relating to its Fee Interests or the Leased Premises.
No written notice has been received by a Contributor or any Affiliate thereof
from any insurance company with respect to its Fee Interests or the Leased
Premises or by any board of fire underwriters claiming any material defects or
deficiencies or requiring the performance of any repairs, replacement,
alteration or other work relating to the improvements situated thereon (in each
case, which have not been cured).
3.7 Working Capital. Each Contributor has operated the Contributed
---------------
Business in the ordinary course of business from September 30, 1997 to the
Closing Date such that its Inventory, Stores Inventory, Prepaid Expenses,
Accounts Receivable (and all reserves or allowances for doubtful accounts,
returned products or potential price adjustments) and Trade Accounts Payable, as
of the Closing Date, are at substantially the same level as would have existed
for such Contributor without regard to the transactions contemplated by the
Master Transaction Agreement. In connection with this Section 3.7, it is
understood among the parties that the Originator Receivables Sale Agreement
dated as of October 29, 1998, by and among Occidental Receivables Inc., OCC and
other parties, has been terminated with respect to Oxy Petrochemicals.
3.8 Technology and Similar Rights. Each Contributor owns or is licensed
-----------------------------
to use all of its Intellectual Property, Licensed Technology and Licensed
Trademarks, and such Intellectual Property, Licensed Technology and Licensed
Trademarks together with the rights assigned or licensed under the Related
Agreements constitute all relevant patents, pending patent applications,
invention disclosures, copyrights, software, trade secrets, technical
information, technology, know-how, processes, tradenames, trademarks, trademark
registrations or applications, copyrights, copyright applications or
registrations or any derivative thereof or design used in connection
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therewith necessary for the normal operation and conduct of the Contributed
Business as it is currently operated and conducted, except where the failure to
have such ownership or licenses would not reasonably be expected to have a
Material Adverse Effect.
3.9 Government Licenses, Permits and Related Approvals. The Government
--------------------------------------------------
Licenses constitute all those necessary for the normal operation and conduct of
the Contributed Business as it is currently operated and conducted, except where
the failure to have such Government Licenses would not reasonably be expected to
have a Material Adverse Effect.
3.10 All Necessary Assets. The Assets together with the rights under the
--------------------
Related Agreements constitute all property and other rights necessary to enable
the Partnership to operate and conduct the Contributed Business in substantially
the same manner as it is being operated and conducted on the date of this
Agreement, except in all cases where the failure of the Partnership to acquire
such property or other rights by conveyance or license would not in the
aggregate reasonably be expected to have a Material Adverse Effect.
3.11 Conduct of Business in Compliance with Regulatory and Contractual
-----------------------------------------------------------------
Requirements. Each Contributor, and any Affiliate thereof, is operating and
- ------------
conducting the Contributed Business in compliance with all applicable Legal
Requirements, rights of concession, licenses, know-how or other proprietary
rights of others, the failure to comply with which would reasonably be expected
to have a Material Adverse Effect.
3.12 Legal Proceedings. There is no litigation, proceeding, claim,
-----------------
grievance, arbitration, investigation or other action to which a Contributor or
any Affiliate thereof is a party (i) that is pending or, to the Knowledge of a
Contributor, threatened, (ii) that relates in any way to the Assets, to the
operation or conduct of the Contributed Business, or to the transactions
contemplated by this Agreement, and (iii) that upon resolution adverse to a
Contributor or any of its Affiliates, could reasonably be expected to have a
Material Adverse Effect.
3.13 [Reserved].
--------
3.14 Tax Matters.
-----------
(a) There are no material liens for Taxes (other than for current Taxes not
yet due and payable) upon the Assets.
(b) None of the Assets directly or indirectly secures any indebtedness for
money borrowed the interest on which is tax-exempt.
3.15 [Reserved].
----------
3.16 HSE Matters. Except as would not be reasonably likely to have a
-----------
Material Adverse Effect:
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(a) (i) The Fee Interests, the Leased Premises and the operations of
each Contributor and any Affiliate thereof in connection with the Contributed
Business are in compliance with all HSE Laws and (ii) to the extent arising out
of a Contributor's or any Affiliate's ownership or use of the Assets or
operation of the Contributed Business, there are no Chemical Substances held,
located, released, generated, treated, stored or disposed of, on, under or from
such Fee Interests or such Leased Premises or in, on or from any fixtures or
improvement thereon in excess of any standard prescribed or permitted by any HSE
Laws or which require corrective or other action pursuant to the provisions of
any HSE Laws.
(b) No Contributor or any Affiliate has received any notice from any
federal, state, or local agency naming such Contributor or such Affiliate as a
potentially responsible party ("PRP"), or otherwise notifying such Contributor
or such Affiliate of any potential liability under either the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA" or "Superfund"), the Resource Conservation and Recovery Act of 1976,
as amended ("RCRA"), or any state statute, rule or local regulation imposing
liability similar to CERCLA or RCRA that relates in any way to any Chemical
Substances generated by or derived from the operations on the Fee Interests, or
the Leased Premises of such Contributor or any Affiliate; nor has either
Contributor or any of its Affiliates received any comparable claim or notice
from any private party.
(c) Each Contributor or an Affiliate thereof, as applicable, has been
and is, in compliance with, all permits, licenses, approvals, permission, or
authorizations necessary for its operations in connection with the Contributed
Business to comply in all respects with HSE Laws.
(d) (i) No Contributor or any Affiliate thereof has received written
notice of any actual, impending, or potential proceedings, allegations, claims,
losses, actions, investigations or inquiries of any kind in connection with the
Contributed Business and HSE Laws or Chemical Substances ("HSE Proceedings") and
(ii) no Contributor nor any Affiliate thereof has any Knowledge of any facts,
events or occurrences that would reasonably be expected to result in any HSE
Proceedings being brought.
(e) No Contributor or any Affiliate thereof is party to, or is subject
to the terms of, any consent order, consent judgment, consent decree, court or
administrative order or judgment, agreement, schedule, or decree issued by any
Authority with respect to the Contributed Business.
3.17 Investigation to Acquire Knowledge. Each of the persons covered by
----------------------------------
clauses (i) and (ii) of the definition of "Knowledge" set forth in Section 1 has
reviewed, with counsel to such Contributor, the other representations and
warranties contained in, and the Schedules that relate to, this Section 3 to the
extent that they relate to such person's area of responsibility or expertise and
has made a reasonable inquiry as to the accuracy and completeness of such
representations, warranties and Schedules.
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SECTION 3A
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF OXY CH SUB
-------------------------------------------------------
Except as set forth on Schedule 3, Oxy CH Sub represents and warrants to
the Partnership as follows:
3A.1 Capitalization. At the Effective Time, the authorized capital
--------------
stock of Oxy Petrochemicals will consist of 1,100 shares of common stock, of
which 1,100 shares will be issued and outstanding. All shares of the capital
stock of Oxy Petrochemicals which will be outstanding as of the Effective Time
will be duly authorized, validly issued, fully paid and non-assessable, and will
not be subject to or have been issued in violation of any preemptive rights.
Except as contemplated by this Agreement, there are no other shares of capital
stock of Oxy Petrochemicals authorized or outstanding and there are no
subscriptions, options to purchase, rights of refusal, rights of first offer,
conversion or exchange rights, warrants, preemptive rights or other agreements,
claims or commitments of any kind obligating Oxy Petrochemicals or any Affiliate
thereof to issue, transfer, deliver or sell shares of the capital stock or other
securities of, or interests in, Oxy Petrochemicals or obligating Oxy
Petrochemicals or an Affiliate thereof to grant, extend or enter into any such
agreement or commitment. At the Effective Time, there will be no shareholder
agreements, voting trusts or other agreements or understandings to which Oxy
Petrochemicals or an Affiliate thereof is a party or by which Oxy Petrochemicals
or such Affiliate is bound, relating to the voting of any shares of the capital
stock of Oxy Petrochemicals.
3A.2 Ownership of Common Stock. Oxy CH Sub is the beneficial owner of
-------------------------
all of the issued and outstanding shares of Oxy Petrochemicals Common Stock, in
each case, free and clear of any Encumbrances or limitations on the voting or
transfer thereof.
3A.3 No Undisclosed Liabilities. As of the Effective Time, Oxy
--------------------------
Petrochemicals will have no debts, liabilities or obligations whether accrued,
absolute, contingent or otherwise and whether due or to become due, other than
(a) the Assumed Liabilities and (b) the Excluded Liabilities assumed by Oxy CH
Sub pursuant to Section 1.8.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP
-------------------------------------------------
The Partnership represents and warrants to each Contributor as follows:
4.1 Due Organization; Good Standing and Power. The Partnership is a
-----------------------------------------
limited partnership duly formed and validly existing under the laws of the State
of Delaware. The Partnership has all partnership power and authority to enter
into this Agreement and the other Related Agreements and to perform its
obligations hereunder and thereunder. The Partnership is duly authorized,
qualified or licensed to do business as a foreign partnership, in each of the
jurisdictions in which its right, title or interest in or to any asset, or the
conduct of its business, requires such authorization, qualification or
licensing, except where the failure to so qualify would
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not have a material adverse effect on the ability of the Partnership to perform
its obligations hereunder or under the Assignment and Assumption Agreements.
4.2 Authorization and Validity of Agreement. The execution, delivery and
---------------------------------------
performance of this Agreement and the other Related Agreements by the
Partnership and the consummation by the Partnership of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
partnership action on the part of the Partnership. No other partnership action
is necessary for the authorization, execution, delivery and performance by the
Partnership of this Agreement, the other Related Agreements and the consummation
by the Partnership of the transactions contemplated hereby or thereby. This
Agreement and the other Related Agreements have been duly executed and delivered
by the Partnership and constitute legal, valid and binding obligations of the
Partnership, enforceable in accordance with their terms, except as the same may
be limited by bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights generally and by general equity
principles.
4.3 No Consents Required; No Conflict with Instruments to which the
---------------------------------------------------------------
Partnership is a Party. The execution, delivery and performance of this
- ----------------------
Agreement and the other Related Agreements by the Partnership and the
consummation by it of the transactions contemplated thereby (i) will not require
any Consent except for such Consents the failure of which to be obtained or
made, would not in the aggregate reasonably be expected to have a Material
Adverse Effect on the Partnership's ability to perform its obligations hereunder
or thereunder, and (ii) will not violate (with or without the giving of notice
or the lapse of time or both), conflict with, or result in the breach or
termination of any provision of, or constitute a default under, or result in the
acceleration of the performance of the obligations of the Partnership under, the
partnership agreement of the Partnership, or any indenture, mortgage, deed of
trust, lease, licensing agreement, contract, instrument or other agreement to
which the Partnership is a party or by which the Partnership or any of its
assets or properties is bound, except for such violations, conflicts, breaches,
terminations, defaults, accelerations or liens which would not in the aggregate
reasonably be expected to have a material adverse effect on the Partnership's
ability to perform its obligations hereunder or thereunder.
SECTION 5
COVENANTS SUBSEQUENT TO CLOSING DATE
------------------------------------
5.1 Access to Information. Following the Closing Date, the Partnership
---------------------
shall afford, and will cause its Affiliates to afford, to the Asset
Contributors, Oxy CH Sub, their counsel, accountants and other authorized
representatives, during normal business hours, reasonable access to the books,
records and other data of the Contributed Business with respect to the period
prior to the Closing Date (and any personnel familiar therewith) to the extent
that such access may be reasonably required by an Asset Contributor or Oxy CH
Sub to facilitate (i) the preparation by such Asset Contributor or Oxy CH Sub of
such tax returns as it may be required to file with respect to the operations of
the Assets and the Contributed Business or in connection with any audit, amended
return, claim for refund or any proceeding with respect thereto, (ii) the
investigation, litigation and final disposition of any claims which may have
been or may be made against such Asset Contributor or Oxy CH Sub in connection
with the Assets and the Contributed Business, (iii) the payment of any amount in
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connection with any liabilities or obligations which have not been assumed by
the Partnership under this Agreement and (iv) for any other reasonable business
purpose. For a period of ten years after the date of this Agreement, the
Partnership will not dispose of, alter or destroy any such books, records and
other data without giving 90 days' prior notice to such Asset Contributor or Oxy
CH Sub to permit it, at its expense, to examine, duplicate or repossess such
records, files, documents and correspondence.
5.2 Mail or Other Communications. Each Asset Contributor or Oxy CH Sub
----------------------------
authorizes and empowers the Partnership on and after the Closing Date to receive
and open all mail received by the Partnership relating to the Contributed
Business or the Assets and to deal with the contents of such communications in
any proper manner. Each Asset Contributor and Oxy CH Sub shall promptly deliver
to the Partnership any mail or other communication received by it on and after
the Closing Date pertaining to the Contributed Business or the Assets and any
cash, checks or other instruments of payment to which the Partnership is
entitled. The Partnership shall promptly deliver to the appropriate Asset
Contributor or Oxy CH Sub any mail or other communication received by it after
the Closing Date pertaining to the Excluded Assets or Excluded Liabilities, and
any cash, checks or other instruments of payment in respect of such.
5.3 Use of Trade Name. Pursuant to the Trademark License to be granted to
-----------------
the Partnership by Occidental and OCC, after the Closing Date the Partnership
shall be permitted to use any items of Inventory or packaging material, any
sales or promotional materials, any forms or documents or any other printed
materials that bear the names set forth on Schedule 2.2(c) or other trademarks
or trade names of which such names or any name similar thereto forms a part.
5.4 Closing Date Balance Sheet. Not later than 60 days after the Closing
--------------------------
Date, each Contributor shall cause Arthur Andersen LLP to prepare and deliver to
such Contributor and the Partnership an audited balance sheet of the Contributed
Business as of the Closing Date (the "Closing Date Balance Sheet"). In
addition, each Contributor shall prepare and deliver to the Partnership such
other financial statements or information as the Partnership may reasonably
request in connection with any proposed Partnership financing; it is currently
anticipated that the Partnership will request the Contributors to provide the
Partnership with audited financial statements related to the operation of the
Contributed Business for the past three (3) fiscal years.
5.5 [Reserved]
--------
5.6 Collection of Accounts Receivable. The Partnership shall take all
---------------------------------
commercially reasonable efforts to collect any Accounts Receivable; provided,
---------
however, to the extent any Accounts Receivable set forth on the Closing Date
- -------
Balance Sheet are not collected within 180 days after the Closing Date by the
Partnership, the appropriate Contributor (or, in the case of Oxy Petrochemicals,
Oxy CH Sub) will buy such uncollected Accounts Receivable from the Partnership
at the amount set forth on the Closing Date Balance Sheet; provided, further,
-----------------
that the amount to be paid by the appropriate Contributor (or, in the case of
Oxy Petrochemicals, Oxy CH Sub) for such uncollected Accounts Receivable shall
be reduced by the amount of any reserve or allowance for doubtful accounts,
returned products or potential price adjustments, transferred to the Partnership
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<PAGE>
pursuant to Section 2.1(j); and provided, further, that any payments or
-----------------
reimbursements that are made by the Partnership as a result of volume or price
rebates or adjustments and that are attributable (in whole or in part) to
transactions prior to the Closing Date shall be for the account of the
Contributor (or, in the case of Oxy Petrochemicals, Oxy CH Sub), to the extent
so attributable. Collections on Accounts Receivable shall be applied on a
specific identification basis. The Partnership will report monthly in writing
to each Contributor (or, in the case of Oxy Petrochemicals, Oxy CH Sub) on the
amounts collected during the preceding month, and shall provide an aging summary
of uncollected accounts and a detailed description of each problem account (45
or more days overdue). On reasonable notice to the Partnership, each
Contributor (or, in the case of Oxy Petrochemicals, Oxy CH Sub) shall have the
right to take over the collection process for any problem account.
5.7 Reimbursement for Prepaid Expenses. The Partnership and each
----------------------------------
Contributor acknowledge that the Prepaid Expenses attributable to its
Contributed Business have been conveyed to the Partnership solely in order to
facilitate the timely and efficient transfer of the Contributed Business to the
Partnership. Consequently, the Partnership shall reimburse such Contributor
(or, in the case of Oxy Petrochemicals, Oxy CH Sub) for the Prepaid Expenses
associated with its Contributed Business (other than the prepaid expenses for
"turnaround" costs) within 10 days following the receipt of the Closing Date
Balance Sheet.
SECTION 6
SURVIVAL AND INDEMNIFICATION
----------------------------
6.1 Survival Limitations. The representations and warranties of the
--------------------
parties hereto contained in this Agreement or in any certificate or other
writing delivered pursuant hereto or in connection herewith shall survive the
Closing until the date that is 60 months after the Closing Date, except (i)
Section 314, which shall survive until the expiration of the applicable statute
of limitations and (ii) Section 35, which shall survive without limitation and
shall not be merged with the Assignment and Assumption Agreements. No action
can be brought with respect to any breach of any representation or warranty
(except with respect to Section 35) pursuant to this Agreement unless a written
notice that complies with Section 63 has been delivered pursuant to such Section
63 prior to the expiration of the survival period applicable to such
representation or warranty; provided that upon the giving of such notice,
--------
notwithstanding any other provision of this Agreement the representation and
warranty that is the basis of such action shall continue with respect to such
action beyond the time at which the representation and warranty would otherwise
terminate.
6.2 Indemnification.
---------------
(a) Subject to the other provisions of this Section 6, each Asset
Contributor and Oxy CH Sub hereby agrees, to the fullest extent permitted by
applicable law, to indemnify, defend and hold harmless the Partnership, its
partners, their Affiliates and their respective officers, directors and
employees from, against and in respect of any losses, claims, damages, fines,
penalties, assessments by public agencies, settlement, cost or expenses
(including costs of defense and attorneys' fees) and other liabilities (any of
the foregoing being a "Liability") incurred or suffered by the Partnership or
any of its Affiliates, arising out of, in connection with or relating to:
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<PAGE>
(i) Any misrepresentation in or breach of the representations and
warranties of a Contributor, Oxy CH Sub or any of its Affiliates in this
Agreement, the Assignment and Assumption Agreements, the Master
Intellectual Property Agreement, or the Master Transaction Agreement,
provided that any Liability arising out of, in connection with or relating
to any breach of the warranties in any Assignment and Assumption Agreement
that is not a breach of the warranties in this Agreement shall not be
indemnified against pursuant to this Section 6;
(ii) Any failure of a Contributor, Oxy CH Sub or any of its
Affiliates to perform any of its covenants or obligations contained in this
Agreement, the Assignment and Assumption Agreements, the Master
Intellectual Property Agreement, or the Master Transaction Agreement;
(iii) Excluded Liabilities; or
(iv) Any Pre-Closing Contingent Liability that is not an Assumed
Liability.
provided, however, that the following limitations shall apply to the
- -------- -------
indemnification obligations in clauses (i) and (iv) above:
(A) the Asset Contributors and Oxy CH Sub, in the aggregate, shall
not have any indemnification obligation under clause (i) and (iv) above for
any individual Liability unless the amount of such Liability exceeds
$25,000 (the "Individual Basket") (it being understood that all Liabilities
arising from the same event, condition or set of circumstances shall be
considered as an individual Liability for purposes of such calculation),
but if the amount of such Liability exceeds the Individual Basket, the
entire amount of such Liability, including the first $25,000 of such
Liability, may be the subject of indemnification hereunder; provided,
--------
further, that the parties agree that the amount of Liability for which
-------
indemnification may be sought for breach of any representation or warranty
under clause (i) above shall be calculated taking into account the
Individual Basket but without regard to any qualification or exception
regarding materiality or Material Adverse Effect qualification contained in
such representation or warranty (it being understood that such materiality
or Material Adverse Effect qualifications shall apply for purposes of
determining whether there has been such a breach in the first place, but
once it has been established that there is such a breach, the Partnership
shall be entitled to indemnity relating back to the first dollar); and
(B) to the extent any misrepresentation in or breach of the
representations and warranties of a Contributor or Oxy CH Sub results in a
Liability of the Partnership in excess of the Individual Basket and such
Liability would also constitute a Pre-Closing Contingent Liability, such
misrepresentation or breach shall be treated as a Pre-Closing Contingent
Liability.
(b) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, TO THE FULLEST
EXTENT PERMITTED BY LAW, NO ASSET CONTRIBUTOR, OXY CH SUB
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<PAGE>
OR ANY OF THEIR AGENTS, EMPLOYEES, REPRESENTATIVES OR AFFILIATES SHALL BE LIABLE
FOR CONSEQUENTIAL, INCIDENTAL, INDIRECT OR PUNITIVE DAMAGES IN CONNECTION WITH
DIRECT CLAIMS BY AN INDEMNIFIED PARTY (I.E., A CLAIM BY AN INDEMNIFIED PARTY
THAT DOES NOT SEEK REIMBURSEMENT FOR A THIRD PARTY CLAIM PAID OR PAYABLE BY SUCH
INDEMNIFIED PARTY) WITH RESPECT TO THEIR INDEMNIFICATION OBLIGATIONS UNDER THIS
AGREEMENT UNLESS ANY SUCH CLAIM ARISES OUT OF THE FRAUDULENT ACTIONS OF AN ASSET
CONTRIBUTOR OR OXY CH SUB. IN DETERMINING THE AMOUNT OF ANY LOSS, LIABILITY, OR
EXPENSE FOR WHICH AN INDEMNIFIED PARTY IS ENTITLED TO INDEMNIFICATION UNDER THIS
AGREEMENT, THE GROSS AMOUNT THEREOF WILL BE REDUCED (BUT NOT BELOW ZERO) BY THE
NET PRESENT VALUE OF ANY CORRELATIVE INSURANCE PROCEEDS ACTUALLY REALIZED BY
SUCH INDEMNIFIED PARTY UNDER POLICIES TO THE EXTENT THAT THE FUTURE PREMIUM RATE
WILL NOT BE INCREASED BY CLAIM EXPERIENCE RELATING TO SUCH LOSS, LIABILITY OR
EXPENSE.
(c) Notwithstanding the provisions of Sections 62 and 6.2(a)(iv), it is
expressly agreed that no Asset Contributor or Oxy CH Sub shall be required to
indemnify the Partnership for any Liability arising out of, in connection with
or related to any HSE Claim to the extent that the condition, event,
circumstance or other basis for the HSE Claim was exacerbated or accelerated by
the Partnership. The Partnership shall not be deemed to have exacerbated a
condition, event, circumstance or other basis for an HSE Claim by reason of the
continuance thereof after the Closing (i) under circumstances where the
Partnership does not know of its existence and has not breached any legal duty
to have conducted an investigation or inquiry that would have uncovered the
matter or (ii) under circumstances where the Partnership does know of its
existence but is taking commercially reasonable actions to cure the matter or to
otherwise achieve compliance in a commercially reasonable and prudent manner.
(d) Subject to the other provisions of this Section 6, the Partnership
hereby indemnifies, to the fullest extent permitted by law each Asset
Contributor, Oxy CH Sub and their Affiliates and their respective officers,
directors and employees against and agrees to hold each of them harmless from
any and all Liability incurred or suffered by such Person arising out of or
relating to:
(i) Any misrepresentation in or breach of the representations and
warranties of the Partnership or the failure of the Partnership to perform
any of its covenants or obligations contained in this Agreement, the
Assignment and Assumption Agreements, the Master Intellectual Property
Agreement or the Master Transaction Agreement;
(ii) Assumed Liabilities; or
(iii) Any HSE Claim to the extent arising out of the Partnership's
exacerbation or acceleration of such HSE Claim.
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<PAGE>
(e) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, TO THE FULLEST
EXTENT PERMITTED BY LAW, NEITHER THE PARTNERSHIP NOR ANY OF ITS AGENTS,
EMPLOYEES, REPRESENTATIVES OR AFFILIATES SHALL BE LIABLE FOR CONSEQUENTIAL,
INCIDENTAL, INDIRECT OR PUNITIVE DAMAGES IN CONNECTION WITH DIRECT CLAIMS BY AN
INDEMNIFIED PARTY (I.E., A CLAIM BY AN INDEMNIFIED PARTY THAT DOES NOT SEEK
REIMBURSEMENT FOR A THIRD PARTY CLAIM PAID OR PAYABLE BY SUCH INDEMNIFIED PARTY
) WITH RESPECT TO THEIR INDEMNIFICATION OBLIGATIONS UNDER THIS AGREEMENT UNLESS
ANY SUCH CLAIM ARISES OUT OF THE FRAUDULENT ACTIONS OF THE PARTNERSHIP. IN
DETERMINING THE AMOUNT OF ANY LOSS, LIABILITY, OR EXPENSE FOR WHICH AN
INDEMNIFIED PARTY IS ENTITLED TO INDEMNIFICATION UNDER THIS AGREEMENT, THE GROSS
AMOUNT THEREOF WILL BE REDUCED (BUT NOT BELOW ZERO) BY THE NET PRESENT VALUE OF
ANY CORRELATIVE INSURANCE PROCEEDS ACTUALLY REALIZED BY SUCH INDEMNIFIED PARTY
UNDER POLICIES TO THE EXTENT THE FUTURE PREMIUM RATE WILL NOT BE INCREASED BY
CLAIM EXPERIENCE RELATING TO SUCH LOSS, LIABILITY OR EXPENSE.
(f) The rights provided to each Indemnified Party pursuant to this Section
6, as limited by and subject to the provisions of this Section 6, shall be such
Indemnified Party's sole remedy for breach of any representation or warranty by
or covenant or obligation of any Indemnifying Party under this Agreement, the
Assignment and Assumption Agreements, the Master Intellectual Property Agreement
and the Master Transaction Agreement.
6.3 Procedures.
----------
(a) Any Person seeking indemnification under Section 62 (the "Indemnified
Party") agrees to give prompt written notice to the party against whom indemnity
is sought (the "Indemnifying Party") of the assertion of any claim that does not
involve a Third Party Claim, which notice shall describe in reasonable detail
the nature of the claim, an estimate of the amount of damages attributable to
such claim to the extent feasible and the basis of the Indemnified Party's
request for indemnification under this Agreement. If the Indemnifying Party
disputes such claim and such dispute is not resolved by the parties, such
dispute shall be resolved in accordance with Section 7.9.
(b) If an Indemnified Party is notified of a Third Party Claim which may
give rise to a claim for indemnification against any Indemnifying Party under
this Section, then the Indemnified Party shall promptly notify each Indemnifying
Party thereof in writing (including copies of all papers served with respect to
such Third Party Claim), which notice shall describe in reasonable detail the
nature of the Third Party Claim, an estimate of the amount of damages
attributable to the Third Party Claim to the extent feasible and the basis of
the Indemnified Party's request for indemnification under this Agreement;
provided that any failure to timely give such notice shall not relieve the
- --------
Indemnifying Party of any of its obligations under this Section 6 except to the
extent that such failure prejudices or impairs, in any material respect, any of
the rights or obligations of the Indemnifying Party.
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<PAGE>
(c) Any Indemnifying Party may, and at the request of the Indemnified
Party shall, participate in and control the defense of the Third Party Claim
with counsel of its choice reasonably satisfactory to the Indemnified Party. The
Indemnified Party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the Indemnified Party unless (i) the
employment thereof has been specifically authorized in writing by the
Indemnifying Party, (ii) the Indemnifying Party failed to assume the defense and
employ counsel or failed to diligently prosecute or settle the Third Party Claim
or (iii) there shall exist or develop a conflict that would ethically prohibit
counsel to the Indemnifying Party from representing the Indemnified Party. If
requested by the Indemnifying Party, the Indemnified Party agrees to cooperate
with the Indemnifying Party and its counsel in contesting any Third Party Claim
that the Indemnifying Party elects to contest, including, without limitation, by
making any counterclaim against the person or entity asserting the Third Party
Claim or any cross-complaint against any person or entity, in each case only if
and to the extent that any such counterclaim or cross-complaint arises from the
same actions or facts giving rise to the Third Party Claim. The Indemnifying
Party shall be the sole judge of the acceptability of any compromise or
settlement of any claim, litigation or proceeding in respect of which indemnity
may be sought hereunder, provided that the Indemnifying Party will give the
--------
Indemnified Party reasonable prior written notice of any such proposed
settlement or compromise and will not consent to the entry of any judgment or
enter into any settlement with respect to any Third Party Claim without the
prior written consent of the Indemnified Party, which shall not be unreasonably
withheld. The Indemnifying Party (if the Indemnified Party is entitled to
indemnification hereunder) shall reimburse the Indemnified Party for its
reasonable out of pocket costs incurred with respect to such cooperation.
(d) If the Indemnifying Party fails to assume the defense of a Third Party
Claim within a reasonable period after receipt of written notice pursuant to the
first sentence of subparagraph (c), or if the Indemnifying Party assumes the
defense of the Indemnified Party pursuant to subparagraph (c) but fails
diligently to prosecute or settle the Third Party Claim, then the Indemnified
Party shall have the right to defend, at the sole cost and expense of the
Indemnifying Party (if the Indemnified Party is entitled to indemnification
hereunder), the Third Party Claim by all appropriate proceedings, which
proceedings shall be promptly and vigorously prosecuted by the Indemnified Party
to a final conclusion or settled. The Indemnified Party shall have full control
of such defense and proceedings; provided that the Indemnified Party shall not
--------
settle such Third Party Claim without the written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld. The Indemnifying Party
may participate in, but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this Section, and the Indemnifying Party shall
bear its own costs and expenses with respect to such participation.
(e) Notwithstanding the other provisions of this Section 6.3, if the
Indemnifying Party disputes its potential liability to the Indemnified Party
under this Section 6.3 and if such dispute is resolved in favor of the
Indemnifying Party, the Indemnifying Party shall not be required to bear the
costs and expenses of the Indemnified Party's defense pursuant to this Section
63 or of the Indemnifying Party's participation therein at the Indemnified
Party's request, and the Indemnified Party shall reimburse the Indemnifying
Party in full for all costs and expenses of the litigation
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<PAGE>
concerning such dispute. If a dispute over potential liability is resolved in
favor of the Indemnified Party, the Indemnifying Party shall reimburse the
Indemnified Party in full for all costs of the litigation concerning such
dispute.
(f) After it has been determined, by acknowledgment, agreement, or ruling
of court of law, that an Indemnifying Party is liable to the Indemnified Party
under this Section 6, the Indemnifying Party shall pay or cause to be paid to
the Indemnified Party the amount of the Liability within ten business days of
receipt by the Indemnifying Party of a notice reasonably itemizing the amount of
the Liability but only to the extent actually paid or suffered by the
Indemnified Party.
(g) In the event a Third Party Claim is brought in which the liability as
between the Partnership and any or all Contributors is alleged to be joint (it
being agreed that any Third Party Claim related to a Pre-Closing Contingent
Liability shall be deemed joint) or in which the entitlement to indemnification
under this Section 6 has not been determined, the Partnership and the
appropriate Contributors shall cooperate in the joint defense of such Third
Party Claim and shall offer to each other such assistance as may reasonably be
requested in order to ensure the proper and adequate defense of any such matter.
Such joint defense shall be under the general management and supervision of the
party which is expected to bear the greater share of the liability, unless
otherwise agreed; provided, however, that neither party shall settle or
-------- -------
compromise any such joint defense matter without the consent of the other, which
consent shall not be unreasonably withheld or delayed. Any uninsured costs of
such joint defense shall be borne as the parties may agree, provided, however,
that in the absence of such agreement, the defense costs shall be borne by the
party incurring such costs; provided, further, that, if it is determined that
--------
one party was entitled to indemnification under this Section 6, the other party
shall reimburse the party entitled to indemnification for all of its costs
incurred in connection with such defense.
6.4 Subrogation. In the event of any payment by an Indemnifying Party to
-----------
an Indemnified Party in connection with any Liability, the Indemnifying Party
shall be subrogated to and shall stand in the place of the Indemnified Party as
to any events or circumstances in respect of which the Indemnified Party may
have any right or claim against any third party relating to such event or
indemnification. The Indemnified Party shall cooperate with the Indemnifying
Party in any reasonable manner in prosecuting any subrogated claim.
6.5 Claims for HSE Work. Notwithstanding the other provisions of this
-------------------
Section 6, in the case of any assertion, claim or demand requiring the
performance of investigatory, removal or remedial work with respect to
environmental conditions, HSE Laws or Chemical Substances for which the
Partnership may seek indemnification, the Partnership shall have the right to
conduct and control such work provided (i) it uses its good faith, commercially
reasonable efforts to achieve the Lowest Cost Response and (ii) it provides the
Contributors with the opportunity to: (A) review and comment upon any work plans
for any remedial action prior to finalization and implementation; (B) attend
meetings with regulators concerning the remedial action; and (C) have a
representative present during the performance of any remedial action.
