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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-9210
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OCCIDENTAL PETROLEUM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
DELAWARE 95-4035997
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
10889 WILSHIRE BOULEVARD 90024
LOS ANGELES, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 208-8800
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
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10 1/8% Senior Notes due 2001 New York Stock Exchange
10 1/8% Senior Debentures due 2009 New York Stock Exchange
11 1/8% Senior Debentures due 2019 New York Stock Exchange
9 1/4% Senior Debentures due 2019 New York Stock Exchange
$3.00 Cumulative CXY-Indexed New York Stock Exchange
Convertible Preferred Stock
Common Stock New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section 13 or l5(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
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At March 20, 1998, the aggregate market value of the voting stock held as
at March 6, 1998, by nonaffiliates of the registrant was approximately $10
billion, based on the New York Stock Exchange closing price of $29.25 per share
of Common Stock on March 20, 1998. Shares of Common Stock held by each officer
and director have been excluded from this computation in that such persons may
be deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
At March 6, 1998, there were 348,999,592 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report for the year ended December 31,
1997, are incorporated by reference into Parts I and II. Portions of the
registrant's definitive Proxy Statement filed in connection with its May 1,
1998, Annual Meeting of Stockholders are incorporated by reference into Part
III.
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TABLE OF CONTENTS
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PART I
ITEMS 1 AND 2 Business and Properties............................... 1
General..................................................... 1
Oil and Gas Operations...................................... 2
Chemical Operations......................................... 8
Capital Expenditures........................................ 14
Employees................................................... 14
Environmental Regulation.................................... 14
ITEM 3 Legal Proceedings........................................... 15
Environmental Proceedings................................... 15
ITEM 4 Submission of Matters to a Vote of Security Holders......... 16
Executive Officers of the Registrant........................ 16
PART II
ITEM 5 Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 18
ITEM 6 Selected Financial Data..................................... 19
ITEM 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 19
ITEM 8 Financial Statements and Supplementary Data................. 20
ITEM 9 Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.................................... 23
PART III
ITEM 10 Directors and Executive Officers of the Registrant.......... 23
ITEM 11 Executive Compensation...................................... 23
ITEM 12 Security Ownership of Certain Beneficial Owners and
Management.................................................. 23
ITEM 13 Certain Relationships and Related Transactions.............. 23
PART IV
ITEM 14 Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 23
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PART I
ITEMS 1 AND 2 BUSINESS AND PROPERTIES
GENERAL
Occidental Petroleum Corporation, a Delaware corporation ("Occidental"),
explores for, develops, produces and markets crude oil and natural gas; and
manufactures and markets a variety of chlorovinyls (including basic chemicals
and polymers and plastics), specialty chemicals and petrochemicals. Occidental
conducts its principal operations through two subsidiaries: Occidental Oil and
Gas Corporation and Occidental Chemical Corporation. Occidental's executive
offices are located at 10889 Wilshire Boulevard, Los Angeles, California 90024;
telephone (310) 208-8800.
Occidental was organized in April 1986 and, as the result of a
reorganization effective May 21, 1986, became the successor to a California
corporation of the same name organized in 1920. As used herein, the term
"Occidental" refers to Occidental alone or together with one or more of its
subsidiaries.
Occidental's principal businesses constitute two industry segments, the
operations of which are described below. For information with respect to the
revenues, net income and assets of Occidental's industry segments and of its
operations in various geographic areas for each of the three years in the period
ended December 31, 1997, see Note 17 to the Consolidated Financial Statements of
Occidental ("Consolidated Financial Statements"), which are included in
Occidental's 1997 Annual Report ("1997 Annual Report") and are incorporated by
reference in Item 8 of this report, and the information appearing under the
caption "Management's Discussion and Analysis," which is included in the 1997
Annual Report and is incorporated by reference in Item 7 of this report.
Throughout this report, portions of the 1997 Annual Report are incorporated by
reference. These portions of the 1997 Annual Report are included as Exhibit 13
to this report.
In February 1998, Occidental acquired the government's approximate 78
percent interest (the "Interest") in the Elk Hills Naval Petroleum Reserve field
in California ("Elk Hills") for approximately $3.5 billion. Prior to the
purchase of the Interest in Elk Hills, Occidental sold all of the common stock
of its wholly-owned subsidiary, MidCon Corp. ("MidCon"), through which it
engaged in interstate and intrastate natural gas transmission and marketing. The
sale of MidCon to KN Energy, Inc. closed effective January 31, 1998, for net
proceeds to Occidental of approximately $3.1 billion after certain expenses.
Finally, on March 20 Occidental announced the proposed contribution of its
petrochemical business to a joint venture limited partnership called Equistar
Chemicals, LP ("Equistar"), in return for a 29.5 percent interest in such
partnership. (For a description of the Equistar transaction, please see the
information appearing under the caption "Chemical Operations -- Recent
Development" elsewhere in this report.)
Occidental has also sold or agreed to sell a number of nonstrategic oil and
gas producing properties described below in this report.
Occidental has undertaken these asset sales as part of a larger $4.7
billion asset redeployment program. The focus of such program is to sell certain
nonstrategic assets in order to: (i) improve average return on assets, (ii)
repay debt incurred in connection with the acquisition of the Interest in Elk
Hills, and (iii) fund Occidental's stock repurchase program. (See the
information appearing under the caption "Item 5 -- Market for Registrant's
Common Equity and Related Stockholder Matters" appearing elsewhere in this
report.)
Certain statements contained in this Annual Report on Form 10-K constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risk, uncertainties and other factors that may cause the actual results,
performance or achievements of Occidental to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
general economic and business conditions; changes in political, social and
economic conditions and local regulations; global commodity pricing
fluctuations; competitive pricing pressures; higher than expected costs,
including feedstocks; the supply/demand considerations for Occidental's
products; any general economic recession domestically or internationally; not
successfully completing any development of new fields, expansion, capital
expenditure, efficiency improvement, acquisition or disposition; foreign
currency fluctua-
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tions; changes in, or failure to comply with, government regulations;
demographic changes; the reduction in sales to or loss of any significant
customers; changes in methods of distribution and technology; industry capacity;
cost and availability of drilling equipment; changes in business strategy or
development plans; availability of liquidity sufficient to meet Occidental's
need for capital; availability of qualified personnel; and various other factors
referenced in this Annual Report on Form 10-K. Occidental assumes no obligation
to update the forward-looking information to reflect actual results or changes
in the factors affecting such forward-looking information.
The forward-looking information referred to above includes, but is not
limited to: (a) expectations regarding sales growth, gross margins,
manufacturing productivity, and selling, general and administrative expenses;
(b) the availability and utilization of net operating loss carryforwards and
other deferred tax assets for income tax purposes; (c) expectations regarding
Occidental's financial condition and liquidity, as well as future cash flows;
(d) expectations regarding capital expenditures; and (e) the success of the
development of the Interest in Elk Hills and Occidental's asset redeployment
program.
OIL AND GAS OPERATIONS
Exploration and Production
GENERAL Through its subsidiaries, including Occidental Oil and Gas
Corporation, and its approximate 29 percent equity interest in Canadian
Occidental Petroleum Ltd. ("CanadianOxy"), Occidental produces or participates
in the production of crude oil, condensate and natural gas in the United States,
Canada, Colombia, Ecuador, the Dutch and United Kingdom sectors of the North
Sea, Oman, Pakistan, Peru, Qatar, Russia and Yemen. Occidental is continuing its
development programs for certain existing fields in certain of these countries
and also is conducting exploration activities in several of these countries, as
well as in other countries.
Recent Developments
Elk Hills is one of the 11 largest fields in the lower 48 states and the
acquisition of the Interest significantly increases the quantity and quality of
Occidental's domestic reserves. Occidental expects to book initial proved
reserves of approximately 300 million barrels of oil and 665 billion cubic feet
of natural gas from the Interest. Through the application of improved drilling
and field management techniques to develop fully Occidental's share of the
field, Elk Hills reserves net to Occidental are expected ultimately to exceed
such numbers. Production is expected to increase as the field is developed.
Gross crude oil production averaged approximately 54,500 barrels of oil per day
in January 1998, with gas sales averaging 144 million cubic feet of gas per day
after reinjection of 197 million cubic feet of gas to maintain reservoir
pressure. Corresponding natural gas liquids production amounts to about 11,000
barrels per day. Gross crude oil production is forecast, based on estimates
prepared by Occidental's engineers and geophysicists, to rise to 65,000 barrels
of oil per day in 1998 and may rise to more than 100,000 barrels per day in the
year 2000, while gross natural gas sales are expected to reach 380 million cubic
feet per day in 1999. Occidental is the operator of Elk Hills. Chevron remains
the other unit interest holder.
In February 1998, Occidental sold its entire interest in an oil field
development project in Venezuela to Union Texas Petroleum for approximately $205
million in cash plus contingent payments of up to $90 million over six years
(not to exceed $15 million in any one year) based on future oil prices.
Occidental also has agreed to sell its natural gas properties in Oklahoma and
Kansas outside of the Hugoton field to ONEOK Resources Company for approximately
$135 million. In March 1998, Occidental agreed to sell the stock of its MC
Panhandle subsidiary, which owns certain natural gas interests in the West
Panhandle field in Texas to Chesapeake Energy Corporation for approximately $105
million. Also in March, Occidental announced execution of a definitive agreement
to sell certain Oklahoma oil and gas properties to Anadarko Petroleum
Corporation for approximately $120 million. The transaction is scheduled to
close in April subject to satisfaction of certain customary closing conditions.
Other smaller packages of assets have been scheduled for disposition, and many
of such sales are pending, for a total of 12 scheduled domestic oil and gas
transactions.
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Estimated average 1997 production attributable to the nonstrategic assets
to be sold and described above was approximately 46,000 barrels of oil per day
(including approximately 25,000 barrels per day attributable to the sale of
Occidental's Venezuela interest) and 140 million cubic feet ("MMcf") of gas per
day. Following these nonstrategic asset sales and the acquisition of Elk Hills,
it is expected that Occidental's oil and gas production in the United States
will increase significantly. Accordingly, the description of United States
production information and description of properties set forth below concerns
Occidental's historic 1997 business.
COMPARATIVE OIL AND GAS RESERVES AND PRODUCTION
(Oil in millions of barrels; natural gas in billions of cubic feet)
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1997 1996 1995
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OIL GAS TOTAL* OIL GAS TOTAL* OIL GAS TOTAL*
--- ----- ------ --- ----- ------ --- ----- ------
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International Reserves 703 823 840 694 840 834 734 639 841
U.S. Reserves 197 1,635 470 203 1,744 494 196 1,821 499
--- ----- ----- --- ----- ----- --- ----- -----
Total 900 2,458 1,310 897 2,584 1,328 930 2,460 1,340
=== ===== ===== === ===== ===== === ===== =====
International Production 80 40 87 84 42 91 78 46 86
U.S. Production 21 218 57 21 220 58 23 223 60
--- ----- ----- --- ----- ----- --- ----- -----
Total 101 258 144 105 262 149 101 269 146
=== ===== ===== === ===== ===== === ===== =====
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* Natural gas volumes have been converted to equivalent barrels based on energy
content of six thousand cubic feet ("Mcf") of gas to one barrel of oil. 1995
amounts have been restated to reflect this methodology.
In 1997, Occidental added more oil to its reserves than it produced.
Occidental's consolidated worldwide net proved developed and undeveloped
reserves of crude oil (not including those of CanadianOxy) were 900 million
barrels at year-end 1997, compared with 897 million barrels at year-end 1996.
Domestic reserves of crude oil were 197 million barrels at year-end 1997,
compared with 203 million barrels at year-end 1996, while international crude
oil reserves increased to 703 million barrels from 694 million barrels at
year-end 1996. Worldwide net crude oil reserve additions of 106 million barrels,
with the single largest reserve additions in Qatar, more than replaced
Occidental's worldwide production of 101 million barrels. The calculation of net
reserve additions does not take into account sales of reserves. Worldwide net
proved developed and undeveloped reserves of natural gas were approximately 2.5
trillion cubic feet ("Tcf") at year-end 1997, with 1.6 Tcf attributable to
domestic operations. Worldwide net proved developed and undeveloped natural gas
reserves were about 2.6 Tcf in the previous year. Occidental's crude oil
reserves include condensate. Estimates of reserves have been made by Occidental
engineers. These estimates include reserves in which Occidental holds an
economic interest under service contracts and other arrangements. The reserves
are stated after applicable royalties. See the information under the caption
"Reserves, Production and Related Information" and the information incorporated
under the caption "Supplemental Oil and Gas Information" incorporated by
reference in Item 8 of this report.
Net daily worldwide oil production averaged 277,000 barrels per day
compared to 286,000 barrels per day in 1996, and net worldwide natural gas
production averaged 706 MMcf per day compared to 716 MMcf per day in 1996.
International operations accounted for approximately 79 percent of Occidental's
oil production, while approximately 84 percent of gas production came from the
United States. On an oil equivalent basis, Occidental produced 394,100 net
barrels per day in 1997 from operations in 12 countries, including the United
States.
As a producer of crude oil and natural gas, Occidental competes with
numerous other producers, as well as with nonpetroleum energy producers. Crude
oil and natural gas are commodities that are sensitive to prevailing conditions
of supply and demand and generally are sold at posted or contract prices. Among
the methods that Occidental uses to compete are the acquisition of contract
exploration blocks in areas with known oil and gas deposits and the
cost-efficient development and production of its worldwide oil and gas
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reserves. Specific strategies include the buying or selling of proved reserves
and flexible and responsive marketing techniques, particularly for natural gas.
Occidental has commenced the development process for its recent gas discoveries
in the Far East. Occidental is also pursuing opportunities to increase
production through (i) enhanced oil recovery projects, similar to those in
Qatar, (ii) oil and gas exploration and (iii) strategic acquisitions.
Occidental's domestic oil and gas operations are affected by political
developments and by federal, state and local laws and regulations relating to,
among other things, increases in taxes and royalties, production limits and
environmental matters.
In December 1995, Occidental agreed to deliver to Clark USA, Inc. ("Clark")
approximately 17.7 million barrels of West Texas Intermediate crude
("WTI")-equivalent oil over a six-year period. In exchange, Occidental received
$100 million in cash and approximately 5.5 million shares of Clark common stock.
Occidental delivered approximately 3.2 million barrels of WTI-equivalent oil to
an assignee of Clark in 1997. At December 31, 1997, approximately 12.2 million
barrels (depending on future oil prices) remain to be delivered.
Portions of Occidental's oil and gas assets are located in countries
outside North America, some of which may be considered politically and
economically unstable. These assets and the related operations are subject to
the risk of actions by governmental authorities and insurgent groups. Occidental
attempts to conduct its financial affairs so as to protect against such risks
and would expect to receive compensation in the event of nationalization. At
December 31, 1997, the carrying value of Occidental's oil and gas assets in
countries outside North America aggregated approximately $2.3 billion, or
approximately 15 percent of Occidental's total assets at that date.
Approximately $950 million of such assets were located in the Middle East, and
approximately $700 million of such assets were located in Latin America.
Substantially all of the remainder was located in the Netherlands (comprising,
in part, the Dutch sector of the North Sea) and the Far East.
UNITED STATES Occidental produces crude oil and natural gas, principally in
Texas, the Gulf of Mexico, Kansas, Oklahoma, Louisiana, New Mexico, California,
Mississippi and Alaska.
Oil Production and Marketing
Net daily domestic production of crude oil averaged approximately 57,100
barrels in 1997, compared with 57,300 barrels in 1996. The 1997 production is
net of approximately 5,200 barrels per day delivered to Clark's assignee. Net
daily domestic production of natural gas averaged 596 MMcf in 1997, compared
with 601 MMcf in 1996.
Occidental's average sales price for domestic crude oil was $18.72 per
barrel in 1997, compared with $18.98 in the previous year. The average natural
gas sales price in 1997 was $2.39 per Mcf, compared with $2.11 per Mcf during
1996.
Additionally, Occidental has an agreement to supply CITGO Petroleum
Corporation ("CITGO"), at CITGO's option, with a majority of its domestic lease
crude oil production through August 31, 1998. During 1997, Occidental sold CITGO
approximately 38,000 barrels of oil per day under this agreement. Occidental is
currently disputing certain provisions of this agreement.
In February 1998, Occidental entered into a fifteen-year contract with
Tosco Corporation ("Tosco") through which Tosco will take the majority of
Occidental's interest in the current gross oil production of the Interest in Elk
Hills of approximately 54,500 barrels per day. Tosco will also take additional
production as it increases.
Gas Production and Marketing
Occidental's largest concentration of gas reserves and production is the
Hugoton area encompassing portions of Kansas, Oklahoma and Texas, where it
produced an average of more than 210 MMcf of gas per day or approximately
one-third of the domestic total. Occidental has approximately 862 billion cubic
feet
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("Bcf") of gas reserves and 4.2 million barrels of oil reserves in the Hugoton
area. Occidental continued infill drilling and fracture-stimulation program in
the Chase formation of the Hugoton field in 1997.
Occidental has an agreement to make available to certain parties, in
connection with a legal settlement, up to 49,500 million British thermal units
("MMBtu") of natural gas per day through 2010 at prices related to market.
Occidental also has an agreement to supply fuel gas at market prices to a CITGO
refinery until 2003 to the extent that CITGO does not obtain such gas from other
sources.
Occidental has various agreements to supply certain gas marketing companies
with 69,400 MMBtu of natural gas per day in 1998 and with volumes ranging from
69,400 MMBtu down to 1,900 MMBtu per day from 1998 through 2003. Prices under
the different agreements are based on energy equivalent crude oil prices,
market-sensitive prices or contract prices, some with a yearly escalation
provision. Occidental also has agreements with various public utility companies
to provide approximately 40,000 MMBtu of natural gas per day through 1997 and
approximately 19,100 MMBtu per day in 1998. The public utility agreements
provide for market-sensitive prices.
CANADA Occidental owns an approximate 29 percent interest in CanadianOxy,
which is accounted for as an equity investment. See Note 15 to the Consolidated
Financial Statements.
CanadianOxy produces crude oil, natural gas, natural gas liquids and sulfur
in Canada, principally in the provinces of Alberta and Saskatchewan; owns a 7.23
percent interest in Syncrude Canada Ltd., which produces synthetic crude oil
from the tar sands of Northern Alberta; has interests in producing oil and gas
leases onshore and offshore in the United States and in the United Kingdom
sector of the North Sea and Yemen (where CanadianOxy is operator and Occidental
a participant); engages in exploration activities in Canada, the United States,
Indonesia, Australia, Nigeria and Colombia; and participates with Occidental in
its operations in Ecuador. CanadianOxy also conducts chemical operations in
Canada and the United States (where CanadianOxy is the operator and Occidental a
participant), and is involved in crude oil and natural gas marketing activities,
primarily in North America.
At December 31, 1997, Occidental's proportional interest in CanadianOxy's
worldwide net proved developed and undeveloped reserves aggregated approximately
73 million barrels of crude oil, condensate and natural gas liquids, 238 Bcf of
natural gas and 45 million barrels of synthetic crude oil recoverable from tar
sands. This increase in reserves since last year reflects CanadianOxy's
acquisition of Wascana Energy Inc. in April 1997.
BANGLADESH In early 1995, Occidental signed production-sharing contracts to
explore a 3.4-million-acre area in the gas-producing northeastern region and to
appraise the Jalalabad discovery made in 1989. Appraisal and development of the
Jalalabad gas discovery is expected to result in gas production and sales before
the end of 1998. A sale contract with Petrobangla, the national oil company, for
the initial delivery of 100 MMcf per day of natural gas was signed in November
1996. Occidental has farmed-out 50 percent of its interest in this block to an
affiliate of Unocal. Seismic exploration resulted in the definition of multiple
prospects, one of which is being drilled. The first exploratory well drilled in
mid-1997 blew out after encountering shallow, high-pressure gas. A replacement
well will be drilled in 1998. Additional seismic acquisition is underway to
determine the course of future exploration. Occidental is negotiating with
Petrobangla regarding the continuation of the exploration period for several
blocks. A drilling program has commenced appraisal and development of the
Jalalabad natural gas discovery, and it is expected that initial gas production
from this field will be delivered to Petrobangla in 1998.
COLOMBIA Occidental conducts exploration and production operations in
Colombia under three contracts with Ecopetrol, the Colombian national oil
company. These contracts cover the producing Cano Limon area in the Llanos
region of northeastern Colombia, one exploration area in the Llanos fold belt
and one exploration area in the Bogota basin. Occidental's interest in these
contracts is through its 75 percent ownership of the stock of a subsidiary that
owns the company conducting operations in Colombia. After giving effect to a
government royalty, Occidental's net share of existing production is 15 percent
from the contract covering the Llanos area.
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All of Occidental's share of production is exported through a trans-Andean
pipeline system operated by Ecopetrol, the state oil company, that carries crude
oil to an export terminal at Covenas. Occidental has an 18.75 percent net
ownership interest in the pipeline and marine terminal. The pipeline is subject
to periodic attacks by insurgent groups, which from time to time disrupt the
flow of oil. Gross production from Occidental's Cano Limon area declined to
approximately 160,000 barrels per day in 1997, compared with 190,000 barrels per
day in 1996. Part of the reduction is due to a natural decline, but there was an
increase in the frequency and severity of terrorist activity against the oil
pipeline during the past year which continues to restrict the pipeline's ability
to transport all of the oil that the field is capable of producing.
ECUADOR Occidental operates the 494,000-acre Block 15, in the Oriente
Basin, under a risk-service contract. Six oil fields were discovered from 1985
to 1992. Due to pipeline restrictions, gross production declined to
approximately 17,100 barrels per day in 1997 compared to gross production of
approximately 21,500 barrels per day in 1996. Development of the fields will
continue in 1998 after completion of a three-dimensional seismic program and
expansion of the government-owned pipeline system. After renegotiation of
contract terms for the concession to provide incentives for additional
exploration over 97 percent of the acreage, Occidental drilled the Eden-1, the
first of four commitment wells, in the southeast corner of the block in late
1996. The well tested from four zones at a combined rate of 6,500 barrels per
day of oil with an average gravity of 21 degrees API, and negotiations are under
way with the Ecuador state oil company, PetroEcuador, to develop the field in
1998. Occidental also completed acquisition of two-dimensional seismic data to
be used to delineate exploration prospects in the eastern portion of the block.
Occidental has an 85 percent interest in the parent of the company that
holds title to Block 15. CanadianOxy owns the remaining 15 percent.
NETHERLANDS NORTH SEA Occidental has interests in seven gas-producing
licenses and one exploration license in the Dutch sector of the North Sea, and a
38.6 percent interest in a 110-mile gas pipeline system that services the area.
Net production for 1997 was approximately 72 MMcf of gas per day.
OMAN Occidental is the operator, with a 65 percent working interest, of the
Suneinah Block, which contains the Safah field and six small fields along the
southern border of the block. Exploration and field development will continue in
1998. Occidental's net share of production from the block in 1997 averaged
approximately 14,400 barrels per day of crude oil, compared with 13,400 barrels
per day in 1996.
A new contract area, Block 31, the Mountain Front Block, was awarded to
Occidental by the government in September, and acquisition of three-dimensional
seismic is scheduled for 1998 to confirm prospects defined by older seismic.
Occidental has a 100 percent working interest in this area.
PAKISTAN In southern Pakistan, Occidental has a 30 percent working interest
in the three Badin Blocks, which in 1997 produced a net share of 6,600 barrels
of oil per day and 38 MMcf of gas per day, compared to 6,400 barrels of oil per
day and 43 MMcf of gas per day in 1996. Recent exploration resulted in two oil
and gas discoveries that will help maintain production at current rates.
In addition, Occidental holds exploration rights for a 356,000-acre block
in northern Pakistan and for two contiguous blocks in the Central Indus gas
basin totaling 2.9 million acres. Seismic exploration of the Northern Pakistan
Salt Range block has delineated several prospects. One exploratory well was
drilled in 1997 and the block is being evaluated for further drilling. However,
the Central Indus gas basin blocks are under force majeure due to tribal unrest.
PERU Occidental conducts exploration activities under four separate service
contracts with the Peruvian government. Occidental conducts production
activities under one of these contracts, in which Occidental retains all the
interest, covers continuing operations in the northern jungle and provides for
Occidental to receive, as compensation for its services, fees, based on barrels
of production, that vary with the value of a "basket" of international oils. All
production is delivered to Perupetro, the Peruvian national oil company. Net
production from the northern jungle block averaged approximately 49,500 barrels
per day in 1997, compared to 54,000 barrels per day in 1996.
Occidental owns a 65 percent interest and a 50 percent interest,
respectively, in two contiguous exploration blocks totalling 4.4 million acres.
The remaining contract in which Occidental has a 70 percent interest covers a
2-million-acre block in the Hualluga Basin of the Northern Jungle Region. In
1997
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Occidental was awarded a 100 percent interest in the 859,000-acre Offshore Block
Z-3 along the northern coast of Peru.
QATAR In October 1994, a unified agreement was approved authorizing
Occidental to implement a development plan to increase production and reserves
from the Idd el Shargi North Dome field ("ISND").
Under a production-sharing agreement, Occidental is the operator of the
field and will complete development of the field's three main reservoirs using
horizontally drilled wells in conjunction with pressure maintenance by both
water injection and gas injection to effect a high recovery from the reservoir.
Average gross production increased from approximately 38,000 net barrels per day
for 1996 to approximately 89,800 net barrels per day for 1997. Average net
interest production from such field in 1997 amounted to approximately 45,000
barrels per day, amounting to an approximate 50 percent working interest. Proved
developed and undeveloped project reserves are presently estimated by Occidental
to be approximately 206 million barrels.
In December 1997, Occidental signed a second production-sharing agreement
to develop the Idd el Shargi South Dome ("ISSD") field, 15 miles south of the
ISND field. Occidental will operate ISSD as a satellite of the ISND field, which
has sufficient capacity to handle the field's expected production of 50,000
barrels per day. Occidental expects to eventually invest up to $450 million in
capital and have a net interest of approximately 44 percent over the life of the
field.
RUSSIA In 1992, Occidental and AAOT Chernogorneft Enterprise began
operation of a 50 percent owned joint venture company, Vanyoganneft, which was
formed to increase oil recovery and production from the Vanyogan and Ayogan oil
fields and to sell the oil to foreign markets. The two oil fields are located 40
miles northeast of the city of Nizhnevartovsk in the western Siberian oil basin.
During 1997, gross production averaged 54,000 barrels per day compared to 50,800
barrels per day in 1996. Approximately 39 percent of such oil was exported in
1997. Occidental expects to continue exports of a minimum of 30 percent of its
oil production in 1998. Export prices are materially higher than domestic prices
in Russia.
In 1992, Occidental was awarded the 1.5-million-acre Block 15 in the
Russian Federation's Komi Republic. A joint venture, Parmaneft, was established
between Occidental, which owns a 75 percent interest, and
Ukhtaneftegasgeologica, to explore for oil and gas and develop discoveries
within the block. During the exploration phase, Occidental is paying 100 percent
of the costs. 1996 Occidental results included a $105 million charge, reflecting
the write-down of its investment in Komi. No operations were undertaken in 1997.
YEMEN In 1991, Occidental acquired an 18 percent working interest in the
310,000-acre Masila Block (although the block consisted at one time of 6.8
million acres, substantial territory was relinquished in 1995 and 1996).
CanadianOxy, the operator, with a 52 percent working interest, has made 14 oil
discoveries, including one in 1997. Production started in July 1993.
Occidental's net share under a production-sharing contract was 14,100 barrels
per day in 1997 compared to 14,700 barrels per day in 1996.
OTHER INTERNATIONAL OPERATIONS Several of the projects listed below would
involve substantial expenditures and several years would be required to complete
project development.
In 1992, a substantial oil and gas discovery was made in the Malampaya
prospect in Block SC-38 offshore northwest Palawan Island in the Philippines.
Appraisal wells confirmed that the 1989 Camago discovery by Occidental and the
Malampaya discovery contain sufficient recoverable gas for a commercial project.
Each of Occidental and its partner, Shell Philippines Exploration B.V., the
operator, has a 50 percent working interest in this project. With recoverable
gas estimated by the operator of 3.4 Tcf, the fields have the capacity to supply
a plateau rate of 400 MMcf per day for 20 years. Recoverable condensate is
estimated at about 120 million barrels. Occidental and Shell have negotiated
conditional gas sale agreements. Under these agreements, if approved by the
Philippine government and the parties, beginning in 2002, joint ventures formed
by First Philippine Holdings, British Gas and the Manila Electric Company, would
consume approximately 200 MMcf of natural gas per day at newly built combined
cycle gas turbine ("CCGT") power plants at Santa Tira and Calabarson, and the
Philippine National Power Corporation would construct a CCGT plant in Iljian and
consume approximately 150 MMcf of natural gas per day.
7
<PAGE> 10
In East Malaysia, Occidental has made significant gas discoveries offshore
Sarawak. In 1995, agreements were executed with its partners for the
commercialization of these discoveries. A joint venture company will be owned by
Occidental and its partners, PETRONAS, the Malaysian national oil company, Shell
Gas B.V. and Nippon Oil Company to construct the country's third liquefied
natural gas ("LNG") plant. Feedstock for the plant initially will come from the
Occidental discovery containing recoverable gas estimated at 2.9 Tcf. Occidental
is the operator, with a 33.75 percent interest in the gas discoveries. An
Occidental subsidiary will have a 9 percent interest in the new LNG plant. The
partners began the detailed upstream facility design in 1996. In 1997 Occidental
sold 10 percent of its interest in these Malaysian operations by selling equity
in two Occidental subsidiaries to a third party.
In Indonesia, Occidental has a 22.9 percent interest in the Berau Block,
offshore Irian Jaya, where appraisal of five major natural gas discoveries by
ARCO, the operator, will continue into 1998 to determine if the natural gas
reserves are sufficient to justify construction of an LNG plant on Irian Jaya.
Prior to ARCO farming in to the Berau Block, Occidental made two discoveries.
The Berau Block discoveries, together with ARCO's Wiriagar Block discovery,
contain an estimated 20 Tcf of natural gas, sufficient to justify construction
of a multi-train LNG project which might be slated for start-up early in the
next century.
In addition, during 1997 Occidental acquired new exploration blocks in the
United States Gulf of Mexico and Albania. Occidental acquired interests in 15
exploration blocks in a promising deep-water section of the Gulf of Mexico.
During 1998, exploration activities are planned in these areas as well as on
previously acquired blocks in Albania, Angola, Bangladesh, Colombia, the Congo,
Ecuador, Gabon, Indonesia, Malaysia, Netherlands, Oman, Pakistan, Papua New
Guinea, Peru and the Philippines.
Special Items in 1997
In 1997, Occidental recorded charges of $256 million for the write-down of
various nonstrategic assets, including assets expected to be sold and related
costs, and additional environmental and other reserves. The asset write-downs
included $88 million for the Austin Chalk oil and gas property and $44 million
for the Garden Banks oil and gas property. The operating results from these
properties were not significant.
Reserves, Production and Related Information
Reference is made to Note 18 to the Consolidated Financial Statements and
the information incorporated under the caption "Supplemental Oil and Gas
Information" incorporated by reference in Item 8 of this report for information
with respect to Occidental's oil and gas reserves, the production from and other
changes in such reserves, the discounted present value of estimated future net
cash flows therefrom, certain costs and other financial and statistical
information regarding Occidental's oil and gas exploration and production
operations. Estimates of reserves have been made by Occidental engineers and
include reserves under which Occidental holds an economic interest under service
contracts and other arrangements. The definitions used are in accordance with
applicable Securities and Exchange Commission regulations. Accordingly, proved
oil and gas reserves are those estimated quantities of crude oil, natural gas,
and natural gas liquids that geological and engineering data demonstrate with
reasonable certainty will be recoverable in future years from known reservoirs
under existing economic and operating conditions. Proved developed oil and gas
reserves are proved reserves that can be expected to be recovered through
existing wells with existing equipment and operating methods. Unless otherwise
stated, all references to reserves are made on a net basis. On June 10, 1997,
Occidental reported to the U.S. Department of Energy (the "DOE") on Form EIA-28
the same proved oil and gas reserves at December 31, 1996, as are set forth for
that date in the information incorporated under the caption "Supplemental Oil
and Gas Information" contained in Occidental's 1996 Annual Report.
CHEMICAL OPERATIONS
General
Occidental conducts its chemical operations through Occidental Chemical
Corporation and its various subsidiaries and affiliates (collectively,
"OxyChem"). OxyChem manufactures and markets a variety of chlorovinyls
(including basic chemicals and polymers and plastics), specialty chemicals and
petrochemicals.
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<PAGE> 11
OxyChem has added capacity at several of its facilities over the past few
years through "debottlenecking" projects, which expand or modify portions of
existing facilities that had previously limited production, thus adding
incremental capacity at a relatively low cost.
OxyChem's operations are affected by cyclical factors in the general
economic environment and by specific chemical industry conditions. The chemical
industry in the United States was characterized in 1997 by higher sales prices
and lower hydrocarbon feedstock costs, partially offset by increased energy
costs, resulting in improved margins for many chemical products, including those
manufactured by OxyChem. The integration strategy adopted by OxyChem permitted
it to maintain relatively high operating rates in 1997. Operating rates for
certain products may decline in 1998 as a result of weakness in key Asian
economies.
OxyChem's operations also have been affected by environmental regulation
and associated costs. See the information appearing under the caption
"Environmental Regulation" in this report.
Recent Development
On March 20, 1998, Occidental, Lyondell Petrochemical Company ("Lyondell")
and Millennium Chemicals Inc. ("Millennium") announced the signing of a
definitive master transaction agreement ("MTA") to expand Equistar, which is
currently owned by subsidiaries of Lyondell and Millennium, through the
contribution of the ethylene, propylene, ethylene oxide ("EO") and ethylene
glycol ("EG") derivatives businesses of OxyChem (the "Petrochemicals Business").
The Petrochemicals Business includes the following:
(i) Olefins plants at Corpus Christi and Chocolate Bayou, Texas, and Lake
Charles, Louisiana, producing 3.65 billion pounds per year of ethylene;
(ii) EO and EG derivatives plant located at Bayport, Texas, together with
Occidental's 50 percent ownership of PD Glycol, a limited partnership which
operates EO/EG plants at Beaumont, Texas (PD Glycol is a 50/50 joint venture
with Du Pont);
(iii) A distribution system consisting of more than 950 miles of
ethylene/propylene pipelines in the U.S. Gulf Coast and two storage wells in
South Texas; and
(iv) $205 million of OxyChem debt currently associated with these
businesses (the "Assumed Debt"). The addition of the Petrochemicals Business
will make Equistar the second-largest producer of ethylene in the world, with
more than 11.4 billion pounds of annual capacity.
Through their respective subsidiaries, Lyondell and Millennium presently
own Equistar. Pursuant to the terms and conditions set forth in the MTA, at
closing three subsidiaries of OxyChem (a newly formed subsidiary to be organized
prior to closing, Oxy Petrochemicals Inc. and PDG Chemical Inc. (collectively,
the "Occidental Partners")) will contribute certain assets to Equistar, subject
to the assumption by Equistar of certain liabilities of the Occidental Partners,
including the Assumed Debt. Following the closing of the transactions
contemplated by the MTA, which is expected to occur by mid-year 1998, Lyondell
will own a 41 percent interest in Equistar, and Millennium and Occidental will
each own a 29.5 percent interest. Prior to closing the parties must execute and
deliver an Amended and Restated Partnership Agreement, a Parent Agreement and an
Asset Contribution Agreement (the "Definitive Agreements") and certain other
agreements. At closing, Equistar will borrow approximately $500 million of
additional debt in order to distribute cash of $420 million to Occidental
Petroleum and $75 million to Millennium. The transaction also includes a
long-term agreement for Equistar to supply the ethylene requirements (up to 2.55
billion pounds per annum) for OxyChem's chlorovinyls business.
The investment in Equistar is subject to satisfaction of certain conditions
precedent, including: (i) expiration or early termination of all applicable
waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976;
(ii) approval by Occidental's Board of Directors; (iii) execution and delivery
of the Definitive Agreements and other agreements and (iv) the implementation by
Equistar of a larger credit facility.
9
<PAGE> 12
Chlorovinyl Products
A substantial portion of OxyChem's products are principally commodity in
nature, i.e., they are equivalent to products manufactured by others that are
generally available in the marketplace and are produced and sold in large
volumes, primarily to industrial customers for use as raw materials. Many of
OxyChem's manufacturing operations are integrated, and many of its products are
both sold to others and further processed by OxyChem into other chemical
products. Approximately 70 percent of OxyChem's ethylene and 45 percent of its
chlorine production is consumed internally, primarily into the vinyls product
chain, including ethylene dichloride ("EDC"), vinyl chloride monomer ("VCM") and
polyvinyl chloride ("PVC") resin. To better manage and sharpen its focus on its
chlor-alkali and plastic businesses, OxyChem combined its basic chemicals and
polymers and plastics groups into the Chloro-Vinyls Group.
In March 1997, OxyChem's wholly-owned Brazilian subsidiary, Vulcan Material
Plastico S.A. ("Vulcan") acquired the business and assets of Plasticos Plavinil
S.A., the largest Brazilian producer of PVC laminated film. This business gives
OxyChem a very strong position in several growing markets and complements the
company's existing Vulcan PVC operations in the state of Rio de Janeiro.
In May 1997, OxyChem announced plans to expand production capacity of
potassium hydroxide by 100,000 tons per year, bringing total capacity to 500,000
tons per year by the end of 1999. Potassium hydroxide is used by fertilizer,
soap and detergent and rubber manufacturers. Also in May, OxyChem and Thai
Plastic and Chemicals Public Company Limited began commercial operation of a new
22,500 tons-per-year PVC plant in Rayong Province in Thailand. Output from the
new plant will be sold within Thailand and through regional exports.
In June 1997, Occidental sold its chlor-alkali chemical plant located in
Tacoma, Washington for approximately $102 million which included $97 million in
cash and the balance in the buyer's convertible preferred stock. The sale did
not have a material effect on the results of operations. In addition, Occidental
purchased 28,000 shares of preferred stock of Leslie's Poolmart, Inc.
("Leslie's"), an OxyChem customer, for total consideration of $28 million, which
consisted of cash and the exchange of $10 million of Leslie's subordinated
debentures held by Occidental. Also in June, OxyChem completed a
700-million-pound-per-year VCM expansion project at Ingleside, Texas, increasing
production capacity at the joint-venture plant by 50 percent to 2.1 billion
pounds per year.
In November 1997, OxyChem took significant steps to increase its
chlorovinyl integration. A 450-million-pounds-per-year expansion at the
company's Pasadena, Texas, PVC plant increased capacity at the Pasadena site to
1.8 billion pounds, thereby increasing OxyChem's total capacity to 2 billion
pounds of PVC.
Specialty Chemicals
As a counterbalance to the commodity business, Occidental organized the
Specialty Business Group in 1995. The Specialty Business Group focuses on
smaller-volume specialty and intermediate chemical markets where OxyChem's
products may be more readily differentiated and enjoy a particular market niche.
Demand for specialty chemical products is less cyclical than commodity products
and specialty products are expected to provide a more steady source of earnings.
OxyChem has targeted the Specialty Business Group for substantial growth in the
coming years through volume expansion in existing products, development of new
products and acquisitions of synergistic businesses and product lines.
In February 1997, OxyChem began several specialty chemicals projects at its
Niagara Falls, New York, chemicals complex. Spending is expected to total
approximately $85 million and is scheduled to be completed by the end of 1998.
An additional $42 million has been committed at the same location in order to
enhance production of specialty chemicals, as well as to make new products which
are used for crop protection, pharmaceutical, coating and solvent applications.
This additional investment will be used to enhance production and handling of
key existing specialty chemicals, as well as make new products.
In July 1997, OxyChem announced an investment of $17 million to increase
specialty chemicals production at the company's Ashtabula, Ohio, Designed
Products Plant. This investment will enhance
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<PAGE> 13
OxyChem's capabilities to launch and support new and existing products to serve
the agricultural intermediates, pharmaceutical intermediates, coating and
polymer additives industries.
In September 1997, OxyChem and Sumitomo Bakelite began production at a new
glass-filled phenolic molding compound facility adjacent to OxyChem's Durez(R)
division's Fort Erie, Ontario, manufacturing site. This expansion will serve
component manufacturers that supply the automotive and outdoor power-equipment
industries.
In December 1997, OxyChem enhanced its specialty chemical position by
purchasing Elf Atochem's flame retardants business, which will enhance its
capabilities in this important growth market.
In February 1998, OxyChem announced an agreement to form a joint venture
company, Aqua Clear Industries, LLC, with Aqua Clear Industries, Inc. The
venture will own and operate Aqua Clear's New York state-based swimming pool and
spa chemical formulating, packaging and marketing business, and will be a steady
consumer of OxyChem's chlorinated isocyanurates.
OxyChem continues to build on its specialty business acquired in large part
through the following acquisitions. In 1996, OxyChem acquired a 64 percent
equity interest (on a fully-diluted basis) in INDSPEC Holding Corporation, and,
indirectly, its sole operating subsidiary INDSPEC Chemical Corporation
("INDSPEC"). INDSPEC is the largest producer of resorcinol in the world and the
sole commercial producer in the United States. Resorcinol is a chemical used
primarily as a bonding and stiffening agent in the manufacture of tires and
tread rubber. In addition, resorcinol is used in the manufacture of
high-performance wood adhesives, ultraviolet stabilizers, sunscreens, dyestuffs,
pharmaceuticals, agrichemicals, carbonless paper and fire retardant plastic
additives.
Also in 1996, OxyChem acquired three specialty chemical units: Laurel
Industries, Inc. ("Laurel"); Natural Gas Odorizing, Inc. ("NGO"); and a plant
from Power Silicates Manufacturing, Inc. ("Power Silicates"). Laurel is North
America's largest producer of antimony oxide at its LaPorte, Texas, facility.
Antimony oxide is used as a polymerization catalyst in the manufacture of
polyethylene terephthalate resins and as a flame retardant in plastics, where it
complements an OxyChem flame retardant synergist, DechPlus(R). NGO was purchased
from Helmerich & Payne, and is the leading U.S. producer of mercaptan-based
warning agents for use in natural gas and propane. The plant is located in
Baytown, Texas. In addition, a plant in Augusta, Georgia, was purchased from
Power Silicates, which produces sodium silicates for use in soap and detergent
formulating, paper manufacturing and silica-based catalysts, augmenting
OxyChem's five existing silicates plants by its presence in the growing
southeast U.S. market.
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Principal Products
OxyChem produces the following chemical products:
<TABLE>
<CAPTION>
PRINCIPAL PRODUCTS MAJOR USES
---------------------------------- ----------------------------------
<S> <C> <C>
Chlorovinyls Chlor-alkali chemicals
Chlorine........................ Raw material for polyvinyl
chloride, chemical manufacturing,
pulp and paper production, water
treatment
Caustic soda.................... Chemical manufacturing, pulp and
paper production, cleaning
products
Potassium chemicals (including
potassium hydroxide)......... Glass, fertilizers, cleaning
products, rubber
Ethylene dichloride............... Raw material for vinyl chloride
monomer
Vinyl chloride monomer............ Raw material for polyvinyl
chloride
Polyvinyl chloride................ Calendering and film, pipe, wire
insulation, flooring, footwear,
bottles, siding, windows, door
frames and other home
construction products
----------------------------------
Specialty Businesses Sodium silicates.................. Soaps and detergents, catalysts,
paint pigments
Chrome chemicals.................. Metal and wood treatments, leather
tanning
ACL pool chemicals (chlorinated
isocyanurates).................. Swimming pool sanitation,
household and industrial
disinfecting and sanitizing
products
Proprietary chemicals (chemical
intermediates derived
principally from fluorine,
chlorine and sulfur)............ Agricultural, pharmaceutical,
plastics, metal plating, aerospace
and food-service applications
Phenolic resins/molding
compounds....................... Automotive brake pistons,
adhesives, carbonless copy paper,
pot and pan handles
Mercaptans........................ Warning agents for natural gas and
propane and agricultural
chemicals
Antimony oxide.................... Flame retardant synergist and
catalysts
Resorcinol........................ Tire manufacture, wood adhesives
and flame retardant synergist
----------------------------------
Petrochemicals Ethylene.......................... Raw material for production of
polyethylene, vinyl chloride
monomer, ethylene glycols and
other ethylene oxide derivatives
Benzene........................... Raw material for production of
styrene, phenolic polymers and
nylon
Propylene......................... Raw material for production of
polypropylene and acrylonitrile
Ethylene glycols and other
ethylene oxide derivatives...... Polyester products, antifreeze,
brake fluids
---------------------------------- ----------------------------------
</TABLE>
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Based on statistics in chemical industry publications, Occidental believes
that during 1997: it was the largest U.S. merchant marketer of chlorine and
caustic soda; including OxyMar (OxyChem's joint venture with Marubeni), the
second-largest U.S. producer of VCM; the third-largest producer of PVC resins in
North America; the largest producer of chrome chemicals and phenolic molding
compounds, antimony oxide and mercaptan warning agents, and, through its
interest in INDSPEC, resorcinol; the second-largest producer of sodium
silicates; and, including its PD Glycol joint venture with Du Pont, the
third-largest producer of ethylene oxide and ethylene glycols. Additionally,
Occidental believes it was the world's largest producer of potassium hydroxide
and chlorinated isocyanurate products and the world's largest marketer of
ethylene dichloride.
Raw Materials
Nearly all raw materials utilized in OxyChem's operations that are not
produced by OxyChem or acquired from affiliates are readily available from a
variety of sources. Most of OxyChem's key raw materials purchases are made
through short- and long-term contracts. OxyChem is not dependent on any single
nonaffiliated supplier for a material amount of its raw material or energy
requirements, subject to establishing alternative means of transportation or
delivery in the event of the termination of arrangements with existing
suppliers.
Patents, Trademarks and Processes
OxyChem owns and licenses a large number of patents and trademarks and uses
a variety of processes in connection with its operations, some of which are
proprietary and some of which are licensed. OxyChem does not regard its business
as being materially dependent on any single patent or trademark it owns or
licenses or any process it uses.
Sales and Marketing
OxyChem's products are sold primarily to industrial users or distributors
located in the United States, largely by its own sales force. OxyChem sells its
products principally at current market or current market-related prices through
short- and long-term sales agreements. Except for sales in the export market,
OxyChem generally does not use spot markets to sell products. No significant
portion of OxyChem's business is dependent on a single customer. In general,
OxyChem does not manufacture its products against a backlog of firm orders;
production is geared primarily to the level of incoming orders and to
projections of future demand.
Competition
The chemical business is very competitive. Since most of OxyChem's products
are commodity in nature, they compete primarily on the basis of price, quality
characteristics and timely delivery. Because OxyChem's products generally do not
occupy proprietary positions, OxyChem endeavors to be an efficient, low-cost
producer through the employment of modern, high-yield plants, equipment and
technology. OxyChem's size and the number and location of its plants also
produce competitive advantages, principally in its ability to meet customer
specifications and delivery requirements.