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6.6 EXTENT OF INDEMNIFICATION. WITHOUT LIMITING OR ENLARGING THE SCOPE
-------------------------
OF THE INDEMNIFICATION, RELEASE AND ASSUMPTION OBLIGATIONS SET FORTH HEREIN, TO
THE FULLEST EXTENT PERMITTED BY LAW, AN INDEMNIFIED PARTY SHALL BE ENTITLED TO
INDEMNIFICATION HEREUNDER IN ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF
WHETHER THE INDEMNIFIABLE LOSS GIVING RISE TO ANY SUCH INDEMNIFICATION
OBLIGATION IS THE RESULT OF THE SOLE, GROSS, ACTIVE, PASSIVE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF ANY LAW
OF OR BY ANY SUCH INDEMNIFIED PARTY. THE PARTIES AGREE THAT THIS STATEMENT
CONSTITUTES A CONSPICUOUS LEGEND.
SECTION 7
MISCELLANEOUS
-------------
7.1 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 provisions of this Agreement and not as an aid in construction:
(ii) no consideration shall be given to the fact or presumption that any of the
parties 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 gender; and (vii) each exhibit, appendix,
attachment and schedule to this Agreement is a part of this Agreement.
7.2 Payment of Certain Expenses and Taxes.
-------------------------------------
(a) Subject to the further provisions of this Section 7.2, (i) each
Contributor shall be responsible for all Taxes attributable to such
Contributor's ownership or use of the Assets or operation of the Contributed
Business prior to the Closing, (ii) Oxy CH Sub shall be responsible for all
Taxes attributable to Oxy Petrochemical's ownership or use of the Assets or
operation of the Contributed Business prior to the Closing, and (iii) the
Partnership shall be responsible for all Taxes attributable to the Partnership's
ownership or use of the Assets or operation of the Contributed Business after
the Closing. Each Contributor and Oxy CH Sub shall be responsible for any
liability of the Partnership pursuant to Texas Tax Code Section 111.020
(including interest, penalties and attorneys' fees in connection therewith) with
respect to any amounts owed or owing by such Person under Title 2, Texas Tax
Code.
(b) All sales, transfer, or other similar taxes incurred in connection
with the transfer of the Assets shall be borne by the Partnership. The
Partnership, each Contributor and Oxy CH Sub shall cooperate fully with each
other after the Closing in connection with (i) the preparation and filing of any
tax return, exemption certificate, or other filing in connection with such
taxes, and (ii) any audit examination by any taxing Authority of the tax
returns, exemption certificates, or other filings referred to above.
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(c) All real property taxes, personal property taxes, ad valorem taxes,
and other similar taxes (or payments in lieu of such taxes) assessed on any of
the Assets (including Inventory) in the tax period in which the Closing Date
occurs ("Property Taxes") shall be prorated between the Partnership and the
Asset Contributors or Oxy CH Sub, as appropriate, as of the Closing.
(d) [RESERVED]
(e) The Partnership shall pay any title or recordation fees in connection
with the transfer of the Assets. The Partnership shall also pay for any title
insurance policies or surveys of the Fee Interests that are requested or ordered
by the Partnership.
(f) After the Closing, either a Contributor (or, in the case of Oxy
Petrochemicals, Oxy CH Sub) or the Partnership receiving each Property Tax bill
or notice applicable to the Assets for the period in which the Closing Date
occurred shall, if other than the Partnership, promptly notify the Partnership
and shall pay each such tax bill prior to the last day such taxes may be paid
without penalty or interest. If paid by a Contributor (or, in the case of Oxy
Petrochemicals, Oxy CH Sub) the Partnership shall promptly on receipt of a
written request (accompanied by appropriate supporting documentation) reimburse
the paying party with respect to the share of the Partnership of such amount so
paid as provided under this Agreement. If paid by the Partnership, the
Contributor (or, in the case of Oxy Petrochemicals, Oxy CH Sub) shall promptly
on receipt of a written request (accompanied by appropriate supporting
documentation) reimburse the Partnership with respect to the share of the
Contributor (or, in the case of Oxy Petrochemicals, Oxy CH Sub) of such amount
so paid as provided under this Agreement. The Contributors and the Partnership
shall cooperate fully with each other on and after Closing with respect to any
Property Tax assessment or valuation (or protest in connection therewith) by any
taxing Authority with respect to the tax period in which the Closing Date
occurs.
(g) If any party receives a refund of any Taxes for which the other is
liable or responsible under this Agreement, the party receiving such refund
shall, within 30 days after the receipt of such refund, remit it to the party
who is liable.
(h) Any Taxes, Property Taxes or other liabilities to be paid by a
Contributor pursuant to this Section 7.2 that relate to the Assets or
Contributed Business of Oxy Petrochemicals shall be paid by Oxy CH Sub.
(i) Notwithstanding any other provision of this Agreement, the obligations
of the parties set forth in this Section 7.2 shall be unconditional and absolute
and shall remain in effect until audit, assessment and collection of any such
taxes are barred by the applicable statute of limitations.
7.3 Notices. All notices, requests, demands and other communications
-------
which 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 with
proof of confirmation from the transmitting machine, or (ii) delivered by
courier or other hand delivery, as follows:
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(a) If to a Contributor or Oxy CH Sub:
c/o Occidental Petroleum Corporation
10889 Wilshire Blvd.
Los Angeles, CA 90004
Attention: President
Telecopy Number: (310) 443-6977
with a copy to:
c/o Occidental Petroleum Corporation
10889 Wilshire Blvd.
Los Angeles, CA 90004
Attention: General Counsel
Telecopy Number: (310) 443-6333
(b) If to the Partnership:
Equistar Chemicals, LP
1221 McKinney Street
Houston, Texas 77010
Attention: Gerald A. O'Brien
Telecopy Number: (713) 309-4718
or to such other address or telecopy number as either party shall have specified
by notice in writing to the other party. All such notices, requests, demands
and communications shall be deemed to be effective upon receipt.
7.4 [Reserved].
----------
7.5 Binding Effect; Benefit. Subject to Section 77, this Agreement shall
-----------------------
inure to the benefit of and be binding upon the parties hereto and their
respective permitted successors and assigns. Nothing in this Agreement,
expressed or implied, is intended to confer on any Person other than the parties
hereto and their Affiliates or their respective permitted successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
7.6 Occasional and Bulk Sales. To the extent applicable, the Partnership
-------------------------
and the Contributors each agree to waive, to the fullest extent permitted by
law, compliance by the other with the provisions of the Bulk Sales Law of any
jurisdiction.
7.7 Assignability. Neither this Agreement nor any of the rights or
-------------
obligations hereunder shall be assignable (by operation of law or otherwise) by
a Contributor without the prior written consent of the Partnership or shall be
assignable (by operation of law or otherwise) by the Partnership (except to a
wholly-owned subsidiary thereof) without the prior written consent of each
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Contributor. Any assignment or purported assignment in violation of this Section
shall be null and void.
7.8 Amendment; Waiver. This Agreement may be amended, supplemented or
-----------------
otherwise modified only by a written instrument executed by the parties hereto.
No waiver by any party of any of the provisions hereof shall be effective unless
explicitly set forth in writing and executed by the party so waiving. Subject
to the agreements and obligations of the Partnership hereunder or under
applicable Legal Requirements, no investigations by the Partnership heretofore
or hereafter made shall affect the representations and warranties of a
Contributor, and, except as otherwise provided in Section 61, such
representations and warranties shall survive any such investigation. The waiver
by any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach.
7.9 Dispute Resolution. All disputes under this Agreement shall be
------------------
resolved in accordance with the Dispute Resolution Procedures set forth in
Appendix A.
7.10 Severability. In the event that any provisions 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 the Contributors or the
Partnership, be deemed severed from this Agreement and every other provision of
this Agreement shall remain in full force and effect.
7.11 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
7.12 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
--------------
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE EXCLUDING CONFLICTS OF LAW
PRINCIPLES OF SUCH JURISDICTION EXCEPT TO THE EXTENT SUCH MATTERS ARE
MANDATORILY SUBJECT TO THE LAWS OF ANOTHER JURISDICTION PURSUANT TO THE LAWS OF
SUCH OTHER JURISDICTION.
7.13 JURISDICTION; CONSENT TO SERVICE OF PROCESS; WAIVER. ANY JUDICIAL
---------------------------------------------------
PROCEEDING BROUGHT AGAINST ANY PARTY TO THIS AGREEMENT 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 DELAWARE, AND,
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES TO THIS
AGREEMENT 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 EXCEPT TO THE EXTENT THIS AGREEMENT RELATES TO
THE CONVEYANCE OR ASSIGNMENT OF ANY INTEREST IN REAL ESTATE OR THE CREATION,
PERFECTION, PRIORITY OR FORECLOSURE OF ANY LIEN ON ANY INTEREST IN REAL ESTATE
IN WHICH CASE, SUCH COURTS
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JURISDICTION SHALL BE NON-EXCLUSIVE. EACH OF THE PARTIES TO THIS AGREEMENT SHALL
APPOINT THE CORPORATION TRUST COMPANY, 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 DELAWARE BY
ENTERING INTO AN AGREEMENT AS OF THE DATE OF THIS AGREEMENT WITH THE AGENT TO
SUCH EFFECT. 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 DELAWARE FOR ANY PURPOSE EXCEPT AS PROVIDED ABOVE AND
SHALL NOT BE DEEMED TO CONFER RIGHTS ON ANY PERSON OTHER THAN THE PARTIES
HERETO. EACH PARTY HEREBY WAIVES ANY OBJECTION IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS.
--------------------
7.14 WAIVER OF JURY TRIAL. THE PARTNERSHIP AND THE CONTRIBUTORS HEREBY
--------------------
KNOWINGLY AND INTENTIONALLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY
IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY
COUNTERCLAIM THEREIN.
SECTION 8
DEFINITIONS
-----------
The terms used in this Agreement have the following definitions or are
defined in the Sections referenced below:
"AAA" is defined in Appendix A.
"Accounts Receivable" constitute, as of the Closing Date and as further
defined below, all uncollected accounts receivable that have been generated by,
or are attributable to, the Contributors' operation prior to the Closing Date of
the Contributed Business in the ordinary course and in all respects in a manner
consistent with the provisions of Section 3.2 of the Master Transaction
Agreement. Accounts Receivable shall not include any reserves or accruals.
"Affiliate" means any Person that directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with the Person specified; provided, however, that for purposes of this
-------- -------
Agreement none of the Partnership, any Person controlled by it, Canadian
Occidental Petroleum Ltd. or any Person controlled by it shall be considered an
Affiliate of any Contributor. For purposes of this definition, the term
"control" shall have the meaning set forth in 17 CFR 230.405 as in effect on the
date hereof. With respect to the period from and after the date hereof, Oxy
Petrochemicals shall not be considered an Affiliate of the Asset Contributors.
"Agreement" is defined in the first paragraph of this Agreement.
"Arbitrator" is defined in Appendix A.
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"Asset Contributors" is defined in the fifth WHEREAS clause.
"Asset Transfer Effective Time" means 4:00 A.M., local time, where the
respective Assets are located, on the Closing Date.
"Assets" means all of the assets, rights and properties being contributed,
conveyed, assigned, transferred and delivered to the Partnership pursuant to
Sections 1.2(a) and 2.1.
"Assignment and Assumption Agreements" means the Assignment of Lake Charles
Lease, the Assignment of Leases, the Bill of Sale and Assignment, the Trademark
License, the Patent Assignment, the Assumption of Partnership Interests, the
Partnership Assumption Agreement, the Excluded Assets Assignment and the Oxy CH
Sub Assumption Agreement.
"Assignment of Lake Charles Lease" is defined in Section 2.3(a).
"Assignment of Leases" is defined in Section 2.3(a).
"Assignment of Partnership Interests" is defined in Section 2.3(c).
"Associated Rights" means all right, title and interest of a Contributor
and any Affiliate thereof, if any, in lands, or real property of others, used
principally in the normal operation and conduct of the Contributed Business.
"Assumed Liabilities" is defined in Section 25.
"Authority" means any government or governmental or regulatory body
thereof, or political subdivision thereof, whether federal (or any commonwealth,
territory or possession thereof), state, local or foreign, or any agency,
department or instrumentality thereof, or any court or arbitrator (public or
private).
"Banked Vacation" is defined in Section 2.8(g).
"Basic Severance" is defined in Section 2.8(b).
"Cain Plan" is defined in Section 2.8(h).
"Capital Spares" means the inventory of spare parts used by a Contributor
in the Contributed Business and owned by a Contributor as of the Closing Date.
"Carryover Vacation" is defined in Section 2.8(g).
"CERCLA" is defined in Section 316.
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"Chemical Substance" means any (i) 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 HSE Law or defined or listed as an industrial,
toxic, deleterious, harmful, radioactive, infectious, disease-causing or
hazardous substance, material or waste under any HSE Law, and (ii) petroleum or
any fraction thereof, asbestos or asbestos-containing material or
polychlorinated biphenyls ("PCBs").
"Closing" is defined in Section 1.3(a).
"Closing Date" is defined in Section 1.3(a).
"Closing Date Balance Sheet" is defined in Section 5.4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consent" means any consent, waiver, appraisal, authorization, exception,
registration, license or declaration of or by any Person or any Authority, or
any expiration or termination of any applicable waiting period under any Legal
Requirement, required with respect to the Contributed Business or a Contributor
or any Affiliate thereof in connection with (i) the execution and delivery of
this Agreement or any of the Related Agreements or (ii) the consummation of the
transactions contemplated hereby or thereby.
"Contracts" means contracts, maintenance and service agreements, purchase
commitments for materials and other services, advertising and promotional
agreements, leases, taxation agreements with any Authority, and other
agreements.
"Contributed Contracts" means, other than Government Licenses, (i) all
Contracts to which a Contributor or an Affiliate thereof is a party, whether or
not entered into in the ordinary course of business, that relate principally to
the normal operation and conduct of the Contributed Business, but in the case of
any Contracts under which either such Asset Contributor or any Affiliate thereof
retains rights with respect to its other businesses, only to the extent any such
Contract relates to the operation of the Contributed Business and (ii) all
agreements and instruments setting forth such Contributor's and any of its
Affiliates' rights with respect to rights-of-way, privileges, riparian and other
rights, appurtenances, licenses or franchises and in respect of intellectual
property rights, in each case that constitute Assets described in clauses (a)
through (e), of Section 2.1.
"Contributed Business" is defined in Schedule A.
"Contributed Intellectual Property" means all of the items referred to in
Section 2.1(g) to the extent such item is not an Excluded Asset, together with
the items referred to in clause (ii) of the definition of Unrecorded Assets.
"Contributed Subsidiaries" is defined in Section 2.1(k).
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<PAGE>
"Contributor(s)" is defined in the sixth WHEREAS clause.
"Contributors' 401(k) Plans" is defined in Section 2.8(g).
"Deeds" is defined in Section 2.3(a).
"De Minimis Claim" means any Third Party Claim for which the Liability
associated therewith is less than $25,000.
"DGCL" is defined as the Delaware General Corporation Law, as amended.
"Dispute Notice" is defined in Appendix A.
"Disputing Party" is defined in Appendix A.
"DRULPA" is defined as the Delaware Revised Uniform Limited Partnership
Act, as amended.
"Effective Time" is defined in Section 1.3(b).
"Employee Pension Benefit Plan" is defined in ERISA Section 3(2).
"Employee Plan" is defined in Section 34.
"Employee Welfare Benefit Plan" is defined in ERISA Section 3.1.
"Employees" is defined in Section 2.8(a).
"Encumbrance" means any lien, charge, encumbrance, security interest, title
defect, option or any other restriction or third party right.
"Environment" is defined in this Section 1 in the definition of "HSE Laws".
"Equipment" means all of the right, title and interest of a Contributor and
any Affiliate thereof in and to the equipment, furniture, furnishings, fixtures,
machinery, Capital Spares, vehicles, tools, computers and other tangible
personal property used principally in the normal operation and conduct of the
Contributed Business including without limitation the items listed on Schedule
21.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, and the regulations promulgated thereunder.
"Excluded Assets" is defined in Section 2.2.
"Excluded Assets Assignment" is defined in Section 1.7.
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"Excluded Liabilities" is defined in Section 2.6.
"Expiration Date" shall mean the date that the term of the Operating
Agreement shall expire or shall be terminated in accordance with the provisions
thereof.
"Fee Interests" means all right, title and interest of a Contributor and
any Affiliate thereof in the parcels of land described as fee property on
Schedule 2.1(a), together with all buildings, structures, fixtures and other
improvements situated thereon and all right, title and interest of such
Contributor and any Affiliate thereof under easements, privileges, rights-of-
way, riparian and other water rights, lands underlying any adjacent streets or
roads, appurtenances and licenses to the extent pertaining to or accruing to the
benefit of the land.
"GAAP" means United States generally accepted accounting principles, as in
effect from time to time.
"Government Licenses" means all licenses, permits or franchises issued by
any Authority relating to the operation, development, use, maintenance or
occupancy of the Facilities or any other Asset or of the Contributed Business to
extent that such licenses, permits or franchises relate principally to the
normal operation and conduct of the Contributed Business.
"HSE Claim" means (i) any action, event, circumstance or responsibility
(including any compliance action or requirement) that is necessary to comply
with HSE Laws but only to the extent that any of the foregoing gives rise to out
of pocket costs or expenses or results in a Liability that is required by GAAP
to be reflected on the balance sheet of the applicable party or (ii) any third
party (including private parties, Authorities and employees acting on each such
party's own behalf or on the behalf of other third parties) action, lawsuit,
claim, investigation or proceeding arising under HSE Laws.
"HSE Laws" means any Legal Requirements or rule of common law now in effect
(including any amendments now in effect) and any current judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree, or judgment, relating to (i) 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 (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.
"HSE Proceeding" is defined in Section 316.
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"Indemnified Party" is defined in Section 63.
"Indemnifying Party" is defined in Section 63.
"Intellectual Property" means research material, technical information,
marketing information, patent rights, patent licenses, pending patent
applications, trade secrets, technical information, know-how, management
information systems, technology, quality control data, specifications, designs,
drawings, software, sales promotion literature and advertising materials.
"Inventory" means materials used by a Contributor in the Contributed
Business and owned by a Contributor as of the Closing Date including raw
materials, feed stocks, supplies, additives, pigments, process chemicals,
packaging materials (to the extent the Partnership's use thereof would be
consistent with Section 5.3), catalysts, work-in-process and finished goods that
relate principally to the normal operation and conduct of the Contributed
Business. Inventory shall include any FIFO or LIFO reserves, as well as any
reserve for slow moving or obsolete items and for any volume or price
adjustments.
"Knowledge" with respect to a Contributor means the actual knowledge of (i)
any plant manager, (ii) any officer of such Contributor having responsibilities
with respect to the Contributed Business, and (iii) any employee reporting
directly to an officer described in clause (ii), in each case employed, as of
the Closing Date, by such Contributor in connection with the Contributed
Business.
"Lake Charles Facility" means the Plant Site, Plant and Pipeline (each as
defined in the Lake Charles Lease).
"Lake Charles Lease" means that certain Lease dated May 15, 1998 between
OCC and Occidental Chemical Sub with respect to the Lake Charles Leased Assets.
"Lake Charles Leased Assets" means all of the tangible assets and
properties, real, personal or mixed, used or held for use in the contemplated
operation and conduct of the Contributed Business at the Lake Charles Facility,
excluding the Lake Charles Transferred Assets and any Excluded Assets listed in
Schedule 2.2(h).
"Lake Charles Transferred Assets" means those Assets set forth in the
schedule to Exhibit C.
"Leased Premises" means, generally, the premises described in the Leases
and specifically, with respect to the Lake Charles Lease, the Lake Charles
Leased Assets.
"Leaseholds" means all right, title and interest of a Contributor and any
Affiliate thereof under the Leases, for the use and occupancy of the Leased
Premises, together with all buildings, structures, fixtures and other
improvements situated thereon and, all rights and interests of such Contributor
and any Affiliate thereof under all easements, privileges, rights-of-way,
riparian and other water rights, appurtenances and licenses pertaining to the
Leases or accruing to the benefit of the tenant under the Leases.
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"Leases" means the Lake Charles Lease and the leases and subleases, all
amendments thereto and all agreements related thereto described on Schedule
2.1(b).
"Legal Requirement" means any law, statute, rule, ordinance, decree,
requirement, regulation, order or judgment of any Authority, including the terms
of any Government License.
"Liability" is defined in Section 62.
"Licensed Technology" means the technology licensed to the Partnership
pursuant to the Master Intellectual Property Agreement.
"Licensed Trademarks" means the trademarks licensed to the Partnership
pursuant to the Master Intellectual Property Agreement.
"Lowest Cost Response" means the response required or allowed under HSE
Laws that addresses the Chemical Substances present at the lowest cost
(considered as a whole taking into consideration any negative impact such
response may have on the conduct of the Contributed Business and any potential
additional costs or liabilities that may arise as a result of such response) as
compared to any other response that is consistent with HSE Laws. Taking no
action shall constitute the Lowest Cost Response if, after investigation, taking
no action is determined to be consistent with HSE Laws. If taking no action is
not consistent with HSE Laws, the least costly non-permanent remedy (such as
mechanisms to contain or stabilize Chemical Substances, including caps, dikes,
encapsulation, leachate collection systems, etc.) shall be the Lowest Cost
Response, provided that such non-permanent remedy is consistent with HSE Laws
and less costly than the least costly permanent remedy (such as the excavation
and removal of soil).
"Master Intellectual Property Agreement" is defined in Section 2.7.
"Master Transaction Agreement" is defined in the second WHEREAS clause.
"Material Adverse Effect" means any adverse circumstance or consequence
that, individually or in the aggregate, has an effect that is material to the
financial condition, results of operations, assets or business of the
Contributed Business or the Assets, taken as a whole.
"Merger" is defined in the sixth WHEREAS clause.
"Mirror Plan" is defined in Section 2.8(g).
"Non-Plant Employees" is defined in Section 2.8(b).
"Non-Union Employee" is defined in Section 2.8(g).
"OCC" is defined in Section 2.7.
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"Occidental" is defined in the first WHEREAS clause.
"Occidental Chemical Sub" is defined in the first paragraph of this
Agreement.
"Occidental's Qualified Plan" is defined in Section 2.8(g).
"Operating Agreement" means that certain Operating Agreement, dated May 15,
1998, between OCC and the Partnership.
"Oxy CH" is defined in the first WHEREAS clause.
"Oxy CH Sub" is defined in the first paragraph of this Agreement.
"Oxy CH Sub Assumption Agreement" is defined in Section 1.8.
"Oxy Petrochemicals" is defined in the first paragraph of this Agreement.
"Oxy Petrochemicals Common Stock" is defined in Section 1.5(a).
"Partnership" is defined in the first paragraph of this Agreement.
"Partnership Benefit Plans" is defined in Section 2.8(g).
"Partnership Employees" is defined in Section 28(a).
"Partnership 401(k) plan is defined in Section 2.8(g).
"Partnership Governance Committee" shall have the meaning assigned to it in
the Amended and Restated Agreement of Limited Partnership of the Partnership.
"Patent Assignment" is defined in Section 2.3(a).
"PCBs" is defined in this Section in the definition of "Chemical
Substance".
"PDG Chemical" is defined in the first paragraph of this Agreement.
"PDG Plan" is defined in Section 2.8(h).
"PD Glycol" is defined in the fifth WHEREAS clause.
"Partnership Assumption Agreement" is defined in Section 2.5(b).
"Person" means any natural person or any corporation, partnership, limited
liability company, joint venture, association, trust or other entity or
organization.
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"Pipeline" means pipe and related equipment used primarily for the
transportation of ethylene and propylene in connection with the Contributed
Business, but excluding pipe and related equipment located within the property
boundaries of facilities not part of the Contributed Business.
"Pre-Closing Contingent Liabilities" means all Liabilities of every kind
and nature arising out of, in connection with or related to the ownership,
operation or use prior to the Closing Date of the Assets or the Contributed
Business other than the Liabilities referred to in Sections 2.5(a)(i), (ii),
(iii), (vii) and (ix).
"Prepaid Expenses" means the balances in the prepaid accounts consistent
with GAAP of a Contributor or its Affiliates, as of the Closing Date, that are
associated with the Contributed Business and that will have value to the
Partnership in owning and operating the Contributed Business after the Closing
Date.
"PRA" is defined in Section 2.8(g).
"Property Tax" is defined in Section 72.
"PSA" is defined in Section 2.8(g).
"Related Agreements" means the Master Transaction Agreement, Tier 1 Related
Agreements (other than this Agreement) and Tier 2 Related Agreements, as such
terms are defined in the Master Transaction Agreement.
"Release" means 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 the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, or any other HSE Law and any noxious noise or odor
emission.
"SEC Reports" means (i) the 1996 Annual Report on Form 10-K and the
Quarterly Reports on Form 10-Q for the first three quarters of 1997 of
Occidental required to be filed with the Securities and Exchange Commission or
(ii) if filed by Occidental on or prior to the date of this Agreement, its 1997
Annual Report on Form 10-K.
"Secretary of State" is defined in Section 1.3(b).
"Seven Year PCCL Claims" means Third Party Claims (other than any De
Minimis Claim) related to Pre-Closing Contingent Liabilities that have been or
are asserted within seven years after the Closing Date.
"SIP" is defined in Section 2.8(g).
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"STIF" is defined in Section 2.8(h).
"Stores Inventory" means the inventory of spare parts, excluding Capital
Spares, that are used by a Contributor or any Affiliate thereof in the
Contributed Business and owned by such Contributor or any Affiliate thereof as
of the Closing Date and that consist of items that generally can be used for
several processes or types of equipment, including, but not limited to, such
items as pumps, motors, pipe fittings, electrical wiring, instruments, nuts and
bolts, unfabricated metals, safety items, small hand tools and other
miscellaneous repair parts or supplies. Stores Inventory shall include any
reserve for slow moving or obsolete materials and supplies, and for any
inventory volume or price adjustments.
"Surviving Partnership" is defined in Section 1.1.
"Taxes" means all taxes, charges, fees, levies or other assessments imposed
by any taxing Authority, including, but not limited to, income, gross receipts,
excise, property, sales, use, transfer, payroll, license, ad valorem, value
added, withholding, social security, national insurance (or other similar
contributions or payments), franchise, severance and stamp taxes (including any
interest, fines, penalties or additions attributable to, or imposed on or with
respect to, any such taxes, charges, fees, levies or other assessments).
"Third Party Claim" means any allegation, claim, civil or criminal action,
proceeding, charge or prosecution brought by a Person other than a Contributor,
any Affiliate thereof, the Partnership, any member of the Millennium Group (as
defined in the Master Transaction Agreement), any member of the Lyondell Group
(as defined in the Master Transaction Agreement) or any member of the Occidental
Group (as defined in the Master Transaction Agreement).
"Trade Accounts Payable" means, as of the Closing Date, all current trade
accounts payable and current accrued expenses, including salaries and wages due
to Partnership Employees that are generated by and result from the execution by
the Contributors and their Affiliates of normal and customary payment and month-
end closing processes prior to the Closing Date. Trade Accounts Payable
includes unpaid invoices or accruals for services, materials, supplies,
feedstocks and products received in the ordinary course of business prior to the
Closing Date and which are attributable to the Contributed Business. Trade
Accounts Payable shall not include any payments due to an Affiliate of the
Contributors including any payments due for services, rent, overhead or similar
items.
"Trademarks" means trade names, trademarks, trademark registrations or
trademark applications, copyrights, copyright applications or copyright
registrations or any derivative thereof or design used in connection therewith.
"Trademark License" is defined in Section 2.3(a).
"Transition Employees" is defined in Section 2.8(d).
-46-
<PAGE>
"Unrecorded Assets" means all (i) right, title and interest in customer
lists, customer credit information (to the extent neither a Contributor nor any
Affiliate thereof is bound to any confidentiality obligation with respect
thereto), customer payment histories and credit limits, vendor lists, catalogs,
and (ii) right, title and interest in Intellectual Property to the extent used
or contemplated for use principally in the normal operation and conduct of (or
to the extent under development for use principally in the normal operation and
conduct of) or the marketing or promotion of, the Contributed Business.
"WARN" is defined in Section 28(f).
-47-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
OCCIDENTAL PETROCHEM PARTNER 1, INC.,
a Delaware corporation
By: /s/ John W. Morgan
-------------------------------------
Name: John W. Morgan
Title: Vice President
OCCIDENTAL PETROCHEM PARTNER 2, INC.,
a Delaware corporation
By: /s/ John W. Morgan
-------------------------------------
Name: John W. Morgan
Title: Vice President
OXY PETROCHEMICALS INC.,
a Delaware corporation
By: /s/ R. J. Schuh
-------------------------------------
Name: R. J. Schuh
Title: Executive Vice President
PDG CHEMICAL INC.,
a Delaware corporation
By: /s/ R.J. Schuh
-------------------------------------
Name: R.J. Schuh
Title: President
[Signature Page of Agreement and Plan of Merger and Asset Contribution]
-48-
<PAGE>
EQUISTAR CHEMICALS, LP,
a Delaware limited partnership
By: /s/ Eugene R. Allspach
-------------------------------------------
Name: Eugene R. Allspach
Title: President and Chief Operating Officer
[Signature Page of Agreement and Plan of Merger and Asset Contribution]
-49-
<PAGE>
Schedule A
Contributed Business
"Contributed Business" means the Contributors' business of owning, leasing
and operating manufacturing facilities and related assets for the production of
olefins, olefins co-products and certain ethylene derivatives (including
ethylene, propylene, butadiene and mixed butylenes, benzene, mixed C5
hydrocarbons, ethylene oxide, ethylene glycol, glycol ethers and ethanolamines)
and the Contributors' right, title and interest in certain transportation,
equipment, storage facilities and rights of way used in connection with the
foregoing products. The manufacturing facilities listed below are included in
the Contributed Business in addition to: (i) a fifty percent interest in a
limited partnership known as PD Glycol which owns manufacturing facilities
located at 3510 Gulf States Road, Beaumont, TX 77701, the remaining fifty
percent interest in which is owned by E. I. du Pont de Nemours and Company
pursuant to a Partnership Agreement, dated as of April 30, 1987, by and among
PDG Acquisition Company, E. I. du Pont de Nemours and Company and PPG Chemicals
Inc., as amended.
The products and Effective Annual Capacities of the Beaumont
facility/1/ are as follows:
Effective Annual
Site Product Capacity
Beaumont, TX Ethylene Oxide 657 MM#/Yr
Ethylene Glycol 910 MM#/Yr; and
(ii) a leasehold interest to be conveyed to the partnership covering the
facility described below, together with its Effective Annual Capacity:
Effective Annual
Site Product Capacity
Lake Charles Ethylene 850 MM#/Yr
4300 State Highway 108, Propylene (PG) 200 MM#/Yr
South Sulphur, LA 70633
The other facilities (with their respective Effective Annual Capacities)
are as follows:
__________________
/1/ The Effective Annual Capacities listed for Beaumont are for the entire
facility and not just PD Glycol's 50% interest.
<PAGE>
Effective Annual
Site Product Capacity
Bayport Ethylene Oxide 750 MM#/Yr
5761 Underwood Road Ethylene Glycol 650 MM#/Yr
Pasadena, TX 77507 Glycol Ethers 180 MM#/Yr
Ethanolamines 45 MM#/Yr
Ethylene 1,178 MM#/Yr
Chocolate Bayou Propylene (CG) 725 MM#/Yr
FM 2917 Butadiene 150 MM#/Yr
(12 Miles south of Alvin, TX) Benzene 105 MMGal/Yr
Alvin, TX 77512 MTBE 190 MMGal/Yr
Corpus Christi Ethylene 1,682 MM#/Yr
1501 McKenzie Road at Propylene (PG) 664 MM#/Yr
Highway 44 Butadiene 195 MM#/Yr
Corpus Christi, TX 78410 Benzene 79 MMGal/Yr
MTBE 165MM#/Yr
The transportation equipment and storage facilities included in the Contributed
Business consist of the Contributors' interests in approximately 738 rail cars
(subject to operational adjustments) used exclusively in connection with the
manufacture and distribution of the products described above, ethylene and
propylene storage facilities in Markham, Texas, and more than 950 miles of
feedstock and finished product pipelines, related facilities and rights of way
serving the foregoing manufacturing facilities and located across south Texas
and southwestern Louisiana.