Properties
As of December 31, 1997, OxyChem, which is headquartered in Dallas, Texas,
operated 33 chemical product manufacturing facilities in the United States. Many
of the larger facilities are located in the Gulf Coast areas of Texas and
Louisiana. In addition, OxyChem operates 10 chemical product manufacturing
facilities in six foreign countries, with the most significant foreign plants
being in Brazil. A number of additional facilities process, blend and store the
chemical products. OxyChem uses an extensive fleet of barges and railroad cars
and, as of December 31, 1997, owned and operated a pipeline network of over 950
miles along the Gulf Coast of Texas for the transportation of ethylene,
propylene and feedstocks.
All of OxyChem's manufacturing facilities are owned or leased on a
long-term basis.
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Special Items in 1997
Chemical division earnings reflected charges of $82 million related to the
write-down of various nonstrategic assets, and a charge of $65 million for
additional environmental reserves relating to various existing sites, and the
related state tax effects.
CAPITAL EXPENDITURES
Occidental's oil and gas operations, based on depletable resources, are
capital intensive, involving large-scale expenditures. In particular, in the
search for and development of new reserves, long lead times are often required.
In addition, Occidental's chemical business requires capital expenditures to
remain competitive and to comply with safety and environmental laws.
Occidental's capital expenditures for its ongoing businesses totaled
approximately $1.549 billion in 1997, $1.2 billion in 1996 and $979 million in
1995, exclusive of the noncash consideration for acquisitions. The 1997 amount
included capital expenditures aggregating $1.15 billion for oil and gas, $396
million for chemical and $3 million for corporate and other. Occidental's total
capital expenditures, exclusive of acquisitions, if any, for 1998 are expected
to approximate $1.2 billion, with approximately $850 million for oil and gas,
the majority of which is for international oil and gas operations. These amounts
do not include the $3.5 billion acquisition of the Elk Hills field in 1998.
EMPLOYEES
Occidental and its subsidiaries employed a total of 12,380 persons at
December 31, 1997, of whom 8,130 were located in the United States. 4,480 were
employed in oil and gas operations and 7,350 in chemical operations. An
additional 550 persons were employed at corporate headquarters. Approximately
1,200 U.S.-based employees are represented by labor unions. These employment
statistics do not reflect the 1,810 persons employed by Occidental's former
natural gas transmissions operations, which were reclassified as discontinued
operations in the fourth quarter of 1997.
Occidental has a long-standing policy to ensure that fair and equal
employment opportunities are extended to all persons without regard to race,
color, religion, ethnicity, gender, national origin, disability, age, sexual
orientation, veteran status or any other legally impermissible factor.
Occidental maintains numerous diversity and outreach programs which are in
effect at company locations.
ENVIRONMENTAL REGULATION
Occidental's operations in the United States are subject to increasingly
stringent federal, state and local laws and regulations relating to improving or
maintaining the quality of the environment. Foreign operations are also subject
to environmental protection laws. Applicable U.S. laws include the Comprehensive
Environmental Response, Compensation and Liability Act, as amended by the
Superfund Amendments and Reauthorization Act, the Resource Conservation and
Recovery Act, as amended by the Hazardous and Solid Waste Amendments, and
similar state environmental laws. The laws that require or address environmental
remediation apply retroactively to previous waste disposal practices and, in
many cases, the laws apply regardless of fault, legality of the original
activities or ownership or control of sites. Occidental is currently
participating in environmental assessments and cleanups under these laws at
federal Superfund sites, comparable state sites and other remediation sites,
including Occidental facilities and previously owned sites. Also, Occidental and
certain of its subsidiaries have been involved in a substantial number of
governmental and private proceedings involving historical practices at various
sites, including, in some instances, having been named as defendants, as
potentially responsible parties ("PRPs"), or as both defendants and PRPs under
the federal Superfund law. These proceedings seek remediation, funding for
remediation, or both, and, in some cases, compensation for alleged personal
injury or property damage, punitive damages and civil penalties, aggregating
substantial amounts.
Occidental has accrued reserves for its environmental liabilities. As of
December 31, 1997 and 1996, Occidental had environmental reserves of
approximately $567 million and $562 million, respectively. Occidental provided
additional reserves of approximately $136 million in 1997, $100 million in 1996
and $21 million in 1995 for costs associated with expected remediation efforts
at a number of sites. The 1997
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amount related to both the oil and gas and the chemical divisions. The 1996 and
1995 amounts related primarily to the chemical division.
Occidental's estimated operating expenses in 1997 relating to compliance
with environmental laws and regulations governing ongoing operations were
approximately $93 million, compared with $100 million in 1996 and $104 million
in 1995. The 1997 amount included $60 million in the chemical division and $33
million in the oil and gas division. In addition, capital expenditures for
environmental compliance were $116 million in 1997, compared with $81 million in
1996 and $70 million in 1995. The 1997 amount included $85 million in the oil
and gas division and $31 million in the chemical division. Occidental presently
estimates that divisional capital expenditures for environmental compliance
(including environmental control facilities) will be in the range of $115
million for 1998 and in the range of $130 million for 1999.
ITEM 3 LEGAL PROCEEDINGS
There is incorporated by reference herein the information regarding
lawsuits, claims and related matters in Note 10 to the Consolidated Financial
Statements.
In 1996, a judgment of $742 million was entered in favor of OXY USA Inc.
("OXY USA") against Chevron USA by the state district court in Tulsa, Oklahoma.
The unanimous verdict was for approximately $229 million in compensatory damages
for breach of a 1982 merger agreement and interest on these damages from 1982 to
the date of judgment. Interest has continued to accrue from July 19, 1996, in an
amount of approximately $6 million per month. Chevron has appealed the decision
to the Oklahoma Supreme Court, and, in connection with that appeal, has obtained
an appeal bond to secure payment of any final judgment and accrued interest as
required by Oklahoma law.
In 1997, Occidental was informed that the Securities and Exchange
Commission (the "SEC") would conduct a private, formal investigation as a result
of certain matters described in a May 12, 1997 Wall Street Journal article
concerning Occidental's business dealings with several foreign consultants.
According to the SEC, the purpose of its investigation is to determine whether
Occidental may have violated the federal securities laws, including the Foreign
Corrupt Practices Act and the reporting requirements of the Securities Exchange
Act of 1934, as amended. That investigation is ongoing. Occidental has
cooperated with the SEC and has produced documents in response to an SEC
subpoena.
In January 1998, two shareholder derivative actions were filed in Los
Angeles Superior Court against the Board of Directors of Occidental and
Occidental, as a nominal defendant, with respect to the payments made in 1997 to
Occidental's Chairman and President in connection with the restructuring of
their respective employment agreements. The actions, brought by the Teachers'
Retirement System of Louisiana and by Rita Edelson, Paul Klingenstein and
Clayton J. Steenson, have been consolidated. No relief is sought against
Occidental. The complaints allege, among other things, corporate waste, breach
of fiduciary duty and unjust enrichment. The plaintiffs seek, among other
things, compensatory damages, equitable and declaratory relief, the imposition
of a constructive trust on the 1997 payments and that the Occidental Board be
ordered to rescind the payments. In addition, the plaintiffs seek a declaration
that the restated and amended employment agreements are null and void and an
order enjoining the receipt of remuneration thereunder. The plaintiffs also seek
an award of attorneys' fees and costs.
ENVIRONMENTAL PROCEEDINGS
In 1996, the West Virginia Division of Environmental Protection ("WVDEP")
filed a civil action in the Circuit Court, Kanawha County, West Virginia,
against OxyChem alleging violations of hazardous waste management regulations at
its Belle Plant, from October 1994 to September 1995. The Complaint sought civil
penalties and injunctive relief requiring correction of the alleged violations.
In December 1997 the WVDEP voluntarily dismissed the action.
In 1997, OxyChem received an Administrative Complaint from the EPA, Region
2, that alleged violations of the permit for a hazardous waste incinerator at
its Durez(R) division facility in Niagara Falls, New York. The Complaint sought
administrative penalties in the amount of $230,500. In October 1997, OxyChem
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<PAGE> 18
entered into an administrative consent order agreeing to pay a penalty of
$27,000 and to implement a Supplemental Environmental Project at the facility,
in settlement of the action.
In 1997, OxyChem received a proposed "Order on Consent" from the New York
State Department of Environmental Conservation ("NYDEC") involving its
chlor-alkali facility in Niagara Falls, New York. The NYDEC alleges a violation
of statutory reporting requirements regarding a chemical spill at the facility
that allegedly caused a further violation of water quality standards, and seeks
an administrative penalty of $100,000. OxyChem is contesting the alleged
violations and the proposed administrative penalty.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of Occidental's security holders during
the fourth quarter of 1997.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
AGE AT
FEBRUARY
28, POSITIONS WITH OCCIDENTAL AND SUBSIDIARIES
NAME 1998 AND FIVE-YEAR EMPLOYMENT HISTORY
---- -------- ------------------------------------------
<S> <C> <C>
Dr. Ray R. Irani 63 Chairman and Chief Executive Officer since 1990;
President from 1984 to 1996; 1984 - 1990, Chief
Operating Officer; Director since 1984; 1983 - January
1991, Chief Executive Officer of Occidental Chemical
Corporation ("Occidental Chemical"); Chairman of the
Board of CanadianOxy since 1987; member of Executive
Committee.
Dr. Dale R. Laurance 52 President and Senior Operating Officer since 1996;
1990 - 1996 Executive Vice President and Senior
Operating Officer; 1984 - 1990, Executive Vice
President -- Operations; Director since 1990; member of
Executive Committee.
Roger L. Abel 54 Executive Vice President since 1997; President and Chief
Operating Officer of Occidental Oil and Gas Corporation
since 1997; 1993 - 1997, Chairman, Conoco Exploration
Production Europe; 1991 - 1993, Vice President, Conoco
Russia.
Stephen I. Chazen 51 Executive Vice President -- Corporate Development since
1994; 1990 - 1994, Managing Director, Merrill Lynch &
Co. Incorporated.
Donald P. de Brier 57 Executive Vice President, General Counsel and Secretary
since 1993; 1989 - 1993, General Counsel and member of
the Management Committee of BP Exploration and
Production Company.
Richard W. Hallock 53 Executive Vice President -- Human Resources since 1994;
1993 - 1994, Director, Worldwide Total Compensation of
IBM; 1990 - 1993, various other human resources
positions with IBM.
David A. Hentschel 64 Executive Vice President since 1997; Chairman of the
Board and Chief Executive Officer of Occidental Oil and
Gas Corporation since 1997; 1995 - 1997, President and
Chief Executive Officer of Canadian Occidental Petroleum
Corporation; 1986 - 1993, Chairman and Chief Executive
Officer of Occidental Oil and Gas Corporation;
1986 - 1993, Executive Vice President.
J. Roger Hirl 66 Executive Vice President since 1984; Director since
1988; President and Chief Executive Officer of
Occidental Chemical since 1991; 1983 - 1991, President
and Chief Operating Officer of Occidental Chemical.
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
AGE AT
FEBRUARY
28, POSITIONS WITH OCCIDENTAL AND SUBSIDIARIES
NAME 1998 AND FIVE-YEAR EMPLOYMENT HISTORY
---- -------- ------------------------------------------
<S> <C> <C>
Anthony R. Leach 58 Executive Vice President and Chief Financial Officer
since 1991; 1984 - 1991, Vice President and Controller.
Howard Collins 54 Vice President -- Public Relations since 1993;
1986 - 1993, Director -- Public Relations.
Samuel P. Dominick, Jr. 57 Vice President and Controller since 1991; 1990 - 1991,
Assistant Controller -- Internal Audit; 1985 - 1990,
Director of Internal Audit.
Kenneth J. Huffman 53 Vice President -- Investor Relations since 1991;
1989 - 1991, Vice President -- Finance, American
Exploration Company.
John L. Hurst 58 Vice President since 1996; Executive Vice President --
Manufacturing and Engineering of Occidental Chemical
since 1996; 1988 - 1996, Executive Vice
President -- Operations of Occidental Chemical.
Robert M. McGee 51 Vice President since 1994; President of Occidental
International Corporation since 1991; 1981 - 1991,
Senior Executive Vice President of Occidental
International Corporation.
John W. Morgan 44 Vice President -- Operations since 1991; 1984 - 1991,
Director -- Operations.
S.A. Smith 53 Vice President since 1984; Executive Vice President --
Worldwide Finance and Administration of Occidental Oil
and Gas Corporation since 1994; 1986 - 1994, Vice
President -- Financial Planning and Analysis.
Richard A. Swan 50 Vice President -- Health, Environment and Safety since
1995; 1991 - 1995, Director -- Investor Relations.
Aurmond A. Watkins, Jr. 55 Vice President -- Tax since 1991; 1986 - 1991,
Director -- Taxes.
David C. Yen 43 Vice President and Treasurer since 1997; 1993 - 1997,
Vice President -- Treasurer, Pratt & Whitney;
1988 - 1993, Assistant Treasurer, United Technologies
Corporation.
</TABLE>
The current term of office of each Executive Officer will expire at the
April 30, 1998 organizational meeting of the Occidental Board of Directors or at
such time as his successor shall be elected.
17
<PAGE> 20
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Recent Preferred Stock Conversion
Occidental gave notice to redeem all 15,106,444 outstanding shares of its
$3.875 voting and nonvoting Cumulative Convertible Preferred Stock by March 13,
1998. Before such time all holders elected to convert the shares of the
preferred stock, causing the issuance of approximately 33 million shares of
common stock. Assuming dividends on the preferred shares of approximately $58
million per annum, the conversion results in annual dividend savings to
Occidental of approximately $25 million.
Common Stock Repurchase Program
In October, Occidental began a program to repurchase up to 40 million
shares of its common stock for approximately $1 billion. The repurchases are
made in the open market or in privately negotiated transactions at the
discretion of Occidental's management, depending upon financial and market
conditions or as otherwise provided by the Securities and Exchange Commission
and New York Stock Exchange ("NYSE") rules and regulations. Since October,
approximately 13 million shares have been repurchased. The program is expected
to be completed in 1998.
Trading Price Range and Dividends
There is hereby incorporated by reference the quarterly financial data
appearing under the caption "Quarterly Financial Data" and the information
appearing under the caption "Management's Discussion and Analysis -- Liquidity
and Capital Resources" in the 1997 Annual Report, relevant portions of which
1997 Annual Report are filed as Exhibit 13 to this report. Occidental's common
stock was held by approximately 97,236 stockholders of record at year-end 1997,
with an estimated 165,000 additional stockholders whose shares were held for
them in street name or nominee accounts. The common stock is listed and traded
principally on the NYSE and also is listed on various foreign exchanges
identified in the 1997 Annual Report. The quarterly financial data on pages 57
and 58 of the 1997 Annual Report sets forth the range of trading prices for the
common stock as reported on the NYSE's composite tape and quarterly dividend
information.
The quarterly dividend rate for the common stock is $.25 per share. On
February 12, 1998, a dividend of $.25 per share was declared on the common
stock, payable on April 15, 1998 to stockholders of record on March 10, 1998.
Occidental is subject to certain financial covenants in instruments pertaining
to its long-term indebtedness which do not currently impose restrictions on
dividend policy. The declaration of future cash dividends is a business decision
made by the Board of Directors from time to time, and will depend on the
foregoing considerations, earnings, financial condition and other factors deemed
relevant by the Board; however, Occidental presently expects that dividends will
continue to be paid.
Recent Sales of Unregistered Securities
During the previous three years commencing January 1, 1995, Occidental sold
the following securities which were not initially registered under the
Securities Act of 1933, as amended (the "Act").
In August 1996, Occidental acquired three specialty chemical units in
separate transactions for approximately $149 million through the issuance of
5,512,355 shares of Occidental common stock, with a value of approximately $130
million, and the balance paid in cash. The acquisitions included Laurel, NGO,
and a plant in Augusta, Georgia, purchased from Power Silicates Manufacturing,
Inc. The NGO shares were issued to its parent, Helmerich & Payne, Inc., while
the Laurel shares were issued to certain Laurel investors.
The securities described in the foregoing paragraph were issued in reliance
on the exemption from registration under Section 4(2) of the Act, and the rules
promulgated under the Act, as transactions not involving a public offering. Each
recipient of such securities stated that it was its intent to acquire the
18
<PAGE> 21
securities for investment purposes. In each case the recipient had access to
Occidental's public financial information. Appropriate restrictive legends were,
in each case, affixed to the stock certificates issued in each transaction. The
shares of Occidental common stock issued in the Laurel and NGO transactions were
subsequently registered for resale in secondary offering Registration Statements
on Form S-3 filed with the Securities and Exchange Commission and the
registration statement in respect of the Laurel shares has been withdrawn.
ITEM 6 SELECTED FINANCIAL DATA
There is hereby incorporated by reference the information appearing under
the caption "Five-Year Summary of Selected Financial Data" in the 1997 Annual
Report.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
There is hereby incorporated by reference the information appearing under
the caption "Management's Discussion and Analysis" in the 1997 Annual Report.
19
<PAGE> 22
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND RELATED INFORMATION
<TABLE>
<CAPTION>
PAGES
-------------------------
ANNUAL REPORT FORM 10-K
------------- ---------
<S> <C> <C>
Financial Statements and Supplementary Data (pages 17
through 54 and pages 56 through 64 of Occidental's 1997
Annual Report incorporated herein by reference):
Consolidated Statements of Operations.................. 29 --
Consolidated Balance Sheets............................ 30 --
Consolidated Statements of Stockholders' Equity........ 32 --
Consolidated Statements of Cash Flows.................. 33 --
Notes to Consolidated Financial Statements............. 34 --
Report of Independent Public Accountants............... 56 --
Quarterly Financial Data............................... 57 --
Supplemental Oil and Gas Information................... 59 --
Report of Independent Public Accountants.................... -- 21
Financial Statement Schedule:
II Valuation and Qualifying Accounts................... -- 22
</TABLE>
20
<PAGE> 23
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors, Occidental Petroleum Corporation:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements included in Occidental Petroleum
Corporation's Annual Report for the year ended December 31, 1997, incorporated
by reference in this Annual Report on Form 10-K, and have issued our report
thereon dated February 16, 1998. Our audit was made for the purpose of forming
an opinion on those statements taken as a whole. The financial statement
schedule listed in the Index to Financial Statements and Related Information is
the responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and regulations
under the Securities Exchange Act of 1934 and is not a required part of the
basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
Los Angeles, California ARTHUR ANDERSEN LLP
February 16, 1998
21
<PAGE> 24
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(In millions)
<TABLE>
<CAPTION>
ADDITIONS
-----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ----------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1997
Allowance for doubtful accounts $ 24 $ 3 $ -- $ (3) $ 24
====== ====== ====== ====== ======
Environmental $ 562 $ 136 $ 6 $ (137)(a) $ 567
Foreign and other taxes, litigation
and other reserves 935 94 16 (143)(a) 902
------ ------ ------ ------ ------
$1,497 $ 230 $ 22 $ (280) $1,469(b)
- ----------------------------------------- ====== ====== ====== ====== ======
1996
Allowance for doubtful accounts $ 19 $ 12 $ -- $ (7) $ 24
====== ====== ====== ====== ======
Environmental $ 578 $ 100 $ 11 $ (127)(a) $ 562
Foreign and other taxes, litigation
and other reserves 931 65 24 (85)(a) 935
------ ------ ------ ------ ------
$1,509 $ 165 $ 35 $ (212) $1,497(b)
- ----------------------------------------- ====== ====== ====== ====== ======
1995
Allowance for doubtful accounts $ 17 $ 8 $ 1 $ (7) $ 19
====== ====== ====== ====== ======
Environmental $ 632 $ 21 $ 18 $ (93)(a) $ 578
Foreign and other taxes, litigation
and other reserves 953 140 50 (212)(a) 931
------ ------ ------ ------ ------
$1,585 $ 161 $ 68 $ (305) $1,509(b)
- ----------------------------------------- ====== ====== ====== ====== ======
</TABLE>
(a) Primarily represents payments.
(b) Of these amounts, $170 million, $204 million and $207 million in 1997, 1996
and 1995, respectively, is classified as current.
22
<PAGE> 25
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There is hereby incorporated by reference the information regarding
Occidental's directors appearing under the caption "Election of Directors" in
Occidental's definitive proxy statement filed in connection with its May 1,
1998, Annual Meeting of Stockholders (the "1998 Proxy Statement"). See also the
list of Occidental's executive officers and related information under "Executive
Officers of the Registrant" in Part I hereof.
ITEM 11 EXECUTIVE COMPENSATION
There is hereby incorporated by reference the information appearing under
the captions "Executive Compensation" (excluding, however, the information
appearing under the subcaptions "Report of the Compensation Committee" and
"Performance Graphs") and "Election of Directors -- Information Regarding the
Board of Directors and Its Committees" in the 1998 Proxy Statement.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is hereby incorporated by reference the information with respect to
security ownership appearing under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the 1998 Proxy Statement.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is hereby incorporated by reference the information appearing under
the caption "Election of Directors -- Compensation Committee Interlocks and
Insider Participation" in the 1998 Proxy Statement.
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A)(1) AND (2). FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Reference is made to the Index to Financial Statements and Related
Information under Item 8 in Part II hereof, where these documents are listed.
(A)(3). EXHIBITS
<TABLE>
<S> <C>
3.(i) (a)* Restated Certificate of Incorporation of Occidental,
together with all certificates amendatory thereof filed with
the Secretary of State of Delaware, as amended to date
(filed as Exhibit 3.(i) to the Annual Report on Form 10-K of
Occidental for the fiscal year ended December 31, 1994, File
No. 1-9210, except for Exhibit 3.(i)(b) described below that
is attached to this report).
(b) Certificate of Amendment of Restated Certificate of
Incorporation of Occidental dated April 25, 1997.
3.(ii)* Bylaws of Occidental, as amended through December 15, 1994
(filed as Exhibit 3.(ii) to the Annual Report on Form 10-K
of Occidental for the fiscal year ended December 31, 1994,
File No. 1-9210).
4.1 Occidental Petroleum Corporation Credit Agreement, dated as
of December 18, 1997.
</TABLE>
- ---------------------------------------------
*Incorporated herein by reference.
23
<PAGE> 26
<TABLE>
<S> <C>
4.2 Instruments defining the rights of holders of other long-term debt of Occidental and its subsidiaries
are not being filed since the total amount of securities authorized under each of such instruments does
not exceed 10 percent of the total assets of Occidental and its subsidiaries on a consolidated basis.
Occidental agrees to furnish a copy of any such instrument to the Commission upon request.
All of the Exhibits numbered 10.1 to 10.45 are management contracts and compensatory plans required to
be identified specifically as responsive to Item 601(b)(10)(iii)(A) of Regulation S-K pursuant to Item
14(c) of Form 10-K.
10.1* Consultation Agreement, dated December 16, 1974, between Occidental Petroleum Corporation, a California
corporation, and Arthur Groman (filed as Exhibit 10.3 to the Annual Report on Form 10-K of Occidental
for the fiscal year ended December 31, 1987, File No. 1-9210).
10.2* Employment Agreement, dated May 14, 1997, between Occidental and J. Roger Hirl (filed as Exhibit 10.1 to
the Quarterly Report on Form 10-Q of Occidental for the quarterly period ended June 30, 1997, File No.
1-9210).
10.3* Employment Agreement, dated as of September 11, 1997, between Occidental and Dr. Ray R. Irani (filed as
Exhibit 10.1 to the Current Report on Form 8-K of Occidental dated October 6, 1997 (date of earliest
event reported), File No. 1-9210).
10.4* Receipt and Acknowledgment, dated September 11, 1997, of Dr. Ray R. Irani and Ghada Irani (filed as
Exhibit 10.2 to the Current Report on Form 8-K of Occidental dated October 6, 1997 (date of earliest
event reported), File No. 1-9210).
10.5* Employment Agreement, dated as of September 11, 1997, between Occidental and Dr. Dale R. Laurance (filed
as Exhibit 10.3 to the Current Report on Form 8-K of Occidental dated October 6, 1997 (date of earliest
event reported), File No. 1-9210).
10.6* Receipt and Acknowledgment, dated September 11, 1997, of Dr. Dale R. Laurance and Lynda E. Laurance
(filed as Exhibit 10.4 to the Current Report on Form 8-K of Occidental dated October 6, 1997 (date of
earliest event reported), File No. 1-9210).
10.7 Employment Agreement, dated as of November 13, 1997, between Occidental and John F. Riordan.
10.8 Employment Agreement, dated as of April 4, 1994, between Occidental and Stephen I. Chazen.
10.9 Indemnification Agreement made and entered into as of February 12, 1998, between Occidental and Stephen
I. Chazen.
10.10* Termination of Consulting Agreement and Release, dated November 11, 1993, between OXY USA Inc. and
George O. Nolley (filed as Exhibit 10.9 to the Annual Report on Form 10-K of Occidental for the fiscal
year ended December 31, 1993, File No. 1-9210).
10.11* Form of Indemnification Agreement between Occidental and each of its directors (filed as Exhibit B to
Occidental's Proxy Statement for its May 21, 1987, Annual Meeting of Stockholders, File No. 1-9210).
10.12* Occidental Petroleum Corporation Split Dollar Life Insurance Program and Related Documents (filed as
Exhibit 10.2 to the Quarterly Report on Form 10-Q of Occidental for the quarterly period ended September
30, 1994, File No. 1-9210).
10.13* Occidental Petroleum Insured Medical Plan, as amended and restated effective April 29, 1994, amending
and restating the Occidental Petroleum Corporation Executive Medical Plan (as amended and restated
effective April 1, 1993) (filed as Exhibit 10 to the Quarterly Report on Form 10-Q of Occidental for the
quarterly period ending March 31, 1994, File No. 1-9210).
10.14* Occidental Petroleum Corporation 1978 Stock Option Plan (as amended and restated effective May 21, 1987)
(filed as Exhibit 28(a) to Occidental's Registration Statement on Form S-8, File No. 33-14662).
</TABLE>
- ---------------------------------------------
*Incorporated herein by reference.
24
<PAGE> 27
<TABLE>
<S> <C>
10.15* Form of Nonqualified Stock Option Grant under Occidental
Petroleum Corporation 1978 Stock Option Plan (filed as
Exhibit 10.19 to the Registration Statement on Form 8-B,
dated June 26, 1986, of Occidental, File No. 1- 9210).
10.16* Form of Incentive Stock Option Grant under Occidental
Petroleum Corporation 1978 Stock Option Plan (filed as
Exhibit 10.20 to the Registration Statement on Form 8-B,
dated June 26, 1986, of Occidental, File No. 1- 9210).
10.17* Occidental Petroleum Corporation 1987 Stock Option Plan, as
amended through April 29, 1992 (filed as Exhibit 10.1 to the
Quarterly Report on Form 10-Q of Occidental for the
quarterly period ended March 31, 1992, File No. 1-9210).
10.18* Form of Nonqualified Stock Option Agreement under Occidental
Petroleum Corporation 1987 Stock Option Plan (filed as
Exhibit 10.2 to the Quarterly Report on Form 10-Q of
Occidental for the quarterly period ended March 31, 1992,
File No. 1-9210).
10.19* Form of Nonqualified Stock Option Agreement, with Stock
Appreciation Right, under Occidental Petroleum Corporation
1987 Stock Option Plan (filed as Exhibit 10.3 to the
Quarterly Report on Form 10-Q of Occidental for the
quarterly period ended March 31, 1992, File No. 1-9210).
10.20* Form of Incentive Stock Option Agreement under Occidental
Petroleum Corporation 1987 Stock Option Plan (filed as
Exhibit 10.4 to the Quarterly Report on Form 10-Q of
Occidental for the quarterly period ended March 31, 1992,
File No. 1-9210).
10.21* Form of Incentive Stock Option Agreement, with Stock
Appreciation Right, under Occidental Petroleum Corporation
1987 Stock Option Plan (filed as Exhibit 10.5 to the
Quarterly Report on Form 10-Q of Occidental for the
quarterly period ended March 31, 1992, File No. 1-9210).
10.22* Occidental Petroleum Corporation 1977 Executive Long-term
Incentive Stock Purchase Plan, as amended through December
10, 1992 (filed as Exhibit 10.20 to the Annual Report on
Form 10-K of Occidental for the fiscal year ended December
31, 1992, File No. 1-9210).
10.23* Form of award letter utilized under Occidental Petroleum
Corporation 1977 Executive Long-term Incentive Stock
Purchase Plan (filed as Exhibit 10.21 to the Annual Report
on Form 10-K of Occidental for the fiscal year ended
December 31, 1992, File No. 1-9210).
10.24* Occidental Petroleum Corporation Incentive Compensation
Plan, effective as of October 28, 1991 (filed as Exhibit
10.2 to the Quarterly Report on Form 10-Q of Occidental for
the quarterly period ended September 30, 1991, File No.
1-9210).
10.25* Occidental Petroleum Corporation 1988 Deferred Compensation
Plan (as amended and restated effective as of January 1,
1994)(filed as Exhibit 10.1 to the Quarterly Report on Form
10-Q of Occidental for the quarterly period ended September
30, 1994, File No. 1-9210).
10.26* Memorandum, dated February 8, 1990, regarding MidCon Corp.
Financial Counseling Program (filed as Exhibit 10.29 to the
Annual Report on Form 10-K of Occidental for the fiscal year
ended December 31, 1989, File No. 1-9210).
10.27* Occidental Petroleum Corporation Senior Executive Deferred
Compensation Plan (effective as of January 1, 1986, as
amended and restated effective as of January 1, 1996)(filed
as Exhibit 10.24 to the Annual Report on Form 10-K of
Occidental for the fiscal year ended December 31, 1995, File
No. 1-9210).
10.28* Occidental Petroleum Corporation Senior Executive
Supplemental Life Insurance Plan (effective as of January 1,
1986, as amended and restated effective as of January 1,
1996)(filed as Exhibit 10.25 to the Annual Report on Form
10-K of Occidental for the fiscal year ended December 31,
1995, File No. 1-9210).
</TABLE>
- ---------------------------------------------
*Incorporated herein by reference.
25
<PAGE> 28
<TABLE>
<S> <C>
10.29* Occidental Petroleum Corporation Senior Executive
Supplemental Retirement Plan (effective as of January 1,
1986, as amended and restated effective as of January 1,
1996)(filed as Exhibit 10.26 to the Annual Report on Form
10-K of Occidental for the fiscal year ended December 31,
1995, File No. 1-9210).
10.30* Occidental Petroleum Corporation Senior Executive Survivor
Benefit Plan (effective as of January 1, 1986, as amended
and restated effective as of January 1, 1996)(filed as
Exhibit 10.27 to the Annual Report on Form 10-K of
Occidental for the fiscal year ended December 31, 1995, File
No. 1-9210).
10.31* Occidental Petroleum Corporation 1995 Incentive Stock Plan,
effective April 29, 1995 (filed as Exhibit 99.1 to
Occidental's Registration Statement on Form S-8, File No.
33-64719).
10.32* Form of Incentive Stock Option Agreement under Occidental
Petroleum Corporation 1995 Incentive Stock Plan (filed as
Exhibit 99.2 to Occidental's Registration Statement on Form
S-8, File No. 33-64719).
10.33* Form of Nonqualified Stock Option Agreement under Occidental
Petroleum Corporation 1995 Incentive Stock Plan (filed as
Exhibit 99.3 to Occidental's Registration Statement on Form
S-8, File No. 33-64719).
10.34* Form of Stock Appreciation Rights Agreement under Occidental
Petroleum Corporation 1995 Incentive Stock Plan (filed as
Exhibit 99.4 to the Registration Statement on Form S-8, File
No. 33-64719).
10.35* Form of Restricted Stock Agreement under Occidental
Petroleum Corporation 1995 Incentive Stock Plan (filed as
Exhibit 99.5 to the Registration Statement on Form S-8, File
No. 33-64719).
10.36* Form of Performance Stock Agreement under Occidental
Petroleum Corporation 1995 Incentive Stock Plan (filed as
Exhibit 99.6 to the Registration Statement on Form S-8, File
No. 33-64719).
10.37* Occidental Petroleum Corporation 1996 Restricted Stock Plan
for Non-Employee Directors, effective April 26, 1996 (filed
as Exhibit 99.1 to the Registration Statement on Form S-8,
File No. 333-02901).
10.38* Form of Restricted Stock Option Assignment under Occidental
Petroleum Corporation 1996 Restricted Stock Plan for
Non-Employee Directors (filed as Exhibit 99.2 to the
Registration Statement on Form S-8, File No. 333-02901).
10.39* Form of Incentive Stock Option Agreement under Occidental
Petroleum Corporation 1995 Incentive Stock Plan (filed as
Exhibit 10.1 to Occidental's quarterly report on Form 10-Q
for the fiscal quarter ended June 30, 1996, File No. 1-9210,
amends Form previously filed as Exhibit 99.2 to Occidental's
Registration Statement on Form S-8, File No. 33-64719 and
incorporated by reference as Exhibit 10.29 to the Annual
Report on Form 10-K of Occidental for the fiscal year ended
December 31, 1995, File No. 1-9210).
10.40* Form of Nonqualified Stock Option Agreement under Occidental
Petroleum Corporation 1995 Incentive Stock Plan (filed as
Exhibit 10.2 to Occidental's quarterly report on Form 10-Q
for the fiscal quarter ended June 30, 1996, File No. 1-9210,
amends Form previously filed as Exhibit 99.3 to Occidental's
Registration Statement on Form S-8, File No. 33-64719 and
incorporates by reference as Exhibit 10.30 to the Annual
Report on Form 10-K of Occidental for the fiscal year ended
December 31, 1995, File No. 1-9210).
10.41* Occidental Petroleum Corporation 1988 Deferred Compensation
Plan (as amended and restated effective as of January 1,
1996)(filed as Exhibit 10.2 to Occidental's quarterly report
on Form 10-Q for the fiscal quarter ended September 30,
1996, File No. 1-9210).
10.42* MidCon Corp. Savings Plan (filed as Exhibit 99.1 to
Occidental's Registration Statement on Form S-8, File No.
333-17879).
</TABLE>
- ---------------------------------------------
*Incorporated herein by reference.
26
<PAGE> 29
<TABLE>
<S> <C>
10.43* Amendment No. 1 to MidCon Corp. Savings Plan (filed as
Exhibit 99.1 to Occidental's Registration Statement on Form
S-8, File No. 333-17879).
10.44* MidCon Corp. Supplemental Retirement Plan (effective as of
January 1, 1997).
10.45* Form of 1997 Performance Stock Option Agreement under the
1995 Incentive Stock Plan of Occidental Petroleum
Corporation (filed as Exhibit 10.2 to the Quarterly Report
on Form 10-Q of Occidental for the quarterly period ended
June 30, 1997, File No. 1-9210).
10.46* Grant of option agreement, executed October 5, 1997, between
the Department of Energy and Occidental related to the
purchase of the U.S. Government's 78 percent interest in the
Elk Hills field (filed as Exhibit 10.1 to the Quarterly
Report on Form 10-Q of Occidental for the quarterly period
ended September 30, 1997, File No. 1-9210).
10.47* Stock Purchase Agreement dated as of December 18, 1997, by
and among Occidental, as seller, and KN Energy, Inc., as
buyer, together with the exhibits thereto (filed as Exhibit
10.1 to the Current Report on Form 8-K of Occidental dated
January 31, 1998 (date of earliest event reported), File No.
1-9210).
10.48* Amendment No. 1 to Stock Purchase Agreement dated January
30, 1998, between Occidental, as seller, and KN Energy,
Inc., as buyer, together with exhibit thereto (filed as
Exhibit 10.2 to the Current Report on Form 8-K of Occidental
dated January 31, 1998 (date of earliest event reported),
File No. 1-9210).
10.49* Supplemental Agreement dated as of January 20, 1998, by and
between Occidental and KN Energy, Inc., together with the
exhibits thereto (filed as Exhibit 10.3 to the Current
Report on Form 8-K of Occidental dated January 31, 1998
(date of earliest event reported), File No. 1-9210).
12 Statement regarding computation of total enterprise ratios
of earnings to fixed charges for the five years ended
December 31, 1997.
13 Pages 17 through 54 and pages 56 through 64 of Occidental's
Annual Report for the fiscal year ended December 31, 1997,
which are incorporated by reference in Parts I and II of
this Annual Report on Form 10-K.
21 List of subsidiaries of Occidental at December 31, 1997.
23 Consent of Independent Public Accountants.
27.1 Financial data schedule of Occidental for the fiscal year
ended December 31, 1997 (included only in the copy of this
report filed electronically with the Securities and Exchange
Commission).
27.2 Financial data schedule of Occidental for the fiscal year
ended December 31, 1995 (included only in the copy of this
report filed electronically with the Securities and Exchange
Commission).
27.3 Financial data schedule of Occidental for the fiscal year
ended December 31, 1996 (included only in the copy of this
report filed electronically with the Securities and Exchange
Commission).
27.4 Financial data schedule of Occidental for the three month
period ended March 31, 1996 (included only in the copy of
this report filed electronically with the Securities and
Exchange Commission).
27.5 Financial data schedule of Occidental for the six month
period ended June 30, 1996 (included only in the copy of
this report filed electronically with the Securities and
Exchange Commission).
27.6 Financial data schedule of Occidental for the nine month
period ended September 30, 1996 (included only in the copy
of this report filed electronically with the Securities and
Exchange Commission).
27.7 Financial data schedule of Occidental for the three month
period ended March 31, 1997 (included only in the copy of
this report filed electronically with the Securities and
Exchange Commission).
27.8 Financial data schedule of Occidental for the six month
period ended June 30, 1997 (included only in the copy of
this report filed electronically with the Securities and
Exchange Commission).
</TABLE>
- ---------------------------------------------
*Incorporated herein by reference.
27
<PAGE> 30
<TABLE>
<S> <C>
27.9 Financial data schedule of Occidental for the nine month period ended September 30, 1997 (included only
in the copy of this report filed electronically with the Securities and Exchange Commission).
</TABLE>
(B) REPORTS ON FORM 8-K
During the fourth quarter of 1997, Occidental filed the following Current
Reports on Form 8-K:
1. Current Report on Form 8-K dated October 6, 1997 (date of earliest event
reported), filed on October 17, 1997, for the purpose of reporting, under Item
5, certain recent developments.
2. Current Report on Form 8-K dated October 16, 1997 (date of earliest
event reported), filed on October 17, 1997, for the purpose of reporting, under
Item 5, Occidental's results of operations for the third quarter ended September
30, 1997.
3. Current Report on Form 8-K dated December 18, 1997 (date of earliest
event reported), filed on December 31, 1997, for the purpose of reporting, under
Item 5, Occidental's disposition of MidCon Corp.
During the first quarter of 1998 to the date hereof, Occidental filed the
following Current Report on Form 8-K:
1. Current Report on Form 8-K dated January 26, 1998 (date of earliest
event reported), filed on January 27, 1998, for the purpose of reporting, under
Item 5, Occidental's results of operations for the fourth quarter and fiscal
year ended December 31, 1997.
2. Current Report on Form 8-K dated January 30, 1998 (date of earliest
event reported), filed on January 30, 1998, for the purpose of reporting, under
Item 5, the filing of restated financial statements for the fiscal year ended
December 31, 1996, and each of the fiscal quarters ended March 31, June 30 and
September 30, 1997, such restatement to reflect the treatment of MidCon Corp. as
a discontinued operation.
3. Current Report on Form 8-K dated January 31, 1998 (date of earliest
event reported), filed on February 10, 1998, for the purpose of reporting, under
Item 2, the acquisition of the Elk Hills field and the disposition of MidCon
Corp., and, under Item 5, certain recent developments.
4. Current Report on Form 8-K dated February 11, 1998 (date of earliest
event reported), filed on February 12, 1998, for the purpose of reporting, under
Item 5, Occidental's recently announced preferred stock redemption.
5. Current Report on Form 8-K dated February 12, 1998 (date of earliest
event reported), filed on February 26, 1998, for the purpose of reporting, under
Item 5, Occidental's announcement of a record date for its annual meeting.
28
<PAGE> 31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
OCCIDENTAL PETROLEUM CORPORATION
March 26, 1998 By: RAY R. IRANI
------------------------------------
Ray R. Irani
Chairman of the Board of Directors
and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
RAY R. IRANI Chairman of the Board of March 26, 1998
- -------------------------------------------------------- Directors and Chief
Ray R. Irani Executive Officer
ANTHONY R. LEACH Executive Vice President March 26, 1998
- -------------------------------------------------------- and Chief Financial
Anthony R. Leach Officer
SAMUEL P. DOMINICK, JR. Vice President and March 26, 1998
- -------------------------------------------------------- Controller (Chief
Samuel P. Dominick, Jr. Accounting Officer)
JOHN S. CHALSTY Director March 26, 1998
- --------------------------------------------------------
John S. Chalsty
EDWARD P. DJEREJIAN Director March 26, 1998
- --------------------------------------------------------
Edward P. Djerejian
ALBERT GORE Director March 26, 1998
- --------------------------------------------------------
Albert Gore
ARTHUR GROMAN Director March 26, 1998
- --------------------------------------------------------
Arthur Groman
J. ROGER HIRL Director March 26, 1998
- --------------------------------------------------------
J. Roger Hirl
</TABLE>
29
<PAGE> 32
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
JOHN W. KLUGE Director March 26, 1998
- --------------------------------------------------------
John W. Kluge
DALE R. LAURANCE Director March 26, 1998
- --------------------------------------------------------
Dale R. Laurance
IRVIN W. MALONEY Director March 26, 1998
- --------------------------------------------------------
Irvin W. Maloney
GEORGE O. NOLLEY Director March 26, 1998
- --------------------------------------------------------
George O. Nolley
RODOLFO SEGOVIA Director March 26, 1998
- --------------------------------------------------------
Rodolfo Segovia
AZIZ D. SYRIANI Director March 26, 1998
- --------------------------------------------------------
Aziz D. Syriani
ROSEMARY TOMICH Director March 26, 1998
- --------------------------------------------------------
Rosemary Tomich
</TABLE>
30
<PAGE> 33
INDEX TO EXHIBITS
EXHIBITS
(A)(3). EXHIBITS
<TABLE>
<S> <C>
3.(i) (a)* Restated Certificate of Incorporation of Occidental,
together with all certificates amendatory thereof filed with
the Secretary of State of Delaware, as amended to date
(filed as Exhibit 3.(i) to the Annual Report on Form 10-K of
Occidental for the fiscal year ended December 31, 1994, File
No. 1-9210, except for Exhibit 3.(i)(b) described below that
is attached to this report).
(b) Certificate of Amendment of Restated Certificate of
Incorporation of Occidental dated April 25, 1997.
3.(ii)* Bylaws of Occidental, as amended through December 15, 1994
(filed as Exhibit 3.(ii) to the Annual Report on Form 10-K
of Occidental for the fiscal year ended December 31, 1994,
File No. 1-9210).
4.1 Occidental Petroleum Corporation Credit Agreement, dated as
of December 18, 1997.
4.2 Instruments defining the rights of holders of other
long-term debt of Occidental and its subsidiaries are not
being filed since the total amount of securities authorized
under each of such instruments does not exceed 10 percent of
the total assets of Occidental and its subsidiaries on a
consolidated basis. Occidental agrees to furnish a copy of
any such instrument to the Commission upon request.
All of the Exhibits numbered 10.1 to 10.45 are management
contracts and compensatory plans required to be identified
specifically as responsive to Item 601(b)(10)(iii)(A) of
Regulation S-K pursuant to Item 14(c) of Form 10-K.
10.1* Consultation Agreement, dated December 16, 1974, between
Occidental Petroleum Corporation, a California corporation,
and Arthur Groman (filed as Exhibit 10.3 to the Annual
Report on Form 10-K of Occidental for the fiscal year ended
December 31, 1987, File No. 1-9210).
10.2* Employment Agreement, dated May 14, 1997, between Occidental
and J. Roger Hirl (filed as Exhibit 10.1 to the Quarterly
Report on Form 10-Q of Occidental for the quarterly period
ended June 30, 1997, File No. 1-9210).
10.3* Employment Agreement, dated as of September 11, 1997,
between Occidental and Dr. Ray R. Irani (filed as Exhibit
10.1 to the Current Report on Form 8-K of Occidental dated
October 6, 1997 (date of earliest event reported), File No.
1-9210).
10.4* Receipt and Acknowledgment, dated September 11, 1997, of Dr.
Ray R. Irani and Ghada Irani (filed as Exhibit 10.2 to the
Current Report on Form 8-K of Occidental dated October 6,
1997 (date of earliest event reported), File No. 1-9210).
10.5* Employment Agreement, dated as of September 11, 1997,
between Occidental and Dr. Dale R. Laurance (filed as
Exhibit 10.3 to the Current Report on Form 8-K of Occidental
dated October 6, 1997 (date of earliest event reported),
File No. 1-9210).
10.6* Receipt and Acknowledgment, dated September 11, 1997, of Dr.
Dale R. Laurance and Lynda E. Laurance (filed as Exhibit
10.4 to the Current Report on Form 8-K of Occidental dated
October 6, 1997 (date of earliest event reported), File No.
1-9210).
10.7 Employment Agreement, dated as of November 13, 1997, between
Occidental and John F. Riordan.
10.8 Employment Agreement, dated as of April 4, 1994, between
Occidental and Stephen I. Chazen.
10.9 Indemnification Agreement made and entered into as of
February 12, 1998, between Occidental and Stephen I. Chazen.
</TABLE>
- ---------------------------------------------
* Incorporated herein by reference.
31
<PAGE> 34
<TABLE>
<S> <C>
10.10* Termination of Consulting Agreement and Release, dated
November 11, 1993, between OXY USA Inc. and George O. Nolley
(filed as Exhibit 10.9 to the Annual Report on Form 10-K of
Occidental for the fiscal year ended December 31, 1993, File
No. 1-9210).
10.11* Form of Indemnification Agreement between Occidental and
each of its directors (filed as Exhibit B to Occidental's
Proxy Statement for its May 21, 1987, Annual Meeting of
Stockholders, File No. 1-9210).
10.12* Occidental Petroleum Corporation Split Dollar Life Insurance
Program and Related Documents (filed as Exhibit 10.2 to the
Quarterly Report on Form 10-Q of Occidental for the
quarterly period ended September 30, 1994, File No. 1-9210).
10.13* Occidental Petroleum Insured Medical Plan, as amended and
restated effective April 29, 1994, amending and restating
the Occidental Petroleum Corporation Executive Medical Plan
(as amended and restated effective April 1, 1993) (filed as
Exhibit 10 to the Quarterly Report on Form 10-Q of
Occidental for the quarterly period ending March 31, 1994,
File No. 1-9210).
10.14* Occidental Petroleum Corporation 1978 Stock Option Plan (as
amended and restated effective May 21, 1987) (filed as
Exhibit 28(a) to Occidental's Registration Statement on Form
S-8, File No. 33-14662).