<PAGE>
Schedule 2.1(a)
Fee Interests
-------------
1. Bayport
5761 Underwood Road
Pasadena, TX 77507
2. Chocolate Bayou
12 miles south of Alvin, Texas, on F.M. 2917
Alvin, TX 77512
(land adjacent to the facility).
3. a. Corpus Christi
1501 McKenzie Road @ Highway 44
Corpus Christi, TX 78410
b. Land adjacent to the Corpus Christi Ship Channel and which is not
contiguous to the plant site.
4. The office building located at 2947 E. Broadway, Pearland, TX 77581.
5. Various parcels of real property upon which portions of the Pipeline are
located excepting any real property related to the Lake Charles Facility.
<PAGE>
Schedule 2.1(b)
Leases
------
1. Chocolate Bayou
a. Sublease Agreement, dated June 9, 1987, between E.I. du Pont de Nemours
and Company and Cain Chemical Inc. (facility ground lease).
b. Agreement for Office Lease and Facilities Services, effective May 1,
1995, between Occidental Chemical Corporation and Lyondell Petrochemical
Company.
c. Tank Sites Lease Agreement, dated April 1, 1987, between Monsanto
Company and E. I. du Pont de Nemours and Company, Inc.
d. Grazing Lease, dated December 22, 1992, between Oxy Petrochemicals
Inc. and Vernon Gray.
2. Corpus Christi
a. Lease Intended for Security, Corpus Christi Ethylene Cracking Facility,
dated December 18, 1991, among Occidental Chemical Corporation, as
Lessee, The Institutions Listed on Schedule I thereto, as Lessors,
Norwest Bank Minnesota, N.A., as Agent and Chemical Bank and The Bank of
Nova Scotia, as Information Agents.
b. Farm Lease Agreement, dated December 15, 1996, between Oxy
Petrochemicals Inc. and George W. Hoelscher.
c. Farm Lease Agreement, dated December 15, 1996, between Oxy
Petrochemicals Inc. and Thomas Kocurek, Richard Kocurek and Charles
Kocurek.
d. Farm Lease Agreement, dated December 15, 1996, between Oxy
Petrochemicals Inc. and Roy Smith.
e. Lease Agreement, dated September 30, 1996, between Occidental Chemical
Corporation and Calallen Independent School District.
f. Lease Agreement, dated January 1, 1997, between Occidental Chemical
Corporation and Northwest Corpus Christi Girls Softball League.
g. Lease Agreement, dated November 9, 1995, between Occidental Chemical
Corporation and Northwest Pony League.
<PAGE>
h. Lease Agreement, dated February 19, 1997, between Occidental Chemical
Corporation and South Texas Adult Baseball League.
i. Lease Agreement, dated September 27, 1996, between Occidental Chemical
Corporation and Tuloso-Midway Independent School District.
j. Lease Agreement, dated January 1, 1997, between Occidental Chemical
Corporation and C.C. Girls Fast Pitch, Inc.
3. Pipeline
a. Pipeline Lease Agreement, commencing January 1. 1995, between Oxy
Petrochemicals Inc. and Amoco Pipeline Company.
b. Pipeline Lease, commencing May 1, 1996, between West Texas Gas, Inc. and
Oxy Petrochemicals Inc.
c. Partial Sublease and Assignment, dated March 1, 1977, between Texas
Brine Corporation and Corpus Christi Petrochemical Company.
d. Modification of Pipeline Corridor Agreement, dated March 18, 1996, among
Exxon Pipeline Company, Friendswood Development Company and Oxy
Petrochemicals Inc.
e. Agreement, effective as of January 1, 1992, between Amoco Chemical
Company and Oxy Petrochemicals Inc. (storage of propylene and use of
pipeline between Chocolate Bayou and Stratton Ridge).
<PAGE>
Schedule 2.1(d)
Equipment
---------
The equipment set forth in the Equipment list dated as of April 1, 1998, and on
Attachment "A" of this Schedule. Any item appearing on both Schedule 2.1(d) and
Schedule 2.2(h) shall be an Excluded Asset.
<PAGE>
Attachment "A"
--------------
Delivered by the Contributors and on file with Equistar Chemicals, LP.
<PAGE>
Schedule 2.1(k)
Contributed Subsidiaries
------------------------
None.
<PAGE>
Schedule 2.2(c)
Names, logos, tradenames, trademarks, etc.
------------------------------------------
All trade names, logos, trademarks and any derivative thereof or design used in
connection therewith of the following:
OXY (word and design)
OxyChem
Occidental
Occidental Chemical
OXY Petrochemicals
<PAGE>
Schedule 2.2(h)
Certain Excluded Assets
-----------------------
1. Leases
a) Lease Agreement dated March 1, 1996, between Copano Ranch, Inc. and
Occidental Chemical Corporation for approximately 50 acres of
waterfront property; and
b) Lease Agreement dated August 18, 1987 between Greenway Plaza, Ltd. and
Cain Chemical Inc., and all subsequent amendments for office space
under lease at property commonly known as Five Greenway Plaza,
Houston, Texas.
2. Contributors' policy and procedure manuals which are not used in or do not
pertain to the Contributed Business or its facilities.
3. Any files, records, descriptions, drawings and technical manuals which are
not used in or do not pertain to the Contributed Business or its
facilities.
4. All systems, equipment and software constituting any part of or residing in
the Occidental Petroleum Corporation Data Center (Tulsa, OK).
5. Claims against third parties outstanding as of the Closing Date which do
not relate to the Assumed Liabilities, including, without limitation:
a) December 28, 1996 turbine failure and subsequent fire at the Bayport
facility; and
b) January 13, 1997 outage at the Lake Charles facility.
6. Receivables relating to returned insurance premiums in respect of the
operations of the Contributed Business prior to Closing Date.
7. Potential subrogation receipts from litigation related to December 28, 1996
turbine failure and subsequent fire at the Bayport facility.
8. 17.5 mile pipeline right of way corridor owned by OxyChem between Mount
Belvieu and Deer Park.
9. Subject to the Pipeline Acquisition Agreement between OCC and the
Partnership dated May 15, 1998, rights of the Contributors or any
Affiliates in respect of the approximately 65 mile 4" cyclohexane pipeline
from the Ingleside, Texas chemical manufacturing facility owned by OCC to
the Bloomington, Texas Chemical manufacturing facility owned by E. I. du
Pont de Nemours and Company.
<PAGE>
10. Various contracts that meet the description in Section 2.9(b).
11. Service Repertory License Agreement dated December 31, 1997 between
Copyright Clearance Center, Inc. and Occidental Petroleum Corporation.
12. Amended and Restated Ethylene Sales Agreement by and between Oxymar and
Occidental Chemical Corporation dated August 31, 1990.
13. The following retrospectively rated insurance policies issued by Companies
of the American International Group to Cain Chemicals Inc. for the period
April 30, 1987 to July 1, 1988:
Auto Liability AL 526-5274
General Liability GL 501-0646
General Liability GL 501-0645
Workers' Comp WC 524-6180
Workers' Comp WC 524-5688
<PAGE>
Schedule 2.5(a)(vii)
Obligations for Indebtedness
----------------------------
1. Lease Intended for Security, dated as of December 18, 1991, among
Occidental Chemical Corporation, as Lessee, The Institutions Listed on
Schedule I thereto, as Lessors, Norwest Bank Minnesota, N.A., as Agent and
Chemical Bank and The Bank of Nova Scotia, as Information Agents, as
amended and supplemented.
2. Leveraged Lease Financing of Certain Hopper and Tank Cars, dated as of
December 14, 1990, among Occidental Chemical Corporation, as Lessee, NYNEX
Credit Company, as Owner Participant, Sun Life Insurance Company of
America, as Loan Participant, Occidental Petroleum Corporation, as
Guarantor, The Connecticut National Bank, as Owner Trustee and Mercantile-
Safe Deposit & Trust Company, as Indenture Trustee, as amended and
supplemented.
3. Participation Agreement dated as of January 25, 1995, among Oxy
Petrochemicals Inc., Lessee, Norlease Inc., Owner Participant, Norwest Bank
of Minnesota, N.A., as Owner Trustee, Principal Mutual Life Insurance
Company, Loan Participant, Occidental Petroleum Corporation, Guarantor and
Manufacturers and Traders Trust Company, as Indenture Trustee, as amended
and supplemented.
4. Lease Intended for Security, dated as of March 28, 1994, between Occidental
Chemical Corporation, as Lessee, and Pitney Bowes Credit Corporation, as
Lessor, as amended and supplemented.
<PAGE>
Schedule 2.5(a)(x)
Assumed Long-Term Liabilities
-----------------------------
Post-retirement benefit plan funding obligations applicable to all the employees
of the Contributed Business, but excluding (except the defined benefit pension
plan applicable to the Beaumont facility) all defined benefit pension plans and
defined contribution pension plans.
<PAGE>
Schedule 2.8(b)
Basic Severance
---------------
The following schedule of Basic Severance provides enhanced benefits contingent
on the execution by the Employee of a separation agreement, the terms of which
shall be mutually acceptable to Occidental, the Contributors and the
Partnership:
WEEKS OF BASE PAY
WITHOUT WEEKS OF BASE PAY
SEPARATION WITH SEPARATION
YEARS OF SERVICE AGREEMENT (A) AGREEMENT (A&B)
0-6 months 5 13
6 months - 1 year 6 14
1 year 6 14
2 years 7 15
3 years 8 16
4 years 9 17
5 years 10 18
6 years 11 19
7 years 12 20
8 years 13 21
9 years 14 22
10 years 15 23
11 years 16 24
12 years 17 25
13 years 18 26
14 years 19 27
15 years 20 28
16 years 22 30
17 years 24 32
18 years 26 34
19 years 28 36
20 years 30 38
21 years 32 40
22 years 34 42
23 years 36 44
24 years 38 46
25 years 52 60
MAXIMUM PAY 52 60
A. Outplacement Assistance 3 months 6 months
up to a maximum of
<PAGE>
WEEKS OF BASE PAY
WITHOUT WEEKS OF BASE PAY
SEPARATION WITH SEPARATION
YEARS OF SERVICE AGREEMENT (A) AGREEMENT (A&B)
B. Transition allowance in N/A Applicable
an amount of 10% of
base pay up to a
maximum of $6,500
(including any gross- up
for taxes).
<PAGE>
Schedule 3
Exceptions to the Representations and Warranties
------------------------------------------------
3.1 None.
3.2 None.
3.3 See Attachment A to Schedule 3.
3.4 (a) (ii), (iii) and (iv) Contributors have been served with a civil
investigative demand from the US Department of Justice requesting documents
concerning the exchange of salary and benefit information between petrochemical
plants in Texas and Louisiana for non-exempt employees and engineers.
(ii), (iii) and (iv) Contributors have been improperly served with a
subpoena in the Todd v. Exxon antitrust class action requesting documents
regarding the exchange of salary information between chemical companies for
salaried, nonunion employees. Contributors are not currently a party to the
above referenced class action.
(b) None.
(c) None.
3.5 (a) None.
(b) Lease Intended for Security, Corpus Christi Ethylene Cracking Facility,
dated December 18, 1991, among Occidental Chemical Corporation, as Lessee, The
institutions listed on Schedule I thereto, as Lessors, Norwest Bank Minnesota,
N.A., as Agent and Chemical Bank and The Bank of Nova Scotia, as Information
Agents, as amended and supplemented.
(c) Lease Intended for Security, Corpus Christi Ethylene Cracking Facility,
dated December 18, 1991, among Occidental Chemical Corporation, as Lessee, the
institutions listed on Schedule I thereto, as lessors, Norwest Bank Minnesota,
N.A., as Agent and Chemical Bank and The Bank of Nova Scotia, as Information
Agents, as amended and supplemented.
Occidental Chemical Corporation and CITGO Refining Company are
currently engaged in discussions regarding the ownership of the following assets
listed on the Corpus Christi equipment list:
<PAGE>
MIC6 6" meter Champlin
MIC8 6" meter Champlin
MIC9 6" meter Champlin
MIC10 6" meter Champlin
MIC11 10" meter Champlin
MIC12 10" meter Champlin
3.6 Partial Sublease and Assignment between Texas Brine Corporation and Corpus
Christi Petrochemical Company, dated March 1, 1997.
Pipeline Lease Agreement, commencing January 1, 1995, between Oxy
Petrochemicals Inc. and Amoco Pipeline Company.
3.7 None.
3.8 None.
3.9 None.
3.10 Excepting the Excluded Assets.
3.11 The butadiene unit boilers at the Corpus Christi facility are not in
compliance with permit number TNRCC-C-6745B. The facility has requested an
amendment to the permit.
The Glycol Unit II at the Beaumont facility is not in compliance with TNRCC
permit number 8639A. The facility has requested an amendment to the permit.
3.12 Contributors have been notified of claims involving potential liability for
remediation and response costs, natural resources damages and third party claims
arising out of alleged contamination of the Calcasieu Estuary.
Contributors have been served with a civil investigative demand from the US
Department of Justice requesting documents concerning the exchange of salary and
benefit information between petrochemical plants in Texas and Louisiana for
nonexempt employees and engineers.
Contributors have been improperly served with a subpoena in the Todd v.
Exxon antitrust class action requesting documents regarding the exchange of
salary information between chemical companies for salaried, nonunion employees.
Contributors are not currently a party to the above referenced class action.
3.13 Not applicable.
3.14 None.
<PAGE>
3.15 Not applicable.
3.16 (a) (i) The butadiene unit boilers at the Corpus Christi facility are
not in compliance with permit number TNRCC-C-6745B. The facility has requested
an amendment to the permit.
(ii) The Glycol Unit II at the Beaumont facility is not in
compliance with TNRCC permit number 8639A. The facility has requested an
amendment to the permit.
(iii) Contributors have been notified of claims involving
potential liability for remediation and response costs, natural resources
damages and third party claims arising out of alleged contamination of the
Calcasieu Estuary.
(b) Contributors have been notified of claims involving potential liability
for remediation and response costs, natural resources damages and third party
claims arising out of alleged contamination of the Calcasieu Estuary.
(c) The butadiene unit boilers at the Corpus Christi facility are not in
compliance with permit number TNRCC-C-6745B. The facility has requested an
amendment to the permit.
The Glycol Unit II at the Beaumont facility is not in compliance with
TNRCC permit number 8639A. The facility has requested an amendment to the
permit.
(d) Contributors have been notified of claims involving potential liability
for remediation and response costs, natural resources damages and third party
claims arising out of alleged contamination of the Calcasieu Estuary.
(e) The Agreed Order, Docket No. 95-0386-AIR-E, In the Matter of an
Enforcement Action Concerning Occidental Chemical Corporation, Account No. NE-
0051-B.
3.17 Not applicable.
<PAGE>
Appendix A
Dispute Resolution Procedures
-----------------------------
(1) Binding and Exclusive Means. The dispute resolution provisions set
---------------------------
forth in this Appendix A shall be the binding and exclusive means to resolve all
disputes arising under this Agreement (each a "Dispute").
(2) Standards and Criteria. In resolving any Dispute, the standards and
----------------------
criteria for resolving such dispute shall, unless the Contributors and the
Partnership in their discretion jointly stipulate otherwise, be as set forth in
Appendix 1 to this Appendix A.
- ----------
(3) ADR and Binding Arbitration Procedures. If a Dispute arises, the
--------------------------------------
following procedures shall be implemented:
(a) Any party to this Agreement may at any time invoke the dispute
resolution procedures set forth in this Appendix A as to any Dispute by
providing written notice of such action to the other party or parties to the
Dispute, who within five Business Days after such notice shall schedule a
meeting to be held in Houston, Texas between the parties. The meeting shall
occur within 10 Business Days after notice of the meeting is delivered to the
other party or parties. The meeting shall be attended by representatives of
each party having decision-making authority regarding the Dispute as well as the
dispute resolution process and who shall attempt in a commercially reasonable
manner to negotiate a resolution of the Dispute.
(b) The representatives of the parties shall cooperate in a commercially
reasonable manner and shall explore whether techniques such as mediation,
minitrials, mock trials or other techniques of alternative dispute resolution
might be useful. In the event that a technique of alternative dispute
resolution is so agreed upon, a specific timetable and completion date for its
implementation shall also be agreed upon. The representatives will continue to
meet and discuss settlement until the date (the "Interim Decision Date") that is
the earliest to occur of the following events: (i) an agreement shall be reached
by the parties resolving the Dispute; (ii) one of the parties shall determine
and notify the other party in writing that no agreement resolving the Dispute is
likely to be reached; (iii) if a technique of alternative dispute resolution is
agreed upon, the completion date therefor shall occur without the parties having
resolved the Dispute; or (iv) if another technique of alternative dispute
resolution is not agreed upon, two full meeting days (or such other time period
as may be agreed upon) shall expire without the parties having resolved the
Dispute.
(c) If, as of the Interim Decision Date, the parties have not succeeded in
negotiating a resolution of the dispute pursuant to subsection (b), the parties
shall proceed under subsections (d), (e) and (f).
(d) After satisfying the requirements above, such Dispute shall be
submitted to mandatory and binding arbitration at the election of any party
involved in the Dispute (the "Disputing Party").
<PAGE>
The arbitration shall be subject to the Federal Arbitration Act as supplemented
by the conditions set forth in this Appendix. The arbitration shall be conducted
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association in effect on the date the notice of arbitration is served, other
than as specifically modified herein. In the absence of an agreement to the
contrary, the arbitration shall be held in Houston, Texas. The Arbitrator (as
defined below) will allow reasonable discovery in the forms permitted by the
Federal Rules of Civil Procedure, to the extent consistent with the purpose of
the arbitration. During the pendency of the Dispute, each party shall make
available to the Arbitrator and the other parties all books, records and other
information within its control requested by the other parties or the Arbitrator
subject to the confidentiality provisions contained herein, and provided that no
such access shall waive or preclude any objection to such production based on
any privilege recognized by law. Recognizing the express desire of the parties
for an expeditious means of dispute resolution, the Arbitrator may limit the
scope of discovery between the parties as may be reasonable under the
circumstances. In deciding the substance of the parties' claims, the laws of the
State of Delaware shall govern the construction, interpretation and effect of
this Agreement (including this Appendix) without giving effect to any conflict
of law principles. The arbitration hearing shall be commenced promptly and
conducted expeditiously, with each party involved in the Dispute being allocated
an equal amount of time for the presentation of its case. Unless otherwise
agreed to by the parties, the arbitration hearing shall be conducted on
consecutive days. Time is of the essence in the arbitration proceeding, and the
Arbitrator shall have the right and authority to issue monetary sanctions
against any of the parties if, upon a showing of good cause, that party is
unreasonably delaying the proceeding. To the fullest extent permitted by law,
the arbitration proceedings and award shall be maintained in confidence by the
Arbitrator and the parties.
(e) The Disputing Party shall notify the American Arbitration Association
("AAA") and the other parties involved in the Dispute in writing describing in
reasonable detail the nature of the Dispute (the "Dispute Notice"). The
arbitrator (the "Arbitrator") shall be selected within 15 days of the date of
the Dispute Notice by all of the parties from the members of a panel of
arbitrators of the AAA or, if the AAA fails or refuses to provide a list of
potential arbitrators, of the Center for Public Resources and shall be
experienced in commercial arbitration. In the event that the parties are unable
to agree on the selection of the Arbitrator, the AAA shall select the
Arbitrator, using the criteria set forth in this Appendix, within 30 days of the
date of the Dispute Notice. In the event that the Arbitrator is unable to
serve, his or her replacement will be selected in the same manner as the
Arbitrator to be replaced. The Arbitrator shall be neutral. The Arbitrator
shall have the authority to assess the costs and expenses of the arbitration
proceeding (including the arbitrators', and attorneys' fees and expenses)
against any or all parties.
(f) The Arbitrator shall decide all Disputes and all substantive and
procedural issues related thereto, and shall enforce this Agreement in
accordance with its terms. Without limiting the generality of the previous
sentence, the Arbitrator shall have the authority to issue injunctive relief;
however, the Arbitrator shall not have any power or authority to (i) award
consequential, incidental, indirect or punitive damages or (ii) amend this
Agreement. The Arbitrator shall render the arbitration award, in writing,
within 20 days following the completion of the arbitration hearing, and shall
set forth the reasons for the award. In the event that the Arbitrator awards
monetary damages
<PAGE>
in favor of either party, the Arbitrator must certify in the award that no
indirect, consequential, incidental, indirect or punitive damages are included
in such award. If the Arbitrator's decision results in a monetary award, the
interest to be granted on such award, if any, and the rate of such interest
shall be determined by the Arbitrator in his or her discretion. The arbitration
award shall be final and binding on the parties, and judgment thereon may be
entered in any court of competent jurisdiction, and may not be appealed except
to the extent permitted by the Federal Arbitration Act.
(4) Continuation of Business. Notwithstanding the existence of any
------------------------
Dispute or the pendency of any procedures pursuant to this Appendix A, the
parties agree and undertake that all payments not in dispute shall continue to
be made and all obligations not in dispute shall continue to be performed.
<PAGE>
Appendix 1
----------
(a) First priority shall be given to maximizing the consistency of the
resolution of the Dispute with the satisfaction of all express obligations of
the parties and their Affiliates as set forth in the Agreement.
(b) Second priority shall be given to resolution of the Dispute in a manner
which best achieves the objectives of the business activities and arrangements
under the Agreement and permits the parties to realize the benefits intended to
be afforded thereby.
(c) Third priority shall be given to such other matters, if any, as the
parties or the Arbitrator shall determine to be appropriate under the
circumstances.
<PAGE>
EXHIBIT 10.15
AMENDED AND RESTATED PARENT AGREEMENT
AMONG
OCCIDENTAL CHEMICAL CORPORATION,
OXY CH CORPORATION,
OCCIDENTAL PETROLEUM CORPORATION,
LYONDELL PETROCHEMICAL COMPANY,
MILLENNIUM CHEMICALS INC.
AND
EQUISTAR CHEMICALS, LP
DATED AS OF
MAY 15, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
----
SECTION 1 GUARANTEE OF OBLIGATIONS 3
1.1 Guarantee. 3
1.2 Guarantee Regarding Interested Owner Agreements 4
1.3 No Demand or Notice 4
1.4 Waiver of Resort to Security 4
1.5 No Discharge. 5
1.6 Waivers by the Parent 5
1.7 No Reduction. 5
1.8 Enforcement. 5
1.9 Continued Effectiveness. 5
1.10 Certain Defenses. 5
1.11 Parties in Interest. 6
1.12 Parent Net Worth 6
SECTION 2 OWNERSHIP AND BUSINESS OF PARTNER SUBS 7
2.1 Restrictions on Transfer and Pledge of Partner Sub Stock. 7
2.2 Right of First Option 9
2.3 Prohibition on Affiliated Obligor Bankruptcy, Etc. 11
2.4 Special Purpose Subsidiaries. 12
SECTION 3 STANDSTILL AGREEMENT AND CERTAIN OTHER MATTERS 12
3.1 Standstill. 12
3.2 Exceptions 13
3.3 OPC Indemnity 14
3.4 Mutual Indemnity 14
SECTION 4 MISCELLANEOUS 16
4.1 No Waivers. 16
4.2 Expenses in Connection with Exercise. 16
4.3 Subordination and Subrogation 16
4.4 Confidentiality and Use of Information 16
4.5 Competing Businesses 16
4.6 Further Assurances. 17
4.7 Assignment; Successors and Assigns 17
4.8 Benefits of Agreement Restricted to the Parties 17
4.9 Notices 17
4.10 Severability 19
4.11 Termination 19
4.12 Construction and Certain Definitions 19
4.13 Counterparts 20
4.14 Governing Law 20
4.15 Jurisdiction; Consent to Service of Process; Waiver 20
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4.16 Waiver of Jury Trial 20
4.17 Dispute Resolution 20
4.18 Obligations Regarding Affiliates 20
4.19 Amendment 20
APPENDICES
Appendix A List of Related Agreements
Appendix B Dispute Resolution Procedures
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AMENDED AND RESTATED PARENT AGREEMENT
This Amended and Restated Parent Agreement (this "Agreement") is made as of
this 15th day of May, 1998 among Occidental Chemical Corporation, a New York
corporation ("OCC"), Oxy CH Corporation, a California corporation ("Oxy CH"),
Lyondell Petrochemical Company, a Delaware corporation ("Lyondell"), Millennium
Chemicals Inc., a Delaware corporation ("Millennium"), Occidental Petroleum
Corporation, a Delaware corporation ("OPC"), and Equistar Chemicals, LP, a
Delaware limited partnership (the "Partnership," and together with OCC, Oxy CH,
Lyondell, Millennium and OPC, the "Parties").
WHEREAS, except as provided in Section 3, OCC and Oxy CH, taken together
and jointly and severally, are the "Occidental Parent" for purposes of this
Agreement, and the Occidental Parent (except as provided in Section 3), Lyondell
and Millennium are each a "Parent" for purposes of this Agreement.
WHEREAS, Lyondell Petrochemical G.P. Inc. ("Lyondell GP") and Lyondell
Petrochemical L.P. Inc. ("Lyondell LP" and, together with Lyondell GP, the
"Lyondell Partner Subs") are both Delaware corporations and direct or indirect
wholly owned subsidiaries of Lyondell.
WHEREAS, Millennium Petrochemicals GP LLC ("Millennium GP") and Millennium
Petrochemicals LP LLC ("Millennium LP" and, together with Millennium GP, the
"Millennium Partner Subs") are both Delaware limited liability companies and
direct or indirect wholly owned subsidiaries of Millennium.
WHEREAS, PDG Chemical Inc. ("Occidental GP") and Occidental Petrochem
Partner 2, Inc. ("Occidental LP2") are both Delaware corporations and direct or
indirect wholly owned subsidiaries of Oxy CH; Occidental Petrochem Partner 1,
Inc. ("Occidental LP1" and, together with Occidental GP and Occidental LP2, the
"Occidental Partner Subs") is a Delaware corporation and a wholly owned
subsidiary of OCC; and Oxy CH and OCC are both direct or indirect wholly owned
subsidiaries of OPC.
WHEREAS, for purposes of this Agreement, the Occidental Partner Subs are
the Partner Subs of the Occidental Parent.
WHEREAS, pursuant to the terms of the Master Transaction Agreement dated as
of July 25, 1997 between Lyondell and Millennium (the "Initial Master
Transaction Agreement"), the Partnership was formed under the laws of the State
of Delaware pursuant to the Limited Partnership Agreement dated October 10, 1997
(the "Old Partnership Agreement"), with Lyondell GP and Millennium GP as the
general partners and Lyondell LP and Millennium LP as the limited partners of
the Partnership.
WHEREAS, in connection with the closing of the transactions contemplated by
the Initial Master Transaction Agreement, Lyondell and Millennium entered into
the Parent Agreement with the Partnership dated as of December 1, 1997 (the
"Initial Parent Agreement"), providing for, among
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other things, certain guarantees of performance by their respective Affiliated
Obligors (as defined therein) and for certain restrictions on the transfer of
their respective Partner Sub Stock (as defined therein);
WHEREAS, the Partnership, OPC, Lyondell and Millennium entered into a
Master Transaction Agreement dated May 15, 1998 (the "Second Master Transaction
Agreement"), providing for, among other things, the admission of the Occidental
Partner Subs as partners in the Partnership. The Occidental Partner Subs,
together with any other Affiliate of the Occidental Parent that is a party to
any of the Related Agreements (as defined herein), are referred to herein as the
"Occidental Affiliated Obligors." The Lyondell Partner Subs, together with any
other Affiliate of Lyondell that is a party to any of the Related Agreements,
are referred to herein as the "Lyondell Affiliated Obligors." The Millennium
Partner Subs, together with any other Affiliate of Millennium that is a party to
any of the Related Agreements, are referred to herein as the "Millennium
Affiliated Obligors." The Occidental Affiliated Obligors, the Lyondell
Affiliated Obligors and the Millennium Affiliated Obligors, collectively or
individually as the context may require, are referred to herein as the
"Affiliated Obligors." The Occidental Partner Subs, the Lyondell Partner Subs
and the Millennium Partner Subs, collectively or individually as the context may
require, are referred to herein as the "Partner Subs."
WHEREAS, in connection with the closing of the transactions effected
pursuant to the Initial Master Transaction Agreement and to be effected in
connection with the closing of the Second Master Transaction Agreement, the
Parents and certain of their respective Affiliates, have entered into or are
entering into various agreements and other legal documents, including the
Amended and Restated Limited Partnership Agreement of the Partnership dated as
of the date of this Agreement (the "Partnership Agreement"), the Agreement and
Plan of Merger and Asset Contribution dated as of the date of this Agreement
(the "Occidental Contribution Agreement") among the Partnership, the Occidental
Partner Subs and Oxy Petrochemicals Inc. ("OPI"), services agreements and other
asset contribution agreements, as applicable (including this Agreement, the
"Related Agreements"), each of which is integrally related to the capitalization
or operations of the Partnership and is listed on Appendix A hereto. The
Related Agreements (other than this Agreement) and any additional agreements
that may from time to time be added to Appendix A hereto by agreement of the
Parents, as they may in the future be amended, supplemented, restated or
otherwise modified, are referred to herein as the "Other Agreements". The Other
Agreements to be entered into in connection with the Second Master Transaction
Agreement are herein called the "Additional Other Agreements".
WHEREAS, the Parties desire to amend and restate the Initial Parent
Agreement in connection with the admission of the Occidental Partner Subs to the
Partnership and the closing of the other transactions contemplated by the Second
Master Transaction Agreement.
WHEREAS, this Agreement is essential to the consummation of the closing
pursuant to the Second Master Transaction Agreement and the entering into and
effectiveness of the Additional Other Agreements and each of the parties to such
agreements is relying on this Agreement in connection with entering into each of
the Additional Other Agreements.
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WHEREAS, this Agreement provides for the continuation of obligations and
restrictions set forth in the Initial Parent Agreement, which were essential to
the consummation of the closing pursuant to the Initial Master Transaction
Agreement and the entering into and effectiveness of the Other Agreements
entered into in connection therewith.
WHEREAS, each Parent is willing, solely for the benefit of the
Beneficiaries (as defined below in Section 1.11) and their successors and
assigns, to guarantee the performance by its Affiliated Obligors of certain of
the obligations of such Affiliated Obligors as set forth in this Agreement.
WHEREAS, each Parent is willing to subject the Partner Sub Stock (as
defined herein) to certain restrictions on transfer, as set forth in this
Agreement.
WHEREAS, OPC is willing to (i) indemnify the Partnership from certain
potential liabilities that the Partnership would not otherwise be subject to but
for the merger of OPI with and into the Partnership, and (ii) agree to certain
other covenants in connection with the closing of the transactions contemplated
by the Second Master Transaction Agreement.
NOW THEREFORE, in, consideration of the foregoing and the mutual promises
and covenants of the Parties hereto, the Parties hereby agree as follows:
SECTION 1
GUARANTEE OF OBLIGATIONS
1.1 Guarantee. Each Parent hereby unconditionally, absolutely and
irrevocably guarantees, undertakes and promises to cause, as herein provided,
the due and punctual payment and the full and prompt performance by its
Affiliated Obligors of all of the amounts to be paid and all of the terms and
provisions to be performed or observed by or on the part of its Affiliated
Obligors under the Other Agreements in accordance with the terms thereof (all
such terms and provisions as now or hereafter in existence being collectively
called the "Obligations") as follows: in the event that its Affiliated Obligors
shall fail in any manner whatsoever to pay, perform or observe any of their
Obligations, when and as the same shall be required to be paid, performed or
observed under the terms of the Other Agreements, such Parent will itself duly
and punctually pay, or fully and promptly perform or observe, as the case may
be, such Obligations, or cause the same to be duly and punctually paid, or fully
and promptly performed or observed, in each case as if such Parent were itself
the obligor with respect to such Obligations under the Other Agreements.
Insofar as this Section 1.1 relates to the obligations of an Affiliated Obligor
under the Partnership Agreement, no Parent shall be required to make, or cause a
Partner Sub to make, any contribution to the Partnership that such Partner Sub
is not otherwise required to make pursuant to the terms of Section 2.3, 2.4, or
12.2(d)(ii) of the Partnership Agreement. Insofar as this Section 1.1 applies
to Other Agreements
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other than the Partnership Agreement, the term "Affiliated Obligors" will not
include the Partnership nor any partner in the Partnership in its capacity as
such. Notwithstanding the foregoing, this Section 1.1 shall not apply to
Obligations that are within the scope of Section 1.2.
1.2 Guarantee Regarding Interested Owner Agreements. Each Parent
acknowledges that the Partnership Agreement sets forth definitions of
"Conflicted General Partner" and "Nonconflicted General Partner," and provides
that the Nonconflicted General Partners (whether one or more) have certain
exclusive rights to control the Partnership with respect to any Conflict
Circumstance (as defined in the Partnership Agreement); and accordingly, without
limiting the rights of its Partner Subs under Section 6.8 of the Partnership
Agreement, and without prejudice to any rights, remedies or defenses the
Partnership may have in respect of any such Other Agreement or Conflict
Circumstance, each Parent hereby agrees to cause its Partner Subs (i) to cause
the Partnership to pay, perform and observe all of the Obligations to be paid,
performed or observed by or on the part of the Partnership under the Other
Agreements, in accordance with the terms thereof, to the extent that such
Partner Sub is a Nonconflicted General Partner and is thereby entitled to cause
the payment, performance and observance of such Obligations and (ii) except to
the extent inconsistent with its obligations under Section 1.2(i), to abide by
its obligations as a Nonconflicted General Partner with respect to any Conflict
Circumstance arising in connection with any Other Agreement in accordance with
the terms of the Partnership Agreement applicable thereto; provided, however,
that each Parent's responsibility under this Section 1.2 for a failure of the
Partnership to pay, perform or observe its Obligations under the Other
Agreements shall be limited to the circumstances in which the Partnership's
failure to so pay, perform or observe its obligations under the Other Agreements
was directly caused by an act or failure to act of its Partner Sub, provided,
further, that nothing in this Section 1.2 shall require a Parent to make or
cause such Partner Sub (i) to cure or mitigate any inability of the Partnership
to make any payment or to perform or observe any Obligations under any Other
Agreements, (ii) to cause the Partnership to require from the Partner Subs any
cash contributions in respect of any payment, performance or observance involved
in such Conflict Circumstance, or (iii) to make any contribution to the
Partnership that such Partner Sub is not otherwise required to make pursuant to
Section 2.3, 2.4, or 12.2(d)(ii) of the Partnership Agreement.
1.3 No Demand or Notice. It shall not be a condition to the guarantees
and agreements set forth in Sections 1.1 and 1.2 above (together, the
"Guarantee") that a Beneficiary shall have first made any request of or demand
upon, or given any notice of the occurrence of a default under the Other
Agreements or any other notice whatsoever to, any Parent or its Affiliated
Obligors or any other Person, or shall have instituted any action or proceeding
against any Affiliated Obligor or any other Person in respect thereof, or shall
have joined any Affiliated Obligor or the Partnership in any such action or
proceeding. A Beneficiary in asserting the benefit of the Guarantee shall give
prompt notice to a Parent of any failure by its Affiliated Obligors or the
Partnership to pay, perform or observe any Obligation; provided, however, that
any failure, delay or defect in the giving of such notice shall not alter or
affect the Guarantee under this Agreement.
1.4 Waiver of Resort to Security. Each Parent further agrees that this
Agreement, insofar as it constitutes a guarantee of monetary Obligations,
constitutes a guarantee of payment when due and not of collection, and each
Parent waives any right to require as a condition to its Guarantee that any
resort be had by a Beneficiary to any security held for the payment of any
Obligations.
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1.5 No Discharge. The Guarantee is and shall remain absolute and
unconditional irrespective of any circumstance that might otherwise constitute a
legal or equitable discharge of a surety or guarantor, as the case may be, with
respect to its Guarantee.
1.6 Waivers by the Parent. Each Parent hereby waives, with respect to the
Guarantee but without prejudice to the rights of the parties to the Other
Agreements, any notice of acceptance of this Agreement, grace, presentment,
demand, protest, notice of the occurrence of a default under the Other
Agreements and any other notice of any kind whatsoever and promptness in making
any claim or demand hereunder. The Guarantee shall not be affected by (i) the
failure of a Beneficiary to assert any claim or demand or to enforce any right
or remedy under the provisions of any of the Other Agreements or any agreement
related thereto or otherwise, (ii) any extension or renewal of any of the Other
Agreements or any agreement related thereto, (iii) any rescission, waiver,
amendment or modification of any of the terms or provisions of any of the Other
Agreements or of any agreement related thereto, including, without limitation,
any change in the time, manner or place of payment or performance of any of the
obligations under the Other Agreements, or (iv) the release of any security held
for payment of any Obligations.
1.7 No Reduction. The Guarantee shall not be subject to any reduction,
limitation, impairment or termination for any reason, including, without
limitation, any claim of waiver, release, surrender, alteration or compromise,
and shall not be subject to any defense or set-off, counterclaim, recoupment or
termination whatsoever, except as provided in Section 1.10.
1.8 Enforcement. Notwithstanding anything herein to the contrary, a
Beneficiary may proceed to enforce the Guarantee without first pursuing or
exhausting any right or remedy that it or any of its successors or assigns may
have against any Affiliated Obligor or any Parent or any other person.
1.9 Continued Effectiveness. The Guarantee shall continue to be effective
or be reinstated, as the case may be, if at any time payment, or any part
thereof, of any Obligation of an Affiliated Obligor is rescinded or must
otherwise be restored or returned by the Person receiving such payment upon the
insolvency, bankruptcy or reorganization of an Affiliated Obligor, all as though
such payment or part thereof had not been made.
1.10 Certain Defenses. Nothing herein is intended to deny to any Parent,
and it is expressly agreed that each Parent shall have and may assert, any and
all of the defenses, set-offs, counterclaims and other rights (other than those
relating to insolvency, bankruptcy or reorganization as described in Section
1.9) with regard to any Obligations that its Affiliated Obligors may possess
except any defense its Affiliated Obligors may possess relating to lack of
validity or enforceability of the Other Agreements or any other agreement or
instrument relating thereto as against its Affiliated Obligors arising from the
defective incorporation or other defective organization of its Affiliated
Obligors, their lack of qualification to do business in any applicable
jurisdiction or their defective corporate or other organizational authority to
enter into, deliver or perform the Other Agreements.
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1.11 Parties in Interest. Section 1 of this Agreement shall inure
solely to the benefit of the Beneficiaries, each of whom has the right to
enforce the Guarantee against the Parents, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement. As used in this Agreement, "Beneficiaries" shall mean (i) as to any
obligations of the Occidental Parent, except for its obligations pursuant to
Section 1.1 hereof with respect to the Partnership Agreement, the Partnership,
Lyondell, the Lyondell Affiliated Obligors, Millennium and the Millennium
Affiliated Obligors, (ii) as to any obligations of Millennium, except for its
obligations pursuant to Section 1.1 hereof with respect to the Partnership
Agreement, the Partnership, the Occidental Parent, the Occidental Affiliated
Obligors, Lyondell and the Lyondell Affiliated Obligors, (iii) as to any
obligations of Lyondell, except for its obligations pursuant to Section 1.1
hereof with respect to the Partnership Agreement, the Partnership, the
Occidental Parent, the Occidental Affiliated Obligors, Millennium and the
Millennium Affiliated Obligors, and (iv) as to any obligations of any Parent
pursuant to Section 1.1 hereof with respect to the Partnership Agreement, the
other Parents. As used in this Agreement, the term Parent includes any
successor or transferee of the Parent, and the term Affiliated Obligors includes
any successor to or transferee of the Affiliated Obligors' interest in the
Partnership permitted pursuant to the Partnership Agreement.
1.12 Parent Net Worth.
(a) Each Parent shall at all times maintain a GAAP Net Worth in an
amount sufficient to satisfy its known and potential obligations under this
Agreement.
(b) Each Parent agrees that, as of the end of each fiscal quarter,
either (i) the excess of its GAAP Net Worth at such time over its Partnership
Investment at such time or (ii) the excess of its Equity Market Capitalization
at such time over its Adjusted Partnership Investment at such time, shall be at
least $250 million.
(c) The term "GAAP Net Worth" means, for a Parent at any time, such
Parent's consolidated stockholders equity, determined in accordance with
generally accepted accounting principles ("GAAP"), as of the end of its most
recent fiscal quarter. The term "Equity Market Capitalization" means, for a
Parent at any time, (x) the aggregate market value of such Parent's outstanding
publicly traded equity securities, as of the end of its most recent fiscal
quarter (based on the average closing price for the most recent 20 trading days
on the principal stock exchange on which such securities are traded) plus (y)
the amount of stockholders equity, determined in accordance with GAAP,
attributable at such time to any equity securities of such Parent that are not
publicly traded. The term "Partnership Investment" means, for a Parent at any
time, its investment in the Partnership, determined in accordance with GAAP as
of the end of the most recent fiscal quarter. The term "Adjusted Partnership
Investment" means, for a Parent at any time, (A) Lyondell's investment in the
Partnership, determined in accordance with GAAP as of the end of the most recent
fiscal quarter, multiplied by (B) a fraction the numerator of which is the
aggregate Percentage Interest at such time of the Partner Subs owned by the
Parent whose Partnership Investment is being determined and the denominator of
which is the aggregate Percentage Interest at such time of the Partner Subs
owned by Lyondell. The term "Percentage Interest" is used as defined in the
Partnership Agreement.
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(d) The provisions of Section 1.12(b) shall expire as to a Parent at
such time after the seventh anniversary of the Closing Date at which no material
Seven Year PCCL Claim (as defined in the Asset Contribution Agreement (as
defined in the Partnership Agreement) applicable to such Parent, its Affiliated
Obligors or, if applicable, its predecessor Parent or its Affiliated Obligors)
is outstanding against such Parent, any of its Affiliated Obligors or, if
applicable, its predecessor Parent or its Affiliated Obligors.
SECTION 2
OWNERSHIP AND BUSINESS OF PARTNER SUBS
2.1 Restrictions on Transfer and Pledge of Partner Sub Stock. (a) Each
Parent agrees that except as otherwise provided below in this Section 2.1 or
Section 2.2 or with the written consent of each of the other Parents, which
consent may be granted or withheld in such Parent's sole discretion, it will
not, in any transaction or series of transactions, directly or indirectly, (i)
sell, assign or otherwise in any manner dispose of, whether by act, deed, merger
or otherwise ("Transfer") or (ii) 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 the capital stock (including any securities
convertible into or exchangeable for or carrying any rights to purchase,
subscribe for or otherwise acquire any such capital stock) of its Partner Subs
(collectively, the "Partner Sub Stock"). (Each of the defined terms
"Transfer"and "Pledge" is used herein both as a noun and as a verb.) Any
attempt by a Parent to Transfer or Pledge all or a portion of its Partner Sub
Stock in violation of this Agreement shall be void ab initio and shall not be
effective to Transfer such Partner Sub Stock or any portion thereof. The
Partnership Agreement contains provisions relating to the Transfer and Pledge of
the Partner Subs' direct interests in the Partnership.
(b) Each Parent agrees that all certificates representing shares of Partner
Sub Stock, whether currently owned or hereafter acquired, shall carry the
following legend, which legend each Parent agrees to cause to be placed thereon
and to cause to remain thereon as long as such shares are subject to the
restrictions of this Agreement:
THE SALE, ASSIGNMENT, PLEDGE OR OTHER TRANSFER OR HYPOTHECATION OF THE
STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS
PURSUANT TO AND MAY NOT BE EFFECTED EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF AN AGREEMENT BINDING UPON THE OWNER OF THE STOCK REPRESENTED
HEREBY. THE OWNER OR ISSUER WILL FURNISH A COPY OF SUCH AGREEMENT TO ANY
PROPOSED TRANSFEREE OR PLEDGEE WITHOUT CHARGE UPON REQUEST.
(c) Without the need for the consent of any Person, any Parent may Transfer
its Partner Sub Stock to any wholly-owned Affiliate of such Parent or of a
common parent.
(d) Without the need for the consent of any Person, each Parent (other than
OCC or Oxy CH) may Transfer all (but not less than all) of its Partner Sub
Stock, if such Transfer is in connection with (i) a merger, consolidation,
conversion or share exchange of such Parent or (ii) a sale or other
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disposition of (x) the Partner Sub Stock plus (y) other assets representing at
least fifty-percent (50%) of the book value of such Parent's assets excluding
the Partner Sub Stock, as reflected on its most recent audited consolidated (or
combined) financial statements; provided, however, that the Successor Parent, if
any, (A) shall succeed to and be substituted for such Parent, with the same
effect as if it had been named herein and (B) shall execute an instrument
wherein such Successor Parent shall agree to be bound by the obligations of such
Parent under this Agreement, with the same effect as if it had been named
herein, whereupon, unless such Parent shall become a direct or indirect
subsidiary of such Successor Parent, such Parent shall thereupon be released
from all obligations under Sections 1, 2 and 4 of this Agreement.
(e) Without the need for the consent of any Person, OCC may Transfer all
(but not less than all) of its Partner Sub Stock, if such Transfer is in
connection with:
(i) a merger, consolidation, conversion or share exchange of OCC,
(ii) a sale or other disposition of (x) the Partner Sub Stock plus (y)
other assets representing at least fifty percent (50%) of the
book value of Oxy CH's assets excluding the Partner Sub Stock, as
reflected on its most recently unaudited consolidated (or
combined) financial statements, or
(iii) any Transfer permitted by Section 2.1(f);
and following the consummation of any such transaction, the Partner Sub
Stock held directly or indirectly by OCC and Oxy CH on the date hereof
shall be held by the same transferee or one or more transferees that are
wholly-owned Affiliates of each other or of a common parent entity;
provided, however, that the Successor Parent, if any, (A) shall succeed to
and be substituted for OCC, with the same effect as if it had been named
herein, and (B) shall execute an instrument wherein such Successor Parent
shall agree to be bound by the obligations of OCC hereunder, with the same
effect as if it had been named herein, whereupon, unless OCC shall become a
direct or indirect subsidiary of such Successor Parent, OCC shall thereupon
be released from all obligations under Sections 1, 2 and 4 of this
Agreement.
(f) Without the need for the consent of any Person, Oxy CH may Transfer all
(but not less than all) of its Partner Sub Stock, if such Transfer is in
connection with:
(i) a merger, consolidation, conversion or share exchange of Oxy CH,
(ii) a sale or other disposition of (A) the Partner Sub Stock plus (B)
other assets representing at least fifty percent (50%) of the
book value of Oxy CH's assets excluding the Partner Sub Stock, as
reflected on its most recently prepared unaudited consolidated
(or combined) financial statements, or
(iii) any Transfer permitted by Section 2.1(e) or (g);
and following the consummation of any such transaction, the Partner Sub
Stock held directly or indirectly by OCC and Oxy CH on the date hereof
shall be held by the same transferee or one or more transferees that are
wholly-owned Affiliates of each other or of a common parent entity;
provided, however, that the Successor Parent, if any, (A) shall succeed to
and
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be substituted for Oxy CH, with the same effect as if it had been named
herein, and (B) shall execute an instrument wherein such Successor Parent
shall agree to be bound by the obligations of Oxy CH hereunder, with the
same effect as if it had been named herein, whereupon, unless Oxy CH shall
become a direct or indirect subsidiary of such Successor Parent, Oxy CH
shall thereupon be released from all obligations under Sections 1, 2 and 4
of this Agreement.
(g) Nothing in this Agreement shall prevent or restrict the Transfer or
Pledge of the capital stock, equity ownership interests or other securities of a
Parent (or, in the case of the Occidental Parent, either of OCC or Oxy CH), and
no such Transfer or Pledge of securities issued by a Parent (or, in the case of
the Occidental Parent, either of OCC or Oxy CH) shall be deemed to constitute a
Transfer or Pledge of Partner Sub Stock hereunder; provided that, (i) in the
event of a Transfer in the form of a transaction described in clause (i) of
Section 2.1(d), (e) or (f), the Successor Parent, if any, shall execute an
instrument to the effect described in clause (B) of Section 2.1(d), (e) or (f),
as applicable, and (ii) following the consummation of any such Transfer or
Pledge of securities of a Parent, all the Partner Sub Stock of such Parent shall
be held by the same transferee or one or more transferees that are wholly-owned
Affiliates of each other or of a common parent entity or shall be Pledged to the
same pledgee or pledgees.
(h) For purposes of this Section 2.1, the term "Successor Parent" shall
mean the acquiring, succeeding or surviving entity in any transaction
contemplated by Section 2.1 (d), (e) or (f) that owns the applicable Partner Sub
Stock following such transaction, if other than a Parent.
(i) Each Parent may Pledge all (but not less than all) of its Partner Sub
Stock to any one or more Approved Lenders; provided that the Pledge shall be
evidenced by an instrument, reasonably satisfactory to the Partnership, wherein
the Approved Lender receiving such Pledge shall agree that in the event such
Approved Lender obtains a right of foreclosure on such Parent's Partner Sub
Stock, such Approved Lender will foreclose on the Partner Sub Stock of each of
such Parent's Partner Subs equally so that such Approved Lender will in all
events hold equal portions of Partner Sub Stock of Occidental GP, Occidental LP1
and Occidental LP2, Lyondell GP and Lyondell LP or Millennium GP and Millennium
LP, as the case may be. An "Approved Lender" shall be any bank, insurance
company, investment bank or other financial institution that is regularly
engaged in the business of making loans.
2.2 Right of First Option.
(a) Without the consent of each of the other Parents, no Parent may
Transfer less than all of its Partner Sub Stock, and unless such Transfer is
otherwise permitted by Section 2.1, no Parent may Transfer its Partner Sub Stock
for consideration other than cash. Unless such Transfer is otherwise permitted
by Section 2.1, any Parent (the "Selling Parent") desiring to Transfer all of
its Partner Sub Stock to any person (including another Parent or any Affiliate
thereof) shall give written notice (the "Initial Notice") to the Partnership and
each of the other Parents (the "Offeree Parents") stating that the Selling
Parent desires to Transfer its Partner Sub Stock and stating the cash
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purchase price and all other terms on which it is willing to sell (the "Offer
Terms"). Delivery of an Initial Notice shall constitute the irrevocable offer
of the Selling Parent to sell its Partner Sub Stock to the Offeree Parents
hereunder.
(b) Each Offeree Parent shall have the option, exercisable by
delivering written notice (the "Acceptance Notice") of such exercise to the
Selling Parent within 45 days of the date of the Initial Notice, to elect to
purchase its pro rata share in the case of both of the limited partner and the
general partner (based on the ratio of the number of Units held by its Partner
Subs to the number of Units held by all of the Partner Subs of the Offeree
Parents or on any other basis that shall be mutually agreed upon between the
Offeree Parents delivering an Acceptance Notice) of all of the Partner Sub Stock
of the Selling Parent on the Offer Terms described in the Initial Notice. If
one Offeree Parent, but not the other, elects to so purchase, the Selling Parent
shall give written notice thereof (the "Additional Notice") to the Offeree
Parent electing to purchase and such Parent shall have the option, exercisable
by delivery of an Acceptance Notice, of such exercise to the Selling Parent
within 15 days of such notice, to purchase all of the Partner Sub Stock held by
the Selling Parent, including the Partner Sub Stock it has not previously
elected to purchase; provided, however, that any election by an Offeree Parent
not to purchase all such Partner Sub Stock shall be deemed a rescission of such
Offeree Parent's original Acceptance Notice and an election not to purchase any
of the Partner Sub Stock of the Selling Parent. Each Acceptance Notice shall
set a date for closing the purchase, such date to be not less than 30 nor more
than 90 days after delivery of the Acceptance Notice; provided that such time
period shall be subject to extension as reasonably necessary (up to a maximum of
an additional 120 days after such 90 day period) in order to comply with any
applicable filing and waiting period requirements under the Hart-Scott-Rodino
Antitrust Improvements Act. The closing shall be held at the Partnership's
offices. The purchase price for the Selling Parent's Partner Sub Stock shall be
paid in cash delivered at the closing. The purchase shall be consummated by
appropriate and customary documentation (including the giving of representations
and warranties substantially similar to (i) in the case of Lyondell or
Millennium, those set forth in Sections 2.1 through 2.4 of the Initial Master
Transaction Agreement, and in the case of the Occidental Parent, those set forth
in Section 2.2 of the Second Master Transaction Agreement, and (ii) customary
representations and warranties regarding the Selling Parent's title to its
Partner Sub Stock).
(c) If one or both of the Offeree Parents does not elect to purchase
all of the Selling Parent's Partner Sub Stock within 45 days after the receipt
of the Initial Notice or within 15 days after the receipt of the Additional
Notice, if applicable, the Selling Parent shall have a further 180 days during
which it may, subject to Sections 2.2(d) and (e), consummate the sale of its
Partner Sub Stock to a third party purchaser at a purchase price and on such
other terms that are no more favorable to such purchaser than the Offer Terms.
If the sale is not completed within such further 180-day period, the Initial
Notice shall be deemed to have expired and a new notice and offer shall be
required before the Selling Parent may make any Transfer of its Partner Sub
Stock.
(d) Before the Selling Parent may consummate a Transfer of its Partner
Sub Stock to a third party in accordance with this Agreement, the Selling Parent
shall demonstrate to the other two Parents that such proposed purchaser (or the
Person willing to serve as its guarantor as contemplated by Section 2.2(e)) has
outstanding indebtedness that is rated investment grade by either
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Moody's Investor Services Inc. or Standard & Poor's Ltd, or if such proposed
purchaser (or such other Person) has no rated indebtedness outstanding, such
Person shall provide an opinion from one of such entities or from a nationally
recognized investment banking firm that it could be reasonably expected to
obtain such a rating.
(e) Notwithstanding the foregoing provisions of this Section 2.2, a
Parent may Transfer its Partner Sub Stock (other than pursuant to Section 2.1)
only if all of the following occur:
(i) The Transfer is accomplished in a non-public offering in
compliance with, and exempt from, the registration and qualification
requirements of all federal and state securities laws and regulations.
(ii) The Transfer does not cause a default under any material
contract which has been approved unanimously by the Partnership
Governance Committee (as defined in the Partnership Agreement) and to
which the Partnership is a party or by which the Partnership or any of
its properties is bound.
(iii) The transferee executes an appropriate agreement to be
bound by this Agreement.
(iv) The transferor and/or transferee bears all reasonable costs
incurred by the Partnership in connection with the Transfer.
(v) The transferee (or the guarantor of the obligations of the
transferee) satisfies the criteria set forth in Section 2.2(d) and
delivers an agreement to each of the other Parents and the Partnership
substantially in the form of this Agreement.
(vi) The proposed transferor is not in default in the timely
performance of any of its material obligations to the Partnership.
(vii) The provisions of Section 2.2(f) are satisfied.
(f) No Parent may Transfer the Partner Sub Stock of any of its Partner
Subs to any Person unless such Parent simultaneously Transfers the Partner Sub
Stock of its other Partner Sub or Partner Subs (if the Parent has more than one
Partner Sub), to such Person or a wholly-owned Affiliate of such Person or of a
common parent.
2.3 Prohibition on Affiliated Obligor Bankruptcy, Etc. Each Parent hereby
agrees that it will not, without the written consent of each of the other
Parents, permit any of its Affiliated Obligors (or their successors or assigns)
(i) to commence a voluntary action under the Federal bankruptcy laws, as now or
hereafter constituted, or any other applicable Federal or State bankruptcy,
insolvency or other similar law, (ii) to institute a proceeding to be
adjudicated a voluntary bankrupt, (iii) to consent to the filing of a bankruptcy
proceeding against it, (iv) to fail to contest a bankruptcy proceeding against
it, (v) to consent to the appointment of a receiver, custodian, liquidator or
trustee for it or for all or any substantial portion of its property, (vi) in
the case of its
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Partner Subs, to issue or sell other than to such Parent any of its own Partner
Sub Stock or (vii) to effect, recognize or permit any transfer of any of its own
Partner Sub Stock other than in accordance with the provisions of Section 2 of
this Agreement.
2.4 Special Purpose Subsidiaries. Each Parent agrees that (i) the
business of its Partner Subs shall be restricted solely to the holding of the
respective interests in the Partnership and the doing of things necessary or
incidental in connection therewith, and (ii) it will cause its Partner Subs not
to own any assets, incur any liabilities or engage, participate or invest in any
business outside the scope of their businesses as described in clause (i);
provided, however, that this Section 2.4 shall not apply with respect to any
wholly-owned Affiliates to whom such Partner Subs shall transfer their
respective interests in the Partnership if such wholly-owned Affiliates are not
bound by Section 9.6 of the Partnership Agreement. Notwithstanding the
foregoing provisions of this Section 2.4, this Section 2.4 shall not prohibit
any Partner Sub from incurring debt payable to its Parent or an Affiliate as
long as:
(i) such debt is not transferable (by contract or operation of law) to any
Person other than Parent or an Affiliate of Parent;
(ii) no payment on such debt is permitted or required to be made if at the time
of such payment such Partner Sub is in Default under (and as defined in)
the Partnership Agreement or by making such payment such Partner Sub would
not be able to perform its obligations under the Partnership Agreement.
Each Parent hereby agrees that it and its Affiliates shall not be entitled to,
and that the Partner Sub shall not be required to make, any payments on any such
debt payable by its Partner Sub if: (i) at the time of such payment such
Partner Sub is in Default under the Partnership Agreement, (ii) by making such
payment such Partner Sub would not be able to perform its obligations under the
Partnership Agreement, or (iii) such Parent is in default of its obligations
under Section 1.12 of this Agreement.
SECTION 3
STANDSTILL AGREEMENT AND CERTAIN OTHER MATTERS
3.1 Standstill. For purposes of this Section 3 only, the term "Parent"
means and includes OPC, Oxy CH, OCC, Lyondell and Millennium. Each Parent
agrees that with respect to each of the other Parents (each a "Subject Parent",
provided that no Parent shall be a "Subject Parent" from and after the
expiration of 24 months from the date on which such Parent and its Affiliates no
longer hold an interest in the Partnership; and provided, further, that none of
OPC, Oxy CH or OCC is a Subject Parent with respect to each other), neither it,
nor any of its Affiliates shall, without prior written invitation or request of
another Subject Parent: (i) in any manner acquire, agree to acquire or make any
proposal to acquire, directly or indirectly, any securities, assets or property
of such other Subject Parent, whether such agreement or proposal is made with or
to such other Subject Parent or a third party; (ii) make any unsolicited
proposal to enter into, directly or indirectly, any merger or other business
combination involving such other Subject Parent; (iii) make, or in any way
participate,
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directly or indirectly, in any "solicitation" of "proxies" (as such terms are
used in the proxy rules of the Securities and Exchange Commission) to vote, or
seek to advise or influence any person with respect to the voting of, any voting
securities of such other Subject Parent; (iv) form, join or in any way
participate in a "group" (within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934) with respect to any voting securities of such
other Subject Parent; (v) otherwise act, alone or in concert with others, to
seek to control the management, Board of Directors or policies of such other
Subject Parent; (vi) disclose any intention, plan or arrangement inconsistent
with the foregoing; or (vii) advise, encourage, provide assistance (including
financial assistance) to or hold discussions with any other persons in
connection with any of the foregoing. Each Parent also agrees during such period
not to: (i) request that such other Subject Parent (or its respective directors,
officers, employees or agents), directly or indirectly, amend or waive any
provision of this Section 3.1 (including this sentence); or (ii) take any action
which might reasonably be expected to require that such other Subject Parent to
make a public announcement regarding the possibility of a business combination
or merger.
3.2 Exceptions. Notwithstanding the provisions of Section 3.1:
(a) Any Parent may, by notice to another Parent, terminate the provisions
of Section 3.1 (as applied to the relationship between such two Parents, but not
as to their respective relationships with the third Parent) at any time within
30 days after the occurrence of any of the following events with respect to such
other Parent: (i) a Change of Control (as defined below) of such other Parent
shall have occurred, (ii) such other Parent shall have entered into a definitive
agreement providing for, or publicly announced its intention to effect, any
transaction involving a Change of Control of such other Parent or (iii) a tender
offer or exchange offer shall have been commenced or publicly announced that, if
consummated, would have the effect with respect to such other Parent described
in clause (c) of the definition of "Change of Control." A "Change of Control"
of a Parent shall mean the occurrence of any of the following events: (a) there
shall be consummated any consolidation, merger or share exchange of such Parent
(i) in which such Parent is not the continuing or surviving Person (other than a
consolidation, merger or share exchange with a wholly owned subsidiary of such
Parent in which all shares of common stock of such Parent outstanding
immediately prior to the effectiveness thereof are changed into or exchanged for
the same number of shares of common stock of such subsidiary) or (ii) pursuant
to which the common stock of such Parent is converted into cash, securities or
other property, other than, in each case, a consolidation, merger or share
exchange of such Parent in which the holders of the common stock immediately
prior to the consolidation, merger or share exchange hold, directly or
indirectly, at least a majority of the voting power and common equity of the
continuing or surviving Person immediately after such consolidation, merger or
share exchange; (b) such Parent's properties and assets are sold or otherwise
disposed of substantially as an entirety on a consolidated basis to any Person
or group of Persons in any one transaction or a series of related transactions,
other than as contemplated by the Initial Master Transaction Agreement or the
Second Master Transaction Agreement; or (c) any Person or any Persons acting
together which would constitute a "group" (as defined in Section 3.1) (other
than such Parent, any subsidiary of such Parent, any employee stock purchase
plan, stock option plan or other stock incentive plan or program, retirement
plan or automatic dividend reinvestment plan or any substantially similar plan
of such Parent or any subsidiary of such Parent or any Person holding securities
of such Parent for or pursuant to the terms of any such employee benefit plan),
together
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with any Affiliates thereof, shall acquire beneficial ownership (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) of 50% or more of the
voting stock of such Parent.
(b) The terms of the first sentence of Section 3.1 shall not be applicable
to the purchase and sale of any securities of a Parent by independent third-
party managers of any pension or other related employee benefit plans who are
acting as passive investors in such Parent.
3.3 OPC Indemnity. OPC hereby agrees, to the fullest extent permitted by
applicable law, to indemnify, defend and hold harmless the Partnership and its
Affiliates and their respective officers, directors and employees from, against
and in respect of any Liability (as defined in Section 6.2(a) of the Occidental
Contribution Agreement) incurred or suffered by the Partnership or any of its
Affiliates, arising out of, in connection with, or relating to:
(a) all income taxes, and all interest and penalties incurred with respect
thereto, that are imposed on OPC or any member of its affiliated group; and
(b) any obligation arising under Title IV of ERISA (as defined in the
Occidental Contribution Agreement) with respect to any Employee Plan (as defined
in the Occidental Contribution Agreement) maintained by any Contributor (as
defined in the Occidental Contribution Agreement) or any member of a controlled
group (as defined in Section 414 of the Code (as defined in the Occidental
Contribution Agreement)) with the Contributor, but excluding obligations arising
under the Cain Plan (as defined in the Occidental Contribution Agreement) and
obligations under the PDG Plan (as defined in the Occidental Contribution
Agreement with respect to funding requirements arising after the Closing Date.
3.4 Mutual Indemnity.
(a) From the date hereof through the twenty-fifth anniversary hereof, each
of OPC, Lyondell and Millennium (an "Indemnifying Party") hereby agrees, to the
fullest extent permitted by applicable law, to indemnify, defend and hold
harmless the Partnership, its partners, their Affiliates and their respective
officers, directors, and employees (collectively, the "Indemnified Parties")
from, against and in respect of any Liability incurred by any of the Indemnified
Parties arising out of, in connection with, or relating to, any Third Party
Claim (as defined in the Occidental Contribution Agreement) (whether in
contract, tort, statute or otherwise) arising out of, in connection with, or
relating to the failure of the Indemnifying Party or any of its Affiliates to
give notice to, obtain any consent of, or obtain any waiver by, or any breach by
the Indemnifying Party or any of its Affiliates of any obligation owing to, any
Person (as defined in the Occidental Contribution Agreement), in each case with
respect to such Indemnifying Party's or its Affiliates' entering into the
Related Agreements or performing their respective obligations thereunder;
provided, however, that the following limitations shall apply to the
indemnification obligations in Sections 3.3 and 3.4 above:
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(b) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, TO THE FULLEST
EXTENT PERMITTED BY LAW, NO INDEMNIFYING PARTY OR ANY OF ITS AFFILIATES OR THEIR
RESPECTIVE AGENTS, EMPLOYEES, OR REPRESENTATIVES SHALL BE LIABLE FOR
CONSEQUENTIAL, INCIDENTAL, INDIRECT OR PUNITIVE DAMAGES IN CONNECTION WITH
DIRECT CLAIMS BY AN INDEMNIFIED PARTY (I.E., A CLAIM BY AN INDEMNIFIED PARTY
THAT DOES NOT SEEK REIMBURSEMENT FOR A THIRD PARTY CLAIM PAID OR PAYABLE BY THE
INDEMNIFIED PARTY) WITH RESPECT TO THE INDEMNIFICATION OBLIGATIONS UNDER THIS
AGREEMENT UNLESS ANY SUCH CLAIM ARISES OUT OF THE FRAUDULENT ACTIONS OF AN
INDEMNIFYING PARTY OR ITS AFFILIATES. IN DETERMINING THE AMOUNT OF ANY LOSS,
LIABILITY, OR EXPENSE FOR WHICH ANY INDEMNIFIED PARTY IS ENTITLED TO
INDEMNIFICATION UNDER THIS AGREEMENT, THE GROSS AMOUNT THEREOF WILL BE REDUCED
(BUT NOT BELOW ZERO) BY THE NET PRESENT VALUE OF ANY CORRELATIVE INSURANCE
PROCEEDS ACTUALLY REALIZED BY THE INDEMNIFIED PARTY UNDER POLICIES TO THE EXTENT
THAT THE FUTURE PREMIUM RATE WILL NOT BE INCREASED BY CLAIM EXPERIENCE RELATING
TO SUCH LOSS, LIABILITY OR EXPENSE.