10.15* Form of Nonqualified Stock Option Grant under Occidental
Petroleum Corporation 1978 Stock Option Plan (filed as
Exhibit 10.19 to the Registration Statement on Form 8-B,
dated June 26, 1986, of Occidental, File No. 1-9210).
10.16* Form of Incentive Stock Option Grant under Occidental
Petroleum Corporation 1978 Stock Option Plan (filed as
Exhibit 10.20 to the Registration Statement on Form 8-B,
dated June 26, 1986, of Occidental, File No. 1-9210).
10.17* Occidental Petroleum Corporation 1987 Stock Option Plan, as
amended through April 29, 1992 (filed as Exhibit 10.1 to the
Quarterly Report on Form 10-Q of Occidental for the
quarterly period ended March 31, 1992, File No. 1-9210).
10.18* Form of Nonqualified Stock Option Agreement under Occidental
Petroleum Corporation 1987 Stock Option Plan (filed as
Exhibit 10.2 to the Quarterly Report on Form 10-Q of
Occidental for the quarterly period ended March 31, 1992,
File No. 1-9210).
10.19* Form of Nonqualified Stock Option Agreement, with Stock
Appreciation Right, under Occidental Petroleum Corporation
1987 Stock Option Plan (filed as Exhibit 10.3 to the
Quarterly Report on Form 10-Q of Occidental for the
quarterly period ended March 31, 1992, File No. 1-9210).
10.20* Form of Incentive Stock Option Agreement under Occidental
Petroleum Corporation 1987 Stock Option Plan (filed as
Exhibit 10.4 to the Quarterly Report on Form 10-Q of
Occidental for the quarterly period ended March 31, 1992,
File No. 1-9210).
10.21* Form of Incentive Stock Option Agreement, with Stock
Appreciation Right, under Occidental Petroleum Corporation
1987 Stock Option Plan (filed as Exhibit 10.5 to the
Quarterly Report on Form 10-Q of Occidental for the
quarterly period ended March 31, 1992, File No. 1-9210).
10.22* Occidental Petroleum Corporation 1977 Executive Long-term
Incentive Stock Purchase Plan, as amended through December
10, 1992 (filed as Exhibit 10.20 to the Annual Report on
Form 10-K of Occidental for the fiscal year ended December
31, 1992, File No. 1-9210).
10.23* Form of award letter utilized under Occidental Petroleum
Corporation 1977 Executive Long-term Incentive Stock
Purchase Plan (filed as Exhibit 10.21 to the Annual Report
on Form 10-K of Occidental for the fiscal year ended
December 31, 1992, File No. 1-9210).
10.24* Occidental Petroleum Corporation Incentive Compensation
Plan, effective as of October 28, 1991 (filed as Exhibit
10.2 to the Quarterly Report on Form 10-Q of Occidental for
the quarterly period ended September 30, 1991, File No.
1-9210).
</TABLE>
- ---------------------------------------------
* Incorporated herein by reference.
32
<PAGE> 35
<TABLE>
<S> <C>
10.25* Occidental Petroleum Corporation 1988 Deferred Compensation
Plan (as amended and restated effective as of January 1,
1994)(filed as Exhibit 10.1 to the Quarterly Report on Form
10-Q of Occidental for the quarterly period ended September
30, 1994, File No. 1-9210).
10.26* Memorandum, dated February 8, 1990, regarding MidCon Corp.
Financial Counseling Program (filed as Exhibit 10.29 to the
Annual Report on Form 10-K of Occidental for the fiscal year
ended December 31, 1989, File No. 1-9210).
10.27* Occidental Petroleum Corporation Senior Executive Deferred
Compensation Plan (effective as of January 1, 1986, as
amended and restated effective as of January 1, 1996)(filed
as Exhibit 10.24 to the Annual Report on Form 10-K of
Occidental for the fiscal year ended December 31, 1995, File
No. 1-9210).
10.28* Occidental Petroleum Corporation Senior Executive
Supplemental Life Insurance Plan (effective as of January 1,
1986, as amended and restated effective as of January 1,
1996)(filed as Exhibit 10.25 to the Annual Report on Form
10-K of Occidental for the fiscal year ended December 31,
1995, File No. 1-9210).
10.29* Occidental Petroleum Corporation Senior Executive
Supplemental Retirement Plan (effective as of January 1,
1986, as amended and restated effective as of January 1,
1996)(filed as Exhibit 10.26 to the Annual Report on Form
10-K of Occidental for the fiscal year ended December 31,
1995, File No. 1-9210).
10.30* Occidental Petroleum Corporation Senior Executive Survivor
Benefit Plan (effective as of January 1, 1986, as amended
and restated effective as of January 1, 1996)(filed as
Exhibit 10.27 to the Annual Report on Form 10-K of
Occidental for the fiscal year ended December 31, 1995, File
No. 1-9210).
10.31* Occidental Petroleum Corporation 1995 Incentive Stock Plan,
effective April 29, 1995 (filed as Exhibit 99.1 to
Occidental's Registration Statement on Form S-8, File No.
33-64719).
10.32* Form of Incentive Stock Option Agreement under Occidental
Petroleum Corporation 1995 Incentive Stock Plan (filed as
Exhibit 99.2 to Occidental's Registration Statement on Form
S-8, File No. 33-64719).
10.33* Form of Nonqualified Stock Option Agreement under Occidental
Petroleum Corporation 1995 Incentive Stock Plan (filed as
Exhibit 99.3 to Occidental's Registration Statement on Form
S-8, File No. 33-64719).
10.34* Form of Stock Appreciation Rights Agreement under Occidental
Petroleum Corporation 1995 Incentive Stock Plan (filed as
Exhibit 99.4 to the Registration Statement on Form S-8, File
No. 33-64719).
10.35* Form of Restricted Stock Agreement under Occidental
Petroleum Corporation 1995 Incentive Stock Plan (filed as
Exhibit 99.5 to the Registration Statement on Form S-8, File
No. 33-64719).
10.36* Form of Performance Stock Agreement under Occidental
Petroleum Corporation 1995 Incentive Stock Plan (filed as
Exhibit 99.6 to the Registration Statement on Form S-8, File
No. 33-64719).
10.37* Occidental Petroleum Corporation 1996 Restricted Stock Plan
for Non-Employee Directors, effective April 26, 1996 (filed
as Exhibit 99.1 to the Registration Statement on Form S-8,
File No. 333-02901).
10.38* Form of Restricted Stock Option Assignment under Occidental
Petroleum Corporation 1996 Restricted Stock Plan for
Non-Employee Directors (filed as Exhibit 99.2 to the
Registration Statement on Form S-8, File No. 333-02901).
</TABLE>
- ---------------------------------------------
* Incorporated herein by reference.
33
<PAGE> 36
<TABLE>
<S> <C>
10.39* Form of Incentive Stock Option Agreement under Occidental
Petroleum Corporation 1995 Incentive Stock Plan (filed as
Exhibit 10.1 to Occidental's quarterly report on Form 10-Q
for the fiscal quarter ended June 30, 1996, File No. 1-9210,
amends Form previously filed as Exhibit 99.2 to Occidental's
Registration Statement on Form S-8, File No. 33-64719 and
incorporated by reference as Exhibit 10.29 to the Annual
Report on Form 10-K of Occidental for the fiscal year ended
December 31, 1995, File No. 1-9210).
10.40* Form of Nonqualified Stock Option Agreement under Occidental
Petroleum Corporation 1995 Incentive Stock Plan (filed as
Exhibit 10.2 to Occidental's quarterly report on Form 10-Q
for the fiscal quarter ended June 30, 1996, File No. 1-9210,
amends Form previously filed as Exhibit 99.3 to Occidental's
Registration Statement on Form S-8, File No. 33-64719 and
incorporates by reference as Exhibit 10.30 to the Annual
Report on Form 10-K of Occidental for the fiscal year ended
December 31, 1995, File No. 1-9210).
10.41* Occidental Petroleum Corporation 1988 Deferred Compensation
Plan (as amended and restated effective as of January 1,
1996) (filed as Exhibit 10.2 to Occidental's quarterly
report on Form 10-Q for the fiscal quarter ended September
30, 1996, File No. 1-9210).
10.42* MidCon Corp. Savings Plan (filed as Exhibit 99.1 to
Occidental's Registration Statement on Form S-8, File No.
333-17879).
10.43* Amendment No. 1 to MidCon Corp. Savings Plan (filed as
Exhibit 99.1 to Occidental's Registration Statement on Form
S-8, File No. 333-17879).
10.44* MidCon Corp. Supplemental Retirement Plan (effective as of
January 1, 1997).
10.45* Form of 1997 Performance Stock Option Agreement under the
1995 Incentive Stock Plan of Occidental Petroleum
Corporation (filed as Exhibit 10.2 to the Quarterly Report
on Form 10-Q of Occidental for the quarterly period ended
June 30, 1997, File No. 1-9210).
10.46* Grant of option agreement, executed October 5, 1997, between
the Department of Energy and Occidental related to the
purchase of the U.S. Government's 78 percent interest in the
Elk Hills field (filed as Exhibit 10.1 to the Quarterly
Report on Form 10-Q of Occidental for the quarterly period
ended September 30, 1997, File No. 1-9210).
10.47* Stock Purchase Agreement dated as of December 18, 1997, by
and among Occidental, as seller, and KN Energy, Inc., as
buyer, together with the exhibits thereto (filed as Exhibit
10.1 to the Current Report on Form 8-K of Occidental dated
January 31, 1998 (date of earliest event reported), File No.
1-9210).
10.48* Amendment No. 1 to Stock Purchase Agreement dated January
30, 1998, between Occidental, as seller, and KN Energy,
Inc., as buyer, together with exhibit thereto (filed as
Exhibit 10.2 to the Current Report on Form 8-K of Occidental
dated January 31, 1998 (date of earliest event reported),
File No. 1-9210).
10.49* Supplemental Agreement dated as of January 20, 1998, by and
between Occidental and KN Energy, Inc., together with the
exhibits thereto (filed as Exhibit 10.3 to the Current
Report on Form 8-K of Occidental dated January 31, 1998
(date of earliest event reported), File No. 1-9210).
12 Statement regarding computation of total enterprise ratios
of earnings to fixed charges for the five years ended
December 31, 1997.
13 Pages 17 through 54 and pages 56 through 64 of Occidental's
Annual Report for the fiscal year ended December 31, 1997,
which are incorporated by reference in Parts I and II of
this Annual Report on Form 10-K.
21 List of subsidiaries of Occidental at December 31, 1997.
23 Consent of Independent Public Accountants.
</TABLE>
- ---------------------------------------------
* Incorporated herein by reference.
34
<PAGE> 37
<TABLE>
<S> <C>
27.1 Financial data schedule of Occidental for the fiscal year ended December 31, 1997 (included only in the
copy of this report filed electronically with the Securities and Exchange Commission).
27.2 Financial data schedule of Occidental for the fiscal year ended December 31, 1995 (included only in the
copy of this report filed electronically with the Securities and Exchange Commission).
27.3 Financial data schedule of Occidental for the fiscal year ended December 31, 1996 (included only in the
copy of this report filed electronically with the Securities and Exchange Commission).
27.4 Financial data schedule of Occidental for the three month period ended March 31, 1996 (included only in
the copy of this report filed electronically with the Securities and Exchange Commission).
27.5 Financial data schedule of Occidental for the six month period ended June 30, 1996 (included only in
the copy of this report filed electronically with the Securities and Exchange Commission).
27.6 Financial data schedule of Occidental for the nine month period ended September 30, 1996 (included only
in the copy of this report filed electronically with the Securities and Exchange Commission).
27.7 Financial data schedule of Occidental for the three month period ended March 31, 1997 (included only in
the copy of this report filed electronically with the Securities and Exchange Commission).
27.8 Financial data schedule of Occidental for the six month period ended June 30, 1997 (included only in
the copy of this report filed electronically with the Securities and Exchange Commission).
27.9 Financial data schedule of Occidental for the nine month period ended September 30, 1997 (included only
in the copy of this report filed electronically with the Securities and Exchange Commission).
</TABLE>
35
<PAGE> 1
<PAGE>
EXHIBIT 3.(i)(b)
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
OCCIDENTAL PETROLEUM CORPORATION
Occidental Petroleum Corporation, a corporation
organized and existing under and by virtue of the General
Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of
the Corporation on February 13, 1997, at which a quorum was
present and acted throughout, resolutions were duly adopted
setting forth a proposed amendment of the Restated
Certificate of Incorporation of the Corporation to
declassify the Board of Directors (the "Amendment"),
declaring the Amendment to be advisable, and directing that
the Amendment be considered at the next annual meeting of
the stockholders of the Corporation.
SECOND: That thereafter on April 25, 1997, the 1997
annual meeting of the Corporation was duly held in
accordance with the by-laws of the Corporation and the
General Corporation Law of the State of Delaware, at which
meeting the necessary number of shares of stock as required
by statute were voted in favor of the following resolution
adopting the Amendment:
NOW, THEREFORE, BE IT RESOLVED, that Paragraph A
of Article VI of the Restated Certificate of
Incorporation, as amended, of this Corporation be
amended so that in its entirety the said Section A
shall read as set forth below:
"A. The business and affairs of the Corporation
shall be managed by or under the direction of a Board
of Directors consisting of not less than ten nor more
than fourteen directors, or such greater number as is
provided for in the following paragraph. The Board of
Directors shall initially consist of fourteen
directors, until the exact number is changed from time
to time within the foregoing limits by, or in such
manner as may be provided in, the By-laws of the
Corporation. The directors shall be divided into three
classes, consisting initially of four, five and five
directors and designated Class I, Class II and Class
III, respectively. Each director elected prior to April
26, 1997 shall serve for the term he was elected, such
that the term of each director elected at the 1995
annual meeting (Class III) shall end at the annual
meeting in 1998, the term of each director elected at
the 1996 annual meeting (Class I) shall end at the
annual meeting in 1999, and the term of each director
elected at the 1997 annual meeting (Class II) shall end
at the annual meeting in 2000. Commencing April 26,
1997, the term of each director elected after that
date, whether at an annual meeting or to
<PAGE>
fill a vacancy in the Board of Directors arising for
any reason, including an increase in the size of the
Board of Directors, shall end at the first annual
meeting following his election. Commencing with the
annual meeting in 2000, the foregoing classification of
the Board of Directors shall cease and all directors
shall be of one class and serve for a term ending at
the annual meeting following the annual meeting at
which the director was elected. In no case will a
decrease in the number of directors shorten the term of
any incumbent director. Each director shall hold office
after the annual meeting at which his term is scheduled
to end until his successor shall be elected and shall
qualify, subject, however, to prior death, resignation,
disqualification or removal from office. Any newly
created directorship resulting from an increase in the
number of directors may be filled by a majority of the
Board of Directors then in office, provided that a
quorum is present, and any other vacancy on the Board
of Directors may be filled by a majority of the
directors then in office, even if less than a quorum,
or by a sole remaining director.
"Notwithstanding the foregoing, whenever the
holders of any one or more classes or series of
preferred stock issued by the Corporation shall have
the right, voting separately by class or series, to
elect directors at an annual or special meeting of
stockholders, the election, term of office, filling of
vacancies and other features of such directorships
shall be governed by the terms of the Certificate of
Incorporation applicable thereto, and such directors so
elected shall be in addition to the number of directors
provided for in the preceding paragraph, and shall not
be divided into classes pursuant to this Article VI
unless expressly provided by such terms."
THIRD: That the Amendment was duly adopted in
accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Amendment of Restated Certificate of
Incorporation to be signed by Donald P. de Brier, its
Executive Vice President and Secretary, this 25th day of
April, 1997.
By D. P. DE BRIER
----------------------
Donald P. de Brier
Executive Vice President
and Secretary
<PAGE> 1
<PAGE>
EXHIBIT 4.1
CONFORMED COPY
======================================================================
OCCIDENTAL PETROLEUM CORPORATION
----------
CREDIT AGREEMENT
dated as of
December 18, 1997
$3,200,000,000
----------
BANCAMERICA ROBERTSON STEPHENS
THE BANK OF NOVA SCOTIA
CHASE SECURITIES INC.
J. P. MORGAN SECURITIES INC.
as Arrangers
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
as Syndication Agent
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
as Documentation Agent
and
THE BANK OF NOVA SCOTIA
THE CHASE MANHATTAN BANK
as Administrative Agents
======================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. .................................................... 2
Definitions .......................................................2
Accumulated Funding Deficiency ....................... 2
Addendum ..............................................2
Administrative Agent ................................. 2
Administrative Agents .................................2
Administrative Questionnaire ..........................2
Affected Bank .........................................2
Agents ................................................2
Agreement .............................................2
Allocable Share ...................................... 2
Alternate Base Rate ...................................3
Alternate Base Rate Loan ..............................3
Applicable Facility Fee Percentage ....................4
Applicable Margin .....................................5
Assenting Bank ........................................6
Assignment and Acceptance .............................6
Bank and Banks ........................................6
Bank Funding Default ..................................6
Board .................................................6
Borrowing .............................................6
Borrowing Date ........................................6
Business Day ..........................................6
Calendar Quarter ......................................6
Capital Adequacy Change ...............................6
Capital Adequacy Rule .................................6
Code ..................................................6
Company ...............................................6
Competitive Bid .......................................7
Competitive Bid Banks .................................7
Competitive Bid Rate ..................................7
Competitive Bid Request ...............................7
Competitive Borrowing .................................7
Competitive Loan ......................................7
Confidential Information ..............................7
Consolidated Adjusted Tangible Net Worth ..............7
Consolidated Debt .....................................7
Consolidated Funded Debt ..............................7
Consolidated Secured Debt .............................7
Consolidated Short-Term Borrowings ....................8
Consolidated Subsidiary ...............................8
Continuing Bank .......................................8
(i)
<PAGE>
Page
----
Documentation Agent ...................................8
Dollars ...............................................8
Domestic Loans and Domestic Loan ......................8
Effective Date ........................................8
Eligible Assignee .....................................8
Elk Hills Acquisition .................................8
Employee Benefit Plan .................................8
ERISA .................................................8
Eurodollar Loan .......................................8
Eurodollar Rate .......................................8
Event of Default ......................................9
Excepted Subsidiary ...................................9
Existing Credit Agreement .............................9
Facility Agent ........................................9
Facility Fee ..........................................9
Fixed Rate Loan .......................................9
Funded Debt ...........................................9
Increased Cost Change .................................9
Indebtedness .........................................10
Indemnified Liabilities ..............................11
Indemnitees and Indemnitee ...........................11
Index Debt ...........................................11
Initial Termination Date .............................11
Interest Payment Date ................................11
Interest Period ......................................11
Interest Rate ........................................11
Lien .................................................11
Loans and Loan .......................................12
Managing Agents ......................................12
Margin ...............................................12
Maturity Date ........................................12
Moody's ..............................................12
Multiemployer Plan ...................................12
Net Proceeds .........................................12
Non-Continuing Bank ..................................12
Officers' Certificate ................................12
Participants and Participant .........................12
PBGC .................................................13
Person ...............................................13
Plan .................................................13
Plan Administrator ...................................13
Plan Sponsor .........................................13
Principal Subsidiaries and Principal Subsidiary ......13
Prohibited Transaction ...............................13
Proportional Share ...................................13
Reference Banks and Reference Bank ...................14
Refinancing Loan .....................................14
Register .............................................14
Regulation D .........................................14
Regulation G .........................................14
Regulation U .........................................14
Regulation X .........................................14
Related Person .......................................14
(ii)
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Replacement Lender ...................................14
Reportable Event .....................................14
Required Banks .......................................14
Revolving Credit Borrowing ...........................15
Revolving Credit Borrowing Request ...................15
Revolving Credit Commitment ..........................15
Revolving Credit Commitments .........................15
Revolving Credit Loan ................................15
Secured Debt .........................................15
Short-Term Borrowing .................................15
Specified Asset Disposition ..........................16
Specified Subsidiary .................................16
S&P ..................................................16
Subsidiary ...........................................16
Syndication Agent ....................................16
Tangible Net Worth ...................................16
Taxes ................................................16
Termination Date .....................................16
Total Commitment .....................................16
Transferee ...........................................16
Unmatured Event of Default ...........................17
Voting Securities ....................................17
SECTION 1.02. ....................................................17
Accounting Terms .................................................17
ARTICLE II
LOAN PROVISIONS
SECTION 2.01. Revolving Credit Commitments; Procedure for
Requests ..........................................17
SECTION 2.02. Competitive Loans; Procedure for Requests .........18
SECTION 2.03. General Terms Relating to the Loans ...............21
SECTION 2.04. Repayment of Loans; Evidence of Debt ..............22
SECTION 2.05. Refinancings ......................................23
SECTION 2.06. Facility Fee ......................................23
SECTION 2.07. Reserve Requirements; Change in Circumstances .....24
SECTION 2.08. Pro Rata Treatment ................................29
SECTION 2.09. Payments ..........................................29
SECTION 2.10. Payments on Business Days .........................29
SECTION 2.11. Net Payments ......................................29
SECTION 2.12. Failed and Credit-Impaired Banks ..................32
SECTION 2.13. Replacement of Non-Continuing Banks ...............34
ARTICLE III
INTEREST PROVISIONS
SECTION 3.01. Interest on Loans .................................35
SECTION 3.02. Interest on Overdue Amounts .......................36
SECTION 3.03. Inability to Determine Eurodollar Rate ............36
SECTION 3.04. Indemnity .........................................37
SECTION 3.05. Rate Determination Conclusive .....................38
(iii)
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ARTICLE IV
REDUCTION, TERMINATION OR EXTENSION OF THE REVOLVING CREDIT
COMMITMENTS AND PREPAYMENTS
SECTION 4.01. Reduction, Termination or Extension of the
Total Commitment ..................................38
SECTION 4.02. Prepayments .......................................39
SECTION 4.03. Required Termination of the Revolving Credit
Commitments and Prepayment ........................40
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Representations and Warranties of the Company .....42
ARTICLE VI
COVENANTS
SECTION 6.01. Affirmative Covenants of the Company ..............46
(a) Reports, Certificates and Other
Information ...................................47
(i) Interim Reports ............................47
(ii) Annual Reports ............................47
(iii) Officers' Certificates. ..................47
(iv) Accountants' Certificates .................48
(vi) Officers' Certificates as to Status
of Excepted Subsidiaries ..................48
(vii) Officers' Certificates as to Status
of Principal Subsidiaries ................48
(viii) Notice of Default .......................49
(ix) Other Information .........................49
(b) Taxes .........................................49
(c) Preservation of Corporate Existence,
etc. ..........................................49
(d) Inspections; Discussions ......................49
(e) Books and Records .............................49
(f) Maintenance of Properties .....................49
(g) Maintenance of Insurance ......................50
(h) Consolidated Adjusted Tangible Net Worth ......50
(i) Compliance with Laws, etc. ....................50
(j) Delivery of Certain Documentation with
Respect to Plans ..............................50
(k) Contributions to Plans ........................51
(l) Use of Proceeds ...............................51
SECTION 6.02. Negative Covenants of the Company .................51
(a) Mergers, Consolidations, Sales ................51
(b) Restriction on Secured Debt ...................52
(c) Restriction on Funded Debt ....................52
(d) Restriction on Dividends from Principal
Subsidiaries ..................................52
(e) Change in Control .............................52
ARTICLE VII
CONDITIONS OF CREDIT
SECTION 7.01. Conditions to Effectiveness of Commitments ........53
SECTION 7.02. Conditions Precedent to All Loans .................54
(iv)
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ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. Events of Default .................................55
ARTICLE IX
THE AGENTS, THE MANAGING AGENTS AND THE BANKS
SECTION 9.01. Appointment and Powers of the Administrative
Agent and the Facility Agent ......................57
SECTION 9.02. Exculpatory Provisions ............................58
SECTION 9.03. Reliance by the Administrative Agent and the
Facility Agent ....................................58
SECTION 9.04. Notice of Default .................................58
SECTION 9.05. Indemnification ...................................59
SECTION 9.06. Nonreliance on the Agents, the Managing
Agents and Other Banks ............................59
SECTION 9.07. The Agents and the Managing Agents in Their
Individual Capacities .............................59
SECTION 9.08. Excess Payments ...................................60
SECTION 9.09. Obligations Several ...............................60
SECTION 9.10. Resignation by any Agent or Managing Agent ........60
ARTICLE X
MISCELLANEOUS
SECTION 10.01. No Waiver; Modifications in Writing ..............60
SECTION 10.02. Confidentiality ..................................61
SECTION 10.03. Notices, etc. ....................................62
SECTION 10.04. Costs, Expenses and Taxes ........................63
SECTION 10.05. Confirmations ....................................63
SECTION 10.06. Successors and Assigns; Participations ...........63
SECTION 10.07. Indemnification ..................................67
SECTION 10.08. Reference Banks ..................................68
SECTION 10.09. Headings .........................................68
SECTION 10.10. Circumstances Requiring Consultation .............68
SECTION 10.11. Execution in Counterparts ........................69
SECTION 10.12. GOVERNING LAW ....................................69
SECTION 10.13. CONSENT TO JURISDICTION AND SERVICE OF
PROCESS; WAIVER OF JURY TRIAL ....................69
SECTION 10.14. Severability of Provisions .......................70
SECTION 10.15. Procedures Relating to Addendum ..................70
(a) Banks Listed on the Signature Pages .............70
(b) Banks Not Listed on Signature Pages .............70
(c) Automatic Amendment of the Agreement ............70
(d) Notification of Administrative Agent, etc. ......70
SECTION 10.16. Maximum Interest .................................70
SECTION 10.17. Special Termination Provision ....................71
(v)
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Schedules
I Revolving Credit Commitments
II Addresses, Telecopier and Telephone Numbers
Exhibits
A Form of Competitive Bid Request
B Form of Notice of Competitive Bid Request
C Form of Competitive Bid
D Form of Revolving Credit Borrowing Request
E Form of Section 7.01(b) Certificate
F Form of Assignment and Acceptance
G Form of Opinion of Robert E. Sawyer, Esq., Counsel to
the Company
H Form of Opinion of Cravath, Swaine & Moore, Special
Counsel to the Agents
I Form of Addendum
J Form of Administrative Questionnaire
(vi)
<PAGE>
CREDIT AGREEMENT
THIS AGREEMENT, dated as of December 18,
1997, is among OCCIDENTAL PETROLEUM
CORPORATION, a Delaware corporation
(hereinafter called the "Company"), the Banks
(as defined below), BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, as syndication
agent (hereinafter, in such capacity,
together with any successor thereto in such
capacity, the "Syndication Agent"), MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, as
documentation agent (hereinafter, in such
capacity, together with any successor thereto
in such capacity, the "Documentation Agent"),
THE BANK OF NOVA SCOTIA and THE CHASE
MANHATTAN BANK, as administrative agents
(hereinafter, in such capacity, together with
any successors to either thereof in such
capacity, the "Administrative Agents", with
each reference herein to the "Administrative
Agent" in the singular meaning THE BANK OF
NOVA SCOTIA), THE CHASE MANHATTAN BANK, as
facility agent (hereinafter, in such
capacity, together with any successor thereto
in such capacity, the "Facility Agent"), and
ABN AMRO BANK, N.V., THE BANK OF NEW YORK,
CANADIAN IMPERIAL BANK OF COMMERCE, CITICORP
USA, INC., CREDIT LYONNAIS NEW YORK BRANCH,
CREDIT SUISSE FIRST BOSTON, DEUTSCHE BANK AG,
NEW YORK BRANCH AND CAYMAN ISLANDS BRANCH,
DRESDNER BANK AG, NEW YORK BRANCH AND GRAND
CAYMAN BRANCH, THE FUJI BANK, LIMITED, LOS
ANGELES AGENCY, KREDIETBANK N.V., MELLON
BANK, N.A., NATIONSBANK OF TEXAS, N.A.,
SOCIETE GENERALE, TORONTO DOMINION (TEXAS)
INC., UNION BANK OF CALIFORNIA, N.A. and
UNION BANK OF SWITZERLAND, HOUSTON AGENCY, as
managing agents (hereinafter, in such
capacity, the "Managing Agents").
W I T N E S S E T H
WHEREAS the Company has requested the Banks to
provide a $3,200,000,000 committed credit facility to
finance the Elk Hills Acquisition (as defined in Article I
hereof) and to pay related costs and expenses, and for
general corporate purposes, including the support of
commercial paper issuances, pursuant to which the Company
may borrow from the Banks pro rata on a revolving credit
basis from time to time on and after the Effective Date and
prior to the Termination Date;
WHEREAS the Company has also requested the Banks
to provide an uncommitted credit facility pursuant to which
the Company may invite Banks from time to time designated by
it to bid on a competitive basis to make short-term loans to
the Company; and
<PAGE>
2
WHEREAS the Banks are willing to provide such
credit facilities to the Company on the terms and conditions
herein set forth;
NOW, THEREFORE, in consideration of the premises
and of the mutual covenants herein contained, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Definitions. As used in this
Agreement, and unless the context requires a different
meaning, the following terms have the meanings indicated
(the meanings given to terms defined herein being equally
applicable to both the singular and plural forms of such
terms):
"Accumulated Funding Deficiency" has the meaning
assigned to that term in Section 412 of the Code.
"Addendum" means an instrument, substantially in
the form of Exhibit I hereto.
"Administrative Agent" has the meaning assigned to
that term in the introduction to this Agreement.
"Administrative Agents" has the meaning assigned
to that term in the introduction to this Agreement.
"Administrative Questionnaire" means an
Administrative Questionnaire substantially in the form of
Exhibit J hereto, which each Bank shall complete and provide
to the Administrative Agent.
"Affected Bank" means, respectively, (i) any Bank
or Participant affected by the events described in Section
2.07(a), Section 2.07(b), Section 2.07(f) or Section 2.11
hereof, (ii) any Bank affected by the events described in
Section 2.12 hereof, (iii) any Bank that shall not have
consented to an extension of the Termination Date requested
by the Company in accordance with Section 4.01(c)(ii)
hereof, or (iv) any Bank affected by the events described in
Section 4.03(a) hereof, as the case may be, but, in the case
of the foregoing clauses (i), (ii) and (iv), only for any
period during which such Bank or Participant shall be
affected by such events.
"Agents" means, collectively, the Syndication
Agent, the Administrative Agent, the Administrative Agents,
the Documentation Agent and the Facility Agent.
"Agreement" means this Agreement, as the same may
at any time be amended or modified and in effect.
"Allocable Share" means, when used with reference
to any Assenting Bank at the time any determination thereof
is to be made, (a) in the case of the Revolving Credit
Commitment and Revolving Credit Loans of an Affected Bank, a
fraction, the numerator of which shall be the Revolving
Credit Commitment of such Assenting Bank
<PAGE>
3
at such time and the denominator of which shall be the
aggregate of the Revolving Credit Commitments of all
Assenting Banks at such time, and (b) in the case of the
Competitive Loans, if any, of an Affected Bank, the
outstanding principal amount thereof, divided among the
Assenting Banks in such proportion as the Company and such
Assenting Banks shall agree.
"Alternate Base Rate" means for any day, a rate
per annum equal to the higher of (a) the Prime Rate in
effect on such day and (b) the Federal Funds Effective Rate
in effect for such day plus 1/2 of 1% per annum.
For purposes hereof, "Prime Rate" means the rate
per annum announced by the Administrative Agent from time to
time as its base rate in effect at its principal office in
the City of New York; each change in the Prime Rate shall be
effective on the date such change is announced as effective.
For purposes hereof, "Federal Funds Effective
Rate" means, for any day, an interest rate per annum equal
to the weighted average of the rates in effect on such day
for overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as
published on the succeeding 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 the day of such transactions received
by the Administrative Agent from three Federal funds brokers
of recognized standing selected by it.
For purposes hereof, any change in the Alternate
Base Rate due to a change in the Federal Funds Effective
Rate shall be effective on the effective date of such
change. If for any reason the Administrative 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 or failure of the
Administrative Agent to obtain sufficient bids or
publications in accordance with the terms hereof, the
Alternate Base Rate shall be the Prime Rate until the
circumstances giving rise to such inability no longer exist.
"Alternate Base Rate Loan" means any Loan with
respect to which the Interest Rate is based on the Alternate
Base Rate.
<PAGE>
4
"Applicable Facility Fee Percentage" means, on any
date, the applicable percentage set forth below based upon
the ratings applicable on such date to Index Debt; provided,
however, that on any date prior to the date on which the
conditions in Section 7.02 hereof are fulfilled, the
Applicable Facility Fee Percentage will mean the applicable
percentage set forth below multiplied by 50%:
PERCENTAGE
----------
LEVEL 1
-------
A- or better by S&P
A3 or better by Moody's .0600%
LEVEL 2
-------
BBB+ by S&P
Baa1 by Moody's .0700%
LEVEL 3
-------
BBB by S&P
Baa2 by Moody's .0800%
LEVEL 4
-------
BBB- by S&P
Baa3 by Moody's .1200%
LEVEL 5
-------
BB+ or below by S&P
Ba1 or below by Moody's .1700%
For purposes hereof, (i) if the ratings established (or
deemed to have been established, as provided in clause (ii)
below) by Moody's and S&P shall fall within different
Levels, the rating in the inferior Level shall be
disregarded, unless one of the ratings is below Level 4, in
which case the Applicable Facility Fee Percentage will be
based on the inferior of the two Levels, (ii) if Moody's or
S&P shall not have in effect a rating for Index Debt (other
than (a) because such rating agency shall no longer be in
the business of rating corporate debt obligations or (b) as
a result of a change in the rating system of Moody's or
S&P), then such rating agency will be deemed to have
established a rating for Index Debt in Level 5 and (iii) if
any rating established (or deemed to have been established,
as provided in clause (ii) above) by Moody's or 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 publicly announced by the
applicable rating agency. Each change in the Applicable
Facility Fee Percentage shall apply during the period
commencing on the effective date of such change and ending
on the date immediately
<PAGE>
5
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 Company and the
Banks (acting through the Administrative Agent) shall
negotiate in good faith to amend the references to specific
ratings in this definition to reflect such changed rating
system or the non-availability of ratings from such rating
agency.
"Applicable Margin" means, on any date, with
respect to any Eurodollar Loan or Alternate Base Rate Loan,
as the case may be, the applicable spread set forth below
based upon the ratings applicable on such date to Index
Debt:
LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 LEVEL 5
S&P A- or better BBB+ BBB BBB- BB+ or below
Moody's A3 or better Baa1 Baa2 Baa3 Ba1 or below
Eurodollar .2400% .2550% .2950% .3300% .5300%
Alternate 0 0 0 0 0
Base Rate
For purposes hereof, (i) if the ratings established (or
deemed to have been established, as provided in clause (ii)
below) by Moody's and S&P shall fall within different
Levels, the rating in the inferior Level shall be
disregarded, unless one of the ratings is below Level 4, in
which case the Applicable Margin will be based on the
inferior of the two Levels, (ii) if Moody's or S&P shall not
have in effect a rating for Index Debt (other than (a)
because such rating agency shall no longer be in the
business of rating corporate debt obligations or (b) as a
result of a change in the rating system of Moody's or S&P),
then such rating agency will be deemed to have established a
rating for Index Debt in Level 5 and (iii) if any rating
established (or deemed to have been established, as provided
in clause (ii) above) by Moody's or 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 publicly announced by the
applicable rating agency. Each change in the Applicable
Margin 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
Company and the Banks (acting through the Administrative
Agent) shall negotiate in good faith to amend the references
to specific ratings in this definition to reflect such
changed rating system or the non-availability of ratings
from such rating agency. Notwithstanding the foregoing, the
Applicable Margin in effect at any time for Eurodollar Loans
shall be increased (a) by .05% per annum on any date on
which the aggregate principal amount of the outstanding
Loans exceeds 50% of the aggregate amount of the Revolving
Credit Commitments at the time in effect (or, if the
Revolving Credit Commitments shall have terminated, 50% of
the aggregate amount of the Revolving Credit Commitments
immediately in effect prior to such termination), and (b) by
an additional .05% per annum on each date after the second
anniversary of the Effective Date.
<PAGE>
6
"Assenting Bank" has the meaning assigned to that
term in Section 2.07(e)(ii) hereof.
"Assignment and Acceptance" means an instrument
substantially in the form of Exhibit F hereto.
"Bank" and "Banks" mean, respectively, (i) each
bank or financial institution which becomes a party to this
Agreement by signing on the signature pages hereto, by
signing an Addendum or pursuant to Section 10.06(c) hereof,
and (ii) all such banks and financial institutions.
"Bank Funding Default" means any failure by the
Company to repay any portion of a Loan which otherwise would
have been repaid in accordance with the second sentence of
Section 2.05 hereof from proceeds of a new Loan or Loans,
which failure is attributable solely to the failure of any
Bank to make available all or any portion of the new Loan or
Loans to be made by such Bank pursuant to Section 2.05
hereof.
"Board" means the Board of Governors of the
Federal Reserve System of the United States.
"Borrowing" means a borrowing by the Company from
the Banks (or any of them) pursuant to this Agreement
(including any such borrowing made as a result of the
operation of Section 2.05, Section 2.07(e)(ii), Section
2.07(e)(iii), Section 2.11(c)(i), Section 2.12(i), Section
2.13(i), Section 4.03(b)(ii), or Section 4.03(b)(iii)
hereof, as the case may be).
"Borrowing Date" means the date on which a
Borrowing is, or is to be, consummated, as the context may
indicate.
"Business Day" means any day not a Saturday,
Sunday or legal holiday in the State of New York and on
which banks and the Federal Reserve Bank of New York are
open for business in New York City; provided, however, that
when used in connection with a Eurodollar Loan, the term
"Business Day" shall also exclude any day on which banks are
not open for dealings in Dollar deposits in the London
Interbank Market.
"Calendar Quarter" means a calendar quarter ending
on the last day of any March, June, September or December.
"Capital Adequacy Change" has the meaning assigned
to that term in Section 2.07(b) hereof.
"Capital Adequacy Rule" has the meaning assigned
to that term in Section 2.07(b) hereof.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time and in effect.
"Company" has the meaning assigned to that term in
the introduction to this Agreement.
<PAGE>
7
"Competitive Bid" means an offer by a Competitive
Bid Bank to make a Competitive Loan pursuant to Section 2.02
hereof.
"Competitive Bid Banks" means those Banks from
time to time designated by the Company, by written notice to
the Administrative Agent, as Competitive Bid Banks entitled
to submit Competitive Bids pursuant to Section 2.02(c)
hereof.
"Competitive Bid Rate" means, as to any
Competitive Bid made by a Bank pursuant to Section 2.02(c)
hereof, (a) in the case of a Eurodollar Loan, the Margin,
and (b) in the case of a Fixed Rate Loan, the fixed rate of
interest offered by the Bank making such Competitive Bid.
"Competitive Bid Request" means a request made
pursuant to Section 2.02(a) hereof substantially in the form
of Exhibit A hereto.
"Competitive Borrowing" means, as the case may be,
(a) a Borrowing consisting of a Competitive Loan from a
Competitive Bid Bank whose Competitive Bid, accepted by the
Company, is equal to the entire amount of such Borrowing, or
(b) a Borrowing consisting of concurrent Competitive Loans
from each of the Competitive Bid Banks whose Competitive Bid
as a part of such Borrowing has been accepted by the
Company, in each case pursuant to the bidding procedure
described in Section 2.02 hereof.
"Competitive Loan" means a Loan from a Competitive
Bid Bank to the Company pursuant to the bidding procedure
described in Section 2.02 hereof.
"Confidential Information" has the meaning
assigned to that term in Section 10.02 hereof.
"Consolidated Adjusted Tangible Net Worth" means
the total of the Tangible Net Worth of the Company and its
Specified Subsidiaries, determined on a consolidated basis
in accordance with generally accepted accounting principles,
after eliminating all inter-company items.
"Consolidated Debt" means the sum of, without
duplication (i) Consolidated Funded Debt, including that
portion of Consolidated Funded Debt maturing within one year
from the date of such determination, (ii) Consolidated Short-
Term Borrowings and (iii) obligations reflected for
financial reporting purposes as deferred credits for revenue
from sales of future production of the Company and its
Specified Subsidiaries.
"Consolidated Funded Debt" means the total of all
Funded Debt of the Company and its Specified Subsidiaries,
determined on a consolidated basis in accordance with
generally accepted accounting principles, after eliminating
all inter-company items.
"Consolidated Secured Debt" means the total of all
Secured Debt of the Company and its Specified Subsidiaries
other than any such Secured Debt which is owed by a
Specified Subsidiary to the Company or which is owed by one
Specified Subsidiary to another Specified Subsidiary.
<PAGE>
8
"Consolidated Short-Term Borrowings" means the
total of all Short-Term Borrowings of the Company and its
Specified Subsidiaries, determined on a consolidated basis
in accordance with generally accepted accounting principles,
after eliminating all inter-company items.
"Consolidated Subsidiary" means any Subsidiary of
the Company included in the financial statements of the
Company and its Subsidiaries prepared on a consolidated
basis in accordance with generally accepted accounting
principles.
"Continuing Bank" has the meaning assigned to that
term in Section 4.01(c)(ii) hereof.
"Documentation Agent" has the meaning assigned to
that term in the introduction to this Agreement.
"Dollars" and the symbol "$" mean the lawful
currency of the United States of America.
"Domestic Loans" and "Domestic Loan" mean,
respectively, (a) any Loans during any period in which such
Loans bear Interest Rates determined with reference to the
Alternate Base Rate and (b) a single such Loan during any
such period.
"Effective Date" means the date upon which the
conditions of Section 7.01 shall have been satisfied. The
Effective Date is December 18, 1997.
"Eligible Assignee" means a commercial bank having
total assets in excess of $8,000,000,000 or any other
financial institution mutually acceptable to the Company and
the Administrative Agent.
"Elk Hills Acquisition" means the acquisition by
the Company from the United States Department of Energy of
the U.S. Government's ownership interest in the Elk Hills
Field, on the terms set forth in the Company's Current
Report to the Securities and Exchange Commission on Form 8-K
dated October 6, 1997.
"Employee Benefit Plan" has the meaning assigned
to the term "employee benefit plan" in Section 3(3) of
ERISA.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time and in
effect.
"Eurodollar Loan" means any Loan with respect to
which the Company shall have selected an Interest Rate based
on the Eurodollar Rate in accordance with the provisions of
Article II hereof.
"Eurodollar Rate" means, for any Interest Period
with respect to any Eurodollar Loan, the rate per annum
which is equal to the arithmetic average (as determined by
the Administrative Agent (subject to Section 10.08 hereof)
on the basis of quotations, if any, received by the
Administrative Agent from the Reference Banks, with such
average expressed as a percentage and rounded, if necessary,
to the nearest 1/10,000 of one percent) of the average rate
per annum at which each Reference Bank is offered deposits
in Dollars by prime banks in the London Interbank Eurodollar
market as of 11:00 a.m., London time, on the day which is
two (2) Business Days prior to the
<PAGE>
9
beginning of such Interest Period, for settlement on the
first day of such Interest Period and for the approximate
number of days comprised therein, in an amount comparable to
the amount of such Reference Bank's portion of the principal
amount of the Revolving Credit Borrowing of which such
Eurodollar Loan forms a part (or, in the case of a
Competitive Loan, a principal amount that would have been
such Reference Bank's portion of the Revolving Credit
Borrowing had such Competitive Borrowing been a Revolving
Credit Borrowing).
"Event of Default" has the meaning assigned to
that term in Section 8.01 hereof.
"Excepted Subsidiary" means (a) Occidental
Receivables, Inc., a California corporation, but only until
such time, if any, as it has been withdrawn from status as
an Excepted Subsidiary by an Officers' Certificate
hereinafter referred to, effective as of the date of such
Officers' Certificate, (b) effective as of the date of the
Officers' Certificate hereinafter referred to, any
Subsidiary of the Company which has been designated as an
Excepted Subsidiary after the Effective Date by an Officers'
Certificate and has not been withdrawn from status as an
Excepted Subsidiary by a subsequent Officers' Certificate
effective as of the date of such subsequent Officers'
Certificate; provided that no Subsidiary of the Company may
be designated as an Excepted Subsidiary unless, immediately
after giving effect to such designation, the Company could
become liable with respect to at least $1.00 of additional
Funded Debt in compliance with Section 6.02(c) hereof, and
(c) every Subsidiary of one or more Excepted Subsidiaries.
"Existing Credit Agreement" means the Credit
Agreement dated as of March 20, 1997, among the Company, the
banks party thereto, J. P. Morgan Securities Inc. and
BancAmerica Securities, Inc., as Co-Syndication Agents, The
Chase Manhattan Bank, as Documentation Agent, and The Bank
of Nova Scotia, as Administrative Agent.
"Facility Agent" has the meaning assigned to that
term in the introduction to this Agreement.
"Facility Fee" has the meaning assigned to that
term in Section 2.06 hereof.
"Fixed Rate Loan" means any Competitive Loan made
by a Bank pursuant to Section 2.02 hereof based upon a fixed
rate per annum offered by such Bank (expressed as a
percentage to 1/10,000 of one percent) and accepted by the
Company.
"Funded Debt" means, with respect to any Person,
all Indebtedness of such Person (a) maturing one year or
more from the date of the creation thereof, (b) directly or
indirectly renewable or extendible, at the option of the
debtor, by its terms or by the terms of any instrument or
agreement relating thereto, to a date one year or more from
the date of the creation thereof, and (c) under a revolving
credit or similar agreement obligating the lender or lenders
to extend credit over a period of one year or more, even
though such Indebtedness may also conform to the definition
of Short-Term Borrowing.
"Increased Cost Change" has the meaning assigned
to that term in Section 2.07(a) hereof.