(c) Indemnification pursuant to Sections 3.3 and 3.4 shall be subject to
the indemnification provisions set forth in Section 6.3 of the Occidental
Contribution Agreement, as if the Indemnified Parties and Indemnifying Party
were the "Indemnified Parties" and the "Indemnifying Party" thereunder.
(d) The rights provided to each Indemnified Party pursuant to Sections 3.3
and 3.4 of this Agreement and Section 14 of the Partnership Agreement, as
limited by and subject to the provisions of this Section 3 shall be such
Indemnified Party's sole remedy for any matter arising out of, relating to, or
in connection with, the matters described in Section 3.3 and 3.4 of this
Agreement and Section 14 of the Partnership and shall be without duplication of
any rights provided to such Indemnified Party under the Master Transaction
Agreement or any of the Related Agreements.
(e) EXTENT OF INDEMNIFICATION. WITHOUT LIMITING OR ENLARGING THE SCOPE OF
THE INDEMNIFICATION OBLIGATIONS SET FORTH HEREIN, TO THE FULLEST EXTENT
PERMITTED BY LAW, AN INDEMNIFIED PARTY SHALL BE ENTITLED TO INDEMNIFICATION
HEREUNDER IN ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE
INDEMNIFIABLE LOSS GIVING RISE TO ANY SUCH INDEMNIFICATION OBLIGATION IS THE
RESULT OF THE SOLE, GROSS, ACTIVE, PASSIVE, CONCURRENT OR COMPARATIVE
NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF ANY LAW OF OR BY ANY
SUCH INDEMNIFIED PARTY. THE PARTIES AGREE THAT THIS STATEMENT CONSTITUTES A
CONSPICUOUS LEGEND.
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SECTION 4
MISCELLANEOUS
4.1 No Waivers. No failure or delay by a Beneficiary or a Party in
exercising any right or power under this Agreement, or any single or partial
exercise of any such right or power, shall preclude any other or further
exercise thereof or the exercise of any other right or power. Such single or
partial exercise of any right or power shall be cumulative and not exclusive of
any rights or remedies provided by law.
4.2 Expenses in Connection with Exercise. In the event of a dispute
between Parties regarding the exercise or enforcement of any of the rights of a
Beneficiary under this Agreement or the failure by a Party to perform or observe
any of the provisions of this Agreement, the Party that does not ultimately
prevail in such dispute shall be liable, and hereby agrees, to reimburse, on
demand, each other such Party for any and all costs and expenses, including the
fees and expenses of legal counsel and of any other counsel, experts,
consultants or agents, that such other Party may incur in connection therewith.
4.3 Subordination and Subrogation. The rights of a Parent against its
Affiliated Obligors arising from any payment or performance by a Parent
hereunder shall be subordinate in all respects to the rights of the
Beneficiaries against such Affiliated Obligors, and such Parent shall not
compete in any way with a Beneficiary in any winding-up or dissolution of such
Affiliated Obligors unless and until all sums due and to become due from such
Affiliated Obligors to the Beneficiaries have been paid in full. If any amount
shall be paid to a Parent in violation of this Section, such amount shall be
held in trust for the benefit of the Beneficiaries and shall forthwith be paid
to the Beneficiaries to be credited and applied to any sums owed or to be owed
by such Parent's Affiliated Obligors. Subject to the foregoing, upon payment of
all sums due or to become due by Affiliated Obligors to the Beneficiaries, the
Parent of such Affiliated Obligors shall be subrogated to the rights of the
Beneficiary against such Affiliated Obligors, and the Beneficiaries agree to
take at such Parent's expense such steps as such Parent may reasonably request
to implement such subrogation.
4.4 Confidentiality and Use of Information. (a) Each Parent agrees that
it and its Affiliates shall be bound by the terms and conditions of Section 13.1
of the Partnership Agreement as if such Person was a "Partner" as defined in
such agreement.
(b) Lyondell, Millennium and OPC shall consult with each other on an
ongoing basis with respect to disclosures regarding the Partnership and its
business and affairs that each is required to make in reports filed from time to
time with the Securities and Exchange Commission.
(c) The letter agreement regarding confidentiality dated December 11, 1997
between Lyondell and OPC is hereby terminated.
4.5 Competing Businesses. If any Parent or an Affiliate thereof desires
to initiate or pursue any opportunity to undertake, engage in, acquire or invest
in a Business Opportunity (as such term is defined in the Partnership
Agreement), such Person shall offer such Business Opportunity to the Partnership
under the terms and conditions set forth in Sections 9.3(c) and (d) of the
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Partnership Agreement as if such Person were the "Proposing Partner" (as defined
in the Partnership Agreement) with respect thereto, and in such event the
Partnership shall have the rights and obligations with respect thereto set forth
in such Sections 9.3(c) and (d).
4.6 Further Assurances. From time to time, each Party agrees to execute
and deliver such additional documents and provide such additional information
and assistance as the Beneficiaries may reasonably require to carry out the
terms of this Agreement.
4.7 Assignment; Successors and Assigns. (a) Except as provided in this
Agreement and except that a Parent may assign its rights or obligations under
this Agreement to a third party in connection with a transfer of direct
interests in the Partnership owned by its Partner Subs if such transfer is
permitted and consummated in accordance with the Partnership Agreement, no
Parent may assign or delegate any of its rights or obligations under this
Agreement without the prior written consent of all the Beneficiaries, which
consent shall be in the sole and absolute discretion of such Beneficiaries. Any
purported assignment or delegation without such consent shall be void and
ineffective.
(b) Except as may be expressly provided herein, this Agreement shall be
binding upon and inure to the benefit of the successors of the Beneficiaries.
(c) Within six months after the date of this Agreement, Oxy CH and OCC
shall be entitled to assign their respective rights and obligations under
Section 1 to Occidental Chemical Holding Corporation, a California corporation
and an indirect wholly owned subsidiary of OPC ("OCHC"), provided that OCHC
executes an instrument wherein OCHC shall agree to be bound by the obligations
of Oxy CH and OCC thereunder and under Section 4 in a form reasonably acceptable
to the Partnership. Upon such execution, OCHC shall become the "Occidental
Parent" for purposes of Section 1, and Oxy CH and OCC shall thereupon be
released from all obligations under Section 1.
4.8 Benefits of Agreement Restricted to the Parties. This Agreement is
made solely for the benefit of the Parties and, with respect to Sections 1 and 4
(excluding Sections 4.4 and 4.5), the Beneficiaries (as defined in Section
1.11), and no other Person shall have any right, claim or cause of action under
or by virtue of this Agreement.
4.9 Notices. All notices, requests, demands and other communications
(collectively, "notices") required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given if and when (i)
transmitted by telecopier facsimile with proof of confirmation from the
transmitting machine or (ii) delivered by commercial courier or other hand
delivery, as follows:
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If to OPC If to OCC, Oxy CH, the Occidental Partner
Subs
Occidental Petroleum Company c/o Occidental Petroleum Corporation
10889 Wilshire Blvd. 10889 Wilshire Blvd.
Los Angeles, CA 90024 Los Angeles, CA 90024
Attention: President Attention: President
Telecopy Number: (310) 443-6977 Telecopy Number:(310) 443-6977
With a copy to With a copy to
Occidental Petroleum Corporation Occidental Petroleum Corporation
10889 Wilshire Boulevard 10889 Wilshire Boulevard
Los Angeles, California 90024 Los Angeles, California 90024
Attention: General Counsel Attention: General Counsel
Telecopy Number: (310) 443-6333 Telecopy Number: (310) 443-6333
If to Lyondell If to the Lyondell Partner Subs
Lyondell Petrochemical Company c/o Lyondell Petrochemical Company
1221 McKinney Street 1221 McKinney Street
Houston, Texas 77010 Houston, Texas 77010
Attention: Kerry A. Galvin Attention: Kerry A. Galvin
Telecopy Number: (713) 309-4718 Telecopy Number: (713) 309-4718
If to Millennium If to the Millennium Partner Subs
Millennium Chemicals Inc. c/o Millennium Chemicals Inc.
99 Wood Avenue South 99 Wood Avenue South
Iselin, New Jersey 08830 Iselin, New Jersey 08830
Attention: George H. Hempstead, III Attention: George H. Hempstead, III
Telecopy Number: (908) 603-6857 Telecopy Number: (908) 603-6857
If to the Partnership
Equistar Chemicals, LP
1221 McKinney Street
Houston, Texas 77010
Attention: Gerald A. O'Brien
Telecopy Number: (713) 309-4718
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or to such other address as such Party or Beneficiary shall have specified by
notice to the other Parent.
4.10 Severability. In the event that any provisions 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 Party, be deemed severed
from this Agreement and every other provision of this Agreement shall remain in
full force and effect.
4.11 Termination. Except for Sections 3.1, 3.2 and 3.4 (which
sections shall terminate only as provided therein), this Agreement shall
terminate and be of no further force and effect as to a Parent (i) as and when
provided in Section 2.1(d), (e) or (f) or (ii) if and when such Parent Transfers
all of its Partner Sub Stock in a transaction permitted by Section 2.2;
provided, however, that such termination shall not discharge (x) any accrued
Obligations owed by a Parent as of the date of such termination or (y) any
Obligations, whether arising before or after such termination, under such
Parent's Asset Contribution Agreement (as such term is defined in the
Partnership Agreement) or any Related Agreement executed pursuant to such Asset
Contribution Agreement. In addition, the Guarantee by a Parent of Obligations
of an Affiliated Obligor other than a Partner Sub shall terminate as and when
the Parent ceases to be an Affiliate of such Affiliated Obligor, insofar as such
Guarantee relates to Obligations arising thereafter. The obligations of OPC and
the obligations of each of Lyondell and Millennium to OPC, in each case pursuant
to Section 4.4(b), shall terminate and be of no further force and effect at such
time as OPC is no longer required to make the disclosures referred to in Section
4.4(b) to the Securities and Exchange Commission.
4.12 Construction and Certain Definitions.
(a) 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 provisions of this Agreement and not as an aid in construction; (ii) no
consideration shall be given to the fact or presumption that any Party 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 gender; and (vii) each exhibit, attachment and
schedule to this Agreement is a part of this Agreement.
(b) The term "Affiliate" shall mean any Person that directly or indirectly
through one or more intermediaries, controls or is controlled by or is under
common control with the Person specified; provided, however, that, in the case
of OPC and its Affiliates, for purposes of this Agreement, such term shall not
include Canadian Occidental Petroleum Ltd. For purposes of this definition, the
term "control" shall have the meaning set forth in 17 CFR 230.405 as in effect
on the date hereof.
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(c) The term "Person" shall mean any natural person or any corporation,
partnership, limited liability company, joint venture, association, trust or
other entity or organization.
4.13 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.
4.14 Governing Law. The laws of the State of Delaware shall govern
the construction, interpretation and effect of this Agreement without giving
effect to any conflicts of law principles.
4.15 Jurisdiction; Consent to Service of Process; Waiver. ANY
JUDICIAL PROCEEDING BROUGHT AGAINST ANY PARTY TO THIS AGREEMENT 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
DELAWARE, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES
TO THIS AGREEMENT 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 PARTIES TO THIS
AGREEMENT SHALL APPOINT THE CORPORATION TRUST COMPANY, 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 DELAWARE. 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 DELAWARE FOR ANY PURPOSE EXCEPT AS PROVIDED
ABOVE AND SHALL NOT BE DEEMED TO CONFER RIGHTS ON ANY PERSON OTHER THAN THE
PARTIES HERETO. EACH PARENT HEREBY WAIVES ANY OBJECTION IT MAY HAVE BASED UPON
LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON-CONVENIENS.
4.16 Waiver of Jury Trial. EACH PARTY HEREBY KNOWINGLY AND
INTENTIONALLY, IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM
THEREIN.
4.17 Dispute Resolution. All disputes under this Agreement shall be
resolved in accordance with the Dispute Resolution Procedures set forth in
Appendix B.
4.18 Obligations Regarding Affiliates. Each Parent shall cause its
Affiliates (including any person controlling such Parent) to comply with all
provisions of this Agreement that apply to Affiliates of such Parent, and each
Parent shall be responsible for any failure of any such Affiliate to comply with
any such provision.
4.19 Amendment. All waivers, modifications, amendments or alterations
of this Agreement shall require the execution of a written instrument signed by
each of the Parties.
20
<PAGE>
IN WITNESS WHEREOF, the Parties have executed and delivered this Amended
and Restated Parent Agreement as of the date first above written.
OCCIDENTAL CHEMICAL CORPORATION
By: /s/ R. J. Schuh
-------------------------
Name: R. J. Schuh
Title: Executive Vice President
OXY CH CORPORATION
By: /s/ Keith C. McDole
------------------------------
Name: Keith C. McDole
Title: Senior Vice President
OCCIDENTAL PETROLEUM CORPORATION
By: /s/ S.P. Dominick, Jr.
------------------------------------
Name: S.P. Dominick, Jr.
Title: Vice President and Controller
[Signature Page to Amended and Restated Parent Agreement]
<PAGE>
LYONDELL PETROCHEMICAL COMPANY
By: /s/ Dan F. Smith
------------------------------
Name: Dan F. Smith
Title: President and Chief Executive Officer
MILLENNIUM CHEMICALS INC.
By: /s/ Geprge H. Hempstead, III
----------------------------------------
Name: George H. Hempstead, III
Title: Senior Vice President
EQUISTAR CHEMICALS, LP
By: /s/ Eugene R. Allspach
--------------------------------------
Name: Eugene R. Allspach
Title: President and Chief Operating Officer
[Signature Page to Amended and Restated Parent Agreement]
<PAGE>
APPENDIX A
TO
PARENT AGREEMENT
LIST OF RELATED AGREEMENTS
1. Old Partnership Agreement.
2. $345 million promissory note dated December 1, 1997, of Lyondell LP payable
to the Partnership.
3. Asset Contribution Agreement dated as of December 1, 1997, between
Lyondell, Lyondell LP and the Partnership.
4. Asset Contribution Agreement dated as of December 1, 1997, between
Millennium Petrochemicals, Millennium LP and the Partnership.
5. Bill of Sale and Assignment dated December 1, 1997 from Lyondell to the
Partnership with respect to property specified on attached schedule.
6. Assignment of Trademarks dated November 25, 1997 from Lyondell to the
Partnership with respect to certain O&P Trademarks as listed on attached
schedule.
7. Assignment of Patents dated November 25, 1997 from Lyondell to the
Partnership with respect to certain O&P Patents as listed on attached
schedule.
8. Assumption Agreement dated December 1, 1997 between Lyondell as Assignor
and the Partnership as Assignee pursuant to the Asset Contribution
Agreement with respect to the assumption by Assignee of certain
liabilities.
9. Master Intellectual Property Agreement dated December 1, 1997 by and
between Lyondell and the Partnership.
10. Assignment dated December 1, 1997 between Lyondell as "Assignor" and the
Partnership as "Assignee" with respect to the contribution by Assignor of
LCR Agreements.
11. Assignment dated December 1, 1997 between Lyondell and the Partnership, of
Ground Lease (LMC) with respect to certain real property specified therein.
12. Assignment dated December 1, 1997 between Lyondell and the Partnership, of
Operating Agreement, Natural Gas Sales and Methanol Supply with respect to
Lyondell Methanol Company.
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13. Administrative Services Agreement (as amended or otherwise modified from
time to time) effective as of December 1, 1997 between the Partnership and
Lyondell with respect to the provision of services as described in Appendix
A attached.
14. Letter Agreement dated December 1, 1997 between Lyondell and the
Partnership with respect to the net payment by the Partnership to Lyondell
for certain Administrative Services as described in Attachment 1 thereto.
15. Assignment dated November 25, 1997, but effective December 1, 1997, from
Lyondell to the Partnership, of leases specified therein (Channelview,
Texas Golf Courses).
16. Assignment dated November 25, 1997, but effective December 1, 1997, from
Lyondell to the Partnership, of leases specified therein (Alvin, Texas).
17. Assignment dated November 25, 1997, but effective as of December 1, 1997,
from Lyondell to the Partnership, of leases specified therein (Plano,
Texas).
18. Assignment dated November 25, 1997, but effective as of December 1, 1997,
from Lyondell to the Partnership, of leases specified therein (Chicago,
Illinois - CALPERS Lease).
19. Assignment of Sublease dated November 25, 1997, but effective as of
December 1, 1997, from Lyondell to the Partnership, of leases specified
therein (Chicago, Illinois - MATRIX Partners Sublease).
20. Assignment dated November 25, 1997, but effective as of December 1, 1997,
from Lyondell to the Partnership, of leases specified therein
(Philadelphia, Pennsylvania).
21. Assignment dated November 25, 1997, but effective December 1, 1997, from
Lyondell to the Partnership, of leases specified therein (Victoria, Texas).
22. Sublease Agreement dated November 25, 1997, but effective December 1, 1997,
by and between Lyondell and the Partnership with respect to Office Lease
Agreement dated December 31, 1985 and amended by 19 Amendments as described
on Exhibit A as attached thereto (Administrative Office Space, OHC).
23. General Warranty Deed dated November 25, 1997, but effective as of December
1, 1997, from Lyondell to the Partnership with respect to certain real
property specified therein (Channelview, Texas).
24. General Warranty Deed dated November 25, 1997, but effective as of December
1, 1997, from Lyondell to the Partnership, with respect to certain real
property specified therein (Mount Belvieu, Texas).
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25. General Warranty Deed dated, November 25, 1997, but effective December 1,
1997, from Lyondell to the Partnership with respect to certain real
property specified therein (Bayport, Texas).
26. General Warranty Deed dated November 25, 1997, but effective December 1,
1997, from Lyondell to the Partnership with respect to certain real
property specified therein (Matagorda, Texas).
27. Conveyance and Assignment of Easements, Rights of Way, and Licenses dated
November 25, 1997, but effective as of December 1, 1997, from Lyondell to
the Partnership with respect to certain real property specified therein
(Pipeline Right of Way).
28. Bill of Sale and Assignment dated December 1, 1997 from Millennium
Petrochemicals to the Partnership with respect to the property set forth on
Schedule A attached.
29. Assignment of Trademarks dated November 21, 1997 between Millennium
Petrochemicals as Assignor and the Partnership as Assignee with respect to
the transfer of O&P Trademarks as set forth in the schedule attached.
30. Assignment of Patents dated November 21, 1997 between Millennium
Petrochemicals as Assignor and the Partnership as Assignee with respect to
the transfer of O&P Patents as set forth in the schedule attached.
31. Assumption Agreement effective as of December 1, 1997 between Millennium
Petrochemicals as Assignor and the Partnership as Assignee pursuant to the
Asset Contribution Agreement with respect to the assumption by the assignee
of certain liabilities.
32. Master Intellectual Property Agreement dated December 1, 1997 by and
between Millennium Petrochemicals and the Partnership.
33. Shared Services Agreement for Wastewater effective as of December 1, 1997
by and between Millennium Petrochemicals and the Partnership.
34. Shared Services Agreement for the LaPorte Complex effective as of December
1, 1997 by and between Millennium Petrochemicals and the Partnership with
respect to the services as specified therein and on the attachments and
appendix.
35. Shared Services Agreement for Water and Utility Instrument Air effective as
of December 1, 1997 by and between Millennium Petrochemicals and the
Partnership with respect to the services as specified therein and on the
attachments, exhibits and appendix.
36. Shared Services Agreement for the Northlake Office Complex effective as of
December 1, 1997 by and between Millennium Petrochemicals and the
Partnership with respect to services as specified therein and on
attachments and appendix.
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<PAGE>
37. Agreement for Interim Study at the LaPorte Complex effective as of December
1, 1997 by and between Millennium Petrochemicals and the Partnership.
38. Fuel Stream Agreement effective as of December 1, 1997 by and between
Millennium Petrochemicals and the Partnership.
39. Electricity Service Agreement effective as of December 1, 1997 by and
between Millennium Petrochemicals and the Partnership.
40. Sales Agreement (Vinyl Acetate Monomer), effective December 1, 1997 between
Millennium Petrochemicals as "Seller" and the Partnership as "Buyer".
41. Sales Agreement (Ethylene), effective December 1, 1997 between the
Partnership as "Seller" and Millennium Petrochemicals as "Buyer".
42. Sales Agreement (Purified Hydrogen), between the Partnership as "Seller"
and Millennium Petrochemicals as "Buyer" effective December 1, 1997.
43. Sales Agreement (Natural Gas), effective December 1, 1997 between the
Partnership as "Seller" and Millennium Petrochemicals as "Buyer".
44. Letter Agreement dated December 1, 1997 between Millennium Petrochemicals
and the Partnership regarding interim distribution logistics support.
45. Letter Agreement dated December 1, 1997 between Millennium Petrochemicals
and the Partnership with respect to the net payment for various shared
services.
46. Assignment of Railcar Lease dated December 3, 1997 by and between
Millennium Petrochemicals Inc. as "Assignor" and the Partnership as
"Assignee" (The Sumitomo Bank Leasing and Finance, Inc. Lease).
47. Assignment of Leasehold dated November 25, 1997 by and between Millennium
Petrochemicals and the Partnership with respect to certain real property
specified therein (Tuscola, Illinois).
48. Assignment of Leasehold dated December 1, 1997 by and between Millennium
Petrochemicals and the Partnership with respect to certain real property
specified therein (Fairport Harbor, Ohio).
49. Assignment dated December 1, 1997 between Millennium Petrochemicals and the
Partnership of lease specified therein (Clinton, Iowa).
50. Quit Claim Deed dated December 1, 1997 from Millennium Petrochemicals to
the Partnership with respect to certain real property specified therein
(Clinton, Iowa).
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<PAGE>
51. Assignment dated December 1, 1997 between Millennium Petrochemicals and the
Partnership of Credit Union Sublease (Clinton, Iowa).
52. Assignment dated December 1, 1997 between Millennium Petrochemicals and the
Partnership of Appurtenant Easements (Clinton, Iowa).
53. Assignment dated December 1, 1997 between Millennium Petrochemicals and the
Partnership of Dock Lease and Agreement (Clinton, Iowa).
54. Assignment dated December 1, 1997 between Millennium Petrochemicals and the
Partnership of Sub-lease Option to Purchase Agreement (Clinton, Iowa).
55. Assignment dated December 1, 1997 between Millennium Petrochemicals and the
Partnership of Cellular Telephone Sublease (Clinton, Iowa).
56. Assignment dated December 1, 1997 between Millennium Petrochemicals and the
Partnership of Farm Leases (Clinton, Iowa).
57. Assignment dated December 1, 1997 between Millennium Petrochemicals and the
Partnership of Eastern Iowa Propane Lease (Clinton, Iowa).
58. Lease Agreement dated December 1, 1997 between Millennium Petrochemicals
and the Partnership with respect to certain real property specified therein
(Lease for Cincinnati Research Laboratory).
59. Warranty Deed dated December 1, 1997 from Millennium Petrochemicals to the
Partnership with respect to certain Real Property specified therein
(Clinton, Iowa).
60. General Warranty Deed dated December 1, 1997 from Millennium Petrochemicals
to the Partnership with respect to certain real property specified therein
(LaPorte, Texas).
61. Letter agreement dated December 1, 1997 from Millennium Petrochemicals to
the Partnership with respect to Millennium Petrochemicals agreement to
provide the Partnership an option on approximately 20+ acres of land
(LaPorte Expansion Land).
62. Warranty Deed dated November 25, 1997 from Millennium Petrochemicals to the
Partnership with respect to certain real property specified therein
(Morris, Illinois).
63. General Warranty Deed dated November 25, 1997 from Millennium
Petrochemicals to the Partnership with respect to certain real property
specified therein (Port Arthur, Texas).
64. General Warranty Deed dated November 25, 1997 from Millennium
Petrochemicals to the Partnership with respect to certain real property
specified therein (Chocolate Bayou, Texas).
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<PAGE>
65. Warranty Deed dated December 1, 1997 from Millennium Petrochemicals to the
Partnership with respect to certain real property specified therein
(Tuscola, Illinois).
66. General Warranty Deed dated December 1, 1997 from Millennium Petrochemicals
to the Partnership with respect to certain real property specified therein
(Heath, Ohio)
67. General Warranty Deed dated November 25, 1997 from Millennium
Petrochemicals to the Partnership with respect to certain real property
specified therein (Crockett, Texas)
68. Deed dated November 24, 1997 from Millennium Petrochemicals to the
Partnership with respect to certain real property specified therein
(Newark, New Jersey).
69. Grant Deed dated December 1, 1997 from Millennium Petrochemicals to the
Partnership with respect to certain real property specified therein
(Anaheim, California).
70. Limited Warranty Deed dated December 1, 1997 from the Partnership to
Millennium Petrochemicals with respect to certain real property specified
therein (the Northlake Drive 0.1553 Acre Parcel Cincinnati-Research Center-
Northlake, Ohio).
71. General Warranty Deed (Conveyance between Adjoining Lot Owners) dated
December 1, 1997 from Millennium Petrochemicals to the Partnership with
respect to certain real property specified therein (Cincinnati-Research
Center-Northlake, Ohio).
72. General Warranty Deed (Conveyance between Adjoining Lot Owners) dated
December 1, 1997 from Millennium Petrochemicals to the Partnership with
respect to certain real property specified therein, the Northlake Drive
0.0987 Acre Parcel (Cincinnati-Research Center-Northlake, Ohio).
73. General Warranty Deed dated December 1, 1997 from Millennium Petrochemicals
to the Partnership with respect to certain real property specified therein,
the East Kemper Road and Northlake Drive 25.0864 Acre Parcel (Cincinnati-
Research Center-Northlake).
74. Declaration of Easements and Restrictive Covenants dated December 1, 1997
by Millennium Petrochemicals and the Partnership with respect to certain
real property specified therein (Cincinnati-Research Center-Northlake,
Ohio).
75. Assignment and Assumption dated December 1, 1997 by and between Millennium
Petrochemicals and the Partnership, of Service Agreement (Cincinnati-
Research Center-Northlake, Ohio).
76. Letter Agreement dated November 20, 1997 from Millennium Petrochemicals to
the Partnership with respect to Fiber-Optic Cable System, Northlake Drive
Property, Cincinnati, Ohio (Cincinnati-Research Center-Northlake, Ohio).
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<PAGE>
77. Parking Agreement dated December 1, 1997 between Millennium Petrochemicals
and the Partnership with respect to additional parking at the Northlake
Facility (Cincinnati-Research Center-Northlake, Ohio).
78. General Warranty Deed dated December 1, 1997 from Millennium Petrochemicals
to the Partnership with respect to certain real property specified therein
(Fairport Harbor, Ohio).
79. Assignment of Easements dated November 25, 1997 from Millennium
Petrochemicals to the Partnership with respect to certain real property
specified therein (Chocolate Bayou, Texas).
80. Easement Agreement dated December 1, 1997 to Millennium Petrochemicals from
the Partnership with respect to certain real property specified therein
(LaPorte, Texas).
81. Easement Agreement dated December 1, 1997 to the Partnership from
Millennium Petrochemicals with respect to certain real property specified
therein (LaPorte, Texas).
82. Assignment (Mont Belvieu Pipeline Easements) dated November 25, 1997 from
Millennium Petrochemicals to the Partnership with respect to certain real
property specified therein.
83. General Warranty (Mont Belvieu Pipeline Fee Parcels) dated November 25,
1997 from Millennium Petrochemicals to the Partnership with respect to
certain real property specified therein.
84. Partnership Agreement.
85. Agreement and Plan of Merger and Asset Contribution dated as of May 15,
1998, among Occidental GP, Occidental LP1, Occidental LP2, OPI and the
Partnership.
86. Sales Agreement (Ethylene) dated as of May 15, 1998 by and between the
Partnership and OCC with respect to the sale of Ethylene by the Partnership
to OCC.
87. Operating Agreement dated as of May 15, 1998 by and between the Partnership
and OCC with respect to OCC providing certain services to the Partnership
after May 15, 1998.
88. Toll Processing Agreement dated May 15, 1998 between the Partnership and
OCC with respect to Ashtabula EO/EG tolling.
89. Amended and Restated Indemnity Agreement among OCC, Occidental GP,
Occidental LP1, Occidental LP2, Lyondell GP, Lyondell LP, Millennium GP,
Millennium LP and Millennium America Inc.
90. Letter Agreement dated May 15, 1998 between OCC and the Partnership with
respect to OCC providing a guarantee for the collection of $419,700,000 of
Partnership debt.
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<PAGE>
91. Letter Agreement dated May 15, 1998 between OCC and the Partnership with
respect to the prepayment or restructuring of the Occidental Assumed Debt.
92. Promissory Note for $419,700,000 dated May 15, 1998 of the Partnership
payable to Occidental LP2.
93. Promissory Note for $75 million dated May 15, 1998 of the Partnership
payable to Millennium LP.
94. Bill of Sale and Assignment dated May 15, 1998 from OCC to Occidental LP1
with respect to property specified on attached schedule.
95. Bill of Sale and Assignment dated May 15, 1998 from Occidental LP1 to the
Partnership with respect to property specified on attached schedule.
96. Patent Assignment dated May 15, 1998 from OCC to the Partnership with
respect to patents as listed on attached schedule.
97. Assumption Agreement dated May 15, 1998 between Occidental LP1, Occidental
LP2 and Occidental GP, as Assignors, and the Partnership, as Assignee,
pursuant to the Agreement and Plan of Merger and Asset Contribution with
respect to the assumption by Assignee of certain liabilities.
98. Master Intellectual Property Agreement dated May 15, 1998 by and between
the Partnership and OCC.
99. Assignment of Partnership Interests dated May 15, 1998 from Occidental GP
to the Partnership with respect to interests in PD Glycol, a Texas limited
partnership.
100. Assignment of Leases dated May 15, 1998 from OCC to the Occidental LP1 with
respect to leases specified therein.
101. Assignment of Lease and Act of Exchange dated May 15, 1998 from Occidental
LP1 to the Partnership with respect to the lease specified therein,
together with such lease.
102. Assignment of Leases dated May 15, 1998 from Occidental LP1 to the
Partnership with respect to leases specified therein.
103. Assumption Agreement dated May 15, 1998 between OPI as Assignor and the
Partnership as Assignee with respect to Lease Intended for Security dated
December 18, 1991 ($205 million).
104. Termination and Release of Guaranty dated May 15, 1998 between Lyondell and
OCC with respect to the termination of Lyondell guaranty of certain
Partnership railcar leases.
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<PAGE>
105. Sublease dated May 15, 1998 from OCC to the Partnership with respect to
1990 railcar lease.
106. Sublease dated May 15, 1998 from OPI to the Partnership with respect to
1995 railcar lease.
107. Tax Indemnity Agreement dated May 15, 1998 between OCC and the Partnership
with respect to Sublease of 1990 railcar lease.
108. Tax Indemnity Agreement dated May 15, 1998 between OPI and the Partnership
with respect to Sublease of 1998 railcar lease.
109. Master Arbitration Amendment to Related Agreements dated May 15, 1998
between the Partnership, Lyondell and Millennium.
110. First Amendment to Lyondell Asset Contribution Agreement dated May 15, 1998
between the Partnership, Lyondell and Lyondell LP.
111. First Amendment to Millennium Asset Contribution Agreement dated May 15,
1998 between the Partnership, Millennium Petrochemicals and Millennium LP.
112. Transition Services Agreement between the Partnership and OCC to be entered
into pursuant to the Operating Agreement with respect to OCC providing
certain services to the Partnership.
113. Pipeline Acquisition Agreement dated as of May 15, 1998 between OCC and
the Partnership with respect to the Cyclohexane pipeline.
114. Trademark License Agreement dated as of May 15, 1998 among OCC, Occidental
and the Partnership with respect to the trademarks as set forth on the
schedule attached.
115. Assignment of Excluded Assets dated May 14, 1998 between OPI as Assignor
and OCC as Assignee with respect to certain assets described therein.
116. Assumption Agreement dated May 14, 1998 between OPI as Assignor and OCC as
Assignee with respect to certain liabilities described therein.
117. Termination Agreement and General Release dated May 15, 1998 among
Occidental, OPI, Occidental LP2 and Occidental Holding Company with respect
to certain intercompany debts.
118. Assumption Agreement dated May 15, 1998 between OPI as Assignor and
Occidental LP2 as Assignee with respect to certain intercompany debts.
119. Assignment and Assumption Agreement dated May 15, 1998 between OCC as
Assignor and the Partnership as Assignee with respect to Lease intended for
security dated March 28, 1994 by and between OCC and Pitney Bowes Credit
Corporation.
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<PAGE>
120. Letter from Lyondell to OCC and the Partnership regarding PVC technology.
121. Agreement regarding provision by the Partnership of certain support
facilities associated with the Lake Charles propylene fractionation unit to
be entered into pursuant to the Operating Agreement.
A-10
<PAGE>
APPENDIX B
TO
PARENT AGREEMENT
DISPUTE RESOLUTION PROCEDURES
(1) Binding and Exclusive Means. The dispute resolution provisions set
forth in this Appendix B shall be the binding and exclusive means to resolve all
disputes arising under this Agreement (each a "Dispute").
(2) Standards and Criteria. In resolving any Dispute, the standards and
criteria for resolving such dispute shall, unless the Parties involved in the
Dispute in their discretion jointly stipulate otherwise, be as set forth in
Appendix 1 to this Appendix B.
(3) ADR and Binding Arbitration Procedures. If a Dispute arises, the
following procedures shall be implemented (with references to "Parties" meaning
the Parties involved in the Dispute):
(a) Any Party may at any time invoke the dispute resolution procedures set
forth in this Appendix B as to any Dispute by providing written notice of such
action to the other Parties, and all Parties within five Business Days after
such notice shall schedule a meeting to be held in Houston, Texas between the
Parties. The meeting shall occur within 10 Business Days after notice of the
meeting is delivered to the other Parties. The meeting shall be attended by
representatives of each Party having decision-making authority regarding the
Dispute as well as the dispute resolution process and who shall attempt in a
commercially reasonable manner to negotiate a resolution of the Dispute.
(b) The representatives of the Parties shall cooperate in a commercially
reasonable manner and shall explore whether techniques such as mediation,
minitrials, mock trials or other techniques of alternative dispute resolution
might be useful. In the event that a technique of alternative dispute
resolution is so agreed upon, a specific timetable and completion date for its
implementation shall also be agreed upon. The representatives will continue to
meet and discuss settlement until the date (the "Interim Decision Date") that is
the earliest to occur of the following events: (i) an agreement shall be reached
by the Parties resolving the Dispute; (ii) one of the Parties shall determine
and notify the other Parties in writing that no agreement resolving the Dispute
is likely to be reached; (iii) if a technique of alternative dispute resolution
is agreed upon, the completion date therefor shall occur without the Parties
having resolved the Dispute; or (iv) if another technique of alternative dispute
resolution is not agreed upon, two full meeting days (or such other time period
as may be agreed upon) shall expire without the Parties having resolved the
Dispute.
(c) If, as of the Interim Decision Date, the Parties have not succeeded in
negotiating a resolution of the dispute pursuant to subsection (b), the Parties
shall proceed under subsections (d), (e) and (f).
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<PAGE>
(d) After satisfying the requirements above, such Dispute shall be
submitted to mandatory and binding arbitration at the election of any Party
involved in the Dispute (the "Disputing Party"). The arbitration shall be
subject to the Federal Arbitration Act as supplemented by the conditions set
forth in this Appendix B. The arbitration shall be conducted in accordance with
the Commercial Arbitration Rules of the American Arbitration Association in
effect on the date the notice of arbitration is served, other than as
specifically modified herein. In the absence of an agreement to the contrary,
the arbitration shall be held in Houston, Texas. The Arbitrator (as defined
below) will allow reasonable discovery in the forms permitted by the Federal
Rules of Civil Procedure, to the extent consistent with the purpose of the
arbitration. During the pendency of the Dispute, each Party shall make
available to the Arbitrator and the other Parties all books, records and other
information within its control requested by the other Parties or the Arbitrator
subject to the confidentiality provisions contained herein, and provided that no
such access shall waive or preclude any objection to such production based on
any privilege recognized by law. Recognizing the express desire of the Parties
for an expeditious means of dispute resolution, the Arbitrator may limit the
scope of discovery between the Parties as may be reasonable under the
circumstances. In deciding the substance of the Parties' claims, the laws of
the State of Delaware shall govern the construction, interpretation and effect
of this Agreement (including this Appendix B) without giving effect to any
conflict of law principles. The arbitration hearing shall be commenced promptly
and conducted expeditiously, with each Party involved in the Dispute being
allocated an equal amount of time for the presentation of its case. Unless
otherwise agreed to by the Parties, the arbitration hearing shall be conducted
on consecutive days. Time is of the essence in the arbitration proceeding, and
the Arbitrator shall have the right and authority to issue monetary sanctions
against any of the Parties if, upon a showing of good cause, that Party is
unreasonably delaying the proceeding. To the fullest extent permitted by law,
the arbitration proceedings and award shall be maintained in confidence by the
Arbitrator and the Parties.
(e) The Disputing Party shall notify the American Arbitration Association
("AAA") and the other Parties in writing describing in reasonable detail the
nature of the Dispute (the "Dispute Notice"). The arbitrator (the "Arbitrator")
shall be selected within 15 days of the date of the Dispute Notice by all of the
Parties from the members of a panel of arbitrators of the AAA or, if the AAA
fails or refuses to provide a list of potential arbitrators, of the Center for
Public Resources and shall be experienced in commercial arbitration. In the
event that the Parties are unable to agree on the selection of the Arbitrator,
the AAA shall select the Arbitrator, using the criteria set forth in this
Appendix B, within 30 days of the date of the Dispute Notice. In the event that
the Arbitrator is unable to serve, his or her replacement will be selected in
the same manner as the Arbitrator to be replaced. The Arbitrator shall be
neutral. The Arbitrator shall have the authority to assess the costs and
expenses of the arbitration proceeding (including the arbitrators', and
attorneys' fees and expenses) against any or all Parties.
(f) The Arbitrator shall decide all Disputes and all substantive and
procedural issues related thereto, and shall enforce this Agreement in
accordance with its terms. Without limiting the generality of the previous
sentence, the Arbitrator shall have the authority to issue injunctive relief;
however, the Arbitrator shall not have any power or authority to (i) award
consequential, incidental, indirect or punitive damages or (ii) amend this
Agreement. The Arbitrator shall render the arbitration award, in writing,
within 20 days following the completion of the arbitration hearing, and
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<PAGE>
shall set forth the reasons for the award. In the event that the Arbitrator
awards monetary damages in favor of any Party, the Arbitrator must certify in
the award that no indirect, consequential, incidental, indirect or punitive
damages are included in such award. If the Arbitrator's decision results in a
monetary award, the interest to be granted on such award, if any, and the rate
of such interest shall be determined by the Arbitrator in his or her discretion.
The arbitration award shall be final and binding on the Parties, and judgment
thereon may be entered in any court of competent jurisdiction, and may not be
appealed except to the extent permitted by the Federal Arbitration Act.
(4) Continuation of Business. Notwithstanding the existence of any Dispute
or the pendency of any procedures pursuant to this Appendix B, the Parties agree
and undertake that all payments not in dispute shall continue to be made and all
obligations not in dispute shall continue to be performed.
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<PAGE>
Appendix 1
(a) First priority shall be given to maximizing the consistency of the
resolution of the Dispute with the satisfaction of all express obligations of
the Parties and their Affiliates as set forth in the Agreement.
(b) Second priority shall be given to resolution of the Dispute in a manner
which best achieves the objectives of the business activities and arrangements
under the Agreement and permits the Parties to realize the benefits intended to
be afforded thereby.
(c) Third priority shall be given to such other matters, if any, as the
Parties or the Arbitrator determine to be appropriate under the circumstances.
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<PAGE>
EXHIBIT 10.15(a)
FIRST AMENDMENT TO AMENDED AND RESTATED
PARENT AGREEMENT
This First Amendment to the Amended and Restated Parent Agreement, dated as
of June 30, 1998 (this "First Amendment"), is entered into by and among
Occidental Chemical Corporation, a New York corporation ("OCC"), Oxy CH
Corporation, a California corporation ("Oxy CH"), Occidental Petroleum
Corporation, a Delaware corporation ("OPC"), Occidental Chemical Holding
Corporation, a California corporation ("OCHC"), Lyondell Petrochemical Company,
a Delaware corporation ("Lyondell"), Millennium Chemicals, Inc., a Delaware
corporation ("Millennium"), and Equistar Chemicals, LP, a Delaware limited
partnership ("Equistar").
WHEREAS, OCC, Oxy CH, OPC, Lyondell, Millennium and Equistar entered into
that certain Amended and Restated Parent Agreement dated as of May 15, 1998 (the
"Parent Agreement");
WHEREAS, OCC, Oxy CH and OCHC effected an assignment and assumption of
certain guarantees, undertakings, promises, rights, covenants and obligations of
OCC and Oxy CH under the Parent Agreement as of June 19, 1998; and
WHEREAS, the parties hereto wish to amend the list of Related Agreements
set forth in Appendix A to the Parent Agreement.
NOW THEREFORE, in consideration of the foregoing and the mutual promises
and covenants of the parties hereto, the parties hereto hereby agree as follows:
1. All capitalized terms that are defined in the Parent Agreement, but are not
defined in this First Amendment, shall have the same meanings as defined in the
Parent Agreement.
2. The following shall be added to the list of Related Agreements in Appendix
A to the Parent Agreement:
"122. First Amendment to Amended and Restated Limited Partnership
Agreement of Equistar Chemicals, LP, dated as of June 30, 1998, by and
among Lyondell LP, Lyondell GP, Millennium LP, Millennium GP,
Occidental GP, Occidental LP1, Occidental LP2 and Occidental Petrochem
Partner GP, Inc., a Delaware corporation."
3. Except as amended by this First Amendment, all the terms and provisions of
the Parent Agreement shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
First Amendment as of the date first above written.
OCCIDENTAL CHEMICAL CORPORATION
By: /s/ David C. Yen
--------------------------------------
Name: David C. Yen
Title: Vice President and Treasurer
OXY CH CORPORATION
By: /s/ David C. Yen
--------------------------------------
Name: David C. Yen
Title: Vice President and Treasurer
OCCIDENTAL PETROLEUM CORPORATION
By: /s/ David C. Yen
--------------------------------------
Name: David C. Yen
Title: Vice President and Treasurer
OCCIDENTAL CHEMICAL HOLDING
CORPORATION
By: /s/ David C. Yen
--------------------------------------
Name: David C. Yen
Title: Vice President and Treasurer
<PAGE>
LYONDELL PETROCHEMICAL COMPANY
By: /s/ T. Kevin De Nicola
--------------------------------------
Name:
Title:
MILLENNIUM CHEMICALS INC.
By: /s/ George H. Hempstead, III
--------------------------------------
Name: George H. Hempstead III
Title: Senior Vice President
EQUISTAR CHEMICALS, LP
By: /s/ Eugene R. Allspach
--------------------------------------
Name: Eugene R. Allspach
Title: President & Chief Operating Officer
<PAGE>
EXHIBIT 10.15(b)
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement") is executed
as of June 19, 1998, by and among Occidental Chemical Corporation, a New York
corporation ("OCC"), Oxy CH Corporation, a California corporation ("Oxy CH",
and, together with OCC, "Assignors"), and Occidental Chemical Holding
Corporation, a California corporation ("Assignee"):
W I T N E S S E T H:
Assignors, Occidental Petroleum Corporation, Lyondell Petrochemical
Company, Millennium Chemicals Inc. and Equistar Chemicals, LP, have entered into
that certain Amended and Restated Parent Agreement dated as of May 15, 1998 (the
"Parent Agreement"). Capitalized terms used in this Agreement and not expressly
defined herein shall have the meanings set forth in the Parent Agreement.
As contemplated by Section 4.7(c) of the Parent Agreement, Assignors and
Assignee desire to effect an assignment and assumption of certain guarantees,
undertakings, promises, rights, covenants and obligations of Assignors under the
Parent Agreement and to release and discharge Assignors of such guarantees,
undertakings, promises, rights, covenants and obligations thereunder.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, effective as of the date hereof, Assignors hereby ASSIGN, CONVEY
AND TRANSFER unto Assignee, and Assignee hereby assumes and agrees to pay,
perform, observe and discharge, fully and timely, all of Assignor's guarantees,
undertakings, promises, rights, covenants and obligations under Section 1 of the
Parent Agreement.
1. From and after the date hereof: (i) Assignee shall be the "Occidental
Parent" and a "Parent" for purposes of Section 1 of the Parent Agreement; (ii)
Assignors shall be fully released and discharged from any guarantees,
undertakings, promises, rights, covenants and obligations arising under Section
1 of the Parent Agreement; (iii) Assignors shall continue to be the "Occidental
Parent" and a "Parent" for purposes of Section 2 of the Parent Agreement; (iv)
each of the Assignors shall continue as a "Parent," and Assignee shall become a
"Parent" for purposes of Section 3 of the Parent Agreement and none of OPC,
Assignee, OCC or Oxy CH will be a "Subject Parent" with respect to each other
for purposes of Section 3; (v) each of Assignors and Assignee shall be a
"Parent" and a "Party" for purposes of Section 4 of the Parent Agreement; (vi)
any notice to be sent to Assignee under the Parent Agreement shall be sent to
Assignee at the address for Assignors set forth in Section 4.9 of the Parent
Agreement; and (vii) in connection with any Transfer pursuant to Section 2.1(e)
or (f) of the Parent Agreement that results in a release of Assignors' rights,
covenants and obligations arising under the Parent Agreement as provided
therein, Assignee shall be released from its obligations under the Parent
Agreement if the Successor Parent also assumes Assignee's obligations under the
Parent Agreement as provided herein and therein.
<PAGE>
2. This Agreement shall be binding upon Assignee and its successors and
assigns, and shall inure to the benefit of Assignors and their respective
successors and assigns.
3. This Assumption Agreement shall be governed by the law of the State
of Delaware, without regard to conflict of laws principles.
4. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument.
EXECUTED as of the date first set forth above.
OCCIDENTAL CHEMICAL CORPORATION
By: /s/ DAVID C. YEN
------------------------------------
Name: David C. Yen
-------------------------------
Title: Vice President and Treasurer
------------------------------
OXY CH CORPORATION
By: /s/ DAVID C. YEN
------------------------------------
Name: David C. Yen
-------------------------------
Title: Vice President and Treasurer
------------------------------
OCCIDENTAL CHEMICAL HOLDING CORPORATION
By: /s/ DAVID C. YEN
------------------------------------
Name: David C. Yen
-------------------------------
Title: Vice President and Treasurer
------------------------------
Effective as of the date first set forth above, the undersigned join in
the execution of this Agreement for purposes of: (i) consenting to the
assignment and assumption described herein; (ii) accepting the form and
substance of this Agreement for all purposes as required by Section 4.7 of the
Parent Agreement and (iii) agreeing to the terms reflected in Section 1 hereof.
LYONDELL PETROCHEMICAL COMPANY
By: /s/ T. KEVIN DeNICOLA
------------------------------------
Name: T. Kevin DeNicola
-------------------------------
Title: Vice President
------------------------------
<PAGE>
MILLENNIUM CHEMICALS INC.
By: /s/ George H. Hempstead III
------------------------------------
Name: George H. Hempstead III
-------------------------------
Title: Senior Vice President
------------------------------
EQUISTAR CHEMICALS, LP
By: /s/ Eugene R. Allspach
------------------------------------
Name: Eugene R. Allspach
-------------------------------
Title: President and Chief Operating
Officer
------------------------------
OCCIDENTAL PETROLEUM CORPORATION
By: /s/ A. R. Leach
------------------------------------
Name: A. R. Leach
-------------------------------
Title: Executive Vice President and
Chief Financial Officer
------------------------------
3
<PAGE>
EXHIBIT 10.16
SALES AGREEMENT
Ethylene
THIS AGREEMENT, dated as of May 15, 1998 ("Effective Date") is entered into by
and between Equistar Chemicals, LP, hereinafter referred to as "Seller," and
Occidental Chemical Corporation, hereinafter referred to as "Buyer". Each of
Seller and Buyer is sometimes hereinafter referred to as a "party" and
collectively as the "parties".
WHEREAS, as of this same date, the parties have entered into the Asset
Contribution Agreement, in accordance with which Ethylene production assets are
transferred from Buyer to Seller;
WHEREAS, Buyer desires to purchase quantities of Ethylene from Seller, and
WHEREAS, Seller desires to sell quantities of Ethylene to Buyer;
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS
"Affiliate(s)" means any person that directy or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with the party specified. For purposes of this definition, the term "control"
shall have the meaning as set forth in 17 C.F.R. 230-405 as in effect on the
date hereof.
"Agreement" means this Ethylene Supply Agreement.
"Annual Maximum" has the meaning set forth in Paragraph 2(a) of this
Agreement and the meaning ascribed in Paragraph 2(f) for the Phase Down
period.
"Annual Minimum" has the meaning set forth in Paragraph 2(a) of this
Agreement and the meaning ascribed in Paragraph 2(f) for the Phase Down
period.
"Asset Contribution Agreement" means the Agreement and Plan of Merger and
Asset Contribution, among Occidental Petrochem Partner 1, Inc., Occidental
Petrochem Partner 2, Inc., Oxy Petrochemicals Inc., PDG Chemical Inc. and
Equistar Chemicals, LP, executed on the same date as this Agreement.
"Bank Rate" means, with respect to any period for which interest is to be
calculated under this Agreement, the rate of interest publicly announced from
time to time by the Chase Manhattan Bank, NA (or its successor) at its
principal office as its prime commercial lending rate. Each change in this
rate resulting from a change in the prime rate shall take effect on the day
on which the announced rate changes.
"Buyer's U.S. Plants" means the manufacturing plants owned or operated by the
Buyer and set forth on Schedule 1, attached hereto. Schedule 1 also includes,
for each of Buyer's U.S. Plants, the current practical production capacity,
approximate ethylene use when operating at current practical production
capacities and actual 1997 ethylene utilization.
<PAGE>
"Delivery Point(s)" means the exit flange on the metering station measuring
Ethylene deliveries to each of the Buyer's U.S. Plants.
"Ethylene" means ethylene having the specifications set forth in Exhibit A to
this Agreement, or in the event of ethylene delivered to Buyer hereunder and
not conforming to such specifications, such ethylene as to which
specifications have been waived by Buyer in order to accept delivery.
"Monomers Market Report" means the monthly publication of the same title
published by Chemical Marketing Associates, Inc.
"Monthly Petrochemicals and Plastics Analysis" means the monthly publication
of the same title published by Chemical Data, Inc.
"OxyMar" means that certain Texas general partnership between subsidiaries of
Occidental Petroleum Corporation, a Delaware corporation, and Marubeni
Corporation, a Japanese corporation.
"OxyMar Plant" means that certain vinyl chloride monomer manufacturing
facility, owned by OxyMar and located at Highway 361, Gregory, Texas and
which is operated by OxyChem for the benefit of OxyMar.
"Phase Down" has the meaning set forth in Paragraph 2(f) of this Agreement.
"Phase Down Annual Maximum" has the meaning set forth in Paragraph 2(f) of
this Agreement.
"Phase Down Annual Minimum" has the meaning set forth in Paragraph 2(f) of
this Agreement.
"Phase Down Basis Quantity" has the meaning set forth in Paragraph 2(f) of
this Agreement.
"Phase Down Notice" has the meaning set forth in Paragraph 2(f) of this
Agreement.
"Reduction Event" means, as to each of Buyer's U.S. Plants, (i) a shut down
of such plant, (ii) a reduction in practical production capacity of such
plant, or (iii) the taking out of service (other than for maintenance or
repair) of all or any portion of the practical production capacity of such
plant.
"Superfund" means the assessment on the production and sale of Ethylene
imposed pursuant to the Comprehensive Environment Response, Compensation and
Liability Act, as the same may be from time to time amended or reauthorized
and in effect.
"Term" has the meaning set forth in Section 3 of this Agreement.
2. QUANTITY
(a) Requirements. Buyer shall buy from Seller and Seller shall sell to Buyer an
"Annual Minimum" quantity of Ethylene equal to 100% of the ethylene
feedstock requirements of Buyer's U.S. Plants, less any quantities up to
250 MM lbs. tolled in accordance with the provisions of Paragraph 2(e),
exclusively for internal use in production at Buyer's U.S. Plants (estimated
to be approximately 2,000 MM lbs./yr. currently) provided that, in any
calendar year, Seller has no obligation to supply more than 2,550 MM lbs. of
Ethylene ("Annual Maximum"). The Annual Maximum will be prorated for the
remaining days of the first calendar year after the start of performance
hereunder. Buyer shall not purchase Ethylene for resale from Seller or any
third party except for resales by Buyer to OxyMar for use in production at
the OxyMar Plant.
(b) Annual Maximum Adjustment. If a Reduction Event occurs, then the Annual
Maximum will be reduced by an amount equal to the reduction in ethylene use
attributable to the reduction in practical production capacity resulting
from such Reduction Event. If all or any portion of such practical
2
<PAGE>
production capacity is placed back into service, then the Annual Maximum
will be increased by the amount of the increased ethylene feedstock
requirements due to such capacity having been restored to service, subject
to the inclusions and exclusions of Paragraph 2(c) below. Any such changes
will be prorated for the remainder of any year in which such Reducton Event
occurs.
(c) Growth of Requirements. Any increase in the ethylene feedstock requirements
of the Buyer's U.S. Plants resulting from the installation of substantial
new production facilities (i.e. new plants or new trains) shall be excluded
from the calculation of the ethylene feedstock requirements of the Buyer's
U.S. Plants under this Agreement; provided that increased ethylene
feedstock requirements due to startup, debottlenecking, modernization or
other modifications of existing equipment will be included in ethylene
feedstock requirements which Buyer will be obligated to purchase hereunder.
(d) Forecasts. Buyer shall provide to Seller an annual forecast of quantities of
Ethylene expected to be purchased from Seller and shipment dates 90 days
prior to the start of each calendar year, supplemented by quarterly updates
30 days prior to the start of each calendar quarter. Such forecasts are for
planning purposes only and will not affect the obligations of either party.
(e) Tolls. In any year Buyer may receive up to 250 MM lbs. of Ethylene tolled
through Seller's pipeline system, provided Buyer nominates the next calendar
year quantity by notifying Seller of the quantity and parameters for
scheduling of such tolls by September 30 of the preceding calendar year. If
timely notice with respect to any calendar year is not received by Seller,
Buyer shall purchase from Seller 100% of Buyer's U.S. Plants' requirements,
without any toll quantity subtracted for that calendar year.
(f) Phase Down. Both parties have the right to elect to reduce the parties'
Ethylene quantity obligations so long as any such reduction is accomplished
in accordance with and subject to the following ("Phase Down"):
i. Either party may exercise its right of Phase Down by providing at
least 3 full calendar years irrevocable written notice (the "Phase Down
Notice") to the other party for each calendar year affected by such
Phase Down Notice, but in no event will Phase Down affect any calendar
year prior to the calendar year beginning January 1, 2009. The party
providing a Phase Down Notice shall state therein the Phase Down
quantity such party elects for any Phase Down year specified in such
Phase Down Notice. The timely delivery of the Phase Down Notice
specifying the Phase Down quantity is an essential term of this
Agreement.
ii. In order to effect the parties' intention that Phase Down of the
entire quantity hereunder could be completed in no less than 5 years
and that the Phase Down quantity in any year may never exceed the
quantity reduction that would occur in a 5 year uniform quantity Phase
Down, the parties agree that a Phase Down Basis Quantity will be the
basis for calculating the maximum Phase Down quantity in any year, as
set forth in Subparagraphs iii. and iv., below.
iii. As used herein, the "Phase Down Basis Quantity" will be the annual
average of the purchased Ethylene quantity hereunder (plus any quantity
Buyer may have been obligated to purchase but did not) for the 3
calendar years immediately preceding the first Phase Down year.
iv. As used herein, the "Phase Down Annual Minimum" will equal Buyer's
purchase obligation in the Phase Down period. In the first Phase Down
year the Phase Down Annual Minimum shall not be less than 83.33% of the
Phase Down Basis Quantity, and in any subsequent year, the reduction of
the Phase Down Annual Minimum for that year as compared to the previous
year may not exceed 16.67% of the Phase Down Basis Quantity. Subject to
Subparagraph 2(f) vii, the party exercising its right to reduce the
Ethylene quantity obligations under Paragraph 2(f) of this Agreement
may elect to reduce the Phase Down Annual Minimum by said 16.67% or any
lesser quantity. If a Reduction Event occurs during the Phase Down, the
Phase Down Annual Minimum for the year in which the Reduction Event
occurs and is continuing will be reduced by an amount equal to the
product of (A) the reduction in ethylene use attributable to the
3
<PAGE>
reduction in practical production capacity resulting from such Reduction
Event multiplied by (B) a fraction, the numerator of which is the Phase
Down Annual Minimum for such year without giving effect to reduction for
any Reduction Event and the denominator of which is the Phase Down Basis
Quantity. If all or any portion of the practical production capacity is
placed back in service, then, subject to Paragraph 2(c), the Phase Down
Annual Minimum will be increased by the same amount as it previously had
been reduced as a result of the reduction of such practical production
capacity. Any such changes will be prorated for the remainder of any year
in which such Reduction Event occurs.
v. As used herein, the "Phase Down Annual Maximum" will be, in each year,
115% of the Phase Down Annual Minimum for that year.
vi. Beginning with the first Phase Down year, the quantity obligations of the
parties will cease to be on a requirements basis for Buyer and on a 2,550
MM lbs. Annual Maximum basis (as may be reduced by a Reduction Event) for
Seller. Beginning with the first Phase Down year the quantity obligations
will apply in accordance with this Paragraph 2(f) in that the Annual
Minimum for any year will be the applicable Phase Down Annual Minimum and
the Annual Maximum for such year will be the applicable Phase Down Annual
Maximum.
vii. If one party has furnished the Phase Down Notice to the other, the other
party may elect to reduce the quantity in the affected year by a greater
amount, but not exceeding, in total reduction quantity, the upper limit
specified in Subparagraph 2(f) iv., provided that the election is made by
written notice at least 3 full calendar years prior to the affected Phase
Down year, or within 10 days after receipt of the Phase Down Notice,
whichever is later.
viii. There will be no automatic reduction of quantity unless the Phase Down
Notice for a given Phase Down year is provided at least 3 full calendar
years prior to such Phase Down year. Phase Down may be effected over any
number of years and this Agreement shall not be terminated in accordance
with Section 3 until the quantity is reduced to zero under the provisions
of this Paragraph 2(f).
An example of a Phase Down of the entire quantity in 5 consecutive years would
occur as follows:
Assuming a Phase Down Basis Quantity of 2,200 MM lbs.,
Phase Down Year Annual Minimum Annual Maximum
--------------- -------------- --------------
(MM lbs.) (MM lbs.)
1 1,833 2,108
2 1,467 1,687
3 1,100 1,265
4 733 844
5 367 422
6 0 0
(g) Audit of Books. Seller will have the right to have a third party
recognized national accounting firm audit Buyer's books and records for
any months hereunder for up to 2 years after such month, upon reasonable
prior nofice and during normal business hours, provided that the
designated auditor may not disclose to Seller the information examined in
the audit other than to corroborate compliance with the quantity
obligations hereunder according to the quantities of Ethylene ordered
hereunder as compared with requirements, growth of requirements and toll
quantities, in each case, for Buyer's U.S. Plants, and report the quantity
discrepancy and circumstances of any alternative supply or ethylene
feedstock consuming capacity or production changes for the relevant
period.
4
<PAGE>
3. TERM
The term of this Agreement (the "Term") will begin on the Effective Date and
will continue in effect until, and terminate on, such date as the Phase Down
Annual Minimum calculated as set forth in Paragraph 2(f) equals zero; it being
understood and agreed that in no event shall such Phase Down Annual Minimum
decline to zero prior to December 31, 2013.
4. PRICE
(a) Price Computation for Purchases Not Deemed Export Support. All purchases
will be priced in accordance with this Paragraph 4(a), unless expressly
excluded under Paragraph 4(b), below. Each month Seller shall invoice Buyer
and Buyer shall pay a preliminary price equal to the prior quarter's
Seller's Weighted Average Sales Price (deemed to be 18.75c/lb. for the first
quarter of 1998) adjusted by an amount equal to the change from the prior
quarter's average Publication Price vs. the invoice month's Publication
Price. Seller's Weighted Average Sales Price and the average Publication
Price for the second quarter of 1998 shall include only two months, May and
June. In the month following each calendar quarter, Seller shall adjust the
preliminary prices for that quarter to equal Seller's Weighted Average Sales
Price for that quarter. Seller shall furnish to Buyer an adjustment invoice
showing the total dollar charge or credit to Buyer for the entire quarter
resulting from the adjustments to arrive at a final price. An example of the
above pricing calculation is included as Exhibit B.
"Weighted Average Sales Price" means Seller's quantity weighted average net
ethylene final transaction price for sales to third parties for a calendar
quarter. Sales included in the averages include all contract and spot
transactions of Seller (including prices designated "export support" and
prices net of special concessions such as absorption by Seller of Superfund
or other governmental assessments on ethylene production where it is
contrary to industry practice for Seller to absorb such costs), whether
based on monthly negotiations, formula or publication reference pricing, or
whether based on the price equivalent of tolls to produce ethylene.
"Publication Price" means a derived price consisting of the sum of (i) 80%
of "large-buyer clearing price, pipeline delivered" for ethylene in the U.S.
Gulf Coast published in that month's Monthly Petrochemical and Plastics
Analysis, plus (ii) 20% of the "low spot price", published in the last issue
of the month of Monomers Market Report for ethylene in the U.S.
(b) Export Support Purchases. Fifteen percent of the purchased quantity of
Ethylene within each month, up to 25 MM lbs., will be priced at the lower of
a reference publication spot price, the "low spot price" (U.S.) in the
Monomers Market Report for the month of deliveries, or the above Paragraph
4(a) price. Buyer shall annually certify export quantifies by furnishing
reasonable supporting data to Seller.
(c) Audit of Books. Buyer will have the right to have a third party recognized
national accounting firm audit Seller's books and records for any months
hereunder for up to 2 years after any such month, upon reasonable prior
notice and during normal business hours, provided that the designated
auditor may not disclose to Buyer the information examined in the audit
other than to corroborate accuracy according to the price terms hereunder
and report the dollar sum of the discrepancy for any month in which any
discrepancy was found. If either of the published prices referenced in
Paragraph 4(a) cease being published or is no longer representative of U.S.
Gulf Coast contract or spot ethylene prices, as applicable, then the parties
shall designate an alternate reference price method to apply after the
redesignation.
5
<PAGE>
5. DELIVERY
(a) Method of Delivery. Seller shall deliver Ethylene or cause Ethylene to be
delivered to the Delivery Points. Except as expressly provided in this
Agreement, Ethylene will be delivered free and clear of pipeline
transportation or other delivery charges, which are for Seller's account.
(b) Seller's Access to Pipelines and Equipment. Buyer shall provide such
easements of access onto the premises of Buyer's U.S. Plants as shall enable
the Seller to operate and maintain its pipelines and metering equipment for
the delivery and measurement of Ethylene provided to the Buyer, in
accordance with Seller's normal pipeline operating and maintenance
procedures.
(c) Monthly Delivery Instructions. Five days prior to the first day of each
month, Buyer shall furnish to Seller in writing a good faith estimate of the
quantities of Ethylene to be delivered to each of Buyer's U.S. Plants during
each of the next three months and such instructions and estimates for the
month immediately following such notice shall be final and binding, subject
to commercially reasonable variations due to fluctuations in the ordinary
course of operation of Buyer's U.S. Plants. The parties shall cooperate
reasonably to distribute deliveries of Ethylene in approximately equal daily
quantities during each year taking into consideration, however, fluctuations
in daily demand due to maintenance, turnarounds, or otherwise occurring in
the ordinary course of business.