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10
"Indebtedness" means, with respect to any Person,
as of the date on which Indebtedness is to be determined,
(a) all items (except items of capital stock or of surplus
or of deferred credits and other liabilities combined with
deferred credits for financial reporting purposes or
minority interests in Subsidiaries of such Person) which in
accordance with generally accepted accounting principles
applied in the preparation of the financial statements of
the Company and its Consolidated Subsidiaries would be
included in determining total liabilities as shown on the
liability side of a balance sheet of such Person, (b) all
indebtedness secured by any mortgage on, or other security
interest in, any property or asset owned or held by such
Person subject thereto, whether or not the indebtedness
secured thereby shall have been assumed by such Person and
(c) all indebtedness of others which such Person has
directly or indirectly guaranteed, endorsed (otherwise than
for collection or deposit in the ordinary course of
business), discounted with recourse, agreed (contingently or
otherwise) to purchase or repurchase or otherwise acquire,
or in respect of which such Person has otherwise become
directly or indirectly liable. For the purpose of computing
the Indebtedness of any Person, there shall be excluded any
particular Indebtedness which meets one or more of the
following categories:
(i) Indebtedness with respect to which sufficient
cash or cash equivalents or securities shall have been
deposited in trust to provide for the full payment,
redemption or satisfaction of the principal of,
premium, if any, and interest to accrue on, such
Indebtedness to the stated maturity thereof or to the
date of prepayment thereof, as the case may be, and as
a result of such deposit such particular Indebtedness,
in accordance with generally accepted accounting
principles, shall no longer be required to be reported
on a balance sheet of such Person as a liability, and
such cash or cash equivalents or securities shall not
be required to be reported as an asset;
(ii) Indebtedness which is not classified as
Indebtedness under clause (a) of the definition of
Indebtedness and (x) which arises from any commitment
of such Person relating to pipeline operations to pay
for property or services substantially without regard
to the non-delivery of such property or the non-
furnishing of such services or (y) which is
Indebtedness of a partnership, joint venture or similar
entity less than a majority of the equity interest of
which is at the time owned by such Person or by such
Person and one or more Subsidiaries of such Person or,
if such Person is a Subsidiary of the Company, by such
Person and either the Company or one or more other
Subsidiaries of the Company or by such Person and the
Company and one or more other Subsidiaries of the
Company and which is payable solely out of the property
or assets owned or held by such partnership, joint
venture or similar entity or is secured by a mortgage
on, or other security interest in, the property or
assets owned or held by such partnership, joint venture
or similar entity, in either case without any further
recourse to or liability of such Person; or
(iii) Indebtedness which is not classified as
Indebtedness under clause (a) of the definition of
Indebtedness and which is payable solely out of certain
property or assets of such Person, or is secured by a
mortgage on, or other security interest in, certain
property or assets owned or held by such Person, in
either case without any further recourse to or
liability of such Person, to the extent such
Indebtedness exceeds (x) if such Person records such
property or assets on its books, the value for such
property or assets recorded on such books or (y) if
such Person does not record such property or assets on
its books, (1) if such
<PAGE>
11
Indebtedness is a general obligation of the entity
which does record such property or assets on its books,
the net investment in or advances to such entity as
recorded on the books of such Person or (2) if such
Indebtedness is payable solely out of certain property
or assets of such entity, the lesser of the value for
such property or assets recorded on the books of such
entity or the net investment in or advances to such
entity as recorded on the books of such Person, in each
case determined in accordance with generally accepted
accounting principles.
"Indemnified Liabilities" has the meaning assigned
to that term in Section 10.07 hereof.
"Indemnitees" and "Indemnitee" have the respective
meanings assigned to those terms in Section 10.07 hereof.
"Index Debt" means senior, unsecured, non-credit-
enhanced, publicly- held, long-term indebtedness for
borrowed money of the Company.
"Initial Termination Date" means December 17,
1998.
"Interest Payment Date" means (a) with respect to
Alternate Base Rate Loans, the last day of each Calendar
Quarter, commencing with the first of such dates to occur
after the date of this Agreement, and the Maturity Date, (b)
with respect to any Eurodollar Loan, the last day of the
Interest Period applicable thereto and, in the case of a
Eurodollar Loan with an Interest Period of 6 months, also
the day that would have been the Interest Payment Date for
such Loan had an Interest Period of 3 months been applicable
to such Loan, and (c) in the case of a Fixed Rate Loan, the
last day of the Interest Period applicable thereto and in
the case of a Fixed Rate Loan with an Interest Period of
more than 90 days, each day within such Interest Period that
would have been an Interest Payment Date had such Loan been
a series of consecutive Fixed Rate Loans with 90-day
Interest Periods.
"Interest Period" means (a) as to any Eurodollar
Loan, the period commencing on the Borrowing Date of such
Loan and ending on the numerically corresponding day (or if
there is no such corresponding day, the last day) in the
calendar month that is 1, 2, 3 or 6 months later, as the
Company may elect, (b) as to any Alternate Base Rate Loan,
the period commencing on the Borrowing Date of such Loan and
ending 90 days later or, if earlier, on the date of
prepayment of such Loan and (c) as to any Fixed Rate Loan,
the period commencing on the Borrowing Date of such Loan and
ending on the date specified in the Competitive Bid accepted
by the Company with respect to such Fixed Rate Loan, which
period shall not be less than 8 days or more than 360 days;
provided, however, that (i) if any Interest Period would end
on a day which shall not be a Business Day, such Interest
Period shall be extended to the next succeeding Business Day
unless, with respect to Eurodollar 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, and (ii) no Interest Period may
be selected that ends later than the Maturity Date.
"Interest Rate" means the rate or rates of
interest to be determined as provided in Article III hereof.
"Lien" means and includes any mortgage, pledge,
lien, security interest, conditional sale or other title
retention agreement or other similar encumbrance.
<PAGE>
12
"Loans" and "Loan" mean, respectively, (a) all
loans made by the Banks or Competitive Bid Banks or a single
Bank or Competitive Bid Bank (as the context may indicate)
to the Company pursuant to this Agreement (including any
such loan made as a result of the operation of Section 2.05,
Section 2.07(e)(ii), Section 2.07(e)(iii), Section
2.11(c)(i), Section 2.12(i), Section 2.13(i), Section
4.03(b)(ii) or Section 4.03(b)(iii) hereof, as the case may
be), and (b) a single such loan made by any Bank or
Competitive Bid Bank.
"Managing Agents" has the meaning assigned to that
term in the introduction to this Agreement.
"Margin" means, as to any Competitive Bid relating
to a Eurodollar Loan, the margin (expressed as a percentage
rate per annum and rounded, if necessary, to the nearest
1/10,000 of one percent) to be added to or subtracted from
the Eurodollar Rate to determine the interest rate offered
by such Competitive Bid Bank with respect to such Eurodollar
Loan.
"Maturity Date" means the Termination Date;
provided, that if the Company shall so request in a notice
delivered to the Administrative Agent (which shall promptly
deliver a copy of such notice to each Bank) not later than
the 30th day prior to the Termination Date, the Maturity
Date will be extended to and will occur on December 18,
2000.
"Moody's" means Moody's Investors Service, Inc. or
any successor thereto.
"Multiemployer Plan" has the meaning assigned to
the term "multiemployer plan" in Section 3(37) of ERISA.
"Net Proceeds" means, as to any Specified Asset
Disposition, cash proceeds as and when received by the
Company or any Subsidiary, net of (a) the direct costs
relating to such Specified Asset Disposition excluding
amounts payable of such direct costs to the Company or any
Subsidiary, (b) sales, use or other transaction taxes, (c)
an assumed 37.6% federal and state income tax, paid or
payable as a direct result thereof, (d) amounts required to
be applied to repay principal, interest and prepayment
premiums and penalties on purchase money Indebtedness
secured by a Lien on the asset which is the subject of the
Specified Asset Disposition, (e) amounts required to pay all
foreign income taxes and (f) any withholding taxes
associated with repatriation of such amounts to the United
States.
"Non-Continuing Bank" has the meaning assigned to
that term in Section 4.01(c)(ii) hereof.
"Officers' Certificate" means a certificate
executed on behalf of the Company by its President or one of
its Vice Presidents and by one of its other Vice Presidents
or its Treasurer or one of its Assistant Treasurers or its
Controller or one of its Assistant Controllers.
"Participants" and "Participant" mean,
respectively, (a) the banks and other entities referred to
in Section 10.06(b) hereof, and (b) any one of such banks or
other entities.
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13
"PBGC" means the Pension Benefit Guaranty
Corporation established pursuant to Subtitle A of Title IV
of ERISA.
"Person" means a corporation, an association, a
partnership, an organization, a business, an individual, a
government or a political subdivision thereof or a
governmental agency.
"Plan" means (a) with respect to the Company, any
plan described in Section 4021(a) of ERISA and not excluded
pursuant to Section 4021(b) thereof, under which the Company
or any Related Person to the Company has contributed, and
(b) with respect to any other Person, any employee benefit
plan or other plan established or maintained by such Person
for the benefit of such Person's employees and to which
Title IV of ERISA applies.
"Plan Administrator" has the meaning assigned to
the term "administrator" in Section 3(16)(A) of ERISA.
"Plan Sponsor" has the meaning assigned to the
term "plan sponsor" in Section 3(16)(B) of ERISA.
"Principal Subsidiaries" and "Principal
Subsidiary" mean, respectively, (a) the following Persons
(or any other Person which is, directly or indirectly, the
survivor or successor in interest in any merger or
consolidation involving, or the transferee with respect to
all or substantially all of the assets of, the following
Persons): MidCon Corp., a Delaware corporation, Natural Gas
Pipeline Company of America, a Delaware corporation,
Occidental Chemical Corporation, a New York corporation,
Occidental Chemical Holding Corporation, a California
corporation, Occidental International Exploration and
Production Company, a California corporation, Occidental Oil
and Gas Corporation, a California corporation, Occidental
Petroleum Investment Co., a California corporation, Oxy CH
Corporation, a California corporation, Oxy Chemical
Corporation, a California corporation, Oxy Petrochemicals
Inc., a Delaware corporation, OXY USA Inc., a Delaware
corporation, and any other Person which shall have become a
Subsidiary of the Company after September 30, 1997, and
shall have, according to its most recent audited year-end
financial statements (or, if there are no audited financial
statements for its most recent fiscal year, its most recent
unaudited year-end financial statements) available at the
date it became a Subsidiary, total assets in excess of 5% of
the consolidated assets of the Company and its Consolidated
Subsidiaries shown on the Company's most recent audited year-
end financial statements available at such time, and (b) any
one of such Persons (or any other Person which is, directly
or indirectly, the survivor or successor in interest in any
merger or consolidation involving, or the transferee with
respect to all or substantially all of the assets of, any
one of such Persons); provided that, notwithstanding the
foregoing, no Excepted Subsidiary and no Person which is not
a Consolidated Subsidiary shall be a Principal Subsidiary.
"Prohibited Transaction" has the respective
meanings assigned to that term in Section 4975 of the Code
and in Section 406 of ERISA.
"Proportional Share" means, at the time any
determination thereof is to be made and when used with
reference to any Bank and any described aggregate or total
amount, an amount equal to the result obtained by
multiplying such described aggregate or total amount by a
fraction, the numerator of which shall be such Bank's
Revolving Credit Commitment at such time and the denominator
of which shall be the Total
<PAGE>
14
Commitment at such time; provided, however, that if prior to
the time of such determination the Revolving Credit
Commitments shall have been terminated pursuant to Section
8.01 hereof, any determination of Proportional Share shall
be based upon the amounts of Revolving Credit Commitments
and Total Commitment in effect immediately prior to such
termination.
"Reference Banks" and "Reference Bank" mean,
respectively, (a) the following Persons: ABN AMRO Bank
N.V., The Bank of Nova Scotia, and The Chase Manhattan Bank,
or any other Person hereafter appointed as a Reference Bank
pursuant to Section 10.08 hereof, and (b) any one of such
Persons.
"Refinancing Loan" means (A) any Revolving Credit
Loan (i) which is made on the date of repayment of any other
Revolving Credit Loan and (ii) all of the proceeds of which
are applied, in accordance with Section 2.05 hereof, to the
repayment of such other Revolving Credit Loan and (B) any
Revolving Credit Loan (i) which is made on the date of
prepayment of any other Revolving Credit Loan and (ii) all
of the proceeds of which are applied, in accordance with
Section 4.02 hereof, to the prepayment of such other
Revolving Credit Loan. A Refinancing Loan may be a
Eurodollar Loan, an Alternate Base Rate Loan, or a
combination thereof, irrespective of whether the Loan or
Loans being refinanced with the proceeds of such Refinancing
Loan were bearing interest based upon the same or a
different interest rate basis as such Refinancing Loan.
"Register" has the meaning assigned to that term
in Section 10.06(e) hereof.
"Regulation D" means Regulation D of the Board, as
the same may at any time be amended or modified and in
effect.
"Regulation G" means Regulation G of the Board, as
the same may at any time be amended or modified and in
effect.
"Regulation U" means Regulation U of the Board, as
the same may at any time be amended or modified and in
effect.
"Regulation X" means Regulation X of the Board, as
the same may at any time be amended or modified and in
effect.
"Related Person" means, with respect to any
Person, any trade or business (whether or not incorporated)
which, together with such Person, is under common control as
described in Section 414(c) of the Code.
"Replacement Lender" means a lending institution
designated by the Company pursuant to Section 2.07(e)(iv),
Section 2.11(c)(ii), Section 2.12(ii), Section 2.13(ii), or
Section 4.03(b)(iv) hereof, which, at the time of such
designation, is not a Bank.
"Reportable Event" means a "reportable event"
described in Section 4043(b) of ERISA.
"Required Banks" means, at the time any
determination thereof is to be made, (i) Banks whose
Revolving Credit Commitments aggregate at least 51% of the
Total Commitment, or (ii) if the Revolving Credit
Commitments shall have been
<PAGE>
15
terminated pursuant to Section 8.01 hereof at the time when
no Loans are outstanding, Banks whose Revolving Credit
Commitments immediately prior to such termination aggregated
at least 51% of the Total Commitment immediately prior to
such termination, or (iii) if the Revolving Credit
Commitments shall have been terminated other than as
provided in clause (ii) above, Banks with Revolving Credit
Loans which aggregate at least 51% of the total aggregate
Revolving Credit Loans.
"Revolving Credit Borrowing" means a Borrowing (a)
pursuant to Section 2.01(a) or Section 2.05 hereof
consisting of simultaneous Revolving Credit Loans from each
of the Banks in accordance with their respective
Proportional Share of such Borrowing, or (b) made as a
result of the operation of Section 2.07(e)(ii), Section
2.07(e)(iii), Section 2.11(c)(i), Section 2.12(i), Section
2.13(i), Section 4.03(b)(ii), or Section 4.03(b)(iii)
hereof.
"Revolving Credit Borrowing Request" means a
request made pursuant to Section 2.01(b) hereof
substantially in the form of Exhibit D hereto.
"Revolving Credit Commitment" means, when used
with reference to any Bank at the time any determination
thereof is to be made, the amount of such Bank's commitment
hereunder to extend credit to the Company as set forth in
Section 2.01(a) hereof, which Revolving Credit Commitment,
subject to Section 8.01 hereof, shall be the amount set
forth opposite the name of such Bank on Schedule I hereto or
the amount set forth in an Addendum of such Bank delivered
in accordance with Section 10.15 hereof, as such commitment
may from time to time be adjusted under Section 2.07(e)(ii),
Section 2.11(c)(i), Section 2.12(i), Section 2.13(i) or
Section 4.03(b)(ii) hereof, reduced by the amount of any
permanent reduction(s) in such amount made pursuant to
Section 4.01 or Section 4.03 hereof.
"Revolving Credit Commitments" means each
Revolving Credit Commitment, collectively.
"Revolving Credit Loan" shall have the meaning
assigned to that term in Section 2.01(a) hereof.
"Secured Debt" means any Funded Debt of the
Company or any Specified Subsidiary secured by a Lien on
assets of the Company or any Specified Subsidiary, plus
(without duplication) obligations of the Company or any
Specified Subsidiary reflected for financial reporting
purposes as deferred credits for revenue from sales of
future production secured by a Lien on any property of the
Company or any Specified Subsidiary. For the purpose of
computing Secured Debt, the portion of any secured
obligation which exceeds the book value (as reflected on the
Company's consolidated balance sheet) of the assets of the
Company and its Specified Subsidiaries securing such
obligation shall be excluded.
"Short-Term Borrowing" means, with respect to any
Person, all Indebtedness of such Person in respect of
borrowed money maturing on demand or within one year from
the date of the creation thereof and not directly or
indirectly renewable or extendible, at the option of the
debtor, by its terms or by the terms of any instrument or
agreement relating thereto, to a date one year or more from
the date of the creation thereof; provided that Indebtedness
of such Person in respect of borrowed money arising under a
revolving credit or similar agreement which obligates the
lender or lenders to extend credit over a period of one year
or more shall constitute Funded Debt and not a
<PAGE>
16
Short-Term Borrowing even though the same matures on demand
or within one year from the date as of which such Short-Term
Borrowing is to be determined.
"Specified Asset Disposition" means a divestiture
of MidCon Corp., a Delaware corporation, or any substantial
portion of the assets of MidCon Corp., a Delaware
corporation, or any sale of other assets determined by the
Company in its sole discretion to be non-strategic assets
(other than individual transactions having aggregate Net
Proceeds not exceeding $10,000,000 for each such
transaction).
"Specified Subsidiary" means, at any time, any
Consolidated Subsidiary, a majority (by number of votes) of
the Voting Securities of which is at such time owned
directly by the Company or by one or more of its Specified
Subsidiaries, or by the Company and one or more of its
Specified Subsidiaries, and which is not at such time
designated as an Excepted Subsidiary; provided that (i) at
the time any Subsidiary of the Company is withdrawn from
status as an Excepted Subsidiary, such Subsidiary shall not
be liable with respect to any Indebtedness which it could
not become liable with respect to hereunder on the date of
such withdrawal if it were then a Specified Subsidiary, and
(ii) immediately after giving effect to such withdrawal, no
Event of Default or Unmatured Event of Default shall have
occurred and be continuing.
"S&P" means Standard & Poor's Corporation or any
successor thereto.
"Subsidiary" means, with respect to any Person,
any corporation, association, partnership or other business
entity, a majority (by number of votes) of the Voting
Securities of which is at the time owned by such Person or
by one or more of its Subsidiaries or by such Person and one
or more of its Subsidiaries.
"Syndication Agent" has the meaning assigned to
that term in the introduction to this Agreement.
"Tangible Net Worth" of any Person means the sum
of the amounts set forth on the balance sheet of such Person
as (a) the par or stated value of all outstanding capital
stock and (b) capital surplus, earned surplus and premium on
capital stock less (i) the par or stated value of all
redeemable preferred stock, (ii) that portion of the book
value of all assets which would be treated as intangibles
under generally accepted accounting principles, including
without limitation, all such items as goodwill, trademarks,
trade names, brands, copyrights, patents, licenses and
rights with respect to the foregoing and unamortized debt
discount and expenses, and (iii) all investments in or
advances to Excepted Subsidiaries appearing on the asset
side of such balance sheet.
"Taxes" has the meaning assigned to that term in
Section 2.11(a) hereof.
"Termination Date" means the earlier of December
17, 1998 (subject to extension as provided in Section
4.01(c) hereof), or the date on which the Revolving Credit
Commitments shall terminate in accordance with the terms of
this Agreement.
"Total Commitment" means at any time the
determination thereof is to be made, the aggregate amount of
the Revolving Credit Commitments of the Banks, as in effect
at such time.
"Transferee" has the meaning assigned to that term
in Section 10.06(g) hereof.
<PAGE>
17
"Unmatured Event of Default" means an event, act
or occurrence which with the giving of notice or the lapse
of time (or both) would become an Event of Default.
"Voting Securities" means stock or partnership
interests of any class or classes (however designated), the
holders of which are at the time entitled, as such holders,
to vote for the election of a majority of the directors (or
persons performing similar functions) of the corporation,
association, partnership or other business entity in
question, other than stock or partnership interests having
the right so to vote solely by reason of the happening of a
contingency.
SECTION 1.02. Accounting Terms. All accounting
terms not specifically defined herein shall be construed in
accordance with generally accepted accounting principles as
in effect from time to time, including, without limitation,
applicable statements, bulletins and interpretations issued
by the Financial Accounting Standards Board and bulletins,
opinions, interpretations and statements issued by the
American Institute of Certified Public Accountants or its
committees. In the event that an actual or anticipated
change (which term for all purposes of this Agreement
includes, without limitation, the adoption of a new
statement of financial accounting standards) in generally
accepted accounting principles would affect the computation
of any dollar amounts or ratios referred to in the financial
covenants herein, the parties to the Agreement will,
promptly upon request, enter into negotiations in good faith
in an effort to agree upon amendments which will most nearly
preserve the original intent of such financial covenants.
Pending agreement on such amendments, such financial
covenants will remain in effect but will be measured by
reference to generally accepted accounting principles as in
effect immediately prior to such change. When used herein,
the term "financial statements" shall include the notes and
schedules thereto, but need not include such notes or
schedules when used with reference to such statements of any
Person as of any date other than the end of a fiscal year of
such Person.
ARTICLE II
LOAN PROVISIONS
SECTION 2.01. Revolving Credit Commitments;
Procedure for Requests. (a) Subject to the terms and
conditions of this Agreement, each Bank, severally and not
jointly, agrees to make revolving credit loans ("Revolving
Credit Loans") to the Company at any time and from time to
time on or after the Effective Date and until the
Termination Date (and, to the extent provided in Section
2.05(b), on or after the Termination Date); provided,
however, that (i) at no time shall the outstanding aggregate
principal amount of all Revolving Credit Loans made by a
Bank exceed its Proportional Share of the outstanding
aggregate principal amount of all Revolving Credit Loans
made by all Banks (notwithstanding the fact that the
aggregate principal amount outstanding at any time of all
Revolving Credit Loans and Competitive Loans, or, except as
set forth in clause (ii) below, any combination thereof,
made by a Bank may exceed the Revolving Credit Commitment of
such Bank then in effect), (ii) at no time prior to the
Termination Date shall the sum of the aggregate principal
amount outstanding of all Revolving Credit Loans of any Bank
exceed the Revolving Credit Commitment of such Bank, and
(iii) at no time prior to the Termination Date shall the sum
of the outstanding aggregate principal amount of all
Revolving Credit Loans and Competitive Loans exceed the
Total Commitment; provided further that nothing contained
herein shall be deemed to prohibit the making of, or to
relieve any Bank of its obligation to make, Revolving Credit
Loans
<PAGE>
18
the proceeds of which are to be applied solely to the
repayment of principal of any Loan pursuant to Section 2.05
hereof. The Company may borrow, repay, prepay and reborrow
Revolving Credit Loans on or after the Effective Date and
prior to the Termination Date (and, to the extent provided
in Section 2.05(b), on or after the Termination Date). The
Revolving Credit Commitments shall automatically and
permanently terminate on the Termination Date, subject to
the right of the Company to refinance Revolving Credit Loans
to the extent provided in Section 2.05(b).
(b) To effect a Revolving Credit Borrowing, the
Company shall give the Administrative Agent notice (by
telephone (confirmed promptly in writing) or telecopier),
substantially in the form of Exhibit D hereto, (i) in the
case of a Revolving Credit Borrowing consisting of
Eurodollar Loans, not later than 12:00 noon, New York City
time, three Business Days before such Revolving Credit
Borrowing, and (ii) in the case of a Revolving Credit
Borrowing consisting of Alternate Base Rate Loans, not later
than 10:00 a.m., New York City time, on the proposed
Borrowing Date of such Revolving Credit Borrowing. Such
notice shall be irrevocable (except as provided in Section
2.07(e)(i), Section 2.11(c)(iii), Section 3.03(b) or Section
4.03(b)(i) hereof) and shall in each case refer to this
Agreement and specify (x) whether the Loans then being
requested are to be Eurodollar Loans or Alternate Base Rate
Loans, or a combination thereof, (y) the Borrowing Date with
respect to such Loans (which shall be a Business Day) and
the aggregate principal amount thereof, and (z) in the case
of Eurodollar Loans, the Interest Period with respect
thereto. If no Interest Period with respect to any
Eurodollar Loan is specified in any such notice, then the
Company shall be deemed to have selected an Interest Period
of one month's duration. The Administrative Agent shall
promptly advise the other Banks by telecopier of any notice
given pursuant to this Section 2.01(b) and of each Bank's
portion of the requested Revolving Credit Borrowing.
SECTION 2.02. Competitive Loans; Procedure for
Requests. (a) Subject to the terms and conditions of this
Agreement, the Company may from time to time request
Competitive Bid Banks to submit Competitive Bids, and the
Competitive Bid Banks may submit such Competitive Bids and,
from time to time on and after the Effective Date and prior
to the Termination Date, may make Competitive Loans in
accordance with the procedures set forth in this Section
2.02. At no time shall (i) the outstanding aggregate
principal amount of all Competitive Loans made by a
Competitive Bid Bank or (ii) the outstanding aggregate
principal amount of all Revolving Credit Loans and
Competitive Loans made by all Banks exceed the Total
Commitment, notwithstanding the fact that the aggregate
principal amount outstanding at any time of all Competitive
Loans made by a Competitive Bid Bank may exceed the
Revolving Credit Commitment of such Bank.
(b) To request Competitive Bids, the Company
shall give the Administrative Agent (by telephone (confirmed
in writing no later than 5:00 p.m., New York City time, on
the same day) or telecopier) a duly completed Competitive
Bid Request substantially in the form of Exhibit A hereto,
to be received by the Administrative Agent (i) in the case
of Eurodollar Loans, not later than 12:00 noon, New York
City time, five Business Days before a proposed Competitive
Borrowing, and (ii) in the case of Fixed Rate Loans, not
later than 11:00 a.m., New York City time, one Business Day
before a proposed Competitive Borrowing. No Alternate Base
Rate Loan 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 A
hereto may be rejected in the Administrative Agent's sole
discretion, and the Administrative Agent shall promptly
notify the Company of such rejection by telephone (confirmed
promptly in
<PAGE>
19
writing) or telecopier. A Competitive Bid Request shall in
each case refer to this Agreement and specify (x) whether
the Loans then being requested are to be Eurodollar Loans or
Fixed Rate Loans, (y) the Borrowing Date with respect to
such Loans (which shall be a Business Day) and the aggregate
principal amount thereof (which shall be in amounts such
that the aggregate principal amount of all Loans outstanding
immediately following the Borrowing of the Loans pursuant to
such Competitive Bid Request shall not exceed the Total
Commitment), and (z) the Interest Period with respect
thereto (which shall not end after the Termination Date).
The aggregate principal amount of the Competitive Borrowing
requested pursuant to any Competitive Bid Request shall not
be less than $50,000,000. Promptly after its receipt of a
Competitive Bid Request that is not rejected as aforesaid,
the Administrative Agent shall invite by telecopier (in the
form set forth in Exhibit B hereto) the Competitive Bid
Banks to bid, on the terms and conditions of this Agreement,
to make Competitive Loans pursuant to the Competitive Bid
Request.
(c) Each Competitive Bid Bank may, in its sole
discretion, make one or more Competitive Bids to the Company
responsive to the Competitive Bid Request. Each Competitive
Bid by a Competitive Bid Bank must be in the form of Exhibit
C hereto and must be received by the Administrative Agent by
telecopier, (i) in the case of Eurodollar Loans, not later
than 2:00 p.m., New York City time, four Business Days
before a proposed Competitive Borrowing, and (ii) in the
case of Fixed Rate Loans, not later than 9:30 a.m., New York
City time, on the Borrowing Date of the proposed Competitive
Borrowing. Competitive Bids that do not conform
substantially to the format of Exhibit C hereto may be
rejected by the Administrative Agent after conferring with,
and upon the instruction of, the Company, and the
Administrative Agent shall notify the Competitive Bid Bank
that submitted such Competitive 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 in
an integral multiple of $1,000,000 and which may equal the
entire aggregate principal amount of the Competitive
Borrowing requested by the Company) of the Competitive Loan
that the Competitive Bid Bank is willing to make to the
Company, (y) the Competitive Bid Rate at which the
Competitive Bid Bank is prepared to make the Competitive
Loan, and (z) the Interest Period with respect thereto.
Except as provided in Section 2.07(e)(i), Section
2.11(c)(iii), Section 3.03(a), and Section 4.03(b)(i)
hereof, a Competitive Bid submitted by a Competitive Bid
Bank pursuant to this Section 2.02(c) shall be irrevocable.
If any Competitive Bid Bank shall elect not to make a
Competitive Bid with respect to a proposed Competitive
Borrowing, such Competitive Bid Bank shall so notify the
Administrative Agent by telecopier (i) in the case of
Eurodollar Loans, not later than 2:00 p.m., New York City
time, four Business Days before such proposed Competitive
Borrowing, and (ii) in the case of Fixed Rate Loans, not
later than 9:30 a.m., New York City time, on the Borrowing
Date of such proposed Competitive Borrowing; provided,
however, that the failure of any Competitive Bid Bank to
give such notice shall not cause such Bank to be obligated
to make any Competitive Loan as part of such Competitive
Borrowing.
(d) The Administrative Agent shall notify the
Company 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 Competitive Bid Bank that made each bid;
such notice shall be given to the Company by telephone
(confirmed immediately by telecopier) not later than (i) 45
minutes (in the case of Competitive Bids for Fixed Rate
Loans) and (ii) 2 hours (in the case of other Competitive
Bids) after the latest time by which such Competitive Bids
were required to be received by the Administrative Agent
pursuant to Section 2.02(c) hereof. The
<PAGE>
20
Administrative Agent shall send a copy of all Competitive
Bids to the Company for its records as soon as practicable
after completion of the bidding process set forth in this
Section 2.02.
(e) The Company may in its sole and absolute
discretion, subject only to the provisions of this Section
2.02(e), accept or reject any Competitive Bid referred to in
Section 2.02(d) hereof. The Company shall notify the
Administrative Agent (by telephone or telecopier) whether
and to what extent it has decided to accept or reject any or
all of the Competitive Bids referred to in Section 2.02(d)
hereof, (i) in the case of Eurodollar Loans, not later than
12:00 noon, New York City time, three Business Days before a
proposed Competitive Borrowing, and (ii) in the case of
Fixed Rate Loans, not later than 10:30 a.m., New York City
time, on the Borrowing Date of the proposed Competitive
Borrowing; provided, however, that (v) the failure by the
Company to give such notice shall be deemed to be a
rejection of all the Competitive Bids referred to in Section
2.02(d) hereof, (w) the Company shall not accept a
Competitive Bid made at a particular Competitive Bid Rate if
the Company has rejected a Competitive Bid made at a lower
Competitive Bid Rate, (x) the aggregate principal amount of
the Competitive Borrowing to be made may not exceed the
principal amount of Competitive Loans requested by the
Company pursuant to the related Competitive Bid Request, (y)
if the Company shall accept Competitive Bids made at a
particular Competitive Bid Rate but shall be restricted by
other conditions hereof from borrowing the aggregate
principal amount of Competitive Loans in respect of which
Competitive Bids at such Competitive Bid Rate have been
made, then, to the extent of the aggregate principal amount
of the Competitive Borrowing to be made, the Company shall
accept a pro rata portion of each Competitive Bid made at
such Competitive Bid Rate based as nearly as possible on the
respective principal amounts of Competitive Loans for which
such Competitive Bids were made (provided that if the
available principal amount of Competitive Loans to be so
allocated is not sufficient to enable Competitive Loans to
be so allocated to each such Competitive Bid Bank in a
minimum principal amount of $5,000,000 and in integral
multiples of $1,000,000, the Company shall select the
Competitive Bid Banks to be allocated such Competitive Loans
and shall round allocations up or down to the next higher or
lower multiple of $1,000,000 as it shall deem appropriate),
and (z) no Competitive Bid shall be accepted for a
Competitive Loan unless such Competitive Loan is in a
minimum principal amount of $5,000,000 and an integral
multiple of $1,000,000. If telephonic notice of acceptance
or rejection of a Competitive Bid is given by the Company to
the Administrative Agent pursuant to the immediately
preceding sentence, such notice shall be confirmed in
writing no later than (A) in the case of Eurodollar Loans
5:00 p.m., New York City time, on the day such notice is
given, or (B) in the case of Fixed Rate Loans, 1:00 p.m.,
New York City time, on the day such notice is given. Except
as provided in Section 2.07(e)(i), Section 2.11(c)(iii),
Section 3.03(a), and Section 4.03(b)(i) hereof, a notice
given by the Company pursuant to this Section 2.02(e) shall
be irrevocable.
(f) The Administrative Agent shall promptly
notify by telecopier each of the Competitive Bid Banks which
has submitted a Competitive Bid whether or not their
Competitive Bids have been accepted (and if so, in what
amount and at what Competitive Bid Rate), and each
successful Competitive Bid Bank shall thereupon become bound
to make the Competitive Loan in respect of which its
Competitive Bid has been accepted.
(g) A Competitive Borrowing shall not be made
within five Business Days of the Borrowing Date of any other
Competitive Borrowing, unless the Company and the
Administrative Agent shall mutually agree otherwise.
<PAGE>
21
(h) If the Administrative Agent shall elect to
submit a Competitive Bid in its capacity as a Competitive
Bid Bank, it shall submit such bid to the Company one
quarter of an hour earlier than the latest time at which the
other Competitive Bid Banks are required to submit their
bids to the Administrative Agent pursuant to Section 2.02(c)
hereof.
SECTION 2.03. General Terms Relating to the
Loans. (a) Each Borrowing made by the Company on any
Borrowing Date shall be (i) in the case of Competitive
Loans, in an integral multiple of $1,000,000 and in a
minimum aggregate principal amount of $5,000,000 and (ii) in
the case of Revolving Credit Loans, in an integral multiple
of $10,000,000 and in a minimum aggregate principal amount
of $50,000,000. Competitive Loans shall be made by the
Competitive Bid Banks in accordance with Section 2.02(e)
hereof and Revolving Credit Loans shall be made by the Banks
ratably in accordance with their respective Revolving Credit
Commitments on the Borrowing Date of the Revolving Credit
Borrowing; provided, however, that the failure of any Bank
to make any Loan shall not in itself relieve any other Bank
of its obligation to lend hereunder.
(b) Each Competitive Loan shall be a Eurodollar
Loan or a Fixed Rate Loan, and each Revolving Credit Loan
shall be a Eurodollar Loan or an Alternate Base Rate Loan,
as the Company may request subject to and in accordance with
Section 2.01 or Section 2.02 hereof, as applicable. Each
Bank may at its option make any Eurodollar Loan by causing a
foreign branch or affiliate of such Bank to make such Loan;
provided, however, that (i) any exercise of such option
shall not affect the obligation of the Company to repay such
Loan to such Bank in accordance with the terms of this
Agreement, (ii) such Bank shall promptly advise the Company
of the exercise of such option, the name and address of such
foreign branch or affiliate and such other information with
respect to such branch or affiliate as the Company may
reasonably request, and (iii) the exercise of such option,
as of the time of such exercise, shall not materially
increase the amounts which would have been payable by the
Company to such Bank under this Agreement. Revolving Credit
Loans of more than one interest rate option may be
outstanding at the same time; provided, however, that,
unless the Administrative Agent and the Company shall
otherwise agree, the Company shall not be entitled to
request any Revolving Credit Loan or Competitive Loan which,
if made, would result in an aggregate of more than ten
separate Revolving Credit Loans of any Bank and ten separate
Competitive Loans being outstanding hereunder at any one
time. For purposes of the foregoing, Revolving Credit Loans
having different Interest Periods, regardless of whether
they commence on the same date, and Revolving Credit Loans
having different interest rate options, shall be considered
separate Loans.
(c) Subject to Section 2.05 hereof, each Bank
shall make available its portion, as appropriate, of each
Competitive Borrowing and Revolving Credit Borrowing on the
proposed Borrowing Date thereof by paying the amount
required to the Administrative Agent in New York, New York,
in Dollars, in immediately available funds not later than
11:00 a.m. (or 12:00 noon in the case of Alternate Base Rate
Loans or Fixed Rate Loans), New York City time, and the
Administrative Agent shall by 1:00 p.m., New York City time,
credit the amounts so received (or, subject to Section
2.03(d) hereof, its own funds but, in either case, in
Dollars in immediately available funds) to such account of
the Company as it shall designate in writing to the
Administrative Agent or, if Loans are not made on such date
because any condition precedent to a Borrowing herein
specified shall not have been met, promptly return the
amounts so received to the respective Banks.
<PAGE>
22
(d) Unless the Administrative Agent shall have
been notified by a Bank prior to the Borrowing Date of any
Loan that such Bank does not intend to make available to the
Administrative Agent such Bank's portion of the Loan to be
made on such Borrowing Date, the Administrative Agent may
assume that such Bank has made such proceeds available to
the Administrative Agent on such date, and the
Administrative Agent may in reliance upon such assumption
(but shall not be required to) make available to the Company
a corresponding amount. If, and only if, such notice is not
given and such corresponding amount is not in fact made
available to the Administrative Agent by such Bank, the
Administrative Agent shall be entitled to recover such
amount on demand from such Bank (or, if such Bank fails to
pay such amount forthwith upon such demand, from the
Company) together with interest thereon in respect of each
day during the period commencing on the date such amount was
made available to the Company and ending on (but excluding)
the date the Administrative Agent recovers such amount at a
rate per annum equal to (i) in the case of such Bank, the
Federal Funds Effective Rate and (ii) in the case of the
Company, the applicable Interest Rate in respect of such
Loan.
SECTION 2.04. Repayment of Loans; Evidence of
Debt. (a) The Company hereby unconditionally promises to
pay to the Administrative Agent for the account of each Bank
the then unpaid principal amount of each Revolving Credit
Loan and each Competitive Loan on the last day of the
Interest Period applicable to such Loan or on any earlier
date that shall be specified herein. Notwithstanding the
foregoing, the unpaid principal amount of each Revolving
Credit Loan and each Competitive Loan shall be due and
payable in full on the Maturity Date.
(b) Each Bank shall maintain in accordance with
its usual practice an account or accounts evidencing the
indebtedness of the Company to such Bank resulting from each
Loan made by such Bank, including the amounts of principal
and interest payable and paid to such Bank from time to time
hereunder.
(c) The Administrative Agent shall maintain
accounts in which it shall record (i) the amount of each
Loan made hereunder, (ii) whether each such Loan is a
Revolving Credit Loan or a Competitive Loan, (iii) the
Interest Rate applicable to each such Loan, (iv) the
Interest Period applicable to each such Loan, (v) the amount
of any principal or interest due and payable or to become
due and payable from the Company to each Bank hereunder and
(vi) the amount of any sum received by the Administrative
Agent hereunder for the account of the Banks and each Bank's
share thereof.
(d) The failure of any Bank or the Administrative
Agent to maintain the accounts referred to in Section
2.04(b) or Section 2.04(c) hereof or any error therein shall
not in any manner affect the obligation of the Company to
repay the Loans or to pay interest thereon in accordance
with the terms of this Agreement.
(e) Any Bank may request that Loans made by it be
evidenced by a promissory note. In such event, the Company
shall prepare, execute and deliver to such Bank a promissory
note payable to the order of such Bank (or, if requested by
such Bank, to such Bank and its registered assigns) and in a
form approved by the Administrative Agent. Thereafter, the
Loans evidenced by such promissory note and interest thereon
shall at all times be represented by one or more promissory
notes in such form payable to the order of the payee named
therein (or, if such promissory note is a registered note,
to such payee and its registered assigns). Any assignment
of such promissory note shall be made in accordance with the
provisions of Section 10.06 hereof.
<PAGE>
23
SECTION 2.05. Refinancings. (a) Prior to the
Termination Date, the Company may refinance all or any part
of any Loan with a Loan or Loans of the same or a different
type made pursuant to Section 2.01 or Section 2.02 hereof;
provided, however, that the aggregate principal amount of
the new Borrowing shall not exceed the aggregate principal
amount of the Loans being refinanced on the date of such
Borrowing. Any Loan or part thereof so refinanced shall be
deemed to be repaid in accordance with Section 2.04 hereof
with the proceeds of a new Borrowing hereunder; provided,
however, that with respect to any new Borrowing which
results in any Bank extending a Loan in a different
principal amount than such Bank extended in the Loan being
refinanced (e.g., the refinancing of a Revolving Credit Loan
with a Competitive Loan), (i) if the principal amount
extended by a Bank in a refinancing is greater than the
principal amount extended by such Bank in the Borrowing
being refinanced, such Bank shall pay such difference to the
Administrative Agent for distribution to the Banks described
in (ii) below, and (ii) if the principal amount extended by
a Bank in the Borrowing being refinanced is greater than the
principal amount being extended by such Bank in the
refinancing, the Administrative Agent shall return the
difference to such Bank out of amounts received pursuant to
(i) above. If the Company shall not have repaid any
Revolving Credit Loan on the last day of the Interest Period
with respect thereto and shall not have given notice with
respect to the refinancing of such Loan in accordance with
the applicable provisions of Section 2.01 or Section 2.02
hereof, as appropriate, it shall be deemed to have elected
to refinance such Loan with a Revolving Credit Loan which is
an Alternate Base Rate Loan to be made on the last day of
the Interest Period of the Loan so refinanced.
(b) On or after the Termination Date and prior to
the Maturity Date, the Company may refinance all or any part
of any Revolving Credit Loan with a Revolving Credit Loan or
Loans of the same or a different type made pursuant to
Section 2.01 hereof; provided, however, that the aggregate
principal amount of the new Borrowing shall not exceed the
aggregate principal amount of the Loans being refinanced on
the date of such Borrowing. Any Loan or part thereof so
refinanced shall be deemed to be repaid in accordance with
Section 2.04 hereof with the proceeds of a new Borrowing
hereunder. If the Company shall not have repaid any
Revolving Credit Loan on the last day of the Interest Period
with respect thereto and shall not have given notice with
respect to the refinancing of such Loan in accordance with
the applicable provisions of Section 2.01 hereof, it shall
be deemed to have elected to refinance such Loan with a
Revolving Credit Loan which is an Alternate Base Rate Loan
to be made on the last day of the Interest Period of the
Loan so refinanced.
SECTION 2.06. Facility Fee. The Company agrees
to pay to each Bank, through the Administrative Agent, on
each March 31, June 30, September 30 and December 31 (the
first such payment to be made on December 31, 1997) and on
the Maturity Date, in immediately available funds, a
facility fee (a "Facility Fee") at a rate per annum equal to
the Applicable Facility Fee Percentage from time to time in
effect on the average daily amount of (a) prior to the
Termination Date, the Revolving Credit Commitment of such
Bank, whether used or unused, and (b) on and after the
Termination Date, the outstanding Loans of such Bank, in
each case during the Calendar Quarter (or shorter period
beginning on the Effective Date or ending on the Maturity
Date, as the case may be) then ended; provided, however,
that the amount payable by the Company under this paragraph
shall be reduced by any amounts paid on account of the
Facility Fees pursuant to Section 4.01 hereof. All Facility
Fees shall be computed on the basis of the actual number of
days elapsed in a year of 365 or 366 days, as the case may
be, and shall commence to accrue on the Effective Date.
<PAGE>
24
SECTION 2.07. Reserve Requirements; Change in
Circumstances. (a) 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 but with
respect to which similarly situated banks generally comply)
(any such change, an "Increased Cost Change") (i) shall
change the basis of taxation of payments to any Bank of the
principal of or interest on any Eurodollar Loan or Fixed
Rate Loan made by such Bank or any other fees or amounts
payable hereunder (other than (x) taxes imposed on the
overall net income of such Bank by the jurisdiction in which
such Bank has its principal or lending office or by any
political subdivision or taxing authority therein (or any
tax which is enacted or adopted by such jurisdiction,
political subdivision or taxing authority as a direct
substitute for any such taxes) or (y) any tax, assessment,
or other governmental charge that would not have been
imposed but for the failure of any Bank to comply with any
certification, information, documentation, or other
reporting requirement), or (ii) 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 Bank or (iii) shall
impose on such Bank or on the London Interbank Market any
other condition affecting this Agreement or any Eurodollar
Loan made by such Bank, and the result of any of the
foregoing shall be to increase the cost to such Bank of
making or maintaining any Eurodollar Loan or to reduce the
amount of any sum received or receivable by such Bank
hereunder (whether of principal, interest or otherwise) in
respect thereof by an amount deemed in good faith by such
Bank to be material, then, subject to Section 2.07(d)
hereof, such additional amount or amounts as will compensate
such Bank for such increase or reduction will be paid by the
Company to such Bank as provided in Section 2.07(c) hereof.
Any such amount determined pursuant to this Section 2.07(a)
shall be computed on the basis of the net effect of any
Increased Cost Changes incurred by such Bank from time to
time after the Effective Date of this Agreement.
(b) If any Bank shall have determined in good
faith that the adoption or issuance, after the date of this
Agreement, of any applicable law, rule, regulation,
guideline, request or directive regarding capital adequacy
(whether or not having the force of law but with respect to
which similarly situated banks generally comply) (a "Capital
Adequacy Rule"), or any change therein, or any change in the
interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with
the interpretation or administration thereof (any such
adoption, issuance or change of a Capital Adequacy Rule
being called a "Capital Adequacy Change"), or compliance
therewith by any Bank (or any lending office of such Bank),
has the net effect of reducing the rate of return on such
Bank's capital as a consequence of its commitment to make,
or the making or maintaining of, any Loans hereunder to a
level below that which such Bank would have achieved but for
such adoption, change or compliance (taking into
consideration such Bank's policies with respect to capital
adequacy and any Capital Adequacy Rule in effect as of the
date of this Agreement) by an amount deemed by such Bank to
be material, then from time to time the Company shall,
subject to Section 2.07(d) hereof, pay to such Bank such
additional amount or amounts as will compensate such Bank
for such reduction as provided in Section 2.07(c) hereof;
provided, however, that to the extent (i) a Bank shall
increase its level of capital above the level maintained by
such Bank on the date of this Agreement and there has not
been a Capital Adequacy Change, or (ii) there has been a
Capital Adequacy Change and a Bank shall increase its level
of capital by an amount greater than the increase
attributable (taking into consideration the same variables
taken into consideration in determining the level of capital
maintained by such Bank on the date of this Agreement) to
such Capital Adequacy Change, the Company shall not be
required to pay any amount or amounts
<PAGE>
25
under this Agreement with respect to any such increase in
capital. Thus, for example, a Bank which is "adequately
capitalized" (as such term or any similar term is used by
any applicable bank regulatory agency having authority with
respect to such Bank) may not require the Company to make
payments in respect of increases in such Bank's level of
capital made under the circumstances described in clause (i)
or (ii) above which improve its capital position from
"adequately capitalized" to "well capitalized" (as such term
or any similar term is used by any applicable bank
regulatory agency having authority with respect to such
Bank).
(c) A certificate of each Bank setting forth such
amount or amounts as shall be necessary to compensate such
Bank (or Participant pursuant to Section 10.06(b) hereof) as
specified in paragraph (a) or (b) of this Section 2.07, as
the case may be, shall be delivered to the Company at the
end of each Calendar Quarter during which such Bank is an
Affected Bank and upon the taking by the Company in respect
of such Bank of one of the actions described in paragraph
(e)(ii) or (e)(iv) of this Section 2.07 and shall, if
submitted in good faith, be conclusive absent manifest
error; provided that any certificate delivered by a Bank
pursuant to this Section 2.07(c) shall (i) in the case of a
certificate in respect of amounts payable pursuant to
paragraph (a) of this Section 2.07, set forth in reasonable
detail the basis for and the calculation of such amounts,
and (ii) in the case of a certificate in respect of amounts
payable pursuant to paragraph (b) of this Section 2.07, (A)
set forth at least the same amount of detail in respect of
the calculation of such amount as such Bank provides in
similar circumstances to other similarly situated borrowers
from such Bank, and (B) include a statement by such Bank
that it has allocated to its Revolving Credit Commitment or
outstanding Loans a proportionately equal amount of any
reduction of the rate of return on such Bank's capital due
to a Capital Adequacy Rule as it has allocated to each of
its other commitments to lend or to each of its other
outstanding loans that are affected similarly by such
Capital Adequacy Rule. The Company shall pay each Bank the
amount shown as due on any such certificate upon the earlier
of (i) the date on which the Company takes one of the
actions in respect of any such Bank described in paragraph
(e)(ii) or (e)(iv) of this Section 2.07 and (ii) 30 days
after receipt by the Company of such certificate.
(d) Subject to the following provisions of this
Section 2.07(d), failure on the part of any Bank to demand
compensation for any amounts payable pursuant to paragraphs
(a) or (b) of this Section 2.07 with respect to any Interest
Period shall not constitute a waiver of such Bank's rights
to demand compensation for any such amounts with respect to
any other Interest Period. In the case of any Increased
Cost Change which is given retroactive effect to a date
prior to the adoption thereof, a Bank shall be entitled to
seek compensation in respect thereof pursuant to paragraph
(a) of this Section 2.07 for the period commencing on such
retroactive effective date and ending on the date on which
the Company takes one of the actions in respect of such Bank
described in paragraph (e)(ii) or (e)(iv) of this Section
2.07; provided, however, that (i) if such Bank shall fail to
notify the Company within 30 days after the date of official
promulgation of such Increased Cost Change that it will
demand such compensation, the period for which such Bank
shall be entitled to seek compensation in respect thereof
shall commence on the date which is 30 days prior to such
Bank's notice that it will demand compensation, and (ii) if
any Increased Cost Change is given retroactive effect to a
date which is more than three months prior to the date of
adoption thereof, the Company's liability to pay
compensation to such Bank in respect thereof for any period
prior to the date which is three months prior to the
adoption thereof shall, subject to the foregoing clause (i)
of this proviso, be equal to 50% of the amount required to
compensate such Bank in respect of such Increased Cost
Change with respect to such period. In the case of any
Increased
<PAGE>
26
Cost Change which is given only prospective effect, a Bank
shall be entitled to seek compensation in respect thereof
pursuant to paragraph (a) of this Section 2.07 for the
period commencing on the later of (A) the date on which such
Increased Cost Change becomes effective and (B) the date 30
days prior to the notice by such Bank that it will demand
such compensation, and ending on the date on which the
Company takes one of the actions in respect of such Bank
described in paragraph (e)(ii) or (e)(iv) of this Section
2.07. In the case of any Capital Adequacy Change, a Bank
shall be entitled to seek compensation in respect thereof
pursuant to paragraph (b) of this Section 2.07 only with
respect to costs or reductions commencing on the later of
(A) the date on which such Capital Adequacy Rule becomes
effective and (B) the date 45 days prior to the notice by
such Bank that it will demand such compensation, and ending
on the date on which the Company takes one of the actions in
respect of such Bank described in paragraph (e)(ii) or
(e)(iv) of this Section 2.07.
(e) In the event that any Affected Bank shall
have given notice that it is entitled to claim compensation
pursuant to this Section 2.07, the Company may exercise any
one or more of the following options:
(i) If any such claim for compensation relates to
Loans then being requested by the Company pursuant to a
notice of Borrowing as provided in this Article II (or,
in the case of claims for compensation pursuant to
paragraph (g) of this Section 2.07, any such claim
relates to Loans outstanding during the Interest Period
most recently ended and the Company has requested
Eurodollar Loans pursuant to such a notice of
Borrowing), the Company may, not later than 12:00 noon,
New York City time, on the day which is three (3)
Business Days prior to the date on which the requested
Loans were to have been made, in the case of Eurodollar
Loans, or not later than 9:00 a.m., New York City time,
on the date on which the requested Loans were to have
been made, in the case of Fixed Rate Loans or Alternate
Base Rate Loans, by giving notice (by telephone
(confirmed in writing promptly thereafter) or
telecopier) to the Administrative Agent (which notice
the Administrative Agent shall transmit to each of the
Banks otherwise required to participate in the
requested Loans as soon as practicable thereafter)
irrevocably withdraw such notice of Borrowing.
(ii) The Company may request one or more of the
non-Affected Banks to take over all (but not part) of
each or any Affected Bank's then outstanding Loan(s)
and to assume all (but not part) of each or any
Affected Bank's Revolving Credit Commitment and
obligations hereunder. If one or more Banks shall so
agree in writing (in this Section 2.07(e)(ii), in
Section 2.11(c)(i) hereof, in Section 2.12(i) hereof,
in Section 2.13(i) hereof and in Section 4.03(b)(ii)
hereof, collectively called the "Assenting Banks" and
individually called an "Assenting Bank") with respect
to an Affected Bank, (x) the Revolving Credit
Commitment of each Assenting Bank and the obligations
of such Assenting Bank under this Agreement shall be
increased by its respective Allocable Share of the
Revolving Credit Commitment and of the obligations of
such Affected Bank under this Agreement, and (y) each
Assenting Bank shall make Loans to the Company,
according to such Assenting Bank's respective Allocable
Share, in an aggregate principal amount equal to the
outstanding principal amount of the Loan(s) of such
Affected Bank, on a date mutually acceptable to the
Assenting Banks and the Company. The proceeds of such
Loans, together with funds of the Company, shall be
used to prepay the Loan(s) of such Affected Bank,
together with all interest accrued thereon and all
other amounts owing to such Affected Bank
<PAGE>
27
hereunder (including any amounts payable pursuant to
Section 3.04 hereof in connection with such
prepayment), and, upon such assumption by the Assenting
Bank and prepayment by the Company, such Affected Bank
shall cease to be a "Bank" for purposes of this
Agreement and shall no longer have any obligations
hereunder (except as provided in Section 2.11(b),
Section 10.02 and Section 10.07 hereof).
(iii) Upon notice (by telephone (confirmed in
writing promptly thereafter) or telecopier) to the
Administrative Agent (which shall advise each Bank
thereof as soon as practicable thereafter), the Company
may terminate the obligations of the Banks to make or
maintain Loans which result in the Affected Banks
making a demand for compensation pursuant to this
Section 2.07 and, in such event, the Company shall
refinance all such Loans with Loans which, at the time
of such refinancing, would not result in such Banks
making such demand for compensation, such refinancing
to be conducted in the manner contemplated by and
pursuant to Section 2.05 or Section 4.02 hereof.
(iv) (A) The Company may designate one or more
Replacement Lenders mutually acceptable to the Company
and the Administrative Agent (whose consent shall not
be unreasonably withheld) to assume the Revolving
Credit Commitment and the obligations of any such
Affected Bank hereunder, and to purchase the
outstanding Loans of such Affected Bank and such
Affected Bank's rights hereunder and with respect
thereto, without recourse upon, or warranty by, or
expense to, such Affected Bank, for a purchase price
equal to the outstanding principal amount of the
Loan(s) of such Affected Bank plus all interest accrued
and unpaid thereon and all other amounts owing to such
Affected Bank hereunder (including the amount which
would be payable to such Affected Bank pursuant to
Section 3.04 hereof if the purchase of its Loans
constituted a prepayment thereof contemplated by clause
(ii) of the first sentence of Section 3.04 hereof), and
upon such assumption and purchase by the Replacement
Lenders, each such Replacement Lender shall be deemed
to be a "Bank" for purposes of this Agreement and such
Affected Bank shall cease to be a "Bank" for purposes
of this Agreement and shall no longer have any
obligations hereunder (except as provided in Section
2.11(b), Section 10.02 and Section 10.07 hereof).
(B) As an alternative, the Company may designate
one or more Replacement Lenders mutually acceptable to
the Company and the Administrative Agent (whose consent
shall not be unreasonably withheld) which shall upon a
date mutually agreed upon by the Company and such
Replacement Lenders assume the Revolving Credit
Commitment and the obligations of such Affected Bank
under this Agreement and shall upon such date make
Loans to the Company in an aggregate principal amount
equal to the outstanding principal amount of the
Loan(s) of such Affected Bank. The proceeds of such
Loans, together with funds of the Company, shall be
used to prepay the Loan(s) of such Affected Bank,
together with all interest accrued thereon and all
other amounts owing to such Affected Bank hereunder
(including any amounts payable pursuant to Section 3.04
hereof in connection with such prepayment), and, upon
such Replacement Lenders making such Loans and such
prepayment by the Company, such Replacement Lenders
shall be deemed to be "Banks" for purposes of this
Agreement and such Affected Bank shall cease to be a
"Bank" for purposes of this Agreement and shall no
longer have any obligations hereunder (except as
provided in Section 2.11(b), Section 10.02 and Section
10.07 hereof). Each such
<PAGE>
28
Replacement Lender shall execute and deliver to the
Administrative Agent such documentation to evidence its
status as a "Bank" hereunder as shall be mutually
acceptable to the Company and the Administrative Agent.
The effectiveness of each Replacement Lender's
Revolving Credit Commitment, the making of such Loans
by such Replacement Lenders and the prepayment by the
Company of the Loan(s) of such Affected Bank shall be
deemed to have occurred simultaneously for all purposes
hereof.
(f) If in respect of any Interest Period for a
Eurodollar Loan made by a Bank under Section 2.01 hereof
such Bank shall be required to maintain reserves against
"Eurocurrency liabilities" under Regulation D, the Company
shall pay to such Bank in accordance with this Section
2.07(f) an additional amount representing such Bank's actual
costs, if any, incurred during such Interest Period as a
result of the applicability of the foregoing reserves to
such Eurodollar Loan, which amount (i) shall be based on the
effective rate at which such reserve requirements are
imposed on such Bank for such Interest Period, (ii) shall be
allocated to the Company in no proportionately greater
amount than such Bank would allocate such costs to its other
borrowers of Eurodollars to which such costs are applicable
if the provisions of this Section 2.07(f) applied to all
such borrowers, and (iii) in any event shall not exceed the
product of the following for each day of such Interest
Period:
(A) the principal amount of the Eurodollar Loan
outstanding on such day made by such Bank to which such
Interest Period relates; and
(B) a percentage equal to (x) the result obtained
by dividing the Eurodollar Rate applicable to such
Eurodollar Loan by the number one minus the maximum
rate (expressed as a decimal) at which such reserve
requirements are imposed by the Board on such date,
minus (y) the Eurodollar Rate applicable to such
Eurodollar Loan; and
(C) a fraction the numerator of which is one and
the denominator of which is 360.
To be entitled to compensation pursuant to this Section
2.07(f) in respect of any Interest Period, such Bank must
notify the Company of its demand for such compensation
within 30 days after the end of such Interest Period. A
certificate of such Bank setting forth in reasonable detail
the basis for and the calculation of such amount necessary
to compensate such Bank pursuant to this Section 2.07(f)
shall be delivered to the Company with such notice and shall
be conclusive absent manifest error. In no event shall the
Company be obligated to make any payment to any Bank
pursuant to this Section 2.07(f) if such payment would
result in a duplication of payments pursuant to this Section
2.07(f) and any other provision of this Section 2.07.
(g) In the event that any Affected Bank shall
have given notice that it is entitled to claim compensation
pursuant to paragraph (f) of this Section 2.07, the Company
may exercise any one or more of the options set forth in
Section 2.07(e) hereof.
(h) In the event that the Company shall take any
of the actions contemplated by Section 2.07(e)(ii) or
Section 2.07(e)(iv) hereof, Schedule I and Schedule II
hereto shall be deemed amended to reflect the addition of
any Replacement Lender and any increases or decreases in the
Revolving Credit Commitments of the Affected Banks and the
Assenting Banks, as the case may be.
<PAGE>
29
SECTION 2.08. Pro Rata Treatment. Except as
permitted under Section 2.05, Section 2.07, Section 2.11,
Section 2.12 and Section 4.03 hereof, (i) each payment by
the Company on account of any fees pursuant to Section 2.06
hereof shall be made pro rata in accordance with the
respective amounts due and owing, (ii) each payment by the
Company on account of principal of and interest on the Loans
shall be made pro rata according to the respective amounts
due and owing, and (iii) each prepayment on account of
principal of the Loans shall be applied to the Revolving
Credit Loans and the Competitive Loans, as directed by the
Company, pro rata according to the respective amounts
outstanding.
SECTION 2.09. Payments. Except for payments made
directly to a Bank or Banks under other provisions of this
Agreement, the Company shall make each payment hereunder and
under any instrument delivered hereunder not later than
12:00 noon (New York City time) on the day when due, in
Dollars, to the Administrative Agent at its offices at One
Liberty Plaza, New York, New York 10006, for the account of
the Banks, in immediately available funds. The
Administrative Agent shall promptly distribute to each Bank
its proper share of each payment so received.
SECTION 2.10. Payments on Business Days.
Whenever any payment to be made hereunder shall be due on a
day which is not a Business Day, then such payment shall be
made on the next succeeding Business Day (unless, with
respect to a payment relating to a Eurodollar Loan, such day
would fall in another calendar month, in which event payment
shall be made on the next preceding Business Day).
SECTION 2.11. Net Payments. (a) All payments
under this Agreement shall be made without setoff or
counterclaim and in such amounts as may be necessary in
order that all such payments (after deduction or withholding
for or on account of any present or future taxes, levies,
imposts, duties or other charges of whatsoever nature
imposed by any government or any political subdivision or
taxing authority thereof (herein collectively called the
"Taxes") other than any Taxes on or measured by the net
income, net worth or shareholders' capital of a Bank or a
Participant pursuant to the income tax laws of the
jurisdiction where such Bank's principal or lending office
is located or where such Participant's principal or
participating office is located) shall not be less than the
amounts otherwise specified to be paid under this Agreement;
provided that if any Bank or any Participant fails to comply
with the applicable provisions of Section 10.06(g) hereof or
paragraph (b) of this Section 2.11, as the case may be,
then, all such payments to such Bank or to any Bank which
has sold a participation pursuant to Section 10.06(b) hereof
shall be net of any amounts the Company is required to
withhold under applicable law. For a Bank to be entitled to
compensation pursuant to this Section 2.11 (i) in the case
of compensation for United States Federal income or
withholding Taxes in respect of any Interest Period, such
Bank must notify the Company within 30 days after the end of
such Interest Period and (ii) in the case of compensation
for any United States Tax other than a United States Federal
income or withholding Tax in respect of any Interest Period,
such Bank must notify the Company within 30 days after such
Bank receives a written claim for such Tax from any
government, political subdivision or taxing authority with
respect to such Interest Period. A certificate as to any
additional amounts payable to any Bank under this Section
2.11 submitted to the Company by such Bank shall show in
reasonable detail the amount payable and the calculations
used to determine such amount and shall be conclusive and
binding upon the parties hereto, in the absence of manifest
error. With respect to each deduction or withholding for or
on account of any Taxes, the Company shall promptly (and in
any event not later than 45 days thereafter) furnish to each
Bank such certificates, receipts and
<PAGE>
30
other documents as may be required (in the reasonable
judgment of such Bank) to establish any tax credit to which
such Bank may be entitled.
(b) Each Bank that is not incorporated under the
laws of the United States or any State thereof agrees to
file with the Administrative Agent and the Company, in
duplicate, (i) on or before the later of (A) the Effective
Date and (B) the date such Bank becomes a Bank under this
Agreement and (ii) thereafter, for each taxable year of such
Bank (in the case of a Form 4224) or for each third taxable
year of such Bank (in the case of any other form) during
which interest or fees arising under this Agreement are
received, unless not legally able to do so as a result of a
change in United States income tax law enacted, or treaty
promulgated, after the date specified in the preceding
clause (i), on or prior to the immediately following due
date of any payment by the Company hereunder (or at any
other time as required under United States income tax law),
a properly completed and executed copy of either Internal
Revenue Service Form 4224 or Internal Revenue Service Form
1001 and Internal Revenue Service Form W-8 or Internal
Revenue Service Form W-9 and any additional form necessary
for claiming complete exemption from United States
withholding taxes (or such other form as is required to
claim complete exemption from United States withholding
taxes), if and as provided by the Code, regulations or other
pronouncements of the United States Internal Revenue
Service, and the Bank warrants to the Company that the form
so filed will be true and complete; provided that such
Bank's failure to complete and execute such Form 4224 or
Form 1001, or Form W-8 or Form W-9, as the case may be, and
any such additional form (or any successor form or forms)
shall not relieve the Company of any of its obligations
under this Agreement, except as otherwise provided in this
Section 2.11. In the event that the Company is required, or
has been notified by the relevant taxing authority that it
will be required, to either withhold or make payment of
Taxes with respect to any payments to be made by the Company
under this Agreement to any transferor Bank and such
requirement or notice arises as a result of the sale of a
participation by such transferor Bank pursuant to Section
10.06(b) hereof, such transferor Bank shall, upon request by
the Company, accompanied by a certificate setting forth in
reasonable detail the basis for such request, provide to the
Company copies of all tax forms required to be provided to
such transferor Bank pursuant to Section 10.06(g) hereof by
the Participant which purchased such participation. The
obligation of each transferor Bank to provide to the Company
such tax forms shall survive the termination of this
Agreement or, if earlier, the termination of the Revolving
Credit Commitment of such transferor Bank.
(c) In the event that any Affected Bank shall
have given notice that it is entitled to claim compensation
pursuant to this Section 2.11, the Company may at any time
thereafter exercise any one or more of the following
options:
(i) The Company may request one or more of the
non-Affected Banks to take over all (but not part) of
each or any Affected Bank's then outstanding Loan(s)
and to assume all (but not part) of each or any
Affected Bank's Revolving Credit Commitment and
obligations hereunder. If one or more Banks shall so
agree in writing with respect to an Affected Bank, (x)
the Revolving Credit Commitment of each Assenting Bank
and the obligations of such Assenting Bank under this
Agreement shall be increased by its respective
Allocable Share of the Revolving Credit Commitment and
of the obligations of such Affected Bank under this
Agreement, and (y) each Assenting Bank shall make Loans
to the Company, according to such Assenting Bank's
respective Allocable Share, in an aggregate principal
amount equal to the outstanding principal amount of the
Loan(s) of such Affected Bank, on a date mutually
acceptable to the Assenting
<PAGE>
31
Banks and the Company. The proceeds of such Loans,
together with funds of the Company, shall be used to
prepay the Loan(s) of such Affected Bank, together with
all interest accrued thereon, and all other amounts
owing to such Affected Bank hereunder (including any
amounts payable pursuant to Section 3.04 hereof in
connection with such prepayment), and, upon such
assumption by the Assenting Banks and prepayment by the
Company, such Affected Bank shall cease to be a "Bank"
for purposes of this Agreement and shall no longer have
any obligations hereunder (except as provided in
Section 2.11(b), Section 10.02 and Section 10.07
hereof).
(ii) (A) The Company may designate one or more
Replacement Lenders mutually acceptable to the Company
and the Administrative Agent (whose consent shall not
be unreasonably withheld) to assume the Revolving
Credit Commitment and the obligations of any such
Affected Bank hereunder, and to purchase the
outstanding Loans of such Affected Bank and such
Affected Bank's rights hereunder and with respect
thereto, without recourse upon, or warranty by, or
expense to, such Affected Bank, for a purchase price
equal to the outstanding principal amount of the
Loan(s) of such Affected Bank plus all interest accrued
thereon and all other amounts owing to such Affected
Bank hereunder (including the amount which would be
payable to such Affected Bank pursuant to Section 3.04
hereof if the purchase of its Loans constituted a
prepayment thereof contemplated by clause (ii) of the
first sentence of Section 3.04 hereof), and upon such
assumption and purchase by the Replacement Lenders,
each such Replacement Lender shall be declared to be a
"Bank" for purposes of this Agreement and such Affected
Bank shall cease to be a "Bank" for purposes of this
Agreement and shall no longer have any obligations
hereunder (except as provided in Section 2.11(b),
Section 10.02 and Section 10.07 hereof).
(B) As an alternative, the Company may designate
one or more Replacement Lenders mutually acceptable to
the Company and the Administrative Agent (whose consent
shall not be unreasonably withheld) which shall upon a
date mutually agreed upon by the Company and such
Replacement Lenders assume the Revolving Credit
Commitment and the obligations of such Affected Bank
under this Agreement and shall upon such date make
Loans to the Company in an aggregate principal amount
equal to the outstanding principal amount of the
Loan(s) of such Affected Bank. The proceeds of such
Loans, together with funds of the Company, shall be
used to prepay the Loan(s) of such Affected Bank,
together with all interest accrued thereon and all
other amounts owing to such Affected Bank hereunder
(including any amounts payable pursuant to Section 3.04
hereof in connection with such prepayment), and, upon
such Replacement Lenders making such Loans and such
prepayment by the Company, such Replacement Lenders
shall be deemed to be "Banks" for purposes of this
Agreement and such Affected Bank shall cease to be a
"Bank" for purposes of this Agreement and shall no
longer have any obligations hereunder (except as
provided in Section 2.11(b), Section 10.02 and Section
10.07 hereof). Each such Replacement Lender shall
execute and deliver to the Administrative Agent such
documentation to evidence its status as a "Bank"
hereunder as shall be mutually acceptable to the
Company and the Administrative Agent. The
effectiveness of each Replacement Lender's Revolving
Credit Commitment, the making of such Loans by such
Replacement Lenders and the prepayment by the Company
of the Loan(s) of such Affected Bank shall be deemed to
have occurred simultaneously for all purposes hereof.
<PAGE>
32
(iii) If any such claim for compensation relates
to Loans then being requested by the Company pursuant
to a notice of Borrowing as provided in Article II
hereof, the Company may, not later than 12:00 noon, New
York City time, on the day which is three (3) Business
Days prior to the date on which the requested Loans
were to have been made, in the case of Eurodollar
Loans, or not later than 9:00 a.m., New York City time,
on the date on which the requested Loans were to have
been made, in the case of Fixed Rate Loans or Alternate
Base Rate Loans, by giving notice (by telephone
(confirmed in writing promptly thereafter) or
telecopier) to the Administrative Agent (which notice
the Administrative Agent shall transmit to each of the
Banks otherwise required to participate in the
requested Loans as soon as practicable thereafter)
irrevocably withdraw such notice of Borrowing.
(d) In the event the Company shall take any of
the actions contemplated by Section 2.11(c)(i) or Section
2.11(c)(ii) hereof, Schedule I and Schedule II hereto shall
be deemed amended to reflect the addition of any Replacement
Lender and any increases or decreases in the Revolving
Credit Commitments of the Affected Banks and the Assenting
Banks, as the case may be.
SECTION 2.12. Failed and Credit-Impaired Banks.
If (a) a Bank shall be adjudged bankrupt or insolvent, or if
a receiver of a Bank or of its property shall be appointed,
or if any public officer shall take charge or control of a
Bank or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, or if a Bank
shall default in respect of its obligation to make Loans
hereunder, (b) any of Moody's, S&P or Thomson BankWatch,
Inc. shall assign a rating to a Bank or its senior,
unsecured, non-credit-enhanced, long-term indebtedness for
borrowed money which shall be classified by such rating
agency as below investment grade, or, in the case of Thomson
BankWatch, Inc., such rating shall be below C/D, or (c) the
Company shall deliver to the Administrative Agent a notice
stating that, as to any Bank which has senior, unsecured,
non-credit-enhanced, long-term indebtedness for borrowed
money which is not rated by any of the rating agencies
referred to in the preceding clause (b), that it reasonably
believes such Bank will become subject to any of the events
referred to in clause (a) above or become unable to perform
its obligations as a Bank hereunder, then the Company may at
any time thereafter, subject to applicable law, exercise any
one or more of the following options:
(i) The Company may request one or more of the
non-Affected Banks to take over all (but not part) of
each or any Affected Bank's then outstanding Loan(s)
and to assume all (but not part) of each or any
Affected Bank's Revolving Credit Commitment and
obligations hereunder. If one or more Banks shall so
agree in writing with respect to an Affected Bank, (x)
the Revolving Credit Commitment of each Assenting Bank
and the obligations of such Assenting Bank under this
Agreement shall be increased by its respective
Allocable Share of the Revolving Credit Commitment and
of the obligations of such Affected Bank under this
Agreement, and (y) each Assenting Bank shall make Loans
to the Company, according to such Assenting Bank's
respective Allocable Share, in an aggregate principal
amount equal to the outstanding principal amount of the
Loan(s) of such Affected Bank, on a date mutually
acceptable to the Assenting Banks and the Company. The
proceeds of such Loans, together with funds of the
Company, shall be used to prepay the Loan(s) of such
Affected Bank, together with all interest accrued
thereon and all other amounts owing to such Affected
Bank hereunder (excluding, in the case of an event
referred to in clause (a) of
<PAGE>
33
Section 2.12, any amounts payable pursuant to Section
3.04 hereof in connection with such prepayment), and,
upon such assumption by the Assenting Bank and
prepayment by the Company, such Affected Bank shall
cease to be a "Bank" for purposes of this Agreement and
shall no longer have any obligations hereunder (except
as provided in Section 2.11(b), Section 10.02 and
Section 10.07 hereof).
(ii) (A) The Company may designate one or more
Replacement Lenders mutually acceptable to the Company
and the Administrative Agent (whose consent shall not
be unreasonably withheld) to assume the Revolving
Credit Commitment and the obligations of any such
Affected Bank hereunder, and to purchase the
outstanding Loans of such Affected Bank and such
Affected Bank's rights hereunder and with respect
thereto, without recourse upon, or warranty by, or
expense to, such Affected Bank, for a purchase price
equal to the outstanding principal amount of the
Loan(s) of such Affected Bank plus all interest accrued
and unpaid thereon and all other amounts owing to such
Affected Bank hereunder (including the amount which
would be payable to such Affected Bank pursuant to
Section 3.04 hereof if the purchase of its Loans
constituted a prepayment thereof contemplated by clause
(ii) of the first sentence of Section 3.04 hereof), and
upon such assumption and purchase by the Replacement
Lenders, each such Replacement Lender shall be deemed
to be a "Bank" for purposes of this Agreement and such
Affected Bank shall cease to be a "Bank" for purposes
of this Agreement and shall no longer have any
obligations hereunder (except as provided in Section
2.11(b), Section 10.02 and Section 10.07 hereof).
(B) As an alternative, the Company may designate
one or more Replacement Lenders mutually acceptable to
the Company and the Administrative Agent (whose consent
shall not be unreasonably withheld) which shall upon a
date mutually agreed upon by the Company and such
Replacement Lenders assume the Revolving Credit
Commitment and the obligations of such Affected Bank
under this Agreement and shall upon such date make
Loans to the Company in an aggregate principal amount
equal to the outstanding principal amount of the
Loan(s) of such Affected Bank. The proceeds of such
Loans, together with funds of the Company, shall be
used to prepay the Loan(s) of such Affected Bank,
together with all interest accrued thereon and all
other amounts owing to such Affected Bank hereunder
(including any amounts payable pursuant to Section 3.04
hereof in connection with such prepayment), and, upon
such Replacement Lenders making such Loans and such
prepayment by the Company, such Replacement Lenders
shall be deemed to be "Banks" for purposes of this
Agreement and such Affected Bank shall cease to be a
"Bank" for purposes of this Agreement and shall no
longer have any obligations hereunder (except as
provided in Section 2.11(b), Section 10.02 and Section
10.07 hereof). Each such Replacement Lender shall
execute and deliver to the Administrative Agent such
documentation to evidence its status as a "Bank"
hereunder as shall be mutually acceptable to the
Company and the Administrative Agent. The
effectiveness of each Replacement Lender's Revolving
Credit Commitment, the making of such Loans by such
Replacement Lenders and the prepayment by the Company
of the Loan(s) of such Affected Bank shall be deemed to
have occurred simultaneously for all purposes hereof.
In the event the Company shall take any of the
actions contemplated by Section 2.12(i) or Section 2.12(ii)
hereof, Schedule I and Schedule II hereto shall be deemed
amended to reflect the addition of any Replacement Lender
and any increases or
<PAGE>
34
decreases in the Revolving Credit Commitments of the
Affected Banks and the Assenting Banks, as the case may be.
SECTION 2.13. Replacement of Non-Continuing
Banks. If a Bank shall withhold consent to an extension of
the Termination Date requested in accordance with Section
4.01(c)(ii) hereof, then the Company may at any time
thereafter, subject to applicable law, exercise any one or
more of the following options:
(i) The Company may request one or more of the
non-Affected Banks to take over all (but not part) of
each or any Affected Bank's then outstanding Loan(s)
and to assume all (but not part) of each or any
Affected Bank's Revolving Credit Commitment and
obligations hereunder. If one or more Banks shall so
agree in writing with respect to an Affected Bank, (x)
the Revolving Credit Commitment of each Assenting Bank
and the obligations of such Assenting Bank under this
Agreement shall be increased by its respective
Allocable Share of the Revolving Credit Commitment and
of the obligations of such Affected Bank under this
Agreement, and (y) each Assenting Bank shall make Loans
to the Company, according to such Assenting Bank's
respective Allocable Share, in an aggregate principal
amount equal to the outstanding principal amount of the
Loan(s) of such Affected Bank, on a date mutually
acceptable to the Assenting Banks and the Company. The
proceeds of such Loans, together with funds of the
Company, shall be used to prepay the Loan(s) of such
Affected Bank, together with all interest accrued
thereon and all other amounts owing to such Affected
Bank hereunder and, upon such assumption by the
Assenting Bank and prepayment by the Company, such
Affected Bank shall cease to be a "Bank" for purposes
of this Agreement and shall no longer have any
obligations hereunder (except as provided in Section
2.11(b), Section 10.02 and Section 10.07 hereof).
(ii) (A) The Company may designate one or more
Replacement Lenders mutually acceptable to the Company
and the Administrative Agent (whose consent shall not
be unreasonably withheld) to assume the Revolving
Credit Commitment and the obligations of any such
Affected Bank hereunder, and to purchase the
outstanding Loans of such Affected Bank and such
Affected Bank's rights hereunder and with respect
thereto, without recourse upon, or warranty by, or
expense to, such Affected Bank, for a purchase price
equal to the outstanding principal amount of the
Loan(s) of such Affected Bank plus all interest accrued
and unpaid thereon and all other amounts owing to such
Affected Bank hereunder (including the amount which
would be payable to such Affected Bank pursuant to
Section 3.04 hereof if the purchase of its Loans
constituted a prepayment thereof contemplated by clause
(ii) of the first sentence of Section 3.04 hereof), and
upon such assumption and purchase by the Replacement
Lenders, each such Replacement Lender shall be deemed
to be a "Bank" for purposes of this Agreement and such
Affected Bank shall cease to be a "Bank" for purposes
of this Agreement and shall no longer have any
obligations hereunder (except as provided in Section
2.11(b), Section 10.02 and Section 10.07 hereof).
(B) As an alternative, the Company may designate
one or more Replacement Lenders mutually acceptable to
the Company and the Administrative Agent (whose consent
shall not be unreasonably withheld) which shall upon a
date mutually agreed upon by the Company and such
Replacement Lenders assume the Revolving Credit
Commitment and the obligations of such Affected Bank
under this Agreement and shall upon such date make
Loans to the Company
<PAGE>
35
in an aggregate principal amount equal to the
outstanding principal amount of the Loan(s) of such
Affected Bank. The proceeds of such Loans, together
with funds of the Company, shall be used to prepay the
Loan(s) of such Affected Bank, together with all
interest accrued thereon and all other amounts owing to
such Affected Bank hereunder (including any amounts
payable pursuant to Section 3.04 hereof in connection
with such prepayment), and, upon such Replacement
Lenders making such Loans and such prepayment by the
Company, such Replacement Lenders shall be deemed to be
"Banks" for purposes of this Agreement and such
Affected Bank shall cease to be a "Bank" for purposes
of this Agreement and shall no longer have any
obligations hereunder (except as provided in Section
2.11(b), Section 10.02 and Section 10.07 hereof). Each
such Replacement Lender shall execute and deliver to
the Administrative Agent such documentation to evidence
its status as a "Bank" hereunder as shall be mutually
acceptable to the Company and the Administrative Agent.
The effectiveness of each Replacement Lender's
Revolving Credit Commitment, the making of such Loans
by such Replacement Lenders and the prepayment by the
Company of the Loan(s) of such Affected Bank shall be
deemed to have occurred simultaneously for all purposes
hereof.
In the event the Company shall take any of the
actions contemplated by Section 2.13(i) or Section 2.13(ii)
hereof, Schedule I and Schedule II hereto shall be deemed
amended to reflect the addition of any Replacement Lender
and any increases or decreases in the Revolving Credit
Commitments of the Affected Banks and the Assenting Banks,
as the case may be.
ARTICLE III
INTEREST PROVISIONS
SECTION 3.01. Interest on Loans. (a) Subject to
the provisions of Section 3.02 hereof, each Eurodollar 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 Eurodollar Rate for the Interest
Period in effect for such Loan plus (i) in the case of each
Competitive Loan, the Margin specified by a Bank with
respect to such Loan in its Competitive Bid submitted
pursuant to Section 2.02(c) hereof, and (ii) in the case of
each Revolving Credit Loan, the Applicable Margin. Interest
on each Eurodollar Loan shall be payable on each Interest
Payment Date applicable thereto.
(b) Subject to the provisions of Section 3.02
hereof, each Alternate Base Rate Loan shall bear interest at
a rate per annum (computed on the basis of the actual number
of days elapsed (i) over a year of 365 or 366 days, as the
case may be, if the Alternate Base Rate is based on the
Prime Rate, and (ii) over a year of 360 days if the
Alternate Base Rate is based on the Federal Funds Effective
Rate) equal to the Alternate Base Rate. Interest on each
Alternate Base Rate Loan shall be payable on each Interest
Payment Date applicable thereto.
(c) Subject to the provisions of Section 3.02
hereof, 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 Competitive Bid Bank making
such Loan and accepted by the Company pursuant to
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36
Section 2.02 hereof. Interest on each Fixed Rate Loan shall
be payable on each Interest Payment Date applicable thereto.
(d) Interest on each Loan shall accrue from and
including the first day of the Interest Period with respect
to such Loan to but excluding the last day of such Interest
Period.
SECTION 3.02. Interest on Overdue Amounts. If
the Company shall default in the payment when due of the
principal of any Loan or of any other amount due hereunder
(other than any amount not paid as a result of a Bank
Funding Default for the period from which such Bank Funding
Default commences to the date on which the failure to pay
such amount due would become an Event of Default), the
Company shall on demand from time to time pay interest, to
the extent permitted by law, on such defaulted amount from
the date such amount shall have become due up to (but not
including) the date of actual payment thereof (x) for other
than Eurodollar Loans, accruing on a daily basis, at a rate
per annum (computed on the basis of a year of 365 or 366
days, as the case may be, if the Alternate Base Rate is
based on the Prime Rate or on the basis of a year of 360
days if the Alternate Base Rate is based on the Federal
Funds Effective Rate) which is equal to the sum of (i) the
Alternate Base Rate from time to time in effect, plus (ii)
two percent (2%) per annum, or (y) for Eurodollar Loans,
accruing on a daily basis at a rate per annum (computed on
the basis of a year of 360 days) which is two and one-half
percent (2-1/2%) per annum in excess of the rate determined
by the Administrative Agent two (2) Business Days prior to
the beginning of periods of one day, one week, one month,
two months or three months (as the Administrative Agent
shall select in its sole discretion from time to time during
the continuation of such default), the first of which
periods shall commence on the date such amount shall have
become due, as the rate at which the Administrative Agent is
offered deposits in Dollars as of 11:00 a.m., London time,
by prime banks in the London Interbank Eurodollar market for
delivery on the first day of any such period and for the
approximate number of days comprised therein, in an amount
comparable to the aggregate amount due. If the Company
shall default in the payment when due of the principal of
any Loan or of any other amount due hereunder as a result of
a Bank Funding Default, for the period from which such Bank
Funding Default commences to the date on which the failure
to pay such amount due would become an Event of Default or,
if earlier, to (but not including) the date of actual
payment thereof, the Company shall on demand from time to
time pay interest, to the extent permitted by law, on such
defaulted amount at a rate per annum equal to (x) for other
than Eurodollar Loans, the Alternate Base Rate (computed on
the basis of a year of 365 or 366 days, as the case may be,
if the Alternate Base Rate is based on the Prime Rate or on
the basis of a year of 360 days if the Alternate Base Rate
is based on the Federal Funds Effective Rate), or (y) for
any Eurodollar Loan, until the last day of the Interest
Period therefor, at the Interest Rate applicable to such
Eurodollar Loan determined in accordance with the provisions
of Section 3.01(a) hereof, and thereafter, in accordance
with clause (x) above; provided, however, that interest
payable by the Company for the period set forth above on
defaulted amounts not paid to a Bank as a result of such
Bank's Bank Funding Default shall be payable at a rate per
annum equal to the lesser of (i) the Interest Rate that
would have been applicable to the Loan or Loans that were
the subject of such Bank's Bank Funding Default, and (ii)
the applicable Interest Rate set forth in clause (x) or (y)
above, as the case may be.
SECTION 3.03. Inability to Determine Eurodollar
Rate. (a) In the event, and on each occasion, that the
Company has accepted a Competitive Bid with respect to a
Eurodollar Loan and, on or before the date on which the
Eurodollar Rate for the Interest
<PAGE>
37
Period relating to such Loan is to be determined, the
Administrative Agent shall have determined that by reason of
circumstances affecting the London Interbank Eurodollar
market or affecting the position of any Reference Bank in
such market, adequate and fair means do not exist for
ascertaining the Interest Rate applicable to such Loan
during such Interest Period, then, and in any such event,
the Competitive Bid Request submitted by the Company with
respect to such Loan and the Competitive Bid submitted by
the Competitive Bid Bank and accepted by the Company with
respect to such Loan shall both be deemed to be rescinded
and of no force and effect whatsoever. The Administrative
Agent shall immediately give notice of such determination by
telephone (confirmed by telecopier) to the Company and to
such Competitive Bid Bank. Each such determination by the
Administrative Agent shall be conclusive and binding upon
the parties hereto in the absence of manifest error.
(b) In the event, and on each occasion, that the
Company has submitted a Revolving Credit Borrowing Request
for a Eurodollar Loan and, on or before the date on which
the Eurodollar Rate for the Interest Period relating to such
Loan is to be determined, the Administrative Agent shall
have determined that by reason of circumstances affecting
the London Interbank Eurodollar market or affecting the
position of any Reference Bank in such market, adequate and
fair means do not exist for ascertaining the Interest Rate
applicable to such Loan during such Interest Period, then,
and in any such event, such Revolving Credit Borrowing
Request shall be deemed to be rescinded and of no force and
effect whatsoever. The Administrative Agent shall
immediately give notice of such determination by telephone
(confirmed by telecopier) to the Company and the Banks.
Each such determination by the Administrative Agent shall be
conclusive and binding upon the parties hereto in the
absence of manifest error.
SECTION 3.04. Indemnity. The Company shall
compensate each Bank, upon written request by such Bank
(which request shall set forth the basis for requesting such
amounts), for all reasonable losses and expenses in respect
of any interest paid by such Bank (or its lending branch or
affiliate) to lenders of funds borrowed by it or deposited
with it to make or maintain its Loans (other than Alternate
Base Rate Loans) which such Bank (or its lending branch or
affiliate) may sustain, to the extent not otherwise
compensated for hereunder and not mitigated by the
reemployment of such funds: (i) if for any reason (other
than a default by such Bank) a Borrowing of any Loan does
not occur on a date specified therefor in a notice of
Borrowing given pursuant to Article II hereof, (ii) if any
prepayment (other than a prepayment under Section 2.12(i)
resulting from an event referred to in clause (a) of Section
2.12 hereof) or repayment of its Loans (other than Alternate
Base Rate Loans) occurs on a date which is not the
expiration date of the relevant Interest Period, (iii) if
any prepayment of its Loans (other than Alternate Base Rate
Loans) is not made on any date specified in a notice of
prepayment given by the Company, or (iv) as a consequence of
any default by the Company under this Agreement. Without
prejudice to the foregoing, the Company shall indemnify each
Bank against any loss or expense which such Bank (or its
lending branch or affiliate) may sustain or incur as a
consequence of the default by the Company in payment of
principal of or interest on any Loan (other than any
Alternate Base Rate Loan), or any part thereof, or of any
amount due under this Agreement, including, but not limited
to, any premium or penalty incurred by such Bank (or its
lending branch or affiliate), in respect of funds borrowed
by it or deposited with it for the purpose of making or
maintaining such Loan (other than any Alternate Base Rate
Loan), as determined by such Bank in the exercise of its
sole discretion. A certificate as to any such loss or
expense (including calculations, in reasonable detail,
showing how such Bank computed such loss or expense) shall
be promptly submitted by such Bank to the
<PAGE>
38
Company (with a copy to the Administrative Agent) and shall,
in the absence of manifest error, be conclusive and binding
as to the amount thereof.
SECTION 3.05. Rate Determination Conclusive. The
applicable Interest Rate for each Interest Period with
respect to each Loan (other than any Fixed Rate Loan) shall
be determined by the Administrative Agent and shall be
conclusive and, subject to Section 3.03 and Section 4.03
hereof, binding upon the parties hereto, in the absence of
manifest error. The Administrative Agent shall, at the
request in writing of the Company or any Bank, deliver to
the Company or such Bank a statement showing the
computations used by the Administrative Agent in determining
any Interest Rate in respect of the Loans payable by the
Company.
ARTICLE IV
REDUCTION, TERMINATION OR EXTENSION OF THE
REVOLVING CREDIT COMMITMENTS AND PREPAYMENTS
SECTION 4.01. Reduction, Termination or Extension
of the Total Commitment. (a) The Company may, from time to
time on at least five (5) Business Days' prior notice (by
telephone (confirmed in writing promptly thereafter) or
telecopier) received by the Administrative Agent (which
shall advise each Bank thereof as soon as practicable
thereafter), permanently reduce the Total Commitment (such
reduction shall reduce each Bank's Revolving Credit
Commitment ratably according to its respective Proportional
Share of the amount of such reduction and Schedule I hereto
shall be deemed amended to reflect the reduction in such
Revolving Credit Commitments) but only upon (i) repayment of
that portion of the aggregate unpaid principal amount of all
Revolving Credit Loans which exceeds the amount of the Total
Commitment as so reduced (such repayment to be applied to
each Bank's Revolving Credit Loans in the same proportion as
its Revolving Credit Commitment is reduced), and (ii)
payment to the Administrative Agent, for the ratable account
of the Banks, of the Facility Fees on the portion of the
Total Commitment so reduced which have accrued through the
date of such reduction; provided, however, the Company may
not so reduce the Total Commitment at any time to an amount
less than the aggregate principal amount of all Competitive
Loans then outstanding. Any such reduction shall be in an
aggregate amount of $50,000,000 or an integral multiple of
$10,000,000 in excess of $50,000,000. The Company may at
any time, on like notice, terminate the Total Commitment
(and each Bank's Revolving Credit Commitment) upon payment
in full of all Loans and the accrued interest thereon and
the Facility Fees accrued through the date of such
termination; provided, however, that the Company may not
terminate the Total Commitment at any time that Competitive
Loans are then outstanding.
(b) The Company shall reduce the Total Commitment
pursuant to Section 4.01(a) hereof (or, after the
Termination Date, repay Loans without refinancing such Loans
pursuant to Section 2.05(b) hereof) by the end of the
calendar quarter next succeeding the calendar quarter in
which Net Proceeds of any Specified Asset Disposition shall
have been received (such reduction or prepayment shall
reduce each Bank's Revolving Credit Commitment or
outstanding Loans ratably according to its respective
Proportional Share of the amount of such reduction or
prepayment and Schedule I hereto shall be deemed amended to
reflect the reduction in such Revolving Credit Commitments)
by the amount (if any) by which the Net Proceeds of
Specified Asset
<PAGE>
39
Dispositions after the Effective Date and prior to the last
day of the calendar quarter in which the Net Proceeds are
received exceed the sum of (i) the aggregate amount of all
reductions of the Total Commitment made pursuant to Section
4.01(a) hereof prior to the end of such succeeding calendar
quarter and (ii) the aggregate amount of the Revolving
Credit Loans repaid after the Termination Date and not
refinanced pursuant to Section 2.05(b) hereof prior to the
end of such succeeding calendar quarter. On the date of any
such reduction of the Revolving Credit Commitments, (i) the
Company shall repay that portion of the aggregate unpaid
principal amount of all Revolving Credit Loans which exceeds
the amount of the Total Commitment as so reduced (such
repayment to be applied to each Bank's Revolving Credit
Loans in the same proportion as its Revolving Credit
Commitment is reduced), and (ii) the Company shall pay to
the Administrative Agent, for the ratable account of the
Banks, the Facility Fees on the portion of the Total
Commitment so reduced which have accrued through the date of
such reduction.
(c)(i) The Company may, upon notice (by telephone
(confirmed in writing promptly thereafter) or telecopier)
received by the Administrative Agent (which shall advise
each Bank thereof as soon as practicable thereafter) not
earlier than sixty (60) days and not later than fifty (50)
days prior to the Initial Termination Date, request that the
Banks extend the Termination Date for an additional 364 days
from the Initial Termination Date. Each Bank shall, by
notice to the Company and the Administrative Agent given not
later than the fifteenth (15th) day after the date of the
Company's notice, advise the Company and the Administrative
Agent whether or not such Bank agrees to such extension (and
any Bank that does not so advise the Company on or before
such day shall be deemed to have advised the Company that it
will not agree to such extension).
(ii) If (and only if) Banks holding Revolving
Credit Commitments that represent at least 66 2/3% of the
Revolving Credit Commitments shall have agreed to extend the
Initial Termination Date (such Banks being called the
"Continuing Banks" and the Banks that shall not have agreed
to extend the Initial Termination Date being called the "Non-
Continuing Banks"), then (A) the Termination Date shall be
extended by 364 days (provided, that if such date is not a
Business Day, then the Termination Date as so extended shall
be the next preceding Business Day), and (B) the Revolving
Credit Commitment of each Non-Continuing Bank shall
terminate (with the result that the total Revolving Credit
Commitments will decrease by the amount of such Revolving
Credit Commitment), and all Loans of each such Non-
Continuing Bank shall become due and payable, together with
all interest accrued thereon and all other amounts owed to
such Non-Continuing Bank hereunder, on the Initial
Termination Date. In the event that the Initial Termination
Date is extended pursuant to the immediately preceding
sentence, the Company may replace Non-Continuing Banks
pursuant to Section 2.13 hereof.
Notwithstanding the foregoing, no extension of the
Initial Termination Date shall be effective with respect to
any Bank unless, on and as of the Initial Termination Date,
the conditions set forth in Section 7.02 shall be satisfied
(with all references to a Loan being deemed to be references
to such extension) and the Administrative Agent shall have
received a certificate to that effect dated the Initial
Termination Date and executed by a financial officer of the
Company.