(d) Title and Risk of Loss. Title to and risk of loss of Ethylene delivered
hereunder shall pass to Buyer at the Delivery Point(s).
(e) Capital Improvement Cost. Seller and Buyer shall cooperate reasonably to
continue effective utilization of delivery logistics systems affected by
this Agreement, including, without limitation, the pipeline systems operated
by Seller to deliver Ethylene to Buyer. The obligation of reasonable
cooperation pursuant to this Paragraph includes reasonable capital
improvement costs allocated between Buyer and Seller in accordance with then
current industry practice.
(f) Toll Ethylene. Buyer shall deliver, or cause to have delivered, toll
ethylene into Seller's pipeline system of like quality to Ethylene supplied
hereunder, at the pressure required by Seller and without Seller incurring
any fees or charges to third parties.
6. QUANTITY MEASUREMENT AND QUALITY TESTING
(a) Determination of Quantity. Seller, Seller's agent or Seller's carrier, as
applicable, shall own, operate and maintain metering equipment at the
Delivery Point where quantities of Ethylene delivered to Buyer shall be
measured and its temperature and pressure recorded. The primary device for
each meter installation shall be a metering tube constructed in accordance
with the specifications recommended by ANSI/API Report 2530 and AGA3/API
14.3, as amended or supplemented from time to time. Sharp-edged orifice
plates shall be retained with a standard orifice fitting (senior type)
equipped with flange type pressure taps. The diameter of the orifice in the
plate shall be in standard one-eighth inch increments. The density of the
Ethylene shall be determined by calculation performed continuously using API
Report 2565 "Density of Ethylene". The flowing temperature and pressure
determined from Seller's meters will be used for the calculation of density.
The volume of Ethylene delivered at the Delivery Point for each day shall be
determined by reference to an on-site Daniels electronic micro-processor
which shall receive the electronic signals from the primary metering device
and calculate pounds of Ethylene through the orifice meter using the latest
version of AGA3/API 14.3, as amended or supplemented from time to time. A
day shall be deemed the period from 7:00 a.m. on one day to 7:00 a.m. on the
next succeeding day. Correction factors and calibrations from such meter
readings for the purpose of determining daily quantities of Product
delivered will conform with procedures set forth below. If the parties are
unable to agree upon the quantity delivered, quantities will be determined
by a mutually agreed upon inspector. The parties will be bound by the
inspector's determination and will equally bear inspection costs. Buyer
shall provide, at its
6
<PAGE>
sole cost, quantities of steam, electricity, nitrogen, and instrument air
required for the operation of the metering equipment.
(b) Temperature Corrections. All quantities of Ethylene will be corrected for
temperature to sixty degrees Fahrenheit (60(degrees)F) in accordance with
current methods which are set forth in American Petroleum Institute Routine
Catalog Number 852-25650 (Chapter 11.3.2.1) or other method mutually agreed
to by both parties.
(c) Calibration of Measuring Equipment. Seiler shall calibrate flow meters,
pressure recorders and temperature recorders at least once each month and at
such other times as the parties may mutually agree. Seller shall provide
reasonable notice to Buyer of the time of calibrations and Buyer shall have
the right to witness the calibrations. If following a calibration, any
metering equipment is found to be inaccurate by one half percent or more,
then the quantity of Ethylene previously delivered shall be retroactively
adjusted at the rate of such inaccuracy for any period of inaccuracy which
is definitely known, provided, however, that if such period is not
definitely known and if the parties cannot otherwise mutually agree upon a
period of time for such retroactive adjustment, then such adjustment shall
be for a period of one-half the number of days from the last previous
calibration.
(d) Measuring Equipment Out of Service. If for any reason the metering equipment
is out of service so that the quantity of Ethylene delivered to the Delivery
Point through such equipment cannot be ascertained, Seller shall notify
Buyer and the quantity of Ethylene delivered through such equipment during
such period shall be estimated and agreed upon by the parties upon the basis
of the best available data, using, in order of preference, the following
methods:
(i) The registration of any check measuring equipment of Buyer, if
installed and properly operating; or
(ii) Any measurement equipment which Seller may have in the flowing stream
of Ethylene, if agreed upon by Buyer.
(e) Determination of Quality. Samples taken on mutually agreed occasions and at
mutually agreed input sampling points shall be the basis for determining
compliance with specifications for the quality of Ethylene delivered
hereunder. Subject to the remaining provisions of this section, Seller's
laboratory analysis, conducted in accordance with the provisions of Exhibit
A, shall conclusively determine whether Ethylene specifications have been
met. Seller shall retain analytical data for at least 90 days. Seller shall
monitor the quality of Ethylene introduced into the delivery pipelines to
each of the Delivery Points. If abnormalities occur in the operation of
Buyer's U.S. Plants supplied hereunder or in plant operations downstream of
any other mutually agreed upon Delivery Points, Buyer may provide notice
requiring Seller, for a reasonable period of time, to take three
representative samples of Ethylene from the relevant sampling point each
day. Two of such samples shall be delivered to Buyer and one shall be
retained by Seller for analysis in accordance with the provisions of Exhibit
A. Buyer shall arrange for analysis of one of the samples in its custody in
accordance with the provisions of Exhibit A. Seller and Buyer shall promptly
advise each other of the results of their respective analyses. If Buyer
deems there to be a material difference in the parties' analysis of their
respective samples and if such difference cannot be reconciled within one
week of Buyer's notice thereof, the remaining sample shall be submitted to a
nationally recognized independent testing laboratory, agreeable to both
Buyer and Seller, for analysis in accordance with the provisions of Exhibit
A. The parties will be bound by the independent laboratory's determination
and will equally bear the cost of such independent analysis.
7
<PAGE>
7. PAYMENT AND CREDIT
Terms and Payment Default. Buyer shall pay Seller for Ethylene by wire transfer
into Seller's account, per Seller's instructions, net 20 days from last day of
the shipment month for purchases. Seller shall invoice promptly after the last
day of the month. Adjustment credits or debits shall be shown on the invoice
issued at the end of the month in which the adjustment was made net 10 days from
date of adjustment invoice. If Buyer fails to pay Seller in accordance with said
terms, Seller may either (i) suspend deliveries until all indebtedness is paid
in full, or (ii) place Buyer on a cash-in-advance status until arrangements are
made for security satisfactory to Seller or, at Seller's option, until all
indebtedness to Seller is paid in full. If Buyer, within 30 days of notice of
payment default, fails to make payment in full for all sums due and payable
which are not reasonably in dispute, Seller may terminate the Agreement
forthwith upon reasonable notice. All timely payments under this Agreement shall
be made without early payment discount. Any overdue balance owed shall accrue
daily interest charges at a rate equal to the greater of (i) 100% of the Bank
Rate (as in effect from time to time) calculated on the basis of a 360 day year
or (ii) the cost of borrowing of the non-defaulting party. If the invoice is
received after noon on one day, such invoice will be deemed received on the next
day. If the payment due date falls on a Saturday or a bank or federal holiday,
other than 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. Any preexisting obligation
of Buyer to make payment for Product delivered hereunder shall survive
termination of this Agreement.
8. TAXES
(a) Pass Through. Any taxes, excises, fees, duties or other charges, or any
increase therein, now or hereafter imposed directly or indirectly by law
upon Ethylene, components of Ethylene, or raw material from which Ethylene
is derived, sold or delivered to Buyer under this Agreement, or on the
production, manufacture, storage, sale, transportation or delivery thereof,
which Seller is required to pay or collect, (including, without limitation,
Superfund, gasoline blendstocks and additives excise taxes) and any
retroactive impositions thereof or adjustments thereto ("Tax or Taxes"),
shall be passed on to Buyer as an explicit surcharge and shall be paid by
Buyer to Seller in addition to the price (including any interest thereon for
which Seller is liable) whether included in the applicable invoice, or added
retroactively to the price, provided, that the pass-through of any such Tax
is in accordance with then prevailing industry practice. If Buyer furnishes
Seller with a timely and valid resale or other exemption certificate or
proof of export acceptable to Seller, sufficient to support an exemption
from any Tax, then such Tax will not be added to the price of Ethylene,
provided, however, if Seller is ever liable for such Tax on the sale of
Ethylene hereunder, Buyer will promptly reimburse Seller from such Tax,
including any interest, penalties and attorneys' fees related thereto
provided, that the pass-through of any such Tax is in accordance with then
prevailing industry practice. Tax collection will be applied and
administered in the same manner as for the other Ethylene customers of
Seller.
(b) Duty Drawback. Seller reserves its rights to claim U.S. Customs duty
drawback and Buyer acknowledges and consents to such reservation. The
parties shall cooperate so as to facilitate Seller's ability to promptly
claim and/or so that Buyer may promptly claim and collect, duty drawbacks.
If Buyer uses Ethylene sold hereunder in a U.S. manufacturing process,
Seller may provide Buyer Certificates of Manufacture and Delivery for such
Ethylene. Buyer shall file a duty drawback entry for the maximum quantity of
eligible Ethylene covered by the Certificates furnished to Buyer and
promptly remit to Seller 50% of all duty drawback proceeds net of any filing
fees, obtained by Buyer with respect to such Ethylene and its derivatives.
9. WARRANTIES
(a) Seller's Warranty. SELLER'S SOLE AND EXCLUSIVE WARRANTY IS THAT THE ETHYLENE
COMPLIES WITH THE PHYSICAL AND CHEMICAL SPECIFICATIONS SET FORTH IN EXHIBIT
A TO THIS
8
<PAGE>
AGREEMENT AND THAT SELLER SHALL CONVEY TITLE THERETO FREE OF ANY LIENS OR
ENCUMBRANCES. SELLER MAKES NO OTHER WARRANTIES, EITHER EXPRESS OR IMPLIED,
WHETHER WITH RESPECT TO ITS RECOMMENDATIONS, INSTRUCTIONS, OR OTHERWISE AND
SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES, WHETHER OF MERCHANTABILITY,
SUITABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE.
(b) Patents. Seller's recommendations or instructions are not intended to
suggest operations which would infringe any patents and Seller assumes no
liability to Buyer of any kind or responsibility for any such infringement.
(c) Uses and Safe Handling. Buyer hereby acknowledges receipt of Seller's
material safety data sheet with respect to Ethylene. Buyer shall maintain
prudent safe handling and use procedures. Buyer will apprise its employees,
contractors and customers of the hazards, proper use and handling
requirements of Ethylene and shall comply with all applicable statutes,
rules and regulations pertaining thereto.
10. CLAIMS
Buyer shall be deemed to have waived all claims with respect to any Ethylene
sold hereunder for which Buyer's notice of insufficient quality has not been
given to Seller in writing within 90 days of Buyer's receipt of such
Ethylene. Any such claim which is not asserted as a claim, counterclaim,
defense or set-off in a judicial proceeding instituted within 2 years after
the cause of action arises shall be forever waived, barred and released.
11. LIMITATION ON DAMAGES
(a) Limitation on Certain Buyer Remedies. Buyer's exclusive remedy and the sole
liability of Seller or any Affiliate of Seller for any shortfall in delivery
of Ethylene or failure of any Ethylene to meet the specifications in Exhibit
A, including but not limited to claims for breach of warranty, breach of
contract, negligence or strict liability, shall be limited at Seller's sole
option, to (i) payment to Buyer of the cover cost to replace such Ethylene,
or (ii) Seller's replacement of the Ethylene in respect of which a valid
claim is made.
(b) No Special Damages. In no event shall Seller or Buyer or any Affiliate of
either be liable for indirect, consequential, special, incidental,
contingent or punitive damages, costs of litigation or for loss of business
or business opportunities.
12. LIABILITY AND RESPONSIBILITY
(a) Buyer's Obligation. Subject to the further provisions of this Paragraph,
Buyer assumes full responsibility for any liability arising out of the
receipt, unloading, discharge, storage, handling, use and disposal of any
Ethylene purchased hereunder, including the use of such Ethylene alone or in
combination with other substances and compliance or non-compliance with any
law or regulations relating thereto. Buyer agrees to indemnify, protect,
defend and hold Seller and/or any of its Affiliates, agents, officers,
directors, employees and representatives (the "Seller Group") harmless from
and against any and all claims, actions, liability, loss, cost and expense
(including reasonable attorney's fees) for damages to any private or public
property or resources, personal injury or death, fines or penalties
("Loss"), made against or incurred by Seller Group relating to Ethylene sold
or the performance of either party hereunder, or by the agents, servants,
employees or contractors of either party, where such Loss was caused by acts
or omissions that occurred at the time of or subsequent to the delivery of
Ethylene to the Buyer hereunder, or arose in any way out of violations of
any federal, state or local statute or governmental rule or regulation by
Buyer or its agents, servants, employees or contractors. IT IS THE EXPRESS
INTENTION OF THE PARTIES THAT THE
9
<PAGE>
INDEMNITY PROVIDED FOR IN THIS PARAGRAPH SHALL REQUIRE BUYER TO DEFEND, HOLD
HARMLESS AND INDEMNIFY THE SELLER GROUP AS PROVIDED ABOVE EXCEPT TO THE
PROPORTIONATE EXTENT THAT THE ACTIONABLE NEGLIGENCE OF THE SELLER GROUP IS
THE SOLE OR A CONCURRING CAUSE OF THE LOSS ALLEGED. FOR APPLICATION OF THE
PROVISIONS OF THIS PARAGRAPH, THE EXTENT OF ANY SUCH NEGLIGENCE OF SELLER
GROUP SHALL BE DETERMINED EXCLUSIVELY IN A SEPARATE ARBITRATION PROCEEDING
REQUESTED BY BUYER AND IN ACCORDANCE WITH MUTUALLY AGREED ARBITRATOR(S),
RULES AND VENUE IN ACCORDANCE WITH THE PROVISIONS OF EXHIBIT C, HEREOF. SUCH
ARBITRATION AND THE RESULTING ALLOCATION OF NEGLIGENCE TO SELLER GROUP WILL
TAKE PLACE AFTER BUYER HAS DEFENDED SELLER GROUP AGAINST AND FINALLY
RESOLVED SUCH THIRD PARTY CLAIMS BY JUDGMENT OR SETTLEMENT.
(b) Seller's Obligation. Seller agrees to indemnify, protect, defend and hold
Buyer and/or any of its Affiliates, agents, officers, directors, employees
and representatives (the "Buyer Group") harmless from and against any and
all Loss made against or incurred by Buyer Group relating to Ethylene sold
or the performance of either party hereunder, or by the agents, servants,
employees or contractors of either party, where such Loss was caused by acts
or omissions that occurred prior to the delivery of Ethylene to the Buyer
hereunder, or arose in any way out of violations of any federal, state or
local statute or governmental rule or regulation by Seller or its agents,
servants, employees or contractors. IT IS THE EXPRESS INTENTION OF THE
PARTIES THAT THE INDEMNITY PROVIDED FOR IN THIS PARAGRAPH SHALL REQUIRE
SELLER TO INDEMNIFY THE BUYER GROUP EXCEPT TO THE PROPORTIONATE EXTENT THAT
THE ACTIONABLE NEGLIGENCE OF THE BUYER GROUP IS THE SOLE OR A CONCURRING
CAUSE OF THE LOSS ALLEGED. FOR APPLICATION OF THE PROVISIONS OF THIS
PARAGRAPH THE EXTENT OF SUCH NEGLIGENCE SHALL BE DETERMINED EXCLUSIVELY IN A
SEPARATE ARBITRATION PROCEEDING REQUESTED BY SELLER AND IN ACCORDANCE WITH
MUTUALLY AGREED ARBITRATOR(S), RULES AND VENUE IN ACCORDANCE WITH THE
PROVISIONS OF EXHIBIT C, HEREOF. ANY SUCH ARBITRATION AND THE RESULTING
ALLOCATION OF NEGLIGENCE WILL TAKE PLACE AFTER SELLER HAS DEFENDED BUYER
GROUP AGAINST AND FINALLY RESOLVED SUCH THIRD PARTY CLAIMS BY JUDGMENT OR
SETTLEMENT.
13. EXCUSE OF PERFORMANCE
(a) Performance Excused. Continued performance of any obligation (except payment
of money due), may be suspended immediately to the extent made impossible by
any event or condition beyond the reasonable control of the party suspending
such performance (except its inability to discharge obligations of a
financial nature), including without limitation (to the extent beyond such
control) acts of God, fire, labor or trade disturbance, war, civil
commotion, compliance in good faith with any applicable legal requirements
(whether or not it later proves to be invalid), unavailability of materials,
or other event or condition whether similar or dissimilar to the foregoing
(a "Force Majeure Event").
(b) Notice and Cure. The party claiming suspension due to a Force Majeure Event
will give prompt notice to the other of the occurrence of the Force Majeure
Event giving rise to the suspension and of its nature and anticipated
duration, and said party will use its best efforts to promptly cure the
cause of the suspension, it being understood, however, that labor disputes
shall be a continuing cause of suspension, and settlement of the same shall
be entirely within the discretion of the party experiencing such difficulty.
The parties shall cooperate with each other to find alternative means and
methods for the provision of the suspended Ethylene shipments or receipts,
as applicable.
(c) Recommencement of Performance. Upon termination of the Force Majeure Event,
performance will recommence.
(d) No Extension of Term. The term of this Agreement shall not be extended by
the duration of any Force Majeure Event.
(e) Right to Terminate. If the Force Majeure Event continues for a period in
excess of three years, the party not claiming suspension due to the Force
Majeure Event may elect to terminate this Agreement
10
<PAGE>
with respect to the Ethylene so suspended upon written notice to the party
claiming suspension, which termination will be effective ten days after
receipt of such notice unless the Force Majeure Event has ceased and the
Ethylene shipments and receipts have recommenced within such ten day period.
(f) Allocation. If caused by any of the above stated causes, or if caused by any
other unanticipated shortage not due to Seller's negligence or mismanagement
of its ethylene business, the quantity of Ethylene available at Seller's (or
Seller's supplier's) plant ordinarily producing Ethylene and deliverable to
the agreed upon delivery location for sale hereunder should be insufficient
to fulfill Seller's Ethylene volume commitments, Seller has the right and
obligation to allocate its available supply of Ethylene equitably among all
term contract customers of Seller and Seller's (and Seller's affiliates')
own requirements during the period of such shortage. In order to achieve an
equitable allocation result, Seller shall consider its customers' supply
alternatives and if the allocation is expected to cause greater hardship to
Buyer due to its dependence on Seller as a sole supplier, then Seller's
allocation arrangements will reflect Buyer's and other sole sourced
customers' greater need for Seller's Ethylene. During any such period of
allocation in which Buyer is unable to satisfy its requirements, Buyer may
purchase ethylene from another supplier to the extent necessary to satisfy
such requirements. If a Force Majeure Event that reduces Buyer's capability
to accept ethylene occurs during the Phase Down, Buyer shall allocate its
purchases of ethylene among all of its suppliers equitably.
14. ASSIGNMENT
(a) Assignment and Consent. This Agreement shall bind the respective successors
and assigns of the parties hereto, provided however, that neither party may
assign or otherwise transfer or delegate its rights or obligations hereunder
to a third party without the prior written consent of the other party
hereto; provided further, that no such consent shall be required for
assignment to an Affiliate or for assignment to a successor to the business
in the case of transfer of all of Buyer's U.S. Plants or all of Seller's
ethylene production facilities in a single transaction, so long as such
assignee executes a written assumption of such party's obligations hereunder
with respect to the rights or obligations assigned in a form reasonably
satisfactory to the other party and delivers such written assumption to the
other party within a reasonable period of time after the effective date of
such assignment. Buyer represents that it shall assign all of its rights and
obligations under this Agreement only to a transferee of all of Buyer's U.S.
Plants in a single transaction. Any permitted assignment shall not relieve
the assignor of its obligations hereunder. Any attempted assignment without
such consent as may be required by this provision shall be void.
(b) Transfer of Buyer's Plants. The parties acknowledge and agree that this
Agreement is integral to the operation of Buyer's U.S. Plants and therefore
in the event that Buyer shall sell, transfer, pledge, hypothecate or assign
("Transfer") any of Buyer's U.S. Plants to be supplied Ethylene in
accordance with this Agreement to any person ("Assignee") Buyer shall give
written notice to Seller of such Transfer and the identity of the proposed
Assignee as soon as the intended Transfer becomes known to Buyer, however in
no event less than 30 days prior to the date such Transfer becomes
effective. In connection with such Transfer, Buyer shall (i) assign the
rights and obligations of Buyer pursuant to this Agreement with respect to
such transferred Buyer's U.S. Plant(s) to the Assignee, and (ii) cause
Assignee to accept such assignment as if such Assignee was a party to this
Agreement as of the Effective Date, unless Seller shall provide Buyer
(within 10 business days after receiving notice pursuant to the previous
sentence) with written notice that it will not consent to such assignment,
in which event (i) Buyer may elect to proceed with the Transfer but without
assigning the rights and obligations of the Buyer pursuant to this Agreement
with respect to such of Buyer's U.S. Plants as are the subject of the
Transfer and (ii) if Buyer shall elect to proceed with such Transfer the
ethylene feedstock requirements of such of Buyer's U.S. Plants as are the
subject of the Transfer shall be removed from this Agreement.
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<PAGE>
(c) Liquidated Damages. If Buyer fails to fulfill its obligations stated in
Paragraphs 14(a) or 14(b) to assign this Agreement (or a portion thereof)
to the transferee or successor to any or all of Buyer's U.S. Plants and to
cause such transferee or successor to accept such assignment and assume such
transferee's or successor's obligations under this Agreement, Buyer shall
pay Seller, as liquidated damages, and not as a penalty, for such failure,
4c/lb. multiplied by three multiplied by the three year average of the
quantity of Ethylene purchases, during the 36 month period preceding
Transfer, at Buyer's U.S. Plant(s) which were transferred. The parties agree
that the damages incurred by Seller from Buyer's failure to assign this
Agreement (or a portion thereof) are substantial but difficult to measure
and have therefore agreed upon this amount as a fair statement of damages
continuing for three years.
(d) Financial Responsibility for Transferee. With respect to the Ethylene
deliveries to be made to any of Buyer's U.S. Plants that are not owned by an
Affiliate of a partner in Seller, if, at any time, in the sole opinion of
Seller, the financial responsibility of the owner of such plant is impaired
or unsatisfactory, Seller shall have the right to restrict or suspend
Ethylene deliveries to such plant unless (i) such owner pays on a cash-in-
advance of delivery basis, (ii) such owner delivers to Seller a letter of
credit, in form and substance acceptable to Seller and from a financial
institution acceptable to Seller, or (iii) such owner and Seller agree upon
other arrangements to secure future deliveries of Ethylene to such plant.
15. MISCELLANEOUS
(a) Notices. Any notice required or permitted to be given pursuant to this
Agreement shall be in writing and shall be sufficiently given when duly
mailed, postage prepaid, and addressed as follows (or to such other address
or facsimile number as either party shall have specified by notice in
writing to the other party) or personally delivered or transmitted
electronically.
If to Buyer: Occidental Chemical Corporation
5005 LBJ Freeway
Dallas, Texas 75244
Attention: Director, Purchasing
Facsimile: (972) 404-3565
If to Seller: Equistar Chemicals, LP
One Houston Center
1221 McKinney, Suite 1600
Houston, Texas 77010
Attention: Roger Crose, Vice President,
Olefins Business Management
Facsimile: (713) 652-7383
(b) Jurisdiction; Dispute Resolution. THE PARTIES HERETO AGREE THAT ALL OF THE
PROVISIONS OF THIS AGREEMENT AND ANY QUESTIONS CONCERNING ITS
INTERPRETATION AND ENFORCEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF TEXAS AND THE EXECUTION AND DELIVERY OF THIS AGREEMENT SHALL BE
DEEMED TO BE THE TRANSACTION OF BUSINESS WITHIN THE STATE OF TEXAS FOR
PURPOSES OF CONFERRING JURISDICTION UPON COURTS LOCATED WITHIN THE STATE.
THE PARTIES AGREE THAT ANY LITIGATION ARISING OUT OF THIS AGREEMENT SHALL BE
BROUGHT ONLY IN THE FEDERAL OR STATE COURTS IN THE STATE OF TEXAS AND BOTH
PARTIES CONSENT TO THE JURISDICTION OF SAID COURTS. ALL DISPUTES UNDER THIS
AGREEMENT SHALL BE RESOLVED IN ACCORDANCE WITH THE "DISPUTE RESOLUTION
PROCEDURES" SET FORTH IN EXHIBIT C OF THIS AGREEMENT.
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<PAGE>
(c) Confidentiality. Each of the parties hereto shall, and shall cause their
respective employees, agents and other representatives to, hold in strict
confidence and not utilize for any commercial or other purpose or disclose
to any other person, except with the prior written consent of the other
party hereto, which consent shall not be unreasonably withheld, any of the
terms and provisions of Section 2 - Quantity, Section 3 - Term, or Section
4 - Price, of this Agreement; provided, however, that the foregoing
obligation of confidentiality shall not apply to (i) any such information
that is or shall become generally available to the public other than as a
result of a disclosure by or on behalf of such party, (ii) any such
information that was available to a party on a non-confidential basis prior
to the Effective Date of this Agreement, (iii) any such information that
comes into a party's possession after the Effective Date of this Agreement
from a third party not under any obligation of confidentiality with respect
to such information, (iv) any such information disclosed to a third party
who has undertaken a written obligation of confidentiality with respect to
such information that is substantially the same as the obligation of
confidentiality contained in this section, or (v) any information that shall
be required to be disclosed by or on behalf of a party as a result of any
applicable law, rule or regulation of any governmental authority having
competent jurisdiction, provided that such party shall give the other party
30 day's prior written notice before making any such disclosure in
accordance with the provisions of this clause.
(d) Amendment. Neither party shall be bound by any change in, addition to or
waiver of any of the provisions hereof unless approved in writing by its
authorized representative.
(e) Waiver. Any waiver of any particular breach or default of this Agreement
shall be in writing and shall not constitute a continuing waiver or a waiver
of any other breach or default. The failure of either party to require
performance of any provision of this Agreement shall not affect either
party's right to full performance thereof at any time thereafter.
(f) Headings. Section headings or titles are included for ease of reference and
do not constitute any part of the text or affect its meaning or
interpretation.
(g) Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which shall be
deemed to be one and the same instrument.
(h) Provisions of this Agreement to Control. With regard to Ethylene sales and
exchanges, the provisions of this Agreement shall supersede any inconsistent
provisions of the Asset Contribution Agreement and any other agreements
between the parties entered into to undertake the transaction to be
consummated thereunder.
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IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement, as of the
date first written above.
EQUISTAR CHEMICALS, LP OCCIDENTAL CHEMICAL CORPORATION
(SELLER) (BUYER)
By: /s/ Eugene R. Allspach By: /s/ R J Schuh
-------------------------- --------------------------
Print Name: Eugene R. Allspach Print Name: R J Schuh
------------------ ------------------
Title: President and Chief Title: Executive Vice President
Operating Officer ------------------------
-----------------------
(Signature Page of Sales Agreement - Ethylene]
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<PAGE>
Schedule 1
Buyer's U.S. Plants
<TABLE>
<CAPTION>
Current Practical Approximate Ethylene
Production Requirements at Current
Capacity Practical Production Actual Ethylene
[for plant product] Capacity Utilization in 1997
Location of Facility (mm lbs/yr) (mm lbs/yr) (mm lbs)
--------------------- ------------------- ---------------------- -------------------
<S> <C> <C> <C>
Ingleside, TX (OxyMar) 2,100.0 972.0 785.6
Deer Park, TX 1,200.0 552.0 576.6
Convent, LA* 1,500.0 421.0 310.4
Ingleside, TX 1,500.0 427.0 203.6
NGO**, Baytown, TX 7.0 3.5 3.3
Tolls which are treated as Buyer's ethylene requirements, not within the Paragraph 2(e) toll exception:
Dow (EDC) 28.7
UCC (VAM) 12.0
DP (AO) 0.9
Ashtabula 0.7
</TABLE>
*Includes UCC and Westlake tolls, quantity at 47.0 MM lbs. and 79.1 MM lbs.
respectively. Tolls of this nature where ethylene is supplied by a third party
and product is received by the same party are considered tolls as defined in
Paragraph 2(e).
**Natural Gas Odorizing, Inc.
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<PAGE>
EXHIBIT A
Ethylene Specifications (1) (2) (3)
Equistar/Occidental Sales Contract
<TABLE>
<CAPTION>
Property Specification Test Method
-------- ------------- ------------
<S> <C> <C>
Ethylene (vol. %) 99.90 min. ASTM D2505
Methane + ethane (mole ppm) 1000 max ASTM D2505
Propylene and heavier (ppm by vol.) 100 max LYON 5605
(typically 10 ppm max)
Carbon monoxide (mole ppm) 5 max ASTM D 2504
Carbon dioxide (mole ppm) 5 max ASTM D 2505
Sulfur (ppm by weight) 2 max ASTM D 3246
Water (mole ppm) 5 max LYON 5422
Acetylene (mole ppm) 4 max ASTM D 2505
Oxygen (mole ppm) 5 max ASTM D 2504
Hydrogen (mole ppm) 5 max ASTM D 2504
Methanol (ppm by weight) 1 max LYON 5881
Ammonia (mole ppm) 2 max NMS 103 5234
(typically 1 ppm max)
- --------------------------------------------------------------------------------------
</TABLE>
1. Seller shall use commercially reasonable efforts to ensure that throughout
the Term its own manufactured ethylene delivered to the Delivery Points and
ethylene manufactured by third parties and delivered to the Delivery Points is
typically at least as good in all parameters affecting EDC and VCM processing at
the Buyer's U.S. Plants as such ethylene which has been delivered to Buyer's
U.S. Plants in 1998, prior to the Effective Date hereof including, without
limitation, a specification of not less than 2 PPM CO\2\ on the South Texas
Ethylene Pipeline System.
2. Buyer shall use commercially reasonable efforts to ensure that throughout the
Term toll supplied ethylene delivered into the Seller's ethylene pipeline system
is typically at least as good in all parameters as ethylene manufactured by
Buyer as of the Effective Date of this Agreement.
3. Buyer and Seller shall cooperate in good faith with respect to the
identification and implementation of activities to improve the quality of
Ethylene delivered to the Delivery Points, provided that any costs associated
with improving ethylene quality shall be borne by the Buyer, unless and to the
extent that such improvements are demonstrably for the benefit of Seller.
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<PAGE>
Exhibit B
Example Price Calculations for Ethylene Invoicing
and Quarterly Price Adjustment
Hypothetical Starting Price: Seller's Average Ethylene Transaction Price for 4Q
at 23.00 cents/lb.
Hypothetical Industry Price Estimates
Preliminary Price Adjustment Factor = monthly Publication Price less the prior
quarter's Average Publication Price
<TABLE>
<CAPTION>
80/20 Price Preliminary Price
CDI Large Buyer Price CMAI Spot Low (Publication Price) Adjustment Factor
--------------------- ------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Oct 25.00 21.00 24.20
Nov 24.00 20.00 23.20
Dec 23.00 19.00 22.20
Fourth Quarter Average Publication Price = 23.20
Jan 22.00 17.00 21.00 (2.20)
Feb 21.00 16.00 20.00 (3.20)
Mar 21.00 17.00 20.20 (3.00)
</TABLE>
<TABLE>
<CAPTION>
Calculation of Hypothetical Monthly Invoice Prices (Preliminary Prices)
= Previous Quarter Seller Average Transaction Price + Preliminary Price Adjustment Factor
<S> <C> <C>
Jan Price = 23.0 - 2.2 = 20.80 cents/lb.
Feb Price = 23.0 - 3.2 = 19.80 cents/lb.
Mar Price = 23.0 - 3.0 = 20.00 cents/lb.
</TABLE>
At the end of each calendar quarter, the above Preliminary Prices will be
adjusted to Seller's Weighted Average Sales Price* for that quarter (which is
20.10 c/lb. for the 1st Quarter in this example), resulting in an adjusted
invoice amount, as shown below:
Calculation of Hypothetical First Quarter Final Price Adjustment
<TABLE>
<CAPTION>
Purchase Seller's Weighted Adjustment
Quantity MM lbs. Invoice Price Average Sales Price cents/lb. $
--------------- ------------- ------------------- --------- -
<S> <C> <C> <C> <C> <C>
Jan 200.00 20.80 20.10 (0.70) $(1,400,000.00)
Feb 180.00 19.80 20.10 0.30 S 540,000.00
Mar 190.00 20.00 20.10 0.10 $ 190,000.00
Total Adjustment $ (670,000.00)
</TABLE>
*Note that Seller's monthly prices and sales quantities used to calculate the
Weighted Average Sales Price will not be disclosed to Buyer.