SECTION 4.02. Prepayments. (a) The Company may
from time to time, upon at least (i) two (2) Business Days'
prior notice (in the event such notice pertains to Domestic
Loans) or (ii) three (3) Business Days' prior notice (in the
event such notice pertains to Eurodollar Loans) (by
telephone (confirmed in writing promptly thereafter) or
telecopier) received by the Administrative Agent (prior to
12:00 noon, New York City
<PAGE>
40
time, in the event such notice pertains to Domestic Loans)
(which shall advise each Bank thereof as soon as practicable
thereafter), prepay any Revolving Credit Borrowing in whole
or in part, without, except as provided in Section 3.04
hereof, premium or penalty (such prepayment to be pro rata
to the Banks according to the respective unpaid principal
amounts of the Revolving Credit Loans owing to them);
provided, however, that each such prepayment shall be in an
aggregate amount of $50,000,000 or an integral multiple of
$10,000,000 in excess of $50,000,000. Except as provided in
Section 2.07(e)(ii), Section 2.07(e)(iii), Section
2.11(c)(i), Section 2.12(i), Section 2.13(i), Section
4.03(a), Section 4.03(b)(ii) or Section 4.03(b)(iii) hereof,
the Company shall not have the right to prepay any
Competitive Borrowing.
(b) Each notice of prepayment shall specify the
Borrowing to be prepaid, the prepayment date and the
aggregate principal to be prepaid, and shall be irrevocable.
All prepayments under this Section 4.02 shall be accompanied
by accrued interest on the principal amount being prepaid to
the date of prepayment.
SECTION 4.03. Required Termination of the
Revolving Credit Commitments and Prepayment. (a) In the
event that at any time any Affected Bank shall have
reasonably determined in good faith (which determination
shall be conclusive and binding upon the parties hereto, in
the absence of manifest error) that the making or
continuation of its Revolving Credit Commitment to make
Eurodollar Loans or its Eurodollar Loans have become
unlawful under any applicable law, governmental rule,
requirement, regulation, guideline or order, then, and in
any such event, such Affected Bank shall as soon as
practicable give notice (by telephone (confirmed in writing
promptly thereafter) or telecopier) to the Company and to
the Administrative Agent (which shall transmit such notice
to each of the Banks as soon as practicable thereafter), of
such determination. Thereupon, the Revolving Credit
Commitment of such Affected Bank and the obligation of such
Affected Bank to make or maintain its Loan(s) shall be
terminated and the Company shall forthwith, and in any event
no later than the earlier of (x) the next succeeding
Interest Payment Date with respect to such Loan(s) or (y)
ten (10) days after receipt of notice from such Affected
Bank under this Section 4.03(a), prepay the outstanding
Loan(s) of such Affected Bank without premium or penalty,
together with all interest accrued thereon and all other
amounts owing to such Affected Bank hereunder (including any
amounts payable pursuant to Section 3.04 hereof in
connection with such prepayment).
(b) In lieu of prepaying the Loan(s) of the
Affected Bank as required by Section 4.03(a) hereof, the
Company may exercise any one or more of the following
options:
(i) If such determination by an Affected Bank
relates to Eurodollar Loans then being requested by the
Company pursuant to a notice of Borrowing as provided
in Sections 2.01, 2.02 or 2.05 hereof, the Company may,
not later than 9:00 a.m., New York City time, on the
day which is three (3) Business Days prior to the date
on which such Loans were to have been made by giving
notice (by telephone (confirmed in writing promptly
thereafter) or telecopier) to the Administrative Agent
(which shall transmit such notice to each of the Banks
otherwise required to participate in such Loans as soon
as practicable thereafter) irrevocably withdraw such
notice of Borrowing.
(ii) The Company may request one or more of the
non-Affected Banks to take over all (but not part) of
each Affected Bank's then outstanding Loan(s) and
<PAGE>
41
to assume all (but not part) of each Affected Bank's
Revolving Credit Commitment and obligations hereunder.
If one or more Banks shall so agree in writing with
respect to an Affected Bank, (x) the Revolving Credit
Commitment of each Assenting Bank and the obligations
of such Assenting Bank under this Agreement shall be
increased by its respective Allocable Share of the
Revolving Credit Commitment and of the obligations of
such Affected Bank under this Agreement, and (y) each
Assenting Bank shall make Loans to the Company,
according to such Assenting Bank's respective Allocable
Share, in an aggregate principal amount equal to the
outstanding principal amount of the Loan(s) of such
Affected Bank, on a date mutually acceptable to the
Assenting Banks, such Affected Bank and the Company.
The proceeds of such Loans, together with funds of the
Company, shall be used to prepay the Loan(s) of such
Affected Bank, together with all interest accrued
thereon, and all other amounts owing to such Affected
Bank hereunder (including any amounts payable pursuant
to Section 3.04 hereof in connection with such
prepayment), and, upon such assumption by the Assenting
Banks and prepayment by the Company, such Affected Bank
shall cease to be a "Bank" for purposes of this
Agreement and shall no longer have any obligations
hereunder (except as provided in Section 2.11(b),
Section 10.02 and Section 10.07 hereof). Any such
prepayment shall occur prior to the time any prepayment
pursuant to Section 4.03(a) hereof is required to be
made.
(iii) Upon notice (by telephone (confirmed in
writing promptly thereafter) or telecopier) to the
Administrative Agent (which shall advise each Bank
thereof as soon as practicable thereafter), the Company
may terminate the obligations of the Banks to make or
maintain Loans as Eurodollar Loans and, in such event,
the Company shall, prior to the time any prepayment
pursuant to Section 4.03(a) hereof is required to be
made, refinance all of the Eurodollar Loans with
Domestic Loans, or prepay such Eurodollar Loans, in the
manner contemplated by and pursuant to Section 2.05 or
Section 4.02 hereof, respectively.
(iv) (A) The Company may designate one or more
Replacement Lenders mutually acceptable to the Company
and the Administrative Agent (whose consent shall not
be unreasonably withheld) to assume the Revolving
Credit Commitment and the obligations of each such
Affected Bank hereunder, and to purchase, prior to the
time any prepayment pursuant to Section 4.03(a) hereof
is required to be made, the outstanding Loans of such
Affected Bank and such Affected Bank's rights hereunder
and with respect thereto, without recourse upon, or
warranty by, or expense to, such Affected Bank, for a
purchase price equal to the outstanding principal
amount of the Loan(s) of such Affected Bank plus all
interest accrued thereon and all other amounts owing to
such Affected Bank hereunder (including the amount
which would be payable to such Affected Bank pursuant
to Section 3.04 hereof if the purchase of its Loans
constituted a prepayment thereof contemplated by clause
(ii) of the first sentence of Section 3.04 hereof), and
upon such assumption and purchase by the Replacement
Lenders, each such Replacement Lender shall be deemed
to be a "Bank" for purposes of this Agreement and such
Affected Bank shall cease to be a "Bank" for purposes
of this Agreement and shall no longer have any
obligations hereunder (except as provided in Section
2.11(b), Section 10.02 and Section 10.07 hereof).
(B) As an alternative, the Company may designate
one or more Replacement Lenders mutually acceptable to
the Company and the Administrative
<PAGE>
42
Agent (whose consent shall not be unreasonably
withheld) which shall upon a date mutually agreed upon
by the Company and such Replacement Lenders assume the
Revolving Credit Commitment and the obligations of such
Affected Bank under this Agreement and shall upon such
date make Loans to the Company in an aggregate
principal amount equal to the outstanding principal
amount of the Loan(s) of such Affected Bank. The
proceeds of such Loans, together with funds of the
Company, shall be used to prepay the Loan(s) of such
Affected Bank, together with all interest accrued
thereon and all other amounts owing to such Affected
Bank hereunder (including any amounts payable pursuant
to Section 3.04 hereof in connection with such
prepayment), and, upon such Replacement Lenders making
such Loans and such prepayment by the Company, such
Replacement Lenders shall be deemed to be "Banks" for
purposes of this Agreement and such Affected Bank shall
cease to be a "Bank" for purposes of this Agreement and
shall no longer have any obligations hereunder (except
as provided in Section 2.11(b), Section 10.02 and
Section 10.07 hereof). Each such Replacement Lender
shall execute and deliver to the Administrative Agent
such documentation to evidence its status as a "Bank"
hereunder as shall be mutually acceptable to the
Company and the Administrative Agent. The
effectiveness of each Replacement Lender's Revolving
Credit Commitment, the making of such Loans by such
Replacement Lenders and the prepayment by the Company
of the Loan(s) of such Affected Bank shall be deemed to
have occurred simultaneously for all purposes hereof.
In the event the Company shall take any of the
actions contemplated by Section 4.03(b)(ii) or Section
4.03(b)(iv) hereof, Schedule I and Schedule II hereto shall
be deemed amended to reflect the addition of any Replacement
Lender and any increases or decreases in the Revolving
Credit Commitments of the Affected Banks and the Assenting
Banks, as the case may be.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Representations and Warranties of
the Company. The Company represents and warrants to the
Banks, the Agents and the Managing Agents as follows:
(a) Company's Organization; Corporate Power. The
Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the
State of Delaware; the Company is duly qualified or
licensed and in good standing as a foreign corporation
authorized to do business in each other jurisdiction
where, because of the nature of its activities or
properties, such qualification or licensing is
required, except for such jurisdictions where the
failure to be so qualified or licensed will not
materially adversely affect the financial condition,
business or operations of the Company and its
Consolidated Subsidiaries, taken as a whole, or prevent
the enforcement of contracts to which the Company is a
party; and the Company has all requisite corporate
power and authority (i) to own its assets and to carry
on the business in which it is engaged, (ii) to
execute, deliver and perform its obligations under this
Agreement, (iii) to borrow in the manner and for the
purpose contemplated by this Agreement, and (iv) to
execute, deliver and perform its obligations under all
other agreements and
<PAGE>
43
instruments executed and delivered by the Company
pursuant to or in connection with this Agreement.
(b) Domestic Specified Subsidiaries;
Organization; Corporate Power. As of the Effective
Date, each domestic Specified Subsidiary is a
corporation or other entity (as the case may be) duly
incorporated or formed, validly existing and in good
standing under the laws of the state or jurisdiction of
its incorporation or formation; and, as of the
Effective Date, each domestic Specified Subsidiary has
all requisite corporate power and authority to own its
assets and to carry on the business in which it is
engaged.
(c) Company's Corporate Authority; No Conflict.
The execution and delivery by the Company of this
Agreement, the performance by the Company of its
obligations under this Agreement, the Borrowings by the
Company in the manner and for the purpose contemplated
by this Agreement, the execution and delivery by the
Company of all other agreements and instruments which
shall have been executed and delivered by the Company
pursuant hereto or in connection herewith, and the
performance by the Company of its obligations under all
other agreements and instruments which shall have been
executed and delivered by the Company pursuant hereto
or in connection herewith, have been duly authorized by
all necessary corporate action (including any necessary
stockholder action) on the part of the Company, and do
not and will not (i) violate any provision of any law,
rule or regulation (including, without limitation,
Regulation U and Regulation X) presently in effect
having applicability to the Company (or any Specified
Subsidiary), or of any order, writ, judgment, decree,
determination or award (which is, individually or in
the aggregate, material to the consolidated financial
condition, business or operations of the Company and
its Consolidated Subsidiaries) presently in effect
having applicability to the Company (or any Specified
Subsidiary) or of the charter or by-laws of the Company
(or any Specified Subsidiary), or (ii) subject to the
Company's compliance with any applicable covenants
pertaining to its incurrence of unsecured indebtedness,
result in a breach of or constitute a default under any
indenture or loan or credit agreement, or result in a
breach of or constitute a default under any other
agreement or instrument (which is, individually or in
the aggregate, material to the consolidated financial
condition, business or operations of the Company and
its Consolidated Subsidiaries), to which the Company or
any Specified Subsidiary is a party or by which the
Company or any Specified Subsidiary or its respective
properties may be bound or affected, or (iii) result
in, or require, the creation or imposition of any Lien
of any nature upon or with respect to any of the
properties now owned or hereafter acquired by the
Company (other than any right of setoff or banker's
lien or attachment that any Bank or other holder of a
Loan may have under applicable law), and the Company is
not in default under or in violation of its charter or
by-laws.
(d) Valid and Binding Obligations of the Company.
This Agreement constitutes, and each other agreement or
instrument executed and delivered by the Company
pursuant hereto or in connection herewith will each
constitute, the legal, valid and binding obligation of
the Company, enforceable against the Company in
accordance with its respective terms, except as
enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights
generally and by general principles of equity,
including, without limitation, concepts of materiality,
reasonableness,
<PAGE>
44
good faith and fair dealing and the possible
unavailability of specific performance or injunctive
relief (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(e) Company's Financial Condition. The Company's
audited consolidated financial statements as at
December 31, 1996, copies of which have been furnished
to each Bank, have been prepared in conformity with
generally accepted accounting principles applied on a
basis consistent with that of the preceding fiscal year
and fairly present the consolidated financial condition
of the Company and its Consolidated Subsidiaries as at
such date and the results of their operations for the
period then ended; since December 31, 1996 to and
including the Effective Date, there has been no
material adverse change in their consolidated financial
condition, business or operations, except as set forth
in the Company's annual report on Form 10-K for the
year ended December 31, 1996, and its quarterly reports
on Form 10-Q for the quarters ended March 31, 1997,
June 30, 1997, and September 30, 1997, in each case to
the Securities and Exchange Commission, (copies of each
of which have been furnished to each Bank) or as
disclosed in writing to the Banks prior to the
Effective Date; and, since the Effective Date, there
has been no material adverse change in their
consolidated financial condition from the most recent
consolidated financial statements of the Company and
its Consolidated Subsidiaries which have been furnished
to the Banks pursuant to this Agreement, except as
disclosed in writing to the Banks.
(f) Litigation with Respect to the Company or Its
Subsidiaries. As of the Effective Date, no litigation
(including, without limitation, derivative actions),
arbitration proceedings or governmental proceedings are
pending or, to the knowledge of the Company, threatened
against the Company or any Subsidiary of the Company
which are likely (to the extent not covered by
insurance) materially and adversely to affect the
consolidated financial condition of the Company and its
Consolidated Subsidiaries or materially to impair the
Company's ability to perform its obligations under this
Agreement, except as set forth in the Company's annual
report on Form 10-K for the year ended December 31,
1996, or its quarterly reports on Form 10-Q for the
quarters ended March 31, 1997, June 30, 1997, and
September 30, 1997, to the Securities and Exchange
Commission, or as disclosed in writing to the Banks
prior to the Effective Date.
(g) Regulatory Approvals with Respect to This
Agreement. No authorization, consent, approval,
license or formal exemption from, nor any filing,
declaration or registration with, any court,
governmental agency or regulatory authority (Federal,
state, local or foreign), including, without
limitation, the Securities and Exchange Commission, or
with any securities exchange, is or will be required in
connection with the execution and delivery by the
Company of this Agreement, the performance by the
Company of its obligations under this Agreement, or the
Borrowings by the Company in the manner and for the
purpose contemplated by this Agreement (except for such
authorizations, consents, approvals, licenses,
exemptions, filings, declarations or registrations, if
any, which may be required to be obtained or made
subsequent to the Effective Date, all of which, if then
required, will have been duly obtained or made on or
before each date on which the foregoing representation
and warranty shall be made, deemed made or reaffirmed,
as the case may be, will be sufficient for all purposes
thereof and will be in full force and effect on each
such date).
<PAGE>
45
(h) ERISA. As of the Effective Date, no material
liability to the PBGC has been, or is expected by the
Company or any Related Person to the Company to be,
incurred by the Company or any Related Person to the
Company. No Reportable Event which presents a material
risk of termination of any Plan maintained by the
Company or a Related Person to the Company has occurred
and is continuing at the Effective Date. No Plan
maintained by the Company or a Related Person to the
Company had an Accumulated Funding Deficiency, whether
or not waived, as of the last day of the most recent
fiscal year of such Plan ending prior to the Effective
Date. Neither the Company nor any Related Person to
the Company has engaged in a Prohibited Transaction
prior to the Effective Date.
(i) Investment Company Act. The Company is not
an "investment company" or a company "controlled" by an
"investment company", within the meaning of the
Investment Company Act of 1940, as amended.
(j) Public Utility Holding Company Act. The
Company is not a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a
"holding company" or of a "subsidiary company" of a
"holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(k) Regulation U; Regulation G; Regulation X.
The Company is not engaged principally, or as one of
its important activities, in the business of extending,
or arranging for the extension of, credit for the
purpose of purchasing or carrying any margin stock
within the meaning of Regulation U or Regulation G, and
no part of the proceeds of any Loan will be used for
any purpose which would be in violation of such
regulations or in violation of Regulation X.
(l) Company's Tax Returns and Tax Liability. The
Company and its Subsidiaries, except for any Subsidiary
(x) incorporated under the laws of any jurisdiction
other than the United States of America or any State
thereof or the District of Columbia or (y) having
substantially all of its properties and assets or
conducting substantially all of its business outside
the United States of America and having assets
immaterial in comparison to the assets of the Company
and its Consolidated Subsidiaries, have filed all tax
returns required to be filed by them and have paid or
provided adequate reserves or obtained adequate
indemnity for the payment of all taxes and assessments
payable by them which have become due, other than (i)
those not yet delinquent, (ii) those the nonpayment of
which would not be reasonably likely to result in a
material adverse effect on the consolidated financial
condition of the Company and its Consolidated
Subsidiaries, (iii) those being contested in good faith
and (iv) those involving foreign taxes and assessments
which are involved in a good faith dispute.
(m) Environmental and Public and Employee Health
and Safety Matters. As of the Effective Date, the
Company and each Subsidiary has complied with all
applicable Federal, state, and other laws, rules and
regulations relating to environmental pollution or to
environmental regulation or control or to public or
employee health or safety, except (i) to the extent
that the failure to so comply would not be reasonably
likely to result in a material and adverse effect on
the consolidated financial condition of the Company and
its Consolidated
<PAGE>
46
Subsidiaries or (ii) as set forth in the Company's
annual report on Form 10-K for the year ended December
31, 1996, or its quarterly reports on Form 10-Q for the
quarters ended March 31, 1997, June 30, 1997, and
September 30, 1997, to the Securities and Exchange
Commission, or as disclosed in writing to the Banks
prior to the Effective Date. As of the Effective Date,
the Company's and the Subsidiaries' facilities do not
manage any hazardous wastes, hazardous substances,
hazardous materials, toxic substances or toxic
pollutants regulated under the Resource Conservation
and Recovery Act, the Comprehensive Environmental
Response Compensation and Liability Act, the Hazardous
Materials Transportation Act, the Toxic Substance
Control Act, the Clean Air Act, the Clean Water Act or
any other applicable law relating to environmental
pollution or public or employee health and safety, in
violation of any such law, or any rules or regulations
promulgated pursuant thereto, except (A) for violations
that would not be reasonably likely to result in a
material and adverse effect on the consolidated
financial condition of the Company and its Consolidated
Subsidiaries or (B) as set forth in the Company's
annual report on Form 10-K for the year ended December
31, 1996, or its quarterly reports on Form 10-Q for the
quarters ended March 31, 1997, June 30, 1997, and
September 30, 1997, to the Securities and Exchange
Commission, or as disclosed in writing to the Banks
prior to the Effective Date. As of the Effective Date,
the Company is aware of no events, conditions or
circumstances involving environmental pollution or
contamination or public or employee health or safety,
in each case applicable to it or its Subsidiaries, that
would be reasonably likely to result in a material and
adverse effect on the consolidated financial condition
of the Company and its Consolidated Subsidiaries except
as set forth in the Company's annual report on Form 10-
K for the year ended December 31, 1996, or its
quarterly reports on Form 10-Q for the quarters ended
March 31, 1997, June 30, 1997, and September 30, 1997,
to the Securities and Exchange Commission, or as
disclosed in writing to the Banks prior to the
Effective Date.
(n) True and Complete Disclosure. To the best of
the Company's knowledge and belief, all factual
information heretofore or contemporaneously furnished
by or on behalf of the Company or any Subsidiary of the
Company to any Bank, any Agent or any Managing Agent
for purposes of or in connection with this Agreement or
any transaction contemplated hereby is, and all other
such factual information hereafter furnished by or on
behalf of the Company or any Subsidiary of the Company
to any Bank, any Agent or any Managing Agent will be,
true and accurate (taken as a whole) on the date as of
which such information is dated or certified and not
incomplete by omitting to state any material fact
necessary to make such information (taken as a whole)
not misleading at such time.
ARTICLE VI
COVENANTS
SECTION 6.01. Affirmative Covenants of the
Company. So long as any Loan shall remain unpaid or any
Bank shall have any Revolving Credit Commitment
<PAGE>
47
hereunder, the Company will, unless the Required Banks shall
have otherwise consented in writing:
(a) Reports, Certificates and Other Information.
Furnish to each Bank:
(i) Interim Reports. Within 60 days after
the end of each of the first three quarterly
fiscal periods in each fiscal year of the Company,
a consolidated balance sheet of the Company as at
the end of such period (setting forth in
comparative form the consolidated figures as of
the end of the previous fiscal year), the related
consolidated statement of operations for such
period and (in the case of the second and third
quarterly periods) for the period from the
beginning of the current fiscal year to the end of
such quarterly period (setting forth in each case
in comparative form the consolidated figures for
the corresponding periods of the previous fiscal
year) and the related consolidated statement of
cash flows for the period from the beginning of
the current fiscal year to the end of such
quarterly period (setting forth in comparative
form the consolidated figures from the
corresponding period of the previous fiscal year),
all in reasonable detail and certified, subject to
changes resulting from year-end audit adjustments,
by a financial officer of the Company (it being
understood that the delivery of (A) the Company's
Form 10-Q setting forth such statements for each
such period and (B) a certification by a financial
officer of the Company to the effect that such
statements fairly present in all material respects
the financial condition and results of operations
of the Company on a consolidated basis (subject to
changes resulting from year-end audit adjustments)
shall satisfy the requirements of this Section
6.01(a)(i)).
(ii) Annual Reports. Within 120 days after
the end of each fiscal year of the Company, a
consolidated balance sheet of the Company as at
the end of such year, and the related consolidated
statements of operations and cash flows for such
year, setting forth in each case in comparative
form the consolidated figures for the previous
fiscal year, accompanied by the opinion thereon of
independent public accountants of recognized
national standing selected by the Company, which
opinion shall be prepared in accordance with
generally accepted auditing standards relating to
reporting and shall be based upon an audit by such
accountants of the relevant accounts (it being
understood that the delivery of the Company's Form
10-K setting forth such statements for such year
shall satisfy the requirements of this Section
6.01(a)(ii)).
(iii) Officers' Certificates. Together with
each delivery of financial statements pursuant to
Sections 6.01(a)(i) and 6.01(a)(ii) hereof, an
Officers' Certificate (A) stating that the signers
have reviewed the relevant terms of this Agreement
and have made, or caused to be made under their
supervision, a review of the transactions and
condition of the corporation or corporations
covered by such financial statements during the
accounting period in question, and that such
review has not disclosed the existence during such
accounting period, and that the signers do not
otherwise have knowledge of the existence as at
the date of such Officers' Certificate, of any
Event of Default or Unmatured Event of Default,
or, if any such Event of Default or Unmatured
Event of Default existed or
<PAGE>
48
exists, specifying the nature and period of
existence thereof and what action the Company has
taken or is taking or proposes to take with
respect thereto and (B) demonstrating in
reasonable detail compliance during such
accounting period with Sections 6.01(h), 6.02(b)
and 6.02(c) hereof.
(iv) Accountants' Certificates. Together
with each delivery of financial statements
pursuant to Section 6.01(a)(ii) hereof, a
certificate signed by the independent public
accountants reporting thereon (A) briefly setting
forth the scope of their examination (which shall
include a review of this Section 6.01(a) and of
Sections 6.01(b), 6.01(e), 6.01(h) and 6.02 (other
than Section 6.02(e)) hereof), (B) stating whether
or not their examination has disclosed the
existence, during the fiscal year covered by such
financial statements, of any Event of Default or
Unmatured Event of Default and, if their
examination has disclosed such an Event of Default
or Unmatured Event of Default, specifying the
nature and period of existence thereof, and (C)
stating that they have examined the Officers'
Certificate delivered therewith pursuant to
Section 6.01(a)(iii) hereof.
(v) Reports to SEC and to Stockholders.
Promptly upon their becoming publicly available,
copies of all financial statements, reports,
notices and proxy statements sent by the Company
to its stockholders, and of all regular and
periodic reports filed by the Company or any of
its Specified Subsidiaries with the Securities and
Exchange Commission or any governmental authority
succeeding to any of its functions, which in each
case have not been delivered under paragraph
(a)(i) or (a)(ii) of this Section 6.01.
(vi) Officers' Certificates as to Status of
Excepted Subsidiaries. (A) Promptly after the
designation of a Subsidiary of the Company as an
Excepted Subsidiary or the withdrawal of such
designation, an Officers' Certificate setting
forth the name of the Subsidiary and whether it is
being designated as, or withdrawn from designation
as, an Excepted Subsidiary, and (B) as soon as
practicable after the designation of a Subsidiary
of the Company as an Excepted Subsidiary or the
withdrawal of such designation, or, at the option
of the Company, together with the next delivery of
any financial statements to the Banks pursuant to
Section 6.01(a)(i) or Section 6.01(a)(ii) hereof,
an Officers' Certificate setting forth in
reasonable detail, and certifying the correctness
of, all facts and computations required in order
to establish that such designation or withdrawal
of designation is permitted in accordance with
this Agreement, and listing all Subsidiaries of
the Company that are designated as Excepted
Subsidiaries at such time.
(vii) Officers' Certificates as to Status of
Principal Subsidiaries. As soon as practicable
after the determination that a Person which shall
have become a Subsidiary of the Company after
September 30, 1997, is a Principal Subsidiary or,
at the option of the Company, together with the
next delivery of any financial statements to the
Banks pursuant to Section 6.01(a)(i) or Section
6.01(a)(ii) hereof, an Officers' Certificate
confirming the same.
<PAGE>
49
(viii) Notice of Default. Forthwith upon
any principal officer of the Company obtaining
knowledge of the occurrence of an Event of Default
or an Unmatured Event of Default, an Officers'
Certificate specifying the nature and period of
existence thereof and what action the Company has
taken or is taking or proposes to take with
respect thereto.
(ix) Other Information. With reasonable
promptness, such other information and data with
respect to the Company or any of its Specified
Subsidiaries as from time to time may be
reasonably requested by any Bank.
(b) Taxes. Pay or provide adequate reserves or
obtain adequate indemnity for the payment of, and cause
each Subsidiary to pay or provide adequate reserves or
obtain adequate indemnity for the payment of, all taxes
and assessments payable by it which become due, other
than (i) those not yet delinquent, (ii) those the
nonpayment of which would not be reasonably likely to
result in a material adverse effect on the consolidated
financial condition of the Company and its Consolidated
Subsidiaries, (iii) those being contested in good faith
and (iv) those involving foreign taxes and assessments
which are involved in a good faith dispute with respect
to tax or other matters.
(c) Preservation of Corporate Existence, etc.
Subject to Section 6.02(a) hereof, do or cause to be
done all things necessary to preserve and keep in full
force and effect the corporate existence and the rights
(charter and statutory) of the Company and each
Specified Subsidiary; provided, however, that the
Company shall not be required to preserve any such
right or franchise if the Company shall determine that
the preservation thereof is no longer desirable in the
conduct of the business of the Company or any Specified
Subsidiary and that the loss thereof is not
disadvantageous in any material respect to the Banks
under this Agreement.
(d) Inspections; Discussions. Permit any
authorized representatives designated by a Bank, at
such Bank's expense, to make reasonable inspections of
any of the properties of the Company or any of its
Specified Subsidiaries, including its and their books
of account, and to discuss its and their affairs,
finances and accounts with its and their officers, all
at such reasonable times and as often as may be
reasonably requested by such Bank; provided that if
required by the Company, any such Bank shall, as a
condition to being permitted to make any such
inspection, certify to the Company that the same is
being made solely in order to assist such Bank in
evaluating its extension of credit to the Company under
this Agreement.
(e) Books and Records. Maintain, and cause each
of its Consolidated Subsidiaries to maintain, a system
of accounting established and administered in
accordance with generally accepted accounting
principles applied on a consistent basis, and set
aside, and cause each of its Consolidated Subsidiaries
to set aside, on its books all such proper reserves as
shall be required by generally accepted accounting
principles.
(f) Maintenance of Properties. Cause all
properties used or useful in the conduct of its
business or the business of a Specified Subsidiary to
be maintained and kept in good condition, repair and
working order and supplied with all
<PAGE>
50
necessary equipment, and cause to be made all necessary
repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the
Company may be necessary so that the business carried
on in connection therewith may be properly and
advantageously conducted at all times; provided,
however, that nothing in this Section 6.01(f) shall
prevent the Company from discontinuing the operation or
maintenance, or both the operation and maintenance, of
any of such properties if such discontinuance is, in
the judgment of the Company, desirable in the conduct
of its business or the business of any Specified
Subsidiary and not disadvantageous in any material
respect to the Banks under this Agreement.
(g) Maintenance of Insurance. Insure and keep
insured, and cause each Specified Subsidiary to insure
and keep insured, with reputable insurance companies,
so much of its respective properties, to such an extent
and against such risk (including fire), as companies
engaged in similar businesses and of similar size
customarily insure properties of a similar character;
or, in lieu thereof, in the case of itself or of any
one or more of its Specified Subsidiaries, maintain or
cause to be maintained a system or systems of self-
insurance which will accord with the approved practices
of companies owning or operating properties of a
similar character in maintaining such systems.
(h) Consolidated Adjusted Tangible Net Worth.
Maintain Consolidated Adjusted Tangible Net Worth at
least equal to $2,600,000,000 at all times.
(i) Compliance with Laws, etc. Not violate any
laws, rules, regulations, or governmental orders to
which it is subject (including any such laws, rules,
regulations or governmental orders relating to the
protection of the environment or to public or employee
health or safety), which violation would be reasonably
likely to result in a material adverse effect on the
consolidated financial condition of the Company and its
Consolidated Subsidiaries; and not permit any
Subsidiary of the Company to violate any laws, rules,
regulations, or governmental orders of Federal, state
or local governmental entities within the United States
to which it is subject (including any such laws, rules,
regulations or governmental orders relating to the
protection of the environment or to public or employee
health or safety), which violation would be reasonably
likely to result in a material adverse effect on the
consolidated financial condition of the Company and its
Consolidated Subsidiaries.
(j) Delivery of Certain Documentation with
Respect to Plans. (i) As soon as possible and in any
event within 30 days after it knows or has reason to
know that, regarding any Plan with respect to the
Company or a Related Person to the Company, a
Prohibited Transaction or a Reportable Event which
presents a material risk of termination of any Plan
maintained by the Company or a Related Person to the
Company has occurred (whether or not the requirement
for notice of such Reportable Event has been waived by
the PBGC), deliver to the Syndication Agent and each
Bank a certificate of a responsible officer of the
Company setting forth the details of such Prohibited
Transaction or Reportable Event, (ii) upon request of
the Syndication Agent or any Bank made from time to
time after the occurrence of any such Prohibited
Transaction or Reportable Event, deliver to the
Syndication Agent and each Bank a copy of the most
recent actuarial report and annual report completed
with respect to any Plan maintained by the Company or a
Related Person to the Company, and (iii) as soon as
possible, and in any event
<PAGE>
51
within 10 days, after it knows or has reason to know
that any of the following have occurred with respect to
any Plan maintained by the Company or a Related Person
to the Company: (A) any such Plan has been terminated,
(B) the Plan Sponsor intends to terminate any such
Plan, (C) the PBGC has instituted or will institute
proceedings under Section 4042 of ERISA to terminate
any such Plan, or (D) the Company or any Related Person
to the Company withdraws from any such Plan, deliver to
the Syndication Agent and each Bank a written notice
thereof. For purposes of this Section 6.01(j), the
Company shall be deemed to have knowledge of all facts
known by the Plan Administrator of any Plan or Employee
Benefit Plan of which the Company or any Related Person
to the Company is the Plan Sponsor.
(k) Contributions to Plans. Pay, and use its
best efforts to cause each Related Person with respect
to the Company to pay, when due, all contributions
required to meet the minimum funding standards set
forth in Sections 302 through 308 of ERISA with respect
to each Plan maintained by the Company or a Related
Person to the Company.
(l) Use of Proceeds. Use the proceeds of the
Loans to finance the Elk Hills Acquisition and to pay
related costs and expenses, for general corporate
purposes, including the support of commercial paper
issuances, and not for any purpose which is in
violation of Regulation G, Regulation U, or Regulation
X.
SECTION 6.02. Negative Covenants of the Company.
So long as any Loan shall remain unpaid or any Bank shall
have any Revolving Credit Commitment hereunder, the Company
will not, without the prior written consent of the Required
Banks:
(a) Mergers, Consolidations, Sales. Consolidate
with or merge into any other corporation or convey or
transfer its properties substantially as an entirety to
any Person, unless:
(i) the corporation formed by such
consolidation or into which the Company is merged
or the Person which acquires by conveyance or
transfer the properties and assets of the Company
substantially as an entirety, shall be a
corporation organized and existing under the laws
of the United States or any state or the District
of Columbia, and shall expressly assume the due
and punctual payment of the principal of and
interest on all the Loans and the performance of
every covenant of this Agreement on the part of
the Company to be performed or observed; and
(ii) immediately after giving effect to such
transaction, no Event of Default or Unmatured
Event of Default shall have occurred and be
continuing.
Upon any consolidation or merger by the Company with or
into any other corporation, or any conveyance or
transfer by the Company of its properties and assets
substantially as an entirety to any Person which is
permitted by this Section 6.02(a), the successor
corporation formed by such consolidation or into which
the Company is merged or to which such conveyance or
transfer is made shall succeed to, and be substituted
for, and may exercise every right and power of, the
Company under this Agreement with the same effect as if
such successor
<PAGE>
52
corporation had been named as the Company herein; and,
in the event of such conveyance or transfer, the
Company (which term shall for this purpose mean the
Person named as the "Company" in the introduction to
this Agreement or any successor corporation which shall
theretofore become such in the manner described in this
Section 6.02(a)) shall be discharged from all
obligations and covenants under this Agreement and may
be dissolved and liquidated.
(b) Restriction on Secured Debt. Incur, create,
assume, guarantee or otherwise become liable with
respect to, or permit any Specified Subsidiary to
incur, create, assume, guarantee or otherwise become
liable with respect to, any Secured Debt, which would
cause Consolidated Secured Debt to exceed 15% of the
sum of (x) the principal amount of the additional
Funded Debt permitted at the time of calculation under
Section 6.02(c) hereof and (y) Consolidated Debt at the
time of calculation.
(c) Restriction on Funded Debt. Create, incur,
assume, guarantee or in any other way become liable
for, or permit any Specified Subsidiary to create,
incur, assume, guarantee or in any other way become
liable for, any Indebtedness included in Consolidated
Debt (other than in connection with any renewal,
extension or refunding of such Indebtedness which does
not increase the net amount of the Consolidated Debt
outstanding), unless immediately thereafter, and after
giving effect thereto, the ratio of Consolidated Debt
to Consolidated Adjusted Tangible Net Worth would not
exceed 2.6 to 1.0.
(d) Restriction on Dividends from Principal
Subsidiaries. Enter into any agreement, or permit any
Principal Subsidiary to enter into any agreement,
containing any provision which would limit or restrict
the declaration or payment of dividends by such
Principal Subsidiary (i) if such agreement is an
agreement for borrowed money, to an amount which is
less than 75% of such Principal Subsidiary's cumulative
net income, as determined in accordance with generally
accepted accounting principles and computed on a
consolidated basis for such Principal Subsidiary and
its Subsidiaries, from the first day of the fiscal year
of such Principal Subsidiary in which such agreement is
executed, and (ii) if such agreement is not for
borrowed money, to an amount which would materially
adversely affect the Company's ability to perform its
obligations under this Agreement.
(e) Change in Control. Permit any Person or
group (within the meaning of Rule 13d-5 of the
Securities and Exchange Commission as in effect on the
date hereof) beneficially to own more than 50% (by
number of votes) of the Voting Securities of the
Company unless such Voting Securities shall have been
acquired in a transaction or series of transactions
approved prior to such acquisition by the Board of
Directors of the Company, and the directors so
approving shall include directors who constitute a
majority of the Board of Directors and who are persons
either (i) who are directors on the date hereof or (ii)
who were nominated or elected by a majority of the
directors who (A) are directors on the date hereof or
(B) shall have been nominated or elected as described
in this clause (ii).
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53
ARTICLE VII
CONDITIONS OF CREDIT
The obligations of the Banks to make Loans
hereunder are subject to (a) the Revolving Credit
Commitments having become effective as provided in Section
7.01 below and (b) the satisfaction of the conditions set
forth in Section 7.02 below.
SECTION 7.01. Conditions to Effectiveness of
Commitments. The Revolving Credit Commitments shall become
effective at such time as the following conditions shall
have been satisfied:
(a) State Certificates as to the Company:
(i) The Syndication Agent shall have
received (with a photocopy for each Bank) a copy
of the Restated Certificate of Incorporation of
the Company and each amendment, if any, thereto
(but not the certificates of designation of
preferences of preferred stock), certified by the
Secretary of State of the State of Delaware (as of
a date shortly before the Effective Date) as being
true and correct copies of such documents on file
in the office of such Secretary of State.
(ii) The Syndication Agent shall have
received (with a photocopy for each Bank) the
signed Certificate or Certificates of the
Secretary of State of the State of Delaware, in
regular form (as of a date shortly before the
Effective Date), listing the Restated Certificate
of Incorporation of the Company and each
amendment, if any, thereto, together with the
certificates of designation of preferences of
preferred stock and the certificates of merger or
ownership, on file in the office of such Secretary
of State and stating that such documents are the
only charter documents of the Company on file in
such office filed on the date the Restated
Certificate of Incorporation was filed or
thereafter and that the Company is duly
incorporated and in good standing in the State of
Delaware and as to the franchise tax status of the
Company.
(b) The Syndication Agent and the Administrative
Agent shall have received (with a photocopy for each
Bank) the signed certificate of the President or a Vice
President and the Secretary or an Assistant Secretary
of the Company, dated the Effective Date and in the
form of Exhibit E hereto (appropriately completed),
certifying, among other things, (i) a true and correct
copy of resolutions adopted by the Board of Directors
or Executive Committee of the Board of Directors of the
Company authorizing the execution, delivery and
performance by the Company of this Agreement, (ii) a
true and correct copy of the By-laws of the Company as
in effect on the Effective Date, and (iii) the
incumbency and specimen signatures of officers of the
Company executing (x) the documents specified in clause
(i) above, and (y) any other documents delivered to the
Syndication Agent or the Administrative Agent on the
Effective Date.
(c) The Syndication Agent and the Administrative
Agent shall have received (with a photocopy for each
Bank) the signed opinion of Robert E. Sawyer, Esq.,
Associate General Counsel of the Company and counsel to
the
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54
Company, dated the Effective Date and given upon the
express instructions of the Company, in the form of
Exhibit G hereto, with such changes (if any) therein as
shall be acceptable to the Syndication Agent and
special counsel to the Agents, and as to such other
matters as the Syndication Agent may reasonably
request.
(d) The Syndication Agent and the Administrative
Agent shall have received (with a photocopy for each
Bank) the signed opinion of Cravath, Swaine & Moore,
special counsel to the Agents, dated the Effective
Date, in the form of Exhibit H hereto, with such
changes (if any) therein as shall be acceptable to the
Syndication Agent.
(e) The Syndication Agent and the Administrative
Agent shall have received (with a photocopy for each
Bank) such other instruments and documents as the
Syndication Agent and the Administrative Agent may have
reasonably requested.
(f) Each of the Agents, the Managing Agents and
the Company shall have executed one or more
counterparts of this Agreement.
SECTION 7.02. Conditions Precedent to All
Loans. The obligation of each Bank to make each Loan
shall be subject to the fulfillment at or prior to the
time of the making of such Loan of each of the
following further conditions:
(a) The representations and warranties on the
part of the Company contained in this Agreement shall
be true and correct in all material respects at and as
of the Borrowing Date for each Loan (other than any
Refinancing Loan), as though made on and as of such
date (except to the extent that such representations
and warranties expressly relate solely to an earlier
date).
(b) Both before and after giving effect to such
Loan (other than any Refinancing Loan), the Company
shall be in compliance with the requirements of any
applicable covenants pertaining to its incurrence of
unsecured indebtedness.
(c) No Event of Default and no Unmatured Event of
Default (other than any Unmatured Event of Default
which occurs as a result of a Bank Funding Default)
shall have occurred and be continuing on the Borrowing
Date for such Loan (other than any Refinancing Loan),
or would result from the making of such Loan.
(d) Either (i) the Elk Hills Acquisition shall
have been (or shall simultaneously be) completed or
(ii) the Company shall have (A) advised the Syndication
Agent and the Administrative Agent that the Elk Hills
Acquisition will be completed on a date not later than
the fifth Business Day following the date on which such
Loan is to be, or is available to be, made, (B)
furnished to the Syndication Agent and the
Administrative Agent a letter from the United States
Department of Energy confirming that the Department of
Energy is prepared, subject to the satisfaction of
applicable closing conditions, to complete the Elk
Hills Acquisition on such date and (C) implemented
arrangements satisfactory to the Syndication Agent and
the Administrative Agent for the deposit of all
proceeds of Loans made hereunder and all proceeds of
commercial paper issued by the Company to provide funds
for the Elk Hills Acquisition in an account with
<PAGE>
55
the Administrative Agent pursuant to an escrow
agreement permitting the withdrawal of such funds at
the direction of the Administrative Agent to (w) pay
amounts to the Department of Energy for the completion
of the Elk Hills Acquisition (and, if the Elk Hills
Acquisition shall have been completed, the escrow
agreement shall terminate and any funds remaining in
the escrow account upon such termination shall be paid
to the Company), (x) repay such Loans, (y) repay Loans,
if any, made to repay commercial paper issued by the
Company as contemplated by this Section 7.02 which have
not been repaid by the Company at the maturity date of
such commercial paper or (z) if no amounts are or will
become due under (x) and (y) above, to the Company,
whereupon the escrow agreement shall terminate.
Each Borrowing by the Company shall be deemed to be a
representation and warranty by the Company on the date of
such Borrowing that each of the conditions contained in this
Section 7.02 has been satisfied.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. Events of Default. If any of the
following events, acts or occurrences (herein called an
"Event of Default") shall occur and be continuing:
(a) default, and continuance thereof for three (3)
Business Days or, in the case of any default which
results from a Bank Funding Default, five (5) Business
Days after the Company shall have been advised by the
Administrative Agent of such Bank Funding Default, in
the payment when due of any amount owing by the Company
hereunder in respect of the principal of, or interest
on, any Loan or in respect of the Facility Fee; or
(b) any representation or warranty on the part of
the Company contained in this Agreement or in any
certificate, letter or other writing or instrument
furnished or delivered to any Bank or the Syndication
Agent or the Administrative Agent pursuant hereto or in
connection herewith, shall at any time prove to have
been incorrect in any material respect when made,
deemed made or reaffirmed, as the case may be; or
(c) the Company shall default in the performance
or observance of any term, covenant, condition or
agreement on its part to be performed or observed under
Section 6.01(h), 6.02(b), 6.02(c) or 6.02(d) hereof
(other than a default which would not have occurred or
would not be continuing if the calculations pursuant to
the aforesaid Sections were made without giving effect
to changes in generally accepted accounting principles
which require implementation after the Effective Date);
or
(d) the Company shall default in any material
respect in the performance or observance of any other
term, covenant, condition or agreement on its part to
be performed or observed hereunder (and not
constituting an Event of Default under any other clause
of this Section 8.01), and such default shall continue
unremedied for thirty (30) days after written notice
thereof shall have been given to the Company by the
Facility Agent or any Bank; or
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56
(e) either (i) the Company or any Specified
Subsidiary shall generally fail to pay, or admit in
writing its inability to pay, its debts as they become
due, or shall voluntarily commence any case or
proceeding or file any petition under any bankruptcy,
insolvency or similar law or seeking dissolution,
liquidation or reorganization or the appointment of a
receiver, trustee, custodian or liquidator for itself
or a substantial portion of its property, assets or
business or to effect a plan or other arrangement with
its creditors (except the voluntary dissolution, not
under any bankruptcy or insolvency law, of a Specified
Subsidiary), or shall file any answer admitting the
jurisdiction of the court and the material allegations
of any involuntary petition filed against it in any
bankruptcy, insolvency or similar case or proceeding,
or shall be adjudicated bankrupt, or shall make a
general assignment for the benefit of creditors, or
shall consent to, or acquiesce in the appointment of, a
receiver, trustee, custodian or liquidator for itself
or a substantial portion of its property, assets or
business, or (ii) corporate action shall be taken by
the Company or any Specified Subsidiary for the purpose
of effectuating any of the foregoing; or
(f) involuntary proceedings or an involuntary
petition shall be commenced or filed against the
Company or any Specified Subsidiary under any
bankruptcy, insolvency or similar law or seeking the
dissolution, liquidation or reorganization of the
Company or such Specified Subsidiary (as the case may
be) or the appointment of a receiver, trustee,
custodian or liquidator for the Company or such
Specified Subsidiary (as the case may be) or of a
substantial part of the property, assets or business of
the Company or such Specified Subsidiary (as the case
may be), or any writ, judgment, warrant of attachment,
execution or similar process shall be issued or levied
against a substantial part of the property, assets or
business of the Company or any Specified Subsidiary,
and such proceedings or petition shall not be
dismissed, or such writ, judgment, warrant of
attachment, execution or similar process shall not be
released, vacated or fully bonded, within sixty (60)
days after commencement, filing or levy, as the case
may be; or
(g) (i) the Company or any Specified Subsidiary
shall default (as principal or guarantor or other
surety) in the payment when due (subject to any
applicable notice or grace period), whether at stated
maturity or otherwise, of any principal of or interest
on (howsoever designated) any indebtedness for borrowed
money, whether such indebtedness now exists or shall
hereafter be created, or (ii) an event of default (with
respect to the Company or any Specified Subsidiary) as
defined in any mortgage, indenture or instrument under
which there may be issued, or by which there may be
secured or evidenced, any indebtedness for borrowed
money of, or guaranteed by, the Company or any
Specified Subsidiary, whether such indebtedness now
exists or shall hereafter be created, shall occur and
shall permit such indebtedness to become due and
payable prior to its stated maturity or due date;
provided that no default under this subsection (g)
shall be deemed to exist as a result of a default or
event of default (as described in clause (i) or clause
(ii) above) in respect of any such indebtedness (1)
which is payable solely out of the property or assets
of a partnership, joint venture or similar entity of
which the Company or any Specified Subsidiary is a
participant, or is secured by a mortgage on, or other
security interest in, the property or assets owned or
held by such entity, in either case without any further
recourse to or liability of the Company or any
Specified Subsidiary as a participant in such entity,
or (2) if the principal of and interest on such
indebtedness, when added to the principal of and
interest on
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57
all other such indebtedness then in default (exclusive
of indebtedness under clause (1) above), does not
exceed $50,000,000; or
(h) with respect to any Plan (other than a
Multiemployer Plan) as to which the Company or any
Related Person to the Company may have any liability,
there shall exist an unfunded current liability under
the Code which is material to the consolidated
financial condition of the Company and its Consolidated
Subsidiaries, and (x) steps are undertaken to terminate
such Plan or (y) such Plan is terminated or (z) any
Reportable Event which presents a material risk of
termination with respect to such Plan shall occur;
then, and in any such event (x) if such event relates to the
Company and is described in clause (e) or clause (f) of this
Section 8.01, (i) the Revolving Credit Commitments shall
immediately terminate, and (ii) all sums then owing by the
Company hereunder (and, in the event payment is to be made
on a day which is not the expiration date of the relevant
Interest Period, together with such amounts as will
compensate each Bank in such Bank's sole discretion for any
losses incurred by it (or its lending branch or affiliate)
in respect of funds borrowed by it or deposited with it for
the purpose of making or maintaining its Loans hereunder)
shall become and be immediately due and payable, without
presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived by the Company, and (y) in
the case of any other such event, the Facility Agent shall,
at the direction of the Required Banks, at the same or
different times, take one or more of the following actions:
(i) declare the Revolving Credit Commitments to be
terminated, whereupon the Revolving Credit Commitments shall
forthwith terminate, or (ii) declare all sums then owing by
the Company hereunder to be forthwith due and payable,
whereupon all such sums (and, in the event payment is to be
made on a day which is not the expiration date of the
relevant Interest Period, together with such amounts as will
compensate each Bank in such Bank's sole discretion for any
losses incurred by it (or its lending branch or affiliate)
in respect of funds borrowed by it or deposited with it for
the purpose of making or maintaining its Loans hereunder)
shall become and be immediately due and payable without
presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived by the Company. Promptly
following the making of any such declaration, the Facility
Agent shall give notice thereof to the Company and each
Bank, but failure to do so or any delay in so doing shall
not impair the effect of such declaration.
ARTICLE IX
THE AGENTS, THE MANAGING AGENTS AND THE BANKS
SECTION 9.01. Appointment and Powers of the
Administrative Agent and the Facility Agent. Each Bank
hereby irrevocably designates and appoints each of the
Administrative Agent and the Facility Agent its agent
hereunder and hereby authorizes each such Agent to take such
action on its behalf and to exercise such rights, remedies,
powers and privileges hereunder as are specifically
authorized to be exercised by such Agent by the terms
hereof, together with such rights, remedies, powers and
privileges as are reasonably incidental thereto. Each of
the Administrative Agent and the Facility Agent may execute
any of its respective duties as such Agent hereunder by or
through agents or attorneys-in-fact and shall be entitled to
retain counsel and to act in reliance upon the advice of
such counsel concerning all matters pertaining to the agency
hereby created and its duties hereunder, and shall not be
liable for the negligence or
<PAGE>
58
misconduct of any agents or attorneys-in-fact selected by it
with reasonable care. The Agents and the Managing Agents
shall have no duties or responsibilities to any Bank, except
those expressly set forth in this Agreement, or any
fiduciary relationship with any Bank, and no implied
covenants, functions, responsibilities, duties, obligations
or liabilities shall be read into this Agreement or
otherwise exist against any Agent or any Managing Agent.
SECTION 9.02. Exculpatory Provisions. No Bank,
Agent or Managing Agent, nor any of their respective
directors, officers or employees shall be liable for any
action taken or omitted to be taken by them hereunder or in
connection herewith, except for their own gross negligence
or wilful misconduct; nor shall any Bank, Agent or Managing
Agent be responsible in any manner to any Person for the
representations, warranties or other statements made by any
other Person or for the due execution or delivery, validity,
effectiveness, genuineness, value, sufficiency or
enforceability against the Company or any other obligor of
this Agreement or any other document furnished pursuant
thereto or in connection herewith. Neither the Agents, the
Managing Agents nor any of their respective officers shall
be under any obligation to any Bank to ascertain or to
inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement,
or to inspect the properties, books or records of the
Company or any of its Subsidiaries.
SECTION 9.03. Reliance by the Administrative
Agent and the Facility Agent. Each of the Administrative
Agent and the Facility Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing,
resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed
by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without
limitation, counsel to the Company), independent accountants
and other experts selected by any such Agent. Each of the
Administrative Agent and the Facility Agent shall be fully
justified in failing or refusing to take any action under
this Agreement or any other documents executed and delivered
in connection herewith unless it shall first receive such
advice or concurrence of the Required Banks as it deems
appropriate or it shall first be indemnified to its
satisfaction by the Banks against any and all liability and
expense which may be incurred by it by reason of taking or
continuing to take any such action. Neither the
Administrative Agent nor the Facility Agent shall be liable
to any Bank for acting, or refraining from acting, under
this Agreement or any other documents executed and delivered
in connection herewith in accordance with a request of the
Required Banks, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all
the Banks and their respective successors and assigns.
SECTION 9.04. Notice of Default. Neither the
Administrative Agent nor the Facility Agent shall be deemed
to have knowledge or notice of the occurrence of any Event
of Default or Unmatured Event of Default hereunder unless it
has received notice from a Bank or the Company referring to
this Agreement, describing such Event of Default or
Unmatured Event of Default and stating that such notice is a
"notice of default". In the event that the Administrative
Agent or the Facility Agent receives such a notice, it shall
give notice thereof to the Banks and to such other Agent.
The Facility Agent shall take such action with respect to
such Event of Default or Unmatured Event of Default as shall
be reasonably directed by the Required Banks; provided,
however, that unless and until the Facility Agent shall have
received such direction, the Facility Agent may (but shall
not be obligated to) take such action, or refrain from
taking such action,
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59
with respect to such Event of Default or Unmatured Event of
Default as it shall deem advisable in the best interests of
the Banks; provided further that the Facility Agent shall
have the right, power and authority to take the affirmative
action specified in Section 8.01 hereof only upon the
direction of the Required Banks.
SECTION 9.05. Indemnification. Each Bank hereby
agrees, in the ratio that such Bank's Revolving Credit
Commitment from time to time bears to the Total Commitment
from time to time, to indemnify and hold harmless each Agent
and each Managing Agent, as agents hereunder, from and
against any and all losses, liabilities (including
liabilities for penalties), actions, suits, judgments,
demands, damages, costs and expenses (including, without
limitation, attorneys' fees and expenses) incurred or
suffered by such Agent or Managing Agent in such capacity as
a result of any action taken or omitted to be taken by such
Agent or Managing Agent in such capacity or otherwise
incurred or suffered by, made upon, or assessed against such
Agent or Managing Agent in such capacity; provided that no
Bank shall be liable for any portion of any such losses,
liabilities (including liabilities for penalties), actions,
suits, judgments, demands, damages, costs or expenses
resulting from or attributable to gross negligence or wilful
misconduct on the part of such Agent or Managing Agent or
its officers, employees or agents. Without limiting the
generality of the foregoing, each Bank hereby agrees, in the
ratio aforesaid, to reimburse each Agent and Managing Agent
promptly following its demand for any out-of-pocket expenses
(including, without limitation, attorneys' fees and
expenses) incurred by such Agent or Managing Agent hereunder
and not reimbursed to such Agent or Managing Agent by the
Company. Each Bank's obligations under this paragraph shall
survive the termination of this Agreement or, if earlier,
the termination of the Revolving Credit Commitment of such
Bank, and the discharge of the Company's obligations
hereunder.
SECTION 9.06. Nonreliance on the Agents, the
Managing Agents and Other Banks. Each Bank expressly
acknowledges that neither any Agent, any Managing Agent nor
any of their respective officers, directors, employees,
agents, attorneys-in-fact or affiliates has made any
representations or warranties to it and that no act by any
such Agent or Managing Agent hereafter taken, including any
review of the affairs of the Company, shall be deemed to
constitute any representation or warranty by such Agent or
Managing Agent to any Bank. Each Bank represents to each
Agent and Managing Agent that it has, independently and
without reliance upon any Agent or Managing Agent or any
other Bank, and based on such documents and information as
it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property,
financial and other condition and creditworthiness of the
Company and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Bank also
represents that it will, independently and without reliance
upon any Agent or Managing Agent or any other Bank, and
based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit
analysis, appraisals and decisions in taking or not taking
action under this Agreement, and to make such investigation
as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and
creditworthiness of the Company.
SECTION 9.07. The Agents and the Managing Agents
in Their Individual Capacities. Each Agent and each
Managing Agent and their affiliates may make loans to,
accept deposits from and generally engage in any kind of
business with the Company as though such Agent or Managing
Agent were not an Agent or Managing Agent hereunder. With
respect to its Loans made or renewed by it, each Agent and
Managing Agent shall have the same rights and powers under
this Agreement as any Bank and may exercise the
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60
same as though it were not an Agent or Managing Agent, and
the terms "Bank" and "Banks" shall include each Agent and
Managing Agent in its individual capacity.
SECTION 9.08. Excess Payments. Except for
payments made pursuant to Section 2.07, Section 2.11,
Section 2.12, Section 2.13 or Section 4.03 hereof, if any
Bank shall obtain any payment or other recovery (whether
voluntary, involuntary, by application of offset or
otherwise) on account of principal of or interest on any
Revolving Credit Loan in excess of its pro rata share of
payments and other recoveries obtained by all Banks or
holders on account of principal of and interest on Revolving
Credit Loans then owing to them, such Bank or other holder
shall purchase from the other Banks or holders such
participation in the Revolving Credit Loans owing to them as
shall be necessary to cause such purchasing Bank or holder
to share the excess payment or other recovery ratably with
each of them; provided, however, that if all or any portion
of the excess payment or other recovery is thereafter
recovered from such purchasing Bank or holder, the purchase
shall be rescinded and the purchase price restored to the
extent of such recovery, but without interest. The Company
agrees that any Bank or holder so purchasing a participation
from another Bank or holder pursuant to this Section 9.08
may, to the fullest extent permitted by law, exercise all
its rights of payment (including offset) with respect to
such participation as fully as if such Bank or holder were
the direct creditor of the Company in the amount of such
participation.
SECTION 9.09. Obligations Several. The
obligations of the Banks hereunder are several, and neither
any Bank nor the Agents nor the Managing Agents shall be
responsible for the obligations of any other Person
hereunder, nor will the failure of any Bank to perform any
of its obligations hereunder relieve the Agents, Managing
Agents or any Bank from the performance of their respective
obligations hereunder. Nothing contained in this Agreement,
and no action taken by the Banks or any Agent or Managing
Agent pursuant hereto or in connection herewith, shall be
deemed to constitute the Banks, together or with the Agents
and the Managing Agents, a partnership, association, joint
venture or other entity.
SECTION 9.10. Resignation by any Agent or
Managing Agent. Any Agent and any Managing Agent may resign
as such at any time upon at least 30 days' prior notice to
the Company and the Banks. In the event of such resignation
by the Administrative Agent or the Facility Agent, the
Required Banks (with the consent of the Company (which shall
not be unreasonably withheld) in the event that there then
does not exist an Event of Default or Unmatured Event of
Default), shall as promptly as practicable appoint a
successor Administrative Agent or Facility Agent, as the
case may be.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. No Waiver; Modifications in
Writing. No failure or delay on the part of the
Administrative Agent or the Facility Agent or any Bank in
exercising any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for
herein are cumulative and are not exclusive of any remedies
that may be available to the Administrative Agent or the
Facility Agent or any Bank at law, in
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61
equity or otherwise. Each request by the Company for any
amendment, modification, supplement, termination or waiver
of or to any provision of this Agreement shall be directed
to the Facility Agent, and no such amendment, modification,
supplement, termination or waiver of or to any provision of
this Agreement, nor consent to any departure by the Company
therefrom, shall be effective unless the same shall be in
writing and signed by the Company and by or on behalf of the
Facility Agent and the Required Banks; provided, however,
that no such amendment, modification, supplement,
termination, waiver or consent, as the case may be, which
has the effect of (x) reducing the rate or amount, or
extending the stated maturity or due date, of any sum
payable by the Company to any Bank hereunder, or (y) except
as provided in Section 2.07(e)(ii), Section 2.11(c)(i),
Section 2.12(i), Section 2.13(i), Section 4.03(b)(ii) and
Section 10.06(c) hereof, increasing the amount, or extending
the stated expiration or termination date, of any Bank's
Revolving Credit Commitment hereunder, or (z) changing this
Section 10.01, Section 10.06 or Section 10.07 hereof or the
definitions of the terms "Allocable Share", "Applicable
Facility Fee Percentage", "Applicable Margin", "Event of
Default", "Proportional Share", "Reference Bank", "Reference
Banks", "Required Banks", "Revolving Credit Commitment",
"Total Commitment" and "Unmatured Event of Default", or
changing the designation of the "Required Banks" as the
Banks entitled to direct the Facility Agent pursuant to
Section 8.01 hereof shall be effective unless the same shall
be signed by or on behalf of each Bank; provided further
that no such amendment, modification, supplement,
termination, waiver or consent, as the case may be, which
has the effect of (x) increasing the duties or obligations
of any Agent or any Managing Agent hereunder, or (y)
increasing the standard of care or performance required on
the part of any Agent or any Managing Agent hereunder, or
(z) reducing or eliminating the indemnities or immunities to
which any Agent or Managing Agent is entitled hereunder
(including, without limitation, any amendment or
modification of this Section 10.01) shall be effective
unless the same shall be signed by or on behalf of the Agent
or Managing Agent affected thereby. Any waiver of any
provision of this Agreement, and any consent to any
departure by the Company from the terms of any provision of
this Agreement, shall be effective only in the specific
instance and for the specific purpose for which given. No
notice to or demand on the Company in any case shall entitle
the Company to any other or further notice or demand in
similar or other circumstances.
SECTION 10.02. Confidentiality. Each Agent,
Managing Agent and Bank shall maintain in confidence and not
publish, disseminate or disclose in any manner or to any
Person and shall not use (x) any material, nonpublic
information relating to the Company and its Subsidiaries or
(y) any technical, nonfinancial information, data or know-
how which is identified in writing as confidential by the
Company, in either case which may be furnished pursuant to
this Agreement, including any such information which may be
furnished pursuant to Article VI hereof (hereinafter
collectively called "Confidential Information"), subject to
each Agent, Managing Agent and Bank's (a) obligation to
disclose any such Confidential Information pursuant to a
request or order under applicable laws and regulations or
pursuant to a subpoena or other legal process, (b) right to
disclose any such nontechnical or financial Confidential
Information to bank examiners, its affiliates, auditors,
counsel, other professional advisors, other Banks, and other
banks or other entities in connection with an offer by such
Bank to sell a Participation to such other bank or other
entity or to make an assignment pursuant to Section 10.06(c)
hereof, (c) right to use any such Confidential Information
in connection with the transactions set forth herein, and
(d) right to disclose any such Confidential Information in
connection with the transactions set forth herein or in
connection with any litigation or dispute involving the
Agents, Managing Agents and Banks and the Company
<PAGE>
62
or any of its Subsidiaries or any transfer or other
disposition by such Bank of any of its loans or other
extensions of credit to the Company or any of the Company's
Subsidiaries; provided, however, that Confidential
Information disclosed pursuant to clause (b) or (d) of this
sentence shall be so disclosed subject to such procedures as
are reasonably calculated to maintain the confidentiality
thereof; and provided further that Confidential Information
disclosed pursuant to applicable laws, regulations,
subpoenas or other legal process shall be so disclosed
subject to such confidentiality provisions, if any, as may
be provided under applicable law. The Agents, Managing
Agents and Banks agree, to the extent permitted by
applicable law, to use their best efforts promptly to notify
the Company in writing of each order, subpoena or other
legal process providing for the disclosure and/or production
of Confidential Information and shall, to the extent
permitted by applicable law, use their best efforts promptly
to supply the Company with a copy of such order, subpoena or
other legal process, in order that the Company may intervene
in the relevant administrative or legal proceeding or take
other appropriate legal action to protect the
confidentiality of such Confidential Information.
Notwithstanding the foregoing provisions of this Section
10.02, (i) the foregoing obligation of confidentiality shall
not apply to any such Confidential Information that was
known to such Bank or any of its affiliates prior to the
time it received such Confidential Information from the
Company or its Subsidiaries pursuant to this Agreement,
other than as a result of the disclosure thereof by a Person
who, to the knowledge or reasonable belief of such Agent,
Managing Agent or Bank, was prohibited from disclosing it by
any duty of confidentiality arising (under this Agreement or
otherwise) by contract or law, and (ii) the foregoing
obligation of confidentiality shall not apply to any such
Confidential Information that becomes part of the public
domain independently of any act of such Agent, Managing
Agent or Bank not permitted hereunder (through publication,
the issuance of a patent disclosing such information or
otherwise) or when identical or substantially similar
information is received by such Agent, Managing Agent or
Bank without restriction as to its disclosure or use, from a
Person who, to the knowledge or reasonable belief of such
Agent, Managing Agent or Bank, was not prohibited from
disclosing it by any duty of confidentiality arising (under
this Agreement or otherwise) by contract or law. The
obligations of each Agent, Managing Agent or Bank under this
Section 10.02 shall survive the termination of this
Agreement or, if earlier, the termination of the Revolving
Credit Commitment of such Bank.
SECTION 10.03. Notices, etc. Except where
telephonic instructions or notices are authorized herein to
be given, all notices, demands, instructions and other
communications required or permitted to be given to or made
upon any party hereto shall be in writing and (except for
financial statements and other documents to be furnished
pursuant to Article VI hereof (with the exception of notices
of the occurrence of an Event of Default or an Unmatured
Event of Default which is continuing), which may be sent by
first-class mail, postage prepaid) shall be personally
delivered or sent by registered or certified mail, postage
prepaid, return receipt requested, or by telecopier, and
shall be deemed to be given for purposes of this Agreement
on the day that such writing is delivered or sent to the
intended recipient thereof in accordance with the provisions
of this Section 10.03. Unless otherwise specified in a
notice sent or delivered in accordance with the foregoing
provisions of this Section 10.03, notices, demands,
instructions and other communications in writing shall be
given to or made upon the respective parties hereto at their
respective addresses (or to their respective telecopier
numbers) indicated on Schedule II hereto, and, in the case
of telephonic instructions or notices, by calling the
telephone number or numbers indicated for such party on such
Schedule.
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63
Anything herein to the contrary notwithstanding,
notices from the Company pursuant to Sections 2.01, 2.02,
2.05, 2.07, 2.11, 2.12, 2.13, 4.01, 4.02 and 4.03 hereof
shall be effective, for the purposes of this Agreement, only
when actually received by all Persons to whom such notices
are required to be sent or given.
SECTION 10.04. Costs, Expenses and Taxes. The
Company agrees to pay all costs and expenses of the Agents
in connection with the arrangement of the credit facilities
provided for herein and the negotiation, preparation,
printing, reproduction, execution and delivery of this
Agreement, any amendments or modifications of (or
supplements to) any of the foregoing and any and all other
documents furnished in connection with the execution and
delivery of this Agreement, including the reasonable fees
and out-of-pocket expenses of outside counsel to the Agents
relative thereto (limited, however, to such fees and
expenses of only one outside counsel who shall represent the
Agents), and all costs and expenses (whether of the Agents
or any Bank or otherwise and including, without limitation,
attorneys' fees and expenses), if any, in connection with
the enforcement of this Agreement or any other agreement
furnished pursuant hereto or in connection herewith. In
addition, the Company shall pay all stamp, transfer and
other transaction taxes payable or determined to be payable
in connection with the execution and delivery of this
Agreement, and the Company shall pay all such transaction
taxes payable or determined to be payable in connection with
the making of any Loan by any Bank, and the Company agrees
to save and hold each Agent, each Managing Agent and each
Bank harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission
to pay such transaction taxes. If any action, suit or
proceeding arising from any of the foregoing is brought
against any Agent or any Managing Agent, any Bank, or any
other Person indemnified or intended to be indemnified
pursuant to this Section 10.04, the Company, to the extent
and in the manner directed by the Person or Persons
indemnified or intended to be indemnified, will resist and
defend such action, suit or proceeding or cause the same to
be resisted and defended by counsel designated by the
Company (which counsel shall be satisfactory to the Person
or Persons indemnified or intended to be indemnified). If
the Company shall fail to do any act or thing which it has
covenanted to do hereunder or any representation or warranty
on the part of the Company contained herein shall be
breached, the Facility Agent may (but shall not be obligated
to) do the same or cause it to be done or remedy any such
breach, and may expend its funds for such purpose. Any and
all amounts so expended by the Facility Agent shall be
repayable to it by the Company immediately upon the Facility
Agent's demand therefor, with interest at a rate per annum
(computed on the basis of a year consisting of 365 or, when
appropriate, 366 days) equal to the sum of (i) the Alternate
Base Rate in effect from time to time during the period from
and including the date so expended by such Agent to the date
of repayment, plus (ii) two percent (2%) per annum. The
obligations of the Company under this Section 10.04 shall
survive the termination of this Agreement and the discharge
of the Company's other obligations hereunder.
SECTION 10.05. Confirmations. The Company and
each Bank agree from time to time, upon written request
received by one from the other, to confirm to the other in
writing the aggregate unpaid principal amount of the Loans
of such Bank then outstanding.
SECTION 10.06. Successors and Assigns;
Participations. (a) This Agreement shall be binding upon
and inure to the benefit of the Company, the Banks, the
Agents, the Managing Agents, and their respective successors
and permitted assigns; provided, however, that any
assignment or transfer by a Bank of any or all of its rights
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64
hereunder shall not materially increase the amount which
would have been payable to the Bank making such assignment
or transfer by the Company under this Agreement in the
absence of such assignment or transfer; and provided further
that except in accordance with the provisions of Section
6.02(a) hereof, the Company may not assign its rights
hereunder or in connection herewith or any interest herein
without the prior written consent of all of the Banks. This
Agreement shall not be construed so as to confer any right
or benefit upon any Person other than the parties to this
Agreement and each of their respective successors and
permitted assigns.
(b) Any Bank may without the consent of the
Company sell participations to one or more banks or other
entities that, in the ordinary course of their business,
regularly extend credit of the types and in the amounts
extended by Banks under this Agreement (such banks and other
entities hereinafter referred to, collectively, as
"Participants") in all or a portion of its rights and
obligations under this Agreement (including, without
limitation, all or a portion of its Revolving Credit
Commitment and the Loan or Loans owing to it); provided,
however, that (i) such Bank's obligations under this
Agreement shall remain unchanged, (ii) such Bank shall
remain solely responsible to the other parties hereto for
the performance of such obligations, (iii) the Participants
shall be entitled to the cost protection provisions
contained in Section 2.07, Section 2.11, and Section 3.04
hereof (provided that no Participant shall be entitled to
receive any greater amount pursuant to such provisions than
the transferor Bank would have been entitled to receive in
respect of the amount of the participation transferred by
such transferor Bank to such Participant had no such
transfer occurred and provided further that such Participant
shall have fully complied with the provisions of Section
10.06(g) hereof) and the cost protection provisions of
Section 2.11 hereof shall be applied by assuming that such
Bank did not sell any participation to any Participant, (iv)
the Company, the Agents, the Managing Agents and the other
Banks shall continue to deal solely and directly with such
Bank in connection with such Bank's rights and obligations
under this Agreement and in connection with the cost
protection provisions of this Agreement to which any
Participant is entitled pursuant to this Section 10.06(b),
(v) such Bank shall retain the sole right and responsibility
to enforce the obligations of the Company relating to the
Loans, (vi) such Bank shall not, except with respect only to
changes in the amount of the Revolving Credit Commitment of
such Bank, or the principal amount of its Loans outstanding
or the Interest Rate or Interest Period with respect
thereto, or the amount of any fees payable to it hereunder
or extension of the Initial Termination Date or the Maturity
Date, enter into any agreement with any Participant that
would require the consent of such Participant with respect
to the exercise by such Bank of its voting rights under this
Agreement, and (vii) each such sale shall be made in the
ordinary course of such Bank's commercial banking business
and in compliance with all applicable laws.
(c) Any Bank may assign, with the prior written
consent of the Company and the Administrative Agent, to one
or more Eligible Assignees, or without the consent of the
Company or the Administrative Agent to one or more Banks,
all or a portion of its interests, rights and obligations
under this Agreement (including, without limitation, all or
a portion of its Revolving Credit Commitment and the same
portion of the applicable Loan or Loans at the time owing to
it, other than any Competitive Loans owing to it, which may,
but need not, be assigned); provided, however, that (i) each
such assignment shall be of a constant, and not a varying,
percentage of all the assigning Bank's rights and
obligations under this Agreement, the Loan or Loans at the
time owing to such assigning Bank, other than any
Competitive Loans owing to it, which may, but need not, be
assigned, (ii) except in the case of an assignment of a
Bank's entire interest hereunder, the amount of the
Revolving Credit Commitment of the assigning Bank which it
retains shall
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65
be in a principal amount of not less than $50,000,000 and
the amount of such Revolving Credit Commitment which it
assigns (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to
the Administrative Agent) shall be an integral multiple of
$5,000,000; provided, however, that no assignment may be
made that, taken together with any simultaneous assignments,
would result in any Bank having a Revolving Credit
Commitment which is less than $50,000,000, (iii) the parties
to each such assignment shall execute and deliver to the
Administrative Agent, for its acceptance and recording in
the Register, an Assignment and Acceptance with respect to
such assignment and a processing and recordation fee of (A)
$1,000 in the case of an assignment to any Bank and (B)
$2,500 in all other cases (except that such fee shall not be
payable if the Eligible Assignee is an affiliate of the
assignor Bank), (iv) each such assignment shall be made in
the ordinary course of the assigning Bank's commercial
banking business and in compliance with all applicable laws,
(v) no such assignment shall be effective unless the
Eligible Assignee to which such assignment is made has fully
complied with the provisions of Section 10.06(g) hereof and
(vi) the Company shall have received a copy of the
Assignment and Acceptance signed by the parties thereto.
Upon such execution, delivery, acceptance and recording,
from and after the effective date specified in each
Assignment and Acceptance, which effective date shall be at
least five Business Days after the execution thereof, (x)
the Eligible Assignee thereunder shall be a party hereto
and, to the extent provided in such Assignment and
Acceptance, have the rights and obligations of a Bank
hereunder, (y) the assignor Bank thereunder shall, to the
extent provided in such Assignment and Acceptance, be
released (except as provided in Section 2.11(b), Section
10.02 and Section 10.07 hereof) from its obligations under
this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an
assigning Bank's rights and obligations under this
Agreement, such Bank shall cease to be a party hereto), and
(z) Schedule I and Schedule II hereto shall be deemed
amended to reflect the addition of such Eligible Assignee
and the decrease in the Revolving Credit Commitment of the
assignor Bank. Each assignee of an interest under this
Agreement shall take such interest subject to any request
made, waiver or consent given or other action taken
hereunder prior to the effective date of the Assignment and
Acceptance related to such assignment, and, until the
effective date of such Assignment and Acceptance, the
Administrative Agent and the Company shall be entitled
conclusively to assume that no assignment of any interest
under this Agreement has been made by any Bank or any
assignee. Notwithstanding any other provision of this
Section 10.06, any Bank may at any time assign all or any
portion of its rights under this Agreement held by it to a
Federal Reserve Bank; provided that no such assignment shall
release a Bank from any of its obligations hereunder.
(d) By executing and delivering an Assignment and
Acceptance, the assignor Bank and the Eligible Assignee
thereunder confirm to and agree with each other and the
other parties hereto as follows: (i) the assignor Bank
represents and warrants that it is the legal and beneficial
owner of the interest being assigned thereby free and clear
of any adverse claim, (ii) such assignor Bank makes no
representation or warranty, and assumes no responsibility
with respect to any statements, warranties or
representations made by the Company, in or in connection
with this Agreement or with the execution, legality,
validity, enforceability, genuineness, sufficiency or value
of this Agreement or any other instrument or document
furnished pursuant hereto, (iii) such assignor Bank makes no
representation or warranty and assumes no responsibility
with respect to the financial condition of the Company or
the performance or observance by the Company of its
obligations under this Agreement or any other instrument or
document furnished pursuant hereto, (iv) such Eligible
Assignee confirms that it has received a copy of this
Agreement together with copies of the financial statements
and other documents referred
<PAGE>
66
to in Section 5.01(e), Section 6.01(a) (i), Section
6.01(a)(ii) and Section 6.01(a)(v) hereof 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 Eligible Assignee will,
independently and without reliance upon any Agent or any
Managing Agent, such assignor Bank or any other Bank and
based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this
Agreement, (vi) such Eligible Assignee appoints and
authorizes each of the Administrative Agent and Facility
Agent to take such action as such Agent on its behalf and to
exercise such powers under this Agreement as are delegated
to such Agent by the terms hereof, together with such powers
as are reasonably incidental thereto, (vii) such Eligible
Assignee agrees that it will perform all of the obligations,
in accordance with the terms thereof, of the assignor Bank
under this Agreement which are assumed by such Eligible
Assignee under such Assignment and Acceptance, and (viii)
such Eligible Assignee confirms that it is an Eligible
Assignee.
(e) The Administrative Agent shall maintain at
its address listed on Schedule II hereto a copy of each
Assignment and Acceptance delivered to it and a register for
the recordation of the names and addresses of the Banks and
the Revolving Credit Commitment of, and principal amount of
the Loans owing to, each Bank from time to time (the
"Register"). The entries in the Register shall be
conclusive, in the absence of manifest error, and the
Company, the Agents, the Managing Agents and the Banks may
treat each person whose name is recorded in the Register as
a Bank hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Company or
any Bank at any reasonable time and from time to time upon
reasonable prior notice.
(f) Upon its receipt of an Assignment and
Acceptance executed by an assigning Bank and an Eligible
Assignee, together with the written consent of the Company
to such assignment, the Administrative Agent shall, if such
Assignment and Acceptance has been completed and is
precisely in the form of Exhibit F hereto (or as agreed upon
by the Company and the Administrative Agent), (i) accept
such Assignment and Acceptance, (ii) record the information
contained therein in the Register, (iii) give prompt notice
thereof to the Company, and (iv) deliver a copy of such
Assignment and Acceptance to the Company.
(g) If, pursuant to this Section 10.06, any
interest in this Agreement or any Loan is transferred to any
Participant (a "Transferee") which is organized under the
laws of any jurisdiction other than the United States or any
state thereof, the transferor Bank shall cause such
Transferee, concurrently with the effectiveness of such
transfer, (i) to represent to the transferor Bank (for the
benefit of the transferor Bank, the Administrative Agent and
the Company) that under applicable law and treaties no taxes
will be required to be withheld by the Administrative Agent,
the Company or the transferor Bank with respect to any
payments to be made to such Transferee in respect of the
Loans, (ii) to furnish to the transferor Bank in duplicate,
for each taxable year of such Transferee during which
interest arising under or in connection with this Agreement
is received, and before payment by the Company of any such
interest during such year (or at any other time as required
under United States income tax law), a properly completed
and executed copy of either Internal Revenue Service Form
4224 or Internal Revenue Service Form 1001 and Internal
Revenue Service Form W-8 or Internal Revenue Service Form W-
9 and any additional form (or such other form) as is
necessary to claim complete exemption from United States
withholding taxes (wherein such Transferee claims
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67
entitlement to complete exemption from United States
withholding taxes on all payments hereunder), (iii) to agree
(for the benefit of the transferor Bank, the Administrative
Agent and the Company) to provide to the transferor Bank a
new Internal Revenue Service Form 4224 or Internal Revenue
Service Form 1001 and Internal Revenue Service Form W-8 or
Internal Revenue Service Form W-9 and any such additional
form (or any successor form or forms) upon the expiration or
obsolescence of any previously delivered form and comparable
statements in accordance with applicable United States laws
and regulations and amendments duly executed and completed
by such Transferee, and to comply from time to time with all
applicable United States laws and regulations with regard to
such withholding tax exemption, and (iv) to represent to the
transferor Bank (for the benefit of the transferor Bank, the
Administrative Agent and the Company) that the form or forms
so filed will be true and complete.
SECTION 10.07. Indemnification. In consideration
of the execution and delivery of this Agreement by the Banks
and the agreement to extend and maintain the credit provided
hereunder, the Company hereby agrees to indemnify, exonerate
and hold each of the Banks, the Agents, the Managing Agents,
and each of the officers, directors, employees and agents of
each of the Banks, the Agents and the Managing Agents, and
each Person, if any, who controls any such Bank, such Agent
or any such Managing Agent, or any such officer, director,
employee or agent, within the meaning of the Securities Act
of 1933, as amended, or the Securities Exchange Act of 1934,
as amended (herein collectively called the "Indemnitees" and
individually called an "Indemnitee"), free and harmless from
and against any and all actions, claims, causes of action,
suits, losses, liabilities, damages and expenses, including
without limitation, reasonable attorneys' fees and
disbursements (herein collectively called the "Indemnified
Liabilities"), which may be incurred by or asserted against
the Indemnitees or any Indemnitee as a result of, or arising
out of, or relating to, or in connection with, any
investigation, litigation or proceeding related to (i) any
use made or proposed to be made by the Company of the
proceeds of any Loan, (ii) the consummation of the
transactions contemplated by any such use or proposed use,
(iii) any untrue statement or alleged untrue statement of
any material fact made by the Company in connection
therewith, or (iv) the omission or alleged omission by the
Company to state in connection therewith a material fact
required to be so stated or necessary to make the statements
made, in light of the circumstances under which they were
made, not misleading, whether or not any such Indemnitee is
a party thereto, and, to the extent that the foregoing
undertaking may be unenforceable for any reason, the Company
hereby agrees to make the maximum contribution to the
payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law;
provided, however, that there shall be no right to
indemnification or contribution under this Section 10.07 for
Indemnified Liabilities based upon or arising out of actions
or omissions by any Bank in a capacity other than that of a
lender to the Company or by any Agent or any Managing Agent
in its capacity other than that as agent for the Banks
hereunder. Each Indemnitee will use its best efforts to
promptly notify the Company of each event of which it has
knowledge which may give rise to a claim under the
indemnification provisions of this Section 10.07. If any
action, suit or proceeding arising from any of the foregoing
is brought against any Agent or any Managing Agent, any Bank
or any other Person indemnified or intended to be
indemnified pursuant to this Section 10.07, the Company, to
the extent and in the manner directed by the Person or
Persons indemnified or intended to be indemnified, will
resist and defend such action, suit or proceeding or cause
the same to be resisted and defended by counsel designated
by the Company (which counsel shall be reasonably
satisfactory to the Person or Persons indemnified or
intended to be indemnified). Each Indemnitee will use its
best efforts to cooperate in the defense of any such action,
suit or proceeding. If
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68
the Company shall fail to do any act or thing which it has
covenanted to do hereunder or any representation or warranty
on the part of the Company contained herein shall be
breached, the Facility Agent may (but shall not be obligated
to) do the same or cause it to be done or remedy any such
breach, and may expend its funds for such purpose. Any and
all amounts so expended by the Facility Agent shall be
repayable to it by the Company immediately upon the Facility
Agent's demand therefor, with interest at a rate per annum
(computed on the basis of a year consisting of 365 or, when
appropriate, 366 days) equal to the sum of (i) the Alternate
Base Rate in effect from time to time during the period from
and including the date so expended by the Facility Agent to
the date of repayment, plus (ii) two percent (2%) per annum.
The Company shall have no obligation to any Indemnitee under
this Section 10.07 to the extent that Indemnified
Liabilities result from gross negligence or wilful
misconduct on the part of such Indemnitee. The obligations
of the Company under this Section 10.07 shall survive the
termination of this Agreement and the discharge of the
Company's other obligations hereunder. The obligations of
each Bank (and of each other Indemnitee with respect to such
Bank) under this Section 10.07 shall survive the termination
of this Agreement or, if earlier, the termination of the
Revolving Credit Commitment of such Bank.
SECTION 10.08. Reference Banks. Each Reference
Bank agrees to use its best efforts to furnish quotations to
the Administrative Agent as contemplated hereby by 10:30
a.m., New York City time, on the day such quotations are
required to be furnished hereunder. If any Reference Bank
does not furnish a timely quotation, the Administrative
Agent shall determine the relevant Eurodollar Rate on the
basis of the quotations, if any, furnished by the remaining
Reference Banks and, in the event that all Reference Banks
fail to so furnish a quotation, on the basis of such other
information as the Administrative Agent in its sole
discretion shall deem appropriate. If any Reference Bank
assigns its Loans to an unaffiliated institution, the
Administrative Agent shall, in consultation with the
Company, and with the consent of the Required Banks, appoint
another Bank to act as a Reference Bank hereunder. If the
Company is entitled to replace any Bank (which is also a
Reference Bank) as provided in Section 2.07(e), Section
2.11(c), Section 2.12, Section 2.13 or Section 4.03(b)
hereof, the Company may, in consultation with the
Administrative Agent, and with the consent of the Required
Banks, appoint a replacement Reference Bank.
SECTION 10.09. Headings. Article and Section
headings used in this Agreement are for convenience of
reference only and shall not affect the construction of this
Agreement.
SECTION 10.10. Circumstances Requiring
Consultation. In the event that (i) additional amounts have
become payable to an Affected Bank as a result of the
occurrence of circumstances referred to in Section 2.07
hereof, (ii) any Affected Bank shall have made a
determination pursuant to Section 4.03(a) hereof, or (iii)
additional amounts have become payable to any Bank or any
Participant pursuant to Section 2.11 hereof, then, and in
any such event, such Affected Bank, Bank or Participant, as
the case may be, shall promptly consult with the
Administrative Agent and the Company in order to endeavor,
and such Affected Bank, Bank or Participant, as the case may
be, shall use its best efforts, to take such action as, in
the good faith judgment of such Affected Bank, Bank or
Participant, is then reasonable and practicable under the
circumstances (including, without limitation, changing the
location of its lending office or participating office, as
the case may be, in order to move the situs of such Affected
Bank's or Bank's Loans or such Participant's participation
to another jurisdiction, if possible without material
liability, cost or expense to such Affected Bank, Bank or
Participant and without
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69
material reduction to such Affected Bank or Bank of any
amount otherwise receivable by such Affected Bank or Bank
under this Agreement or receivable by such Participant under
its participation) to mitigate or eliminate the effect of
such event. In addition, in the event that (i) any Bank or
Participant shall, as a result of reserves maintained by
such Bank or Participant with any Federal Reserve Bank of
the United States in connection with any of the Loans or
participations, be entitled to receive, and receive, amounts
from such Federal Reserve Bank (in the form of interest or
otherwise) in respect of such reserves, or (ii) any Bank or
Participant shall receive any similar (or other) benefit as
a result of actions taken by such Bank or Participant with
respect to any Capital Adequacy Rule, then, and in any such
event, such Bank or Participant shall promptly consult with
the Administrative Agent and the Company in order to
endeavor, and such Bank or Participant shall use its best
efforts, to take such action as, in the good faith judgment
of such Bank or Participant, is then reasonable and
practicable under the circumstances to give the benefit of
such amounts or benefits to the Company.
SECTION 10.11. Execution in Counterparts. This
Agreement may be executed in any number of counterparts and
by different parties hereto on separate counterparts, each
of which counterparts, when so executed and delivered, shall
be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same
Agreement.
SECTION 10.12. GOVERNING LAW. THIS AGREEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF SAID STATE WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
SECTION 10.13. CONSENT TO JURISDICTION AND
SERVICE OF PROCESS; WAIVER OF JURY TRIAL. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST THE COMPANY WITH RESPECT TO THIS
AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE CITY OF NEW YORK, AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE COMPANY
ACCEPTS, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION
OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND
BY ANY FINAL JUDGMENT RENDERED THEREBY IN CONNECTION WITH
THIS AGREEMENT FROM WHICH NO APPEAL HAS BEEN TAKEN OR IS
AVAILABLE. THE COMPANY IRREVOCABLY AGREES THAT ALL PROCESS
IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT MAY BE EFFECTED BY
MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR
ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO
IT AT ITS ADDRESS SET FORTH ON SCHEDULE II HERETO OR AT SUCH
OTHER ADDRESS OF WHICH THE ADMINISTRATIVE AGENT SHALL HAVE
BEEN NOTIFIED PURSUANT HERETO, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY THE COMPANY TO BE EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT. EACH OF THE COMPANY, THE AGENTS,
THE MANAGING AGENTS AND THE BANKS IRREVOCABLY WAIVES, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY AND ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF
THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH
<PAGE>
70
ACTION OR PROCEEDING IN ANY SUCH JURISDICTION. NOTHING
HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY APPLICABLE LAW OR LIMIT THE RIGHT OF ANY
BANK TO BRING PROCEEDINGS AGAINST THE COMPANY IN THE COURT
OF ANY OTHER COMPETENT JURISDICTION.
SECTION 10.14. Severability of Provisions. Any
provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 10.15. Procedures Relating to Addendum.
On or prior to the Effective Date a bank may deliver an
Addendum in accordance with the provisions of this Section
10.15.
(a) Banks Listed on the Signature Pages. A bank
listed on the signature pages hereto may become a party
hereto, and may increase or decrease the amount of its
Revolving Credit Commitment as set forth opposite its name
on Schedule I hereto by delivering an Addendum,
appropriately completed and duly executed, to the Company.
Upon acceptance of such Addendum by the Company, such bank
shall become a party to this Agreement as a Bank with the
Revolving Credit Commitment set forth in such Addendum with
the same effect as if such bank had executed this Agreement
by signing on the signature pages hereto.
(b) Banks Not Listed on Signature Pages. A bank
not listed on the signature pages to this Agreement may
become a party hereto by delivering an Addendum,
appropriately completed and duly executed, to the Company.
Upon acceptance of such Addendum by the Company, such bank
shall become a party to this Agreement as a Bank with the
Revolving Credit Commitment set forth in such Addendum with
the same effect as if such bank had executed this Agreement
by signing on the signature pages hereto.
(c) Automatic Amendment of the Agreement. Upon
acceptance by the Company of an Addendum conforming to the
requirements of this Section 10.15, Schedule I and Schedule
II hereto shall be amended automatically to reflect the
changes in Revolving Credit Commitments and other
information set forth in such Addendum.
(d) Notification of Administrative Agent, etc.
The Company shall notify the Administrative Agent promptly
of the Company's acceptance of any Addendum and shall
furnish the Administrative Agent copies of the same. The
Company may not accept an Addendum after the Effective Date.
SECTION 10.16. Maximum Interest. Nothing
contained in this Agreement shall be deemed to establish or
require the payment of interest at a rate in excess of the
maximum rate permitted by applicable law. In the event that
the rate of interest required to be paid to any of the Banks
under this Agreement exceeds the maximum rate permitted by
applicable law, the rate of interest required to be paid to
such Banks hereunder shall be automatically reduced to the
maximum rate permitted by applicable law.
<PAGE>
71
SECTION 10.17. Special Termination Provision. If
the Effective Date has not occurred on or prior to March 10,
1998, then the obligations of the Banks hereunder shall
terminate and this Agreement shall cease to be binding upon
the parties hereto, except that the obligations of the
Company under Section 10.04 and Section 10.07 hereof shall
survive such termination.
<PAGE>
72
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective officers
thereunto duly authorized, as of the date first above
written.
OCCIDENTAL PETROLEUM CORPORATION,
by
DAVID C. YEN
-------------------------------------
Name: David C. Yen
Title: Vice President and Treasurer
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, in its
individual capacity and as
Syndication Agent,
by
J. STEPHEN MERNICK
-------------------------------------
Name: J. Stephen Mernick
Title: Senior Vice President
THE BANK OF NOVA SCOTIA, in its
individual capacity and as
Administrative Agent,
by
M. VAN OTTERLOO
------------------------------------
Name: M. Van Otterloo
Title: Senior Relationship Manager
THE CHASE MANHATTAN BANK, in its
individual capacity, as
Administrative Agent and as
Facility Agent,
by
THOMAS H. KOZLARK
------------------------------------
Name: Thomas H. Kozlark
Title: Vice President
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, in its individual
capacity and as Documentation
Agent,
by
DIANA H. IMHOF
-----------------------------------
Name: Diana H. Imhof
Title: Vice President
<PAGE>
73
ABN AMRO BANK, N.V., in its
individual capacity and as a
Managing Agent,
by
PAUL K. STIMPFL
-----------------------------------
Name: Paul K. Stimpfl
Title: Vice President
JOHN A. MILLER
-----------------------------------
Name: John A. Miller
Title: Group Vice President
ARAB BANK PLC, GRAND CAYMAN,
by
NOFAL S. BARBAR
-----------------------------------
Name: Nofal S. Barbar
Title: Executive Vice President,
Regional Manager
AUSTRALIA AND NEW ZEALAND BANKING
GROUP LIMITED,
by
KYLE LOUGHLIN
-----------------------------------
Name: Kyle Loughlin
Title: Vice President
BANK BRUSSELS LAMBERT, NEW YORK
BRANCH,
by
JOYCE THUNNISSEN
-----------------------------------
Name: Joyce Thunnissen
Title: Vice President
DOMINICK H. J. VANGAEVER
-----------------------------------
Name: Dominick H. J. Vangaever
Title: Senior Vice President Credit
<PAGE>
74
THE BANK OF NEW YORK, in its
individual capacity and as a
Managing Agent,
by
RAYMOND J. PALMER
-----------------------------------
Name: Raymond J. Palmer
Title: Vice President
BANQUE NATIONALE DE PARIS,
by
CLIVE BETTLES
-----------------------------------
Name: Clive Bettles
Title: Senior Vice President &
Manager
MITCHELL M. OZAWA
------------------------------------
Name: Mitchell M. Ozawa
Title: Vice President
CANADIAN IMPERIAL BANK OF
COMMERCE, in its individual
capacity and as a Managing Agent,
by
ALEKSANDRA K. DYMANUS
------------------------------------
Name: Aleksandra K. Dymanus
Title: Authorized Signatory
CANADIAN IMPERIAL BANK OF
COMMERCE, in its individual
capacity and as a Managing Agent,
by
ROBIN W. ELLIOTT
------------------------------------
Name: Robin W. Elliott
Title: Authorized Signatory
CITICORP USA, INC., in its
individual capacity and as a
Managing Agent,
by
MARK STANFIELD PACKARD
------------------------------------
Name: Mark Stanfield Packard
Title: Assistant Vice President
<PAGE>
75
CREDIT LYONNAIS NEW YORK BRANCH, in
its individual capacity and as a
Managing Agent,
by
PHILIPPE SOUSTRA
----------------------------------
Name: Philippe Soustra
Title: Senior Vice President
CREDIT SUISSE FIRST BOSTON, in its
individual capacity and as a
Managing Agent,
by
JAMES P. MORAN
----------------------------------
Name: James P. Moran
Title: Director
by
ERIC J. ECKHOLDT
----------------------------------
Name: Eric J. Eckholdt
Title: Associate
DEUTSCHE BANK AG, NEW YORK BRANCH
AND CAYMAN ISLANDS BRANCH, in its
individual capacity and as a
Managing Agent,
by
STEPHAN A. WIEDEMANN
---------------------------------
Name: Stephan A. Wiedemann
Title: Director
by
THOMAS A. FOLEY
---------------------------------
Name: Thomas A. Foley
Title: Assistant Vice President
<PAGE>
76
DRESDNER BANK AG, NEW YORK BRANCH
AND GRAND CAYMAN BRANCH, in its
individual capacity and as a
Managing Agent,
by
BRIGITTE SACIN
----------------------------------
Name: Brigitte Sacin
Title: Assistant Treasurer
by
JOHN W. SWEENEY
-----------------------------------
Name: John W. Sweeney
Title: Assistant Vice President
BANKBOSTON, N.A.,
by
J. R. VAUGHAN, JR.
----------------------------------
Name: J. R. Vaughan, Jr.