Hypothetical Result:
1. Buyer would receive $670,000 credit in April for Ethylene Purchases in the
first quarter (January through March)
2. The starting point for the second quarter Preliminary Prices would be
Seller's Weighted Average Sales Price for the first quarter, in this case
20.1 cents/lb. This would be adjusted for April, May and June based on the
change in the Publication Price versus the first quarter's average
Publication Price, in this case 20.40 cents/lb. If April's Publication Price
were 20.00 cents/lb. Then April's Invoice price would therefore be 19.70
cents/lb.
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<PAGE>
Exhibit C
Dispute Resolution Procedures
(1) Binding and Exclusive Means. The dispute resolution provisions set forth
in this Exhibit C shall be the binding and exclusive means to resolve all
disputes arising under this Agreement (each a "Dispute").
(2) Standards and Criteria. In resolving any Dispute, the standards and
criteria for resolving such Dispute shall, unless the parties in their
discretion jointly stipulate otherwise, be as set forth in Exhibit 1 to this
Appendix C.
(3) ADR and Binding Arbitration Procedures. If a Dispute arises, the
following procedures shall be implemented:
(a) Any party may at any time invoke the dispute resolution procedures set
forth in this Exhibit C as to any Dispute by providing written notice of such
action to the other party, who within five Business Days after such notice shall
schedule a meeting to be held in Houston, Texas between the parties. The meeting
shall occur within 10 Business Days after notice of the meeting is delivered to
the other party. The meeting shall be attended by representatives of each party
having decision-making authority regarding the Dispute as well as the dispute
resolution process and who shall attempt in a commercially reasonable manner to
negotiate a resolution of the Dispute.
(b) The representatives of the parties shall cooperate in a commercially
reasonable manner and shall explore whether techniques such as mediation,
minitrials, mock trials or other techniques of alternative dispute resolution
might be useful. In the event that a technique of alternative dispute resolution
is so agreed upon, a specific timetable and completion date for its
implementation shall also be agreed, upon. The representatives will continue to
meet and discuss settlement until the date (the "Interim Decision Date") that is
the earliest to occur of the following events: (i) an agreement shall be reached
by the parties resolving the Dispute; (ii) one of the parties shall determine
and notify the other party in writing that no agreement resolving the Dispute is
likely to be reached; (iii) if a technique of alternative dispute resolution is
agreed upon, the completion date therefor shall occur without the parties having
resolved the Dispute; or (iv) if another technique of alternative dispute
resolution is not agreed upon, two full meeting days (or such other time period
as may be agreed upon) shall expire without the parties having resolved the
Dispute.
(c) If, as of the Interim Decision Date, the parties have not succeeded in
negotiating a resolution of the dispute pursuant to subsection (b), the parties
shall proceed under subsections (d), (e) and (f).
(d) After satisfying the requirements above, such Dispute shall be submitted
to mandatory and binding arbitration at the election of any party involved in
the Dispute (the "Disputing Party"). The arbitration shall be subject to the
Federal Arbitration Act as supplemented by the conditions set forth in this
Appendix. The arbitration shall be conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in effect on the date
the notice of arbitration is served, other than as specifically modified herein.
In the absence of an agreement to the contrary, the arbitration shall be held in
Houston, Texas. The Arbitrator (as defined below) will allow reasonable
discovery in the forms permitted by the Federal Rules of Civil Procedure, to the
extent consistent with the purpose of the arbitration. During the pendency of
the Dispute, each party shall make available to the Arbitrator and the other
party all books, records and other information within its control requested by
the other party or the Arbitrator subject to the confidentiality provisions
contained herein, and provided that no such access shall waive or preclude any
objection to such production based on any privilege recognized by law.
Recognizing the express desire of the parties for an expeditious means of
dispute resolution, the Arbitrator may limit the scope of discovery between the
parties as may be reasonable under the circumstances. In deciding the substance
of the parties' claims, the laws of the State of Texas shall govern the
construction, interpretation and effect of this Agreement (including this
Appendix) without giving effect to any conflict of law principles. The
arbitration hearing shall be commenced promptly and conducted expeditiously,
with each party involved in the Dispute being allocated an equal amount of time
for the presentation of its case. Unless otherwise agreed to by the parties, the
arbitration hearing shall be
18
<PAGE>
conducted on consecutive days. Time is of the essence in the arbitration
proceeding, and the Arbitrator shall have the right and authority to issue
monetary sanctions against any of the parties if, upon a showing of good cause,
that party is unreasonably delaying the proceeding. To the fullest extent
permitted by law, the arbitration proceedings and award shall be maintained in
confidence by the Arbitrator and the parties.
(e) The Disputing Party shall notify the American Arbitration Association
("AAA") and the other party involved in the Dispute in writing describing in
reasonable detail the nature of the Dispute (the "Dispute Notice"). The
arbitrator (the "Arbitrator") shall be selected within 15 days of the date of
the Dispute Notice by all of the parties from the members of a panel of
arbitrators of the AAA or, if the AAA fails or refuses to provide a list of
potential arbitrators, of the Center for Public Resources and shall be
experienced in commercial arbitration. In the event that the parties are unable
to agree on the selection of the Arbitrator, the AAA shall select the
Arbitrator, using the criteria set forth in this Appendix, within 30 days of the
date of the Dispute Notice. In the event that the Arbitrator is unable to serve,
his or her replacement will be selected in the same manner as the Arbitrator to
be replaced. The Arbitrator shall be neutral. The Arbitrator shall have the
authority to assess the costs and expenses of the arbitration proceeding
(including the arbitrators', and attorneys' fees and expenses) against any or
all parties.
(f) The Arbitrator shall decide all Disputes and all substantive and
procedural issues related thereto, and shall enforce this Agreement in
accordance with its terms. Without limiting the generality of the previous
sentence, the Arbitrator shall have the authority to issue injunctive relief;
however, the Arbitrator shall not have any power or authority to (i) award
consequential, incidental, indirect or punitive damages or (ii) amend this
Agreement. The Arbitrator shall render the arbitration award, in writing, within
20 days followiing the completion of the arbitration hearing, and shall set
forth the reasons for the award. In the event that the Arbitrator awards
monetary damages in favor of any party, the Arbitrator must certify in the award
that no indirect, consequential, incidental, indirect or punitive damages are
included in such award. If the Arbitrator's decision results in a monetary
award, the interest to be granted on such award, if any, and the rate of such
interest shall be determined by the Arbitrator in his or her discretion. The
arbitration award shall be final and binding on the parties, and judgment
thereon may be entered in any court of competent jurisdiction, and may not be
appealed except to the extent permitted by the Federal Arbitration Act.
(4) Continuation of Business. Notwithstanding the existence of any Dispute
or the pendency of any procedures pursuant to this Exhibit C, the parties agree
and undertake that all payments not in dispute shall continue to be made and all
obligations not in dispute shall continue to be performed.
19
<PAGE>
APPENDIX 1 TO EXHIBIT C
(a) First priority shall be given to maximizing the consistency of the
resolution of the Dispute with the satisfaction of all express obligations of
the parties and their Affiliates as set forth in the Agreement.
(b) Second priority shall be given to resolution of the Dispute in a manner
which best achieves the objectives of the business activities and arrangements
under the Agreement and permits the parties to realize the benefits intended to
be afforded thereby.
(c) Third priority shall be given to such other matters, if any, as the
parties or the Arbitrator shall determine to be appropriate under the
circumstances.
20
<PAGE>
EXHIBIT 11
EQUISTAR CHEMICALS, LP
STATEMENT SETTING FORTH DETAIL FOR COMPUTATION OF
RATIO OF EARNINGS TO FIXED CHARGES - UNAUDITED
(Millions of Dollars)
One Month Year Year
Ended Ended Ended
December 31, December 31, December 31,
1997 1998 1998
(historical) (historical) (pro forma)
____________ ____________ _________
Income from operations before income
taxes $ 7 $143 $154
Fixed charges:
Interest expense, gross $10 $156 $186
Portion of rentals repre-
sentative of interest $ 4 $ 37 $ 38
___________ ___________ _________
Total fixed charges $14 $193 $224
___________ ___________ _________
Earnings $21 $336 $378
Ratio of earnings to fixed charges 1.5 1.7 1.7
<PAGE>
EQUISTAR CHEMICALS, LP
STATEMENT SETTING FORTH DETAIL FOR COMPUTATION OF
RATIO OF EARNINGS TO FIXED CHARGES - UNAUDITED
LYONDELL CONTRIBUTED BUSINESS
(Millions of Dollars)
Eleven
Months Ended Year Ended
November 30, December 31,
___________ ____________________
1997 1996 1995 1994
___________ ____ ____ ____
Historical Information
Income from operations before
income taxes $ 219 $ 102 $ 277 $ 137
Fixed charges:
Interest expense, gross $ 50 $ 65 $ 76 $ 73
Portion of rentals repre-
sentative of interest $ 14 $ 15 $ 13 $ 10
Total fixed charges $ 64 $ 80 $ 89 $ 83
Earnings $ 283 $ 182 $ 366 $ 220
Ratio of earnings to fixed charges 4.4 2.3 4.1 2.7
<PAGE>
EQUISTAR CHEMICALS, LP
STATEMENT SETTING FORTH DETAIL FOR COMPUTATION OF
RATIO OF EARNINGS TO FIXED CHARGES - UNAUDITED
MILLENNIUM CONTRIBUTED BUSINESS
(Millions of Dollars)
Eleven
Months Ended Year Ended
November 30, December 31,
___________ ____________________
1997 1996 1995 1994
___________ ____ ____ ____
Historical Information
Income from operations before
income taxes $ 147 $ 92 $ 243 $ 68
Fixed charges:
Interest expense, gross $ 66 $ 80 $ 80 $ 80
Portion of rentals repre-
sentative of interest $ 13 $ 15 $ 14 $ 13
Total fixed charges $ 79 $ 95 $ 94 $ 93
Earnings $ 226 $ 187 $ 337 $ 161
Ratio of earnings to fixed charges 2.9 2.0 3.6 1.7
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF
EQUISTAR CHEMICALS, LP/(1)/
Name of Subsidiary Jurisdiction of Formation
- ------------------------------------- -------------------------
Equistar Chemicals de Mexico, Inc..... Delaware
Equistar Mont Belvieu Corporation..... Delaware
Equistar Transportation Company....... Delaware
Quantum Pipeline Company.............. Illinois
Equistar FSC, Inc..................... Barbados
Equistar Funding, LLC................. Delaware
Equistar Funding Corporation/(1)/..... Delaware
PD Glycol/(2)/........................ Texas
- ---------------------
/(1)/ Equistar Funding Corporation is a wholly owned subsidiary of Equistar
Chemicals, LP and has no subsidiaries.
/(2)/ PD Glycol is a Texas limited partnership owned 50% by Equistar Chemicals,
LP.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Dallas, Texas
April 9, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Equistar Chemicals, LP, of (1) our
report dated February 26, 1999 relating to the financial statements of Equistar
Chemicals, LP at December 31, 1998 and 1997, for the year ended December 31,
1998 and for the period December 1, 1997 (inception) to December 31, 1997; (2)
our report dated July 7, 1998 relating to the contributed petrochemicals and
polymers business of Lyondell Petrochemical Company at November 30, 1997 and
December 31, 1996, for the eleven month period ended November 30, 1997 and for
each of the two years in the period ended December 31, 1996; and (3) our report
dated July 9, 1998 relating to the contributed business of Millennium Chemicals,
Inc. at November 30, 1997 and December 31, 1996, for the eleven month period
ended November 30, 1997 and for each of the two years in the period ended
December 31, 1996 which appear in such Prospectus.
We also consent to the references to us under the headings "Experts", "Selected
Pro Forma and Historical Financial and Operating Data of Equistar", "Selected
Pro Forma and Historical Financial and Operating Data of the Lyondell
Contributed Business" and "Selected Pro Forma and Historical Financial and
Operating Data of the Millennium Contributed Business" in such Prospectus.
However, it should be noted that PricewaterhouseCoopers LLP has not prepared or
certified such "Selected Historical Financial and Operating Data."
PricewaterhouseCoopers LLP
Houston, Texas
April 16, 1999
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
WHEREAS, Equistar Chemicals, LP, a Delaware limited partnership (the
"Partnership") intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act"), a Registration Statement on Form S-4, including a prospectus, with such
amendment or amendments thereto, whether pre-effective or post-effective, in
each case as may be necessary or appropriate, together with any and all exhibits
and other documents having relation to said Registration Statement
(collectively, the "Registration Statement"), in connection with the
Partnership's proposal to offer to exchange up to $900,000 aggregate principal
amount of notes registered under the Act for a like aggregate principal amount
of outstanding notes;
NOW, THEREFORE, each of the undersigned, in his or her capacity as an
officer of the Partnership does hereby appoint Kelvin R. Collard and Gerald A.
O'Brien, and each of them, each of whom may act without the joinder of the
others, as his or her true and lawful attorneys-in-fact and agents with power to
act and with full power of substitution and resubstitution, to execute in his or
her name, place and stead, in his or her capacity as an officer of the
Partnership, the Registration Statement, and all instruments necessary or
incidental in connection therewith, with such amendment or amendments thereto in
each case as said attorneys-in-fact and agents or any of them shall deem
necessary or appropriate, together with any and all exhibits and other documents
relating thereto as said attorneys-in-fact and agents or any of them shall deem
necessary or appropriate or incidental in connection therewith, and to file the
same or cause the same to be filed with the Commission. Said attorneys-in-fact
and agents shall have full power and authority to do and perform in the name and
on behalf of each of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable to be done to the premises, as fully and to
all intents and purposes as each of the undersigned might or could do in person,
each of the undersigned hereby ratifying and approving the acts of said
attorneys-in-fact and agents or any of them or their substitutes.
IN WITNESS WHEREOF, each of the undersigned has executed this instrument on
this 9th day of April, 1999.
/s/ Dan F. Smith
-------------------------------
Name: Dan F. Smith
Title: Chief Executive Officer
/s/ Kelvin R. Collard
--------------------------------
Name: Kelvin R. Collard
Title: Vice President and Controller
<PAGE>
EXHIBIT 24.2
POWER OF ATTORNEY
WHEREAS, Equistar Funding Corporation, a Delaware corporation (the
"Company") intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), a
Registration Statement on Form S-4, including a prospectus, with such amendment
or amendments thereto, whether pre-effective or post-effective, in each case as
may be necessary or appropriate, together with any and all exhibits and other
documents having relation to said Registration Statement (collectively, the
"Registration Statement"), in connection with the Partnership's proposal to
offer to exchange up to $900,000 aggregate principal amount of notes registered
under the Act for a like aggregate principal amount of outstanding notes;
NOW, THEREFORE, each of the undersigned, in his or her capacity as a
director or officer, or both, as the case may be, of the Company, does hereby
appoint Kelvin R. Collard and Gerald A. O'Brien, and each of them, each of whom
may act without the joinder of the others, as his or her true and lawful
attorneys-in-fact and agents with power to act and with full power of
substitution and resubstitution, to execute in his or her name, place and stead,
in his or her capacity as a director or officer or both, as the case may be, of
the Company, the Registration Statement, and all instruments necessary or
incidental in connection therewith, with such amendment or amendments thereto in
each case as said attorneys-in-fact and agents or any of them shall deem
necessary or appropriate, together with any and all exhibits and other documents
relating thereto as said attorneys-in-fact and agents or any of them shall deem
necessary or appropriate or incidental in connection therewith, and to file the
same or cause the same to be filed with the Commission. Said attorneys-in-fact
and agents shall have full power and authority to do and perform in the name and
on behalf of each of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable to be done to the premises, as fully and to
all intents and purposes as each of the undersigned might or could do in person,
each of the undersigned hereby ratifying and approving the acts of said
attorneys-in-fact and agents or any of them or their substitutes.
IN WITNESS WHEREOF, each of the undersigned has executed this instrument on
this 9th day of April, 1999.
Name
----
/s/ Dan F. Smith
- ------------------------------------------------
Dan F. Smith
Chief Executive Officer and Director
/s/ Kelvin R. Collard
- -------------------------------------------------
Kelvin R. Collard
Vice President and Controller and Director
/s/ Eugene R. Allspach
- -------------------------------------------------
Eugene R. Allspach
President and Chief Operating Officer
and Director
<PAGE>
EXHIBIT 24.3
POWER OF ATTORNEY
WHEREAS, Lyondell Petrochemical G.P. Inc., a Delaware corporation (the
"General Partner"), is a general partner of Equistar Chemicals, LP, a Delaware
limited partnership (the "Partnership"); and
WHEREAS, the Partnership intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act"), a Registration Statement on Form S-4, including a prospectus, with such
amendment or amendments thereto, whether pre-effective or post-effective, in
each case as may be necessary or appropriate, together with any and all exhibits
and other documents having relation to said Registration Statement
(collectively, the "Registration Statement"), in connection with the
Partnership's proposal to offer to exchange up to $900,000 aggregate principal
amount of notes registered under the Act for a like aggregate principal amount
of outstanding notes;
NOW, THEREFORE, each of the undersigned, in his or her capacity as a
director or officer, or both, as the case may be, of the General Partner, does
hereby appoint Dan F. Smith, Jeffrey R. Pendergraft and T. Kevin DeNicola, and
each of them, each of whom may act without the joinder of the others, as his or
her true and lawful attorneys-in-fact and agents with power to act and with full
power of substitution and resubstitution, to execute in his or her name, place
and stead, in his or her capacity as a director or officer or both, as the case
may be, of the General Partner, the Registration Statement, and all instruments
necessary or incidental in connection therewith, with such amendment or
amendments thereto in each case as said attorneys-in-fact and agents or any of
them shall deem necessary or appropriate, together with any and all exhibits and
other documents relating thereto as said attorneys-in-fact and agents or any of
them shall deem necessary or appropriate or incidental in connection therewith,
and to file the same or cause the same to be filed with the Commission. Said
attorneys-in-fact and agents shall have full power and authority to do and
perform in the name and on behalf of each of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable to be done to the
premises, as fully and to all intents and purposes as each of the undersigned
might or could do in person, each of the undersigned hereby ratifying and
approving the acts of said attorneys-in-fact and agents or any of them or their
substitutes.
IN WITNESS WHEREOF, each of the undersigned has executed this instrument on
this 9th day of April, 1999.
/s/ Dan F. Smith
-------------------------------------
Name: Dan F. Smith
Title: President, Chief Executive Officer
and Director
/s/ Jeffrey R. Pendergraft
-------------------------------------
Name: Jeffrey R. Pendergraft
Title: Executive Vice President
and Director
/s/ T. Kevin DeNicola
-------------------------------------
Name: T. Kevin DeNicola
Title: Executive Vice President
and Director
<PAGE>
EXHIBIT 24.4
POWER OF ATTORNEY
WHEREAS, Millennium Petrochemicals Inc., a Virginia corporation (the
"Manager"), is the sole member and the manager of Millennium Petrochemicals GP
LLC, a Delaware limited liability company (the "General Partner"), which is a
general partner of Equistar Chemicals, LP, a Delaware limited partnership (the
"Partnership"); and
WHEREAS, the Partnership intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act"), a Registration Statement on Form S-4, including a prospectus, with such
amendment or amendments thereto, whether pre-effective or post-effective, in
each case as may be necessary or appropriate, together with any and all exhibits
and other documents having relation to said Registration Statement
(collectively, the "Registration Statement"), in connection with the
Partnership's proposal to offer to exchange up to $900,000 aggregate principal
amount of notes registered under the Act for a like aggregate principal amount
of outstanding notes;
NOW, THEREFORE, each of the undersigned, in his or her capacity as a
director or officer, or both, as the case may be, of the Manager, does hereby
appoint George H. Hempstead, III, John E. Lushefski, and C. William Carmean, and
each of them, each of whom may act without the joinder of the others, as his or
her true and lawful attorneys-in-fact and agents with power to act and with full
power of substitution and resubstitution, to execute in his or her name, place
and stead, in his or her capacity as a director or officer or both, as the case
may be, of the Manager, the Registration Statement, and all instruments
necessary or incidental in connection therewith, with such amendment or
amendments thereto in each case as said attorneys-in-fact and agents or any of
them shall deem necessary or appropriate, together with any and all exhibits and
other documents relating thereto as said attorneys-in-fact and agents or any of
them shall deem necessary or appropriate or incidental in connection therewith,
and to file the same or cause the same to be filed with the Commission. Said
attorneys-in-fact and agents shall have full power and authority to do and
perform in the name and on behalf of each of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable to be done to the
premises, as fully and to all intents and purposes as each of the undersigned
might or could do in person, each of the undersigned hereby ratifying and
approving the acts of said attorneys-in-fact and agents or any of them or their
substitutes.
IN WITNESS WHEREOF, each of the undersigned has executed this instrument on
this 7th day of April, 1999.
Name
----
/s/ William M. Landuyt
- ------------------------------------- -------------------------------------
William M. Landuyt Director
/s/ George H. Hempstead, III
- ------------------------------------- -------------------------------------
George H. Hempstead, III Director
/s/ Peter P. Hanik
- ------------------------------------- -------------------------------------
Peter P. Hanik Director, President & Chief Executive
Officer
/s/ Charles A. Daly
- ------------------------------------- -------------------------------------
Charles A. Daly Vice President, Principal Accounting
Officer And Principal Financial
Officer
<PAGE>
EXHIBIT 24.5
POWER OF ATTORNEY
WHEREAS, Occidental Petrochem Partner GP, Inc., a Delaware corporation (the
"General Partner"), is a general partner of Equistar Chemicals, LP, a Delaware
limited partnership (the "Partnership"); and
WHEREAS, the Partnership intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act"), a Registration Statement on Form S-4, including a prospectus, with such
amendment or amendments thereto, whether pre-effective or post-effective, in
each case as may be necessary or appropriate, together with any and all exhibits
and other documents having relation to said Registration Statement
(collectively, the "Registration Statement"), in connection with the
Partnership's proposal to offer to exchange up to $900,000 aggregate principal
amount of notes registered under the Act for a like aggregate principal amount
of outstanding notes;
NOW, THEREFORE, each of the undersigned, in his or her capacity as a
director or officer, or both, as the case may be, of the General Partner, does
hereby appoint Dennis F. Blake, John L. Hurst, Scott A. King and Joseph R.
DeMartino, and each of them, each of whom may act without the joinder of the
others, as his or her true and lawful attorneys-in-fact and agents with power to
act and with full power of substitution and resubstitution, to execute in his or
her name, place and stead, in his or her capacity as a director or officer or
both, as the case may be, of the General Partner, the Registration Statement,
and all instruments necessary or incidental in connection therewith, with such
amendment or amendments thereto in each case as said attorneys-in-fact and
agents or any of them shall deem necessary or appropriate, together with any and
all exhibits and other documents relating thereto as said attorneys-in-fact and
agents or any of them shall deem necessary or appropriate or incidental in
connection therewith, and to file the same or cause the same to be filed with
the Commission. Said attorneys-in-fact and agents shall have full power and
authority to do and perform in the name and on behalf of each of the
undersigned, in any and all capacities, every act whatsoever necessary or
desirable to be done to the premises, as fully and to all intents and purposes
as each of the undersigned might or could do in person, each of the undersigned
hereby ratifying and approving the acts of said attorneys-in-fact and agents or
any of them or their substitutes.
IN WITNESS WHEREOF, each of the undersigned has executed this instrument on
this 6th day of April, 1999.
<TABLE>
<CAPTION>
<S> <C>
/s/ J. Roger Hirl /s/ J. Roger Hirl
- ------------------------------------- -------------------------------
Name: J. Roger Hirl Name: J. Roger Hirl
Title: President Title: Director
/s/ Richard A. Lorraine /s/ Richard A. Lorraine
- ------------------------------------- --------------------------------
Name: Richard A. Lorraine Name: Richard A. Lorraine
Title: Executive Vice President, Title: Director
Chief Financial Officer
(Principal Accounting Officer)
/s/ Keith McDole /s/ Keith McDole
- ------------------------------------- --------------------------------
Name: Keith McDole Name: Keith McDole
Title: Secretary and Senior Vice President Title: Director
</TABLE>
<PAGE>
EXHIBIT 25.1
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [ ]
----------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------------------
EQUISTAR CHEMICALS, LP
(Exact name of obligor as specified in its charter)
Delaware 76-0550481
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
EQUISTAR FUNDING CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 51-0388569
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
1221 McKinney Street, Suite 700
Houston, Texas 77010
(Address of principal executive offices) (Zip code)
______________________
8-1/2% Notes due 2004
(Title of the indenture securities)
========================================================================
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT
IS SUBJECT.
- ------------------------------------------------------------------------------
Name Address
- ------------------------------------------------------------------------------
Superintendent of Banks of the 2 Rector Street, New York,
State of New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York (formerly
Irving Trust Company) as now in effect, which contains the authority to
commence business and a grant of powers to exercise corporate trust
powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with
Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed
with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed
with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-2-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 8th day of April, 1999.
THE BANK OF NEW YORK
By: /s/MICHELE L. RUSSO
---------------------------------------
Name: MICHELE L. RUSSO
Title: ASSISTANT TREASURER
-3-
<PAGE>
EXHIBIT 7
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, NY 10286
And Foreign and Domestic Subsidiaries.
a member of the Federal Reserve System at the close of business December 31,
1998 published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin........... $ 3,951,273
Interest-bearing balances.................................... 4,134,162
Securities:
Held-to-maturity securities.................................. 932,468
Available-for-sale securities................................ 4,279,246
Federal funds sold and Securities purchased under agreements to
resell....................................................... 3,161,626
Loans and lease financing receivables:
Loans and leases, net of unearned income...........37,861,802
LESS Allowance for loan and lease losses..............619,791
LESS Allocated transfer risk reserve....................3,572
Loans and leases net of unearned income allowance and
reserve..................................................... 37,238,439
Trading Assets............................................... 1,551,556
Premises and fixed assets (including capitalized leases)..... 684,181
Other real estate owned...................................... 10,404
Investments in unconsolidated subsidiaries and associated
companies................................................... 196,032
Customers liability to this bank on acceptances outstanding.. 895,160
Intangible assets............................................ 1,127,375
Other assets................................................. 1,915,742
-----------
Total assets................................................. $60,077,664
===========
LIABILITIES
Deposits:
In domestic offices.......................................... $27,020,578
Noninterest-bearing................................11,271,304
Interest-bearing...................................15,749,274
In foreign offices, Edge and Agreement subsidiaries and
IBFs........................................................ 17,197,743
Noninterest-bearing...................................103,007
Interest-bearing...................................17,094,736
Federal funds purchased and Securities sold under agreements
to repurchase................................................. 1,761,170
Demand notes issued to the U.S. Treasury....................... 125,423
Trading liabilities............................................ 1,625,632
Other borrowed money:
With remaining maturity of one year or less.................. 1,903,700
With remaining maturity of more than one year through three
years....................................................... 0
With remaining maturity of more than three years............. 31,639
Banks liability on acceptances executed and outstanding........ 900,390
Subordinated notes and debentures.............................. 1,308,000
Other liabilities.............................................. 2,708,852
-----------
Total liabilities.............................................. 54,583,127
-----------
EQUITY CAPITAL
Common stock................................................... 1,135,284
Surplus........................................................ 764,443
Undivided profits and capital reserves......................... 3,542,168
Net unrealized holding gains (losses) on available-for-sale
securities.................................................... 82,367
Cumulative foreign currency translation adjustments............ (29,725)
-----------
Total equity capital........................................... 5,494,537
-----------
Total liabilities and equity capital........................... $60,077,664
===========
</TABLE>
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Renyi }
Gerald L. Hassell } Directors
Alan R. Griffith }
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 25.2
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [ ]
----------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------------------
EQUISTAR CHEMICALS, LP
(Exact name of obligor as specified in its charter)
Delaware 76-0550481
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
EQUISTAR FUNDING CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 51-0388569
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
1221 McKinney Street, Suite 700
Houston, Texas 77010
(Address of principal executive offices) (Zip code)
______________________
8-3/4% Notes due 2009
(Title of the indenture securities)
========================================================================
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT
IS SUBJECT.
- -------------------------------------------------------------------------------
Name Address
- -------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York (formerly
Irving Trust Company) as now in effect, which contains the authority to
commence business and a grant of powers to exercise corporate trust
powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with
Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed
with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed
with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-2-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 8th day of April, 1999.
THE BANK OF NEW YORK
By: /s/ MICHELE L. RUSSO
---------------------------------------
Name: MICHELE L. RUSSO
Title: ASSISTANT TREASURER
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 8th day of April, 1999.
THE BANK OF NEW YORK
By: /s/ MICHELE L. RUSSO
---------------------------------------
Name: MICHELE L. RUSSO
Title: ASSISTANT TREASURER
-4-
<PAGE>
EXHIBIT 7
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, NY 10286
And Foreign and Domestic Subsidiaries.
a member of the Federal Reserve System at the close of business December 31,
1998 published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin........... $ 3,951,273
Interest-bearing balances.................................... 4,134,162
Securities:
Held-to-maturity securities.................................. 932,468
Available-for-sale securities................................ 4,279,246
Federal funds sold and Securities purchased under agreements to
resell....................................................... 3,161,626
Loans and lease financing receivables:
Loans and leases, net of unearned income...........37,861,802
LESS Allowance for loan and lease losses..............619,791
LESS Allocated transfer risk reserve....................3,572
Loans and leases net of unearned income allowance and
reserve..................................................... 37,238,439
Trading Assets............................................... 1,551,556
Premises and fixed assets (including capitalized leases)..... 684,181
Other real estate owned...................................... 10,404
Investments in unconsolidated subsidiaries and associated
companies................................................... 196,032
Customers liability to this bank on acceptances outstanding.. 895,160
Intangible assets............................................ 1,127,375
Other assets................................................. 1,915,742
-----------
Total assets................................................. $60,077,664
===========
LIABILITIES
Deposits:
In domestic offices.......................................... $27,020,578
Noninterest-bearing................................11,271,304
Interest-bearing...................................15,749,274
In foreign offices, Edge and Agreement subsidiaries and
IBFs........................................................ 17,197,743
Noninterest-bearing...................................103,007
Interest-bearing...................................17,094,736
Federal funds purchased and Securities sold under agreements
to repurchase................................................. 1,761,170
Demand notes issued to the U.S. Treasury....................... 125,423
Trading liabilities............................................ 1,625,632
Other borrowed money:
With remaining maturity of one year or less.................. 1,903,700
With remaining maturity of more than one year through three
years....................................................... 0
With remaining maturity of more than three years............. 31,639
Banks liability on acceptances executed and outstanding........ 900,390
Subordinated notes and debentures.............................. 1,308,000
Other liabilities.............................................. 2,708,852
-----------
Total liabilities.............................................. 54,583,127
-----------
EQUITY CAPITAL
Common stock................................................... 1,135,284
Surplus........................................................ 764,443
Undivided profits and capital reserves......................... 3,542,168
Net unrealized holding gains (losses) on available-for-sale
securities.................................................... 82,367
Cumulative foreign currency translation adjustments............ (29,725)
-----------
Total equity capital........................................... 5,494,537
-----------
Total liabilities and equity capital........................... $60,077,664
===========
</TABLE>
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Renyi }
Gerald L. Hassell } Directors
Alan R. Griffith }
- --------------------------------------------------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001081158
<NAME> EQUISTAR CHEMICALS LP
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 66
<SECURITIES> 0
<RECEIVABLES> 379
<ALLOWANCES> (3)
<INVENTORY> 549
<CURRENT-ASSETS> 1,130
<PP&E> 5,847
<DEPRECIATION> (1,772)
<TOTAL-ASSETS> 6,668
<CURRENT-LIABILITIES> 638
<BONDS> 2,070
0
0
<COMMON> 0
<OTHER-SE> 3,885
<TOTAL-LIABILITY-AND-EQUITY> 6,668
<SALES> 4,363
<TOTAL-REVENUES> 4,363
<CGS> 3,773
<TOTAL-COSTS> 3,773
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 156
<INCOME-PRETAX> 143
<INCOME-TAX> 0
<INCOME-CONTINUING> 143
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 143
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