Title: Director
Energy & Utilities
THE FUJI BANK, LIMITED, LOS ANGELES
AGENCY, in its individual capacity
and as a Managing Agent,
by
MASAHITO FUKUDA
----------------------------------
Name: Masahito Fukuda
Title: Joint General Manager
THE INDUSTRIAL BANK OF JAPAN, LTD.,
LOS ANGELES AGENCY,
by
CARL-ERIC BENZINGER
----------------------------------
Name: Carl-Eric Benzinger
Title: SVP & Senior Manager
<PAGE>
77
KREDIETBANK N.V., in its individual
capacity and as a Managing Agent,
by
ROBERT SNAUFFER
----------------------------------
Name: Robert Snauffer
Title: Vice President
by
TOD R. ANGUS
----------------------------------
Name: Tod R. Angus
Title: Vice President
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD.,
by
MOTOKAZU UEMATSU
----------------------------------
Name: Motokazu Uematsu
Title: Deputy General Manager
MELLON BANK, N.A., in its
individual capacity and as a
Managing Agent,
by
JOHN S. MCCABE
----------------------------------
Name: John S. McCabe
Title: Senior Vice President
NATIONSBANK OF TEXAS, N.A., in its
individual capacity and as a
Managing Agent,
by
DENISE A. SMITH
----------------------------------
Name: Denise A. Smith
Title: Senior Vice President
<PAGE>
78
ROYAL BANK OF CANADA,
by
ANDREW C. WILLIAMSON
----------------------------------
Name: Andrew C. Williamson
Title: Senior Manager
THE SAKURA BANK, LIMITED LOS
ANGELES AGENCY,
by
OFUSA SATO
----------------------------------
Name: Ofusa Sato
Title: Senior Vice President &
Assistant General Manager
SOCIETE GENERALE, in its individual
capacity and as a Managing Agent,
by
GEORGE Y. L. CHAN
---------------------------------
Name: George Y. L. Chan
Title: Vice President
STANDARD CHARTERED BANK,
by
MARY MACHADO-SCHAMMEL
---------------------------------
Name: Mary Machado-Schammel
Title: Vice President
by
SYLVIA D. RIVERA
---------------------------------
Name: Sylvia D. Rivera
Title: Assistant Vice President
<PAGE>
79
TORONTO DOMINION (TEXAS), INC., in
its individual capacity and as a
Managing Agent,
by
JIMMY SIMIEN
-----------------------------------
Name: Jimmy Simien
Title: Vice President
UNION BANK OF CALIFORNIA, N.A., in
its individual capacity and as a
Managing Agent,
by
WALTER M. ROTH
----------------------------------
Name: Walter M. Roth
Title: Vice President
UNION BANK OF SWITZERLAND, HOUSTON
AGENCY, in its individual capacity
and as a Managing Agent,
by
CYNTHIA A. P. DEERE
-----------------------------------
Name: Cynthia A. P. Deere
Title: Director
by
W. BENSON VANCE
-----------------------------------
Name: W. Benson Vance
Title: Assistant Vice President
WACHOVIA BANK N.A.,
by
CHARLES S. ZIMMERMAN
-----------------------------------
Name: Charles S. Zimmerman
Title: Vice President
<PAGE>
SCHEDULE I TO
CREDIT AGREEMENT
AMOUNT OF COMMITMENTS
AMOUNT OF
REVOLVING
CREDIT
NAME OF BANK COMMITMENT
------------ --------------
BANK OF AMERICA $170,000,000
NATIONAL TRUST AND
SAVINGS ASSOCIATION
THE BANK OF NOVA SCOTIA $170,000,000
THE CHASE MANHATTAN $170,000,000
BANK
MORGAN GUARANTY TRUST $170,000,000
COMPANY OF NEW YORK
ABN AMRO BANK, N.V. $110,000,000
THE BANK OF NEW YORK $110,000,000
CANADIAN IMPERIAL BANK $110,000,000
OF COMMERCE
CITICORP USA, INC. $110,000,000
CREDIT LYONNAIS NEW $110,000,000
YORK BRANCH
CREDIT SUISSE FIRST $110,000,000
BOSTON
DEUTSCHE BANK AG, NEW $110,000,000
YORK BRANCH AND CAYMAN
ISLANDS BRANCH
DRESDNER BANK AG, NEW $110,000,000
YORK BRANCH AND GRAND
CAYMAN BRANCH
THE FUJI BANK, LIMITED, $110,000,000
LOS ANGELES AGENCY
KREDIETBANK N.V. $110,000,000
MELLON BANK, N.A. $110,000,000
NATIONSBANK OF TEXAS, $110,000,000
N.A.
SOCIETE GENERALE $110,000,000
TORONTO DOMINION $110,000,000
(TEXAS), INC.
<PAGE>
AMOUNT OF
REVOLVING
CREDIT
NAME OF BANK COMMITMENT
------------ ---------------
UNION BANK OF $110,000,000
CALIFORNIA, N.A.
UNION BANK OF $110,000,000
SWITZERLAND, HOUSTON
AGENCY
AUSTRALIA AND NEW $85,000,000
ZEALAND BANKING GROUP
LIMITED
BANKBOSTON, N.A. $85,000,000
BANQUE NATIONALE DE $85,000,000
PARIS
THE INDUSTRIAL BANK OF $85,000,000
JAPAN, LTD., LOS
ANGELES AGENCY
ROYAL BANK OF CANADA $85,000,000
THE SAKURA BANK, $85,000,000
LIMITED LOS ANGELES
AGENCY
ARAB BANK PLC, GRAND $50,000,000
CAYMAN
BANK BRUSSELS LAMBERT, $50,000,000
NEW YORK BRANCH
THE LONG-TERM CREDIT $50,000,000
BANK OF JAPAN, LTD.
STANDARD CHARTERED BANK $50,000,000
WACHOVIA BANK N.A. $50,000,000
TOTAL $3,200,000,000
<PAGE>
SCHEDULE II TO
CREDIT AGREEMENT
Address, Telecopier and Telephone Numbers
Occidental Petroleum OCCIDENTAL PETROLEUM CORPORATION
Corporation 10889 Wilshire Boulevard
Los Angeles, CA 90024
Attention: Treasurer
Tel. No. 310-208-8800
Telecopier No. 310-443-6694
Bank of America National BANK OF AMERICA NATIONAL TRUST AND
Trust and Savings SAVINGS ASSOCIATION
Association 333 Clay Street, Suite 4500
Houston, TX 77006
Attention: Joseph Goodreault
Tel. No. 713-651-4924
Telecopier No. 713-651-4841
The Bank of Nova Scotia THE BANK OF NOVA SCOTIA
580 California Street, Suite 2100
San Francisco, CA 94104
Attention: Maarten Van Otterloo
Tel. No. 415-616-4161
Telecopier No. 415-397-0791
The Chase Manhattan Bank THE CHASE MANHATTAN BANK
Global Oil & Gas Group
707 Travis, Eighth Floor
Houston, TX 77002
Attention: Peter Lind
Tel. No. 713-216-8880
Telecopier No. 713-216-8882
Morgan Guaranty Trust MORGAN GUARANTY TRUST COMPANY OF NEW
Company of New York YORK
60 Wall Street
New York, NY 10260
Attention: Robert M. Osieski
Diana Imhof
Tel. No. 212-648-7173
212-648-6948
Telecopier No. 212-648-5018
ABN Amro Bank, N.V. ABN AMRO BANK, N.V.
300 South Grand Avenue, Suite 1115
Los Angeles, CA 90071-7519
Attention: Paul Stimfl
Tel. No. 213-687-2303
Telecopier No. 213-687-2061
<PAGE>
Arab Bank Plc, Grand ARAB BANK PLC, GRAND CAYMAN
Cayman 520 Madison Avenue
New York, NY 10022-4237
Attention: Khanh Vuong
Tel. No. 212-715-9700
Telecopier No. 212-593-4632
Australia and New Zealand AUSTRALIA AND NEW ZEALAND BANKING
Banking Group Limited GROUP LIMITED
1177 Avenue of the Americas
New York, NY 10036-2798
Attention: Kyle Loughlin
Tel No. 212-801-9853
Telecopier No. 212-801-9131
Bank Brussels Lambert, BANK BRUSSELS LAMBERT, NEW YORK BRANCH
New York Branch 630 Fifth Avenue, 6th Floor
New York, NY 10111
Attention: Joyce Thunnissen
Tel No. 212-632-5317
Telecopier No. 212-333-5786
The Bank of New York THE BANK OF NEW YORK
One Wall Street, 19th Floor
New York, NY 10286
Attention: Felicia La Forgia
Tel No. 212-635-7861
Telecopier No. 212-635-7923
Banque Nationale de Paris BANQUE NATIONALE DE PARIS
725 So. Figueroa Street, Suite 2090
Los Angeles, CA 90017
Attention: Mitchell (Mitch) M. Ozawa
Tel. No. 213-688-6424
Telecopier No. 213-488-9602
Canadian Imperial Bank of CANADIAN IMPERIAL BANK OF COMMERCE
Commerce Two Paces West
2727 Paces Ferry Road
Suite 1200
Atlanta, GA 30339
Attention: Kathryn McGovern
Tel. No. 770-319-4821
Telecopier No. 770-319-4950
copy to:
CIBC Oppenheimer Corp.
Two Houston Center
Suite 1200
909 Fannin Street
Houston, TX 77010
Attention: Brian R. Swinford
Tel. No. 713-658-8400
<PAGE>
Citicorp USA, Inc. CITICORP USA, INC.
1200 Smith Street, Suite 2000
Houston, TX 77002
Attention: Greg Morzano
Tel. No. 713-654-3559
Telecopier No. 713-654-2849
Credit Lyonnais New York CREDIT LYONNAIS NEW YORK BRANCH
Branch 1000 Louisiana, Suite 5360
Houston, TX 77002
Attention: Page Dillehunt
Tel. No. 713-753-8719
Telecopier No. 713-751-0307
Credit Suisse First CREDIT SUISSE FIRST BOSTON
Boston 11 Madison Avenue, 20th Floor
New York, NY 10010
Attention: James Moran
Tel. No. 212-325-9176
Telecopier No. 212-325-8350
Deutsche Bank AG, New DEUTSCHE BANK AG, NEW YORK BRANCH
York Branch and Cayman AND CAYMAN ISLANDS BRANCH
Islands Branch 31 West 52nd Street
New York, NY 10019
Attention: Steve Pottle
Tel. No. 212-469-7787
Telecopier No. 212-469-8212
Dresdner Bank AG, New DRESDNER BANK AG, NEW YORK BRANCH AND
York Branch and Grand GRAND CAYMAN BRANCH
Cayman Branch 333 So. Grand Avenue, Suite 1700
Los Angeles, CA 90071
Attention: Jon Bland
Tel. No. 213-473-5410
Telecopier No. 213-473-5450
BankBoston, N.A. BANKBOSTON, N.A.
100 Federal Street
Mail Stop 01-08-02
Boston, MA 02110
Attention: Sally Dwyer
Tel. No. 617-434-5934
Telecopier No. 617-434-3652
The Fuji Bank, Limited, THE FUJI BANK, LIMITED,
Los Angeles Agency LOS ANGELES AGENCY
333 So. Hope Street, Suite 3900
Los Angeles, CA 90071
Attention: Mano Mylvaganam
Tel. No. 213-253-4130
Telecopier No. 213-253-4178
<PAGE>
The Industrial Bank of THE INDUSTRIAL BANK OF JAPAN, LTD., LOS
Japan, Ltd., ANGELES AGENCY
Los Angeles Agency 350 Grand Street, Suite 1500
Los Angeles, CA 90071
Attention: Carl-Eric Benzinger
Tel. No. 213-893-6422
Telecopier No. 213-488-9840
Kredietbank N.V. KREDIETBANK N.V.
550 So. Hope Street, Suite 1775
Los Angeles, CA 90071
Attention: Luc Cools
Tel. No. 213-624-0401
Telecopier No. 213-629-5801
The Long-Term Credit Bank THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
of Japan, Ltd. 300 S. Grand Avenue
Los Angeles, CA 90071
Attention: Dennis Blank
Tel. No. 213-689-6330
Telecopier No. 213-622-6908
Mellon Bank, N.A. MELLON BANK, N.A.
400 So. Hope Street, 5th Floor
Los Angeles, CA 90071-2806
Attention: John McCabe
Tel. No. 213-553-9675
Telecopier No. 213-629-0492
NationsBank of Texas, NATIONSBANK OF TEXAS, N.A.
N.A. 901 Main Street, 64th Floor
Dallas, TX 75202
Attention: Tiffany Borlaug
Tel. No. 214-508-1425
Telecopier No. 214-508-1286
Royal Bank of Canada ROYAL BANK OF CANADA
12450 Greenspoint Drive, Suite 1450
Houston, TX 77060
Attention: Andy Williamson
Tel. No. 281-874-5661
Telecopier No. 281-874-0081
The Sakura Bank, Limited THE SAKURA BANK, LIMITED
Los Angeles Agency LOS ANGELES AGENCY
515 So. Figueroa Street, Suite 400
Los Angeles, CA 90071
Attention: Pam Schorr
Tel. No. 213-489-8615
Telecopier No. 213-623-8692
<PAGE>
<PAGE>
Societe Generale SOCIETE GENERALE
2029 Century Park East, Suite 2900
Los Angeles, CA 90067
Attention: George Y.L. Chan
Tel. No. 310-788-7105
Telecopier No. 310-551-1537
Standard Chartered Bank STANDARD CHARTERED BANK
707 Wilshire Boulevard, W14-19
Los Angeles, CA 90017
Attention: Mary Machado
Tel. No. 213-614-4756
Telecopier No. 213-614-5158
Toronto Dominion (Texas), TORONTO DOMINION (TEXAS), INC.
Inc. 909 Fannin Street
Houston, TX 77010
Attention: John Geresi
Tel. No. 713-653-8207
Telecopier No. 713-951-9921
Union Bank of California, UNION BANK OF CALIFORNIA, N.A.
N.A. 4200 Lincoln Plaza
500 North Akard
Dallas, TX 75201
Attention: Dustin Gaspari
Tel. No. 214-922-4200
Telecopier No. 214-922-4209
Dallas
Union Bank of UNION BANK OF SWITZERLAND,
Switzerland, Houston HOUSTON AGENCY
Agency 1100 Louisiana, Suite 4500
Houston, TX 77002
Attention: Cindy Deere
Tel. No. 713-655-6544
Telecopier No. 713-655-6555
Wachovia Bank N.A. WACHOVIA BANK N.A.
191 Peach Street, NE
Mail Code 373
Atlanta, GA 30303
Attention: Charles Zimmerman
Tel. No. 404-332-1494
Telecopier No. 404-332-6898
<PAGE>
EXHIBIT A
---------
COMPETITIVE BID REQUEST
[Date]
The Bank of Nova Scotia, as
Administrative Agent
for the Banks referred to below
600 Peachtree St. N.E., Suite 2700
Atlanta, Georgia 30308-2214
Attention: Loan Administration
Ladies and Gentlemen:
The undersigned, Occidental Petroleum Corporation,
a Delaware corporation (the "Company"), refers to the Credit
Agreement dated as of December 18, 1997 (the "Credit
Agreement"), among the Company, each bank party thereto,
Bank of America National Trust and Savings Association, as
syndication agent, Morgan Guaranty Trust Company of New
York, as documentation agent, The Bank of Nova Scotia and
The Chase Manhattan Bank, as administrative agents (with
each reference herein to the administrative agent in the
singular meaning The Bank of Nova Scotia) and The Chase
Manhattan Bank, as facility agent. Capitalized terms used
herein and not defined shall have the meanings assigned to
such terms in the Credit Agreement.
The Company hereby gives you notice pursuant to
Section 2.02(b) of the Credit Agreement that it requests a
Competitive Borrowing under the Credit Agreement, and in
that connection sets forth below the terms on which such
Competitive Borrowing is requested to be made:
(A) Date of Competitive Borrowing
----------------
(B) Principal amount of Competitive
Borrowing 1/
----------------
(C) Interest rate basis 2/
----------------
(D) Interest Period and the last
day thereof 3/
----------------
Upon acceptance of any or all of the Competitive
Loans offered by the Banks in response to this request, the
Company shall be deemed to have represented and warranted
----------------------------
1/ Not less than $50,000,000 or greater than the available
Total Commitment.
2/ Eurodollar Loan or Fixed Rate Loan.
3/ Which, in the case of Fixed Rate Loans, shall not be less
than 8 days or more than 360 days, and which in each case
shall end not later than the Maturity Date.
<PAGE>
that each of the conditions to lending specified in Section
7.02 of the Credit Agreement has been satisfied.
Very truly yours,
OCCIDENTAL PETROLEUM CORPORATION
By
-----------------------------
Name:
Title:
<PAGE>
EXHIBIT B
---------
NOTICE OF COMPETITIVE BID REQUEST
[Date]
[Name of Bank]
[Address]
Attention:
Ladies and Gentlemen:
Reference is made to the Credit Agreement dated as
of December 18, 1997, (the "Credit Agreement"), among
Occidental Petroleum Corporation, a Delaware corporation
(the "Company"), each bank party thereto, Bank of America
National Trust and Savings Association, as syndication
agent, Morgan Guaranty Trust Company of New York, as
documentation agent, The Bank of Nova Scotia and The Chase
Manhattan Bank, as administrative agents (with each
reference herein to the administrative agent in the singular
meaning The Bank of Nova Scotia) and The Chase Manhattan
Bank, as facility agent. Capitalized terms used herein and
not defined shall have the meanings assigned to such terms
in the Credit Agreement.
The Company made a Competitive Bid Request on
, pursuant to Section 2.02 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 2.02 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
------------------
----------------------------
1/ The Competitive Bid must be received by the
Administrative Agent (i) in the case of Eurodollar Loans,
not later than 2:00 p.m., New York City time, four Business
Days before a proposed Competitive Borrowing and (ii) in the
case of Fixed Rate Loans, not later than 9:30 a.m., New York
City time, on the Borrowing Date of the proposed Competitive
Borrowing.
<PAGE>
(D) Interest Period and the last
day thereof
------------------
Very truly yours,
THE BANK OF NOVA SCOTIA, as
Administrative Agent
By
-------------------------
Name:
Title:
<PAGE>
EXHIBIT C
---------
COMPETITIVE BID
[Date]
The Bank of Nova Scotia, as
Administrative Agent for the
Banks referred to below
600 Peachtree St. N.E., Suite 2700
Atlanta, Georgia 30308-2214
Attention: Loan Administration
Ladies and Gentlemen:
The undersigned, [Name of Bank], refers to the
Credit Agreement dated as of December 18, 1997 (the "Credit
Agreement"), among Occidental Petroleum Corporation, a
Delaware corporation (the "Company"), each bank party
thereto, Bank of America National Trust and Savings
Association, as syndication agent, Morgan Guaranty Trust
Company of New York, as documentation agent, The Bank of
Nova Scotia and The Chase Manhattan Bank, as administrative
agents (with each reference herein to the administrative
agent in the singular meaning The Bank of Nova Scotia) and
The Chase Manhattan Bank, as facility agent. Capitalized
terms used herein and not defined shall have the meanings
assigned to such terms in the Credit Agreement.
The undersigned hereby makes a Competitive Bid
pursuant to Section 2.02(c) of the Credit Agreement, in
response to the Competitive Bid Request made by the Company
on , , 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/
--------------
(C) Interest Period and the
last day thereof
--------------
----------------------------
1/ Not less than $5,000,000 and in integral multiples of
$1,000,000 and which may equal the entire aggregate
principal amount of the Competitive Borrowing requested by
the Company. Multiple bids will be accepted by the
Administrative Agent.
2/ I.e., in the case of Eurodollar Loans, the Margin, and in
the case of Fixed Rate Loans, the fixed rate of interest
offered (expressed as a percentage rate per annum rounded,
if necessary, to the nearest 1/10,000 of one percent).
<PAGE>
The undersigned hereby confirms that it is
prepared to extend credit to the Company upon acceptance by
the Company of this bid in accordance with Section 2.02(e)
of the Credit Agreement.
Very truly yours,
[NAME OF BANK]
By
-------------------------
Name:
Title:
<PAGE>
EXHIBIT D
---------
REVOLVING CREDIT BORROWING REQUEST
[Date]
The Bank of Nova Scotia, as
Administrative Agent
for the Banks referred to below
600 Peachtree St. N.E., Suite 2700
Atlanta, Georgia 30308-2214
Attention: Loan Administration
Ladies and Gentlemen:
The undersigned, Occidental Petroleum Corporation,
a Delaware corporation (the "Company"), refers to the Credit
Agreement dated as of December 18, 1997 (the "Credit
Agreement"), among the Company, each bank party thereto (the
"Banks"), Bank of America National Trust and Savings
Association, as syndication agent, Morgan Guaranty Trust
Company of New York, as documentation agent, The Bank of
Nova Scotia and The Chase Manhattan Bank, as administrative
agents (with each reference herein to the administrative
agent in the singular meaning The Bank of Nova Scotia) and
The Chase Manhattan Bank, as facility agent. Capitalized
terms used herein and not defined shall have the meanings
assigned to such terms in the Credit Agreement.
The Company hereby gives you notice pursuant to
Section 2.01(b) of the Credit Agreement that it requests a
Revolving Credit Borrowing under the Credit Agreement, and
in that connection sets forth below the terms on which such
Revolving Credit Borrowing is requested to be made:
(A) Date of Revolving Credit Borrowing
-------------------
(B) Principal amount of
Revolving Credit Borrowing 1/
-------------------
----------------------------
1/ Not less than
$50,000,000 and in integral multiples of $10,000,000.
<PAGE>
(C) Interest rate basis 2/
-------------------
(D) Interest Period and the last
day thereof 3/
-------------------
Upon the borrowing of the Revolving Credit Loans
to be made by the Banks in response to this request, the
Company shall be deemed to have represented and warranted
that each of the conditions to lending specified in Section
7.02 of the Credit Agreement has been satisfied.
Very truly yours,
OCCIDENTAL PETROLEUM CORPORATION
By
-------------------------
Name:
Title:
----------------------------
2/ Eurodollar Loan or Alternate Base Rate Loan, or a
combination thereof.
3/ Which shall end not later than the Maturity Date.
<PAGE>
EXHIBIT E
---------
OCCIDENTAL PETROLEUM CORPORATION
Certificate
(Pursuant to Section 7.01(b))
I, the undersigned, [an] [the] [Assistant]
Secretary of OCCIDENTAL PETROLEUM CORPORATION, a Delaware
corporation (the "Company"), DO HEREBY CERTIFY that:
1. This Certificate is furnished pursuant to
Section 7.01(b) of that certain Credit Agreement, dated
as of December 18, 1997 among the Company, each bank
party thereto, Bank of America National Trust and
Savings Association, as syndication agent, Morgan
Guaranty Trust Company of New York, as documentation
agent, The Bank of Nova Scotia and The Chase Manhattan
Bank, as administrative agents, and The Chase Manhattan
Bank, as facility agent (such credit agreement, as in
effect on the date of this Certificate, being herein
called the "Credit Agreement"). Unless otherwise
defined herein, capitalized terms used in this
Certificate have the meanings assigned to those terms
in the Credit Agreement.
2. There have been no amendments to the Restated
Certificate of Incorporation of the Company since
, 19 . */
3. Attached hereto as Annex A is a true and
correct copy of the By-laws of the Company as in effect
on the date hereof.
4. Attached hereto as Annex B is a true and
correct copy of the resolutions duly adopted by the
[Executive Committee of] the Board of Directors of the
Company on, and effective as of , 19 ,
which resolutions have not been revoked, modified,
amended or rescinded and are still in full force and
effect.
5. The persons named in Annex C attached hereto
have been duly elected and have duly qualified as, and
at all times since , 19 (to and including
the date hereof) have been, officers of the Company,
holding the respective offices set forth therein
opposite their names, and the signatures set forth
therein opposite their names are their genuine
signatures.
----------------------------
*/ Insert a date which is on or before the date of the Secretary
of State's Certificate furnished pursuant to clause (i) of
Section 7.01(a) of the Credit Agreement.
<PAGE>
6. I know of no proceeding for the dissolution or
liquidation of the Company or threatening its
existence.
WITNESS my hand as of this th day of December,
1997.
--------------------------------
Name:
Title: [Assistant] Secretary
OCCIDENTAL PETROLEUM CORPORATION
I, the undersigned, a Vice President of the
Company, DO HEREBY CERTIFY that is [a] [the]
duly elected and qualified [Assistant] Secretary of the
Company and the signature above is his genuine signature.
WITNESS my hand as of this th day of December,
1997.
--------------------------------
Name:
Title: Vice President
OCCIDENTAL PETROLEUM CORPORATION
<PAGE>
EXHIBIT F
---------
ASSIGNMENT AND ACCEPTANCE
Dated
----------,---
Reference is made to the Credit Agreement dated as
of December 18, 1997 (the "Credit Agreement"), among
OCCIDENTAL PETROLEUM CORPORATION, a Delaware corporation
(the "Company"), each bank party thereto (the "Banks"), Bank
of America National Trust and Savings Association, as
syndication agent, Morgan Guaranty Trust Company of New
York, as documentation agent, The Bank of Nova Scotia and
The Chase Manhattan Bank, as administrative agents (in such
capacity, the "Administrative Agents", with each reference
herein to the "Administrative Agent" in the singular meaning
The Bank of Nova Scotia) and The Chase Manhattan Bank, as
facility agent (in such capacity, the "Facility Agent").
Capitalized terms used herein and not otherwise defined
shall have the meanings assigned to such terms in the Credit
Agreement.
(the "Assignor") and
(the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the
Assignee, and the Assignee hereby purchases and assumes from
the Assignor, a % interest in and to all the Assignor's
rights and obligations under the Credit Agreement as of the
Effective Date (as defined below) (including, without
limitation, such percentage interest in the Revolving Credit
Commitment of the Assignor on the Effective Date and such
percentage interest in the Revolving Credit Loans [and
Competitive Loans], if any, owing to the Assignor
outstanding on the Effective Date together with such
percentage interest in all unpaid interest with respect to
such Revolving Credit Loans [and Competitive Loans] and
Facility Fees, if any, accrued to the Effective Date
[excluding, however, any interest in the Competitive Loans
owing to the Assignor outstanding on the Effective Date or
in the unpaid interest with respect to such Competitive
Loans owing to the Assignor]).
2. The Assignor (i) represents that as of the
date hereof, its Revolving Credit Commitment (without giving
effect to assignments thereof which have not yet become
effective) is $ and the outstanding balance of
its Revolving Credit Loans (unreduced by any assignments
thereof which have not yet become effective) is $
[and the outstanding balance of its Competitive Loans
(unreduced by any assignments thereof which have not yet
become effective) is $ ]; (ii) makes no
representation or warranty with respect to, and assumes no
responsibility with respect to any statements, warranties or
representations made by the Company in or in connection
with, the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement or any other instrument or document
furnished pursuant thereto; (iii) represents and warrants
that it is the legal and beneficial owner of the interest
being assigned by it hereunder and that such interest is
free and clear of any adverse claim; and (iv) makes no
representation or warranty and assumes no responsibility
with respect to the financial condition of the Company or
the performance or observance by the Company of any of its
obligations under the Credit Agreement or any other
instrument or document furnished pursuant thereto.
3. The Assignee (i) represents and warrants that
it is legally authorized to enter into this Assignment and
Acceptance; (ii) confirms that it has received a copy of
<PAGE>
the Credit Agreement, together with copies of the most
recent financial statements and other documents referred to
in Section 5.01(e), Section 6.01(a)(i), Section 6.01(a)(ii)
and Section 6.01(a)(v) thereof and such other documents and
information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment
and Acceptance; (iii) agrees that it will, independently and
without reliance upon any Agent, the Assignor or any other
Bank and based on such documents and information as it shall
deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the
Credit Agreement; (iv) confirms that it is an Eligible
Assignee; (v) appoints and authorizes each of the Facility
Agent and the Administrative Agent to take such action as
agent on its behalf and to exercise such powers under the
Credit Agreement as are delegated to the Facility Agent or
the Administrative Agent, as the case may be, by the terms
thereof, together with such powers as are reasonably
incidental thereto; (vi) agrees that it will perform in
accordance with their terms all the obligations of the
Assignor under the Credit Agreement, assumed by it under
this Assignment and Acceptance, which by the terms of the
Credit Agreement are required to be performed by it as a
Bank; [and] (vii) agrees that it will keep confidential all
information with respect to the Company furnished to it by
the Company or the Assignor (other than information
generally available to the public or otherwise available to
the Assignor on a nonconfidential basis) [; and (viii)
attaches the forms referred to in Section 10.06(g) of the
Credit Agreement as to the Assignee's complete exemption
from United States withholding taxes with respect to all
payments to be made to the Assignee under the Credit
Agreement */ ].
4. The effective date for this Assignment and
Acceptance shall be (the "Effective Date") **/ .
Following the execution of this Assignment and Acceptance,
it will be delivered to the Administrative Agent for
acceptance and recording by the Administrative Agent
pursuant to Section 10.06(e) of the Credit Agreement.
5. Upon such acceptance and recording, from and
after the Effective Date, (i) the Assignee shall be a party
to the Credit Agreement and, to the extent provided in this
Assignment and Acceptance, have the rights and obligations
of a Bank thereunder and (ii) the Assignor shall, to the
extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations
under the Credit Agreement (except as provided in Section
2.11(b), Section 10.02 and Section 10.07 thereof).
6. Upon such acceptance and recording, from and
after the Effective Date, the Administrative Agent shall
make all payments in respect of the interest assigned hereby
(including payments of principal, interest, fees and other
amounts) to the Assignee. The Assignor and Assignee shall,
directly between themselves, make all appropriate
adjustments in payments received from the Administrative
Agent for periods prior to the Effective Date or with
respect to the making of this assignment.
-----------------------------
*/ If the Assignee is organized under the laws of a
jurisdiction outside the United States.
**/ See Section 10.06(c). Such date shall be at least five
Business Days after the execution of this Assignment and
Acceptance and delivery thereof to the Administrative Agent.
<PAGE>
7. Attached hereto is a Schedule containing the
information in respect of the Assignee that is set forth in
Schedule II to the Credit Agreement in respect of each Bank.
8. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.
[NAME OF ASSIGNOR]
By
------------------------
Name:
Title:
[NAME OF ASSIGNEE]
By
------------------------
Name:
Title:
Accepted this day
----
of
-------------------
THE BANK OF NOVA SCOTIA,
as Administrative Agent
By
--------------------------
Name:
Title:
<PAGE>
EXHIBIT G
---------
[LETTERHEAD OF ROBERT E. SAWYER, ESQ.,
COUNSEL TO THE COMPANY]
December 18, 1997
To each of the Banks party
to the Credit Agreement
hereinafter referred to,
to Bank of America National
Trust and Savings Association,
as Syndication Agent,
to Morgan Guaranty Trust
Company of New York,
as Documentation Agent
to The Bank of Nova Scotia and
The Chase Manhattan Bank,
as Administrative Agents, and
to The Chase Manhattan Bank,
as Facility Agent
Re: Occidental Petroleum Corporation
Credit Agreement dated as of
December 18, 1997
Ladies and Gentlemen:
I am an Associate General Counsel of Occidental
Petroleum Corporation, a Delaware corporation (the
"Company"), and have acted as counsel to the Company in
connection with the negotiation, execution and delivery by
the Company of the (a) Credit Agreement, dated as of
December 18, 1997 (the "Credit Agreement"), among the
Company, each bank party thereto (collectively, the "Banks",
and individually, a "Bank"), Bank of America National Trust
and Savings Association, as syndication agent (in such
capacity, the "Syndication Agent"), Morgan Guaranty Trust
Company of New York, as documentation agent (in such
capacity, the "Documentation Agent"), The Bank of Nova
Scotia and The Chase Manhattan Bank, as administrative
agents (in such capacity, the "Administrative Agents") and
The Chase Manhattan Bank, as facility agent (in such
capacity, the "Facility Agent").
This opinion is being delivered to you pursuant to
Section 7.01(c) of the Credit Agreement. Unless otherwise
defined herein, terms used herein have the meanings assigned
to such terms in the Credit Agreement.
I am familiar with the corporate proceedings taken
by the Company in connection with the negotiation and
authorization of the Credit Agreement and the transactions
contemplated thereby. In addition, I have made such inquiry
of such officers
<PAGE>
and attorneys of the Company and its Subsidiaries and
examined such corporate records, certificates of officers of
the Company, of officers of the Company's Subsidiaries and
of public officials and such other documents and such questions
of law and fact as I have considered necessary or appropriate
to form the basis of the opinions hereinafter expressed.
Based upon, and subject to, the foregoing and the
four final paragraphs hereof, I am of the opinion that:
1. The Company is a corporation duly
incorporated, validly existing and in good standing
under the laws of the State of Delaware; and the
Company has all requisite corporate power and authority
(a) to own its assets and to carry on the business in
which it is engaged, (b) to execute, deliver and
perform its obligations under the Credit Agreement and
(c) to borrow in the manner and for the purpose
contemplated by the Credit Agreement.
2. The execution and delivery by the Company of
the Credit Agreement, the performance by the Company of
its obligations under the Credit Agreement, and the
Borrowings by the Company in the manner and for the
purpose contemplated by the Credit Agreement have been
duly authorized by all necessary corporate action
(including any necessary stockholder action) on the
part of the Company, and do not and will not (a)
violate any provision of any Federal, New York or
California law, rule or regulation (including, without
limitation, Regulation U and Regulation X) presently in
effect having applicability to the Company (or any
Specified Subsidiary), or of any order, writ, judgment,
decree, determination or award known to me which is
presently in effect and which has applicability to the
Company (or any Specified Subsidiary), or of the
charter or By-laws of the Company (or any Specified
Subsidiary), or (b), subject to the Company's
compliance with any applicable covenants pertaining to
its incurrence of unsecured indebtedness, result in a
breach of or constitute a default under any indenture
or loan or credit agreement, or any other agreement or
instrument, in each case known to me, to which the
Company or any Specified Subsidiary is a party or by
which the Company or any Specified Subsidiary or its
respective properties may be bound or affected, or (c)
to the best of my knowledge, result in, or require, the
creation or imposition of any Lien of any nature upon
or with respect to any of the properties now owned or
hereafter acquired by the Company (other than any right
of set-off or banker's lien or attachment that any Bank
may have under applicable law), and, to the best of my
knowledge, the Company is not in default under or in
violation of its charter or By-laws as presently in
effect. The Borrowing on the date hereof of Loans in
an aggregate principal amount equal to the Total
Commitment would not result in a breach of or
constitute a default under any indenture or loan or
credit agreement, or any other agreement or instrument,
in each case known to me, to which the Company or any
Specified Subsidiary is a party or by which the Company
or any Specified Subsidiary or its respective
properties may be bound or affected.
3. The Credit Agreement has been duly executed
and delivered by the Company and constitutes a legal,
valid and binding obligation of the Company, and is
enforceable against the Company in accordance with its
terms, and, if the Credit Agreement had referred to
California law rather than New York law as the
governing law, or if a California court having
jurisdiction were to decide that, notwithstanding the
reference to New York law, the Credit Agreement should
be
<PAGE>
construed in accordance with, and governed by,
California law, then the Credit Agreement would be
enforceable against the Company in accordance with its
terms.
4. Except as set forth in the Company's annual
report on Form 1O-K for the year ended December 31,
1996, or its quarterly reports on Form 10-Q for the
quarters ended March 31, 1997, June 30, 1997 and
September 30, 1997, to the Securities and Exchange
Commission, and except as disclosed in writing to the
Banks prior to the Effective Date, there are, to the
best of my knowledge, no actions, suits, proceedings or
investigations pending or threatened against the
Company or any Subsidiary of the Company or any of its
respective properties before any court, governmental
agency or regulatory authority (Federal, state, local
or foreign) which are likely (to the extent not covered
by insurance) to have a material adverse effect on the
present consolidated financial condition of the Company
and its Consolidated Subsidiaries, taken as a whole, or
materially to impair the Company's ability to perform
its obligations under the Credit Agreement.
5. No authorization, consent, approval, license
or formal exemption from, nor any filing, declaration
or registration with, any Federal, New York or
California court, governmental agency or regulatory
authority including, without limitation, the Securities
and Exchange Commission, or with any securities
exchange located in the United States, is or will be
required in connection with the execution, delivery and
performance by the Company of the Credit Agreement, or
the Borrowings by the Company in the manner and for the
purpose contemplated by the Credit Agreement, except
for informational reports the failure to file which
does not affect the validity of the Credit Agreement,
and except as may be required in the ordinary course to
comply with the affirmative covenants in the Credit
Agreement.
6. To the best of my knowledge, neither the
Company nor any Related Person to the Company has
incurred any liability to the PBGC under Title IV of
ERISA which has not been fully discharged.
7. The Company is not an "investment company" or
a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of
1940, as amended.
8. The Company is not a "holding company", or a
"subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of
the Public Utility Holding Company Act of 1935, as
amended.
I am a member of the California and New York Bars
and for purposes of this opinion do not hold myself out as
an expert on, nor do I express any opinion as to, the laws
of any jurisdiction other than the laws of the State of
California, the laws of the State of New York, the Federal
laws of the United States and the General Corporation Law of
the State of Delaware.
In rendering the opinion set forth in numbered
paragraph 3 above with respect to the Credit Agreement, I
have assumed, with your approval, the due
<PAGE>
authorization, execution and delivery of the Credit
Agreement on the part of all parties to the Credit
Agreement, other than the Company, and the legality,
validity, binding effect on, and enforceability against,
all such other parties of the Credit Agreement. That
opinion is subject to (i) bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
creditors' rights generally, (ii) the effect of general
principles of equity, including, without limitation,
concepts of materiality, reasonableness, good faith and
fair dealing and the possible unavailability of specific
performance or injunctive relief, regardless of whether
considered in a proceeding in equity or at law, (iii) the
effect of general rules of contract law that limit the
enforceability of provisions requiring indemnification of a
party for liability for its own action or inaction to the
extent the action or inaction involves gross negligence,
recklessness, willful misconduct or unlawful conduct, and
(iv) the possible challenge to the provisions of the Credit
Agreement which provide for a higher rate of interest after
a default in payment of principal or interest under
California Civil Code Section 1671, which renders invalid
liquidated damages provisions in contracts if such
provisions are found to have been unreasonable under the
circumstances existing at the time the contract was made.
With your approval, I have relied, as to certain
matters of fact, on information obtained from public
officials, officers of the Company and its Subsidiaries and
other sources believed by me to be responsible, and I have
assumed that the signatures on all documents examined by me
are genuine, that all documents submitted to me as originals
are authentic and that all documents submitted to me as
copies conform with the originals, which assumptions I have
not independently verified. Also with your approval, I have
relied, as to certain legal matters, on advice of other
lawyers employed by the Company who are more familiar with
such matters.
This opinion is rendered only to the Banks, the
Syndication Agent, the Documentation Agent, the
Administrative Agents and the Facility Agent and is solely
for their benefit in connection with the Credit Agreement.
This opinion may not be relied upon by the Banks, the
Syndication Agent, the Documentation Agent, the
Administrative Agents or the Facility Agent for any other
purpose or by any other person, firm or corporation for any
purpose without my prior written consent.
Very truly yours,
<PAGE>
EXHIBIT H
---------
[LETTERHEAD OF CRAVATH, SWAINE & MOORE, SPECIAL
COUNSEL TO THE AGENTS]
December 18, 1997
Occidental Petroleum Corporation
Credit Agreement dated as of December 18, 1997
Dear Ladies and Gentlemen:
We have acted as special counsel for the Agents
under and as defined in the Credit Agreement dated as of
December 18, 1997 (the "Credit Agreement"), among Occidental
Petroleum Corporation (the "Company"), each bank party
thereto (the "Banks"), Bank of America National Trust and
Savings Association, as syndication agent (in such capacity,
the "Syndication Agent"), Morgan Guaranty Trust Company of
New York, as documentation agent (in such capacity, the
"Documentation Agent"), The Bank of Nova Scotia and The
Chase Manhattan Bank, as administrative agents (in such
capacity, the "Administrative Agents") and The Chase
Manhattan Bank, as facility agent (in such capacity, the
"Facility Agent"). In that connection, we have examined
originals or copies certified or otherwise identified to our
satisfaction of the Credit Agreement and such other
documents as we have deemed necessary for purposes of this
opinion.
Based upon the foregoing, and assuming that the
Credit Agreement has been duly authorized, executed and
delivered by the Company in conformity with all laws
applicable to it, we are of the opinion that the Credit
Agreement constitutes a legal, valid and binding obligation
of the Company, enforceable against the Company in
accordance with its terms (subject to applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium
and other laws affecting creditors' rights generally from
time to time in effect and subject to general principles of
equity (including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing),
regardless of whether considered in a proceeding in equity
or at law). With respect to the foregoing opinion, (i)
insofar as provisions contained in the Credit Agreement
provide for indemnification, the enforceability thereof may
be limited by public policy considerations, (ii) the
availability of a decree for specific performance or an
injunction is subject to the discretion of the court
requested to issue any such decree or injunction and (iii)
we express no opinion as to the effect (if any) of any law
of any jurisdiction (other than the State of New York) in
which any Bank is located which limits the rate of interest
that such Bank may charge or collect. We express no opinion
as to Section 10.13 of the Credit Agreement insofar as such
Section relates to the subject matter jurisdiction of the
United States District Court for the Southern District of
New York to adjudicate any controversy related to the Credit
Agreement or provides for the waiver of an inconvenient
forum.
<PAGE>
We are members of the Bar of the State of New York
and the foregoing opinion is limited to the laws of the
State of New York and the Federal laws of the United States
of America.
This opinion is rendered solely to you in
connection with the above matter. This opinion may not be
relied upon for any other purpose or relied upon by or
furnished to any other person without our prior written
consent.
Very truly yours,
To the Banks, the Syndication Agent,
the Documentation Agent,
the Administrative Agents, and
the Facility Agent referred to above,
c/o Bank of America National Trust and
Savings Association,
as Syndication Agent
<PAGE>
EXHIBIT I
---------
ADDENDUM
Reference is made to the Credit Agreement dated as of
December 18, 1997 (the "Credit Agreement"), among Occidental
Petroleum Corporation, a Delaware corporation (the
"Company"), each bank party thereto (the "Banks"), Bank of
America National Trust and Savings Association, as
syndication agent (in such capacity, the "Syndication
Agent"), Morgan Guaranty Trust Company of New York, as
documentation agent (in such capacity, the "Documentation
Agent"), The Bank of Nova Scotia and The Chase Manhattan
Bank, as administrative agents (in such capacity, the
"Administrative Agents", with each reference herein to the
to "Administrative Agent" in the singular meaning The Bank
of Nova Scotia) and The Chase Manhattan Bank, as facility
agent (in such capacity, the "Facility Agent"). Capitalized
terms used herein and not defined shall have the meanings
assigned to such terms in the Credit Agreement.
This instrument is submitted by the undersigned
pursuant to Section 10.15 of the Credit Agreement and is an
Addendum as defined in the Credit Agreement.
1. The undersigned hereby agrees to become a party to
the Credit Agreement with the Revolving Credit Commitment
set forth below. The undersigned is [not] listed on
Schedule I to the Credit Agreement.
Revolving Credit Commitment: $
---------
*/ 2. The following information with respect to the
undersigned is supplied for purposes of Schedule II to the
Credit Agreement:
Name of Bank:
---------------------
Address:
---------------------
---------------------
Attention:
---------------------
Tel. No.
---------------------
Telecopier No.
---------------------
3. This instrument may be executed by the undersigned
and accepted by the Company on separate counterparts, each
of which counterparts shall be deemed to be an original and
all of which counterparts, taken together, shall constitute
but one and the same instrument.
----------------------------
*/ If Schedule II to the Credit Agreement already contains
this information, this item need not be completed.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this
instrument to be executed by its officer thereunto duly
authorized as of the date set forth below.
Date:
--------,------ ---------------------
[Name of Bank]
By
---------------------
Name:
Title:
Accepted:
OCCIDENTAL PETROLEUM CORPORATION
By
-------------------------------
Name:
Title:
Date:
----------, -----
<PAGE>
EXHIBIT J
---------
OCCIDENTAL PETROLEUM CORPORATION
$3,200,000,000 SENIOR CREDIT FACILITY
ADMINISTRATIVE DETAILS REPLY FORM
Please complete this form and return to The Bank of Nova Scotia
1) Legal Name of Institution For Signature
Page:
-------------------------------------------------------
2) Name and Title of Individual to Execute Signature
Page:
----------------------------------------------
3) Name of Person(s) to Receive Draft Credit
Agreement:
--------------------------------------------------
4) Address to Send Draft Credit
Agreement:
--------------------------------------------------
5) Contacts Credit Contact Operations Contact Legal Contact
-------------- ------------------ -------------
Name:
-------------- ------------------ -------------
Title:
-------------- ------------------ -------------
Address:
-------------- ------------------ -------------
-------------- ------------------ -------------
Telephone #:
-------------- ------------------ -------------
Facsimile #:
-------------- ------------------ -------------
6) Payment Instructions:
Method of Payment: Fedwire Chips
------------ --------------
Pay to:
----------------------------------------------------
Name of Bank:
----------------------------------------------
City, State,
Zip:
--------------------------------------------------------
ABA Number: Reference
---------------------------- -----------------
Account Number: Account Name:
---------------------- ---------------------
Attention:
-------------------------------------------------------------
7) The Bank of Nova Scotia Administrative Details:
For payment of principal, fees, or interest to the Bank
of Nova Scotia, please credit our account at the Federal
Reserve Bank of New York, ABA#026002532, for further
credit to Account #0610135 - BNS San Francisco Loan
Servicing Account, Reference: Occidental $3.2 billion.
Primary Account Secondary Account
Administrator Administrator
--------------- -----------------
The Bank of Nova Michael Silveira Norm Campbell
Scotia Tel: (404) 877-1522 Tel: (404) 877-1523
Fax: (404) 888-8998 Fax: (404) 888-8998
Please return this form by fax to The Bank of Nova Scotia
Michael Silveira, Fax: (404) 888-8998
<PAGE> 1
<PAGE>
EXHIBIT 10.7
AGREEMENT
---------
This Agreement is made as of the 13th day of November,
1997, by and between Occidental Petroleum Corporation, a
Delaware corporation headquartered in California
(hereinafter, "Employer"), and Mr. John F. Riordan
(hereinafter, "Employee").
WITNESSETH:
WHEREAS, Employee has been rendering services to
Employer since 1958, most recently as Chief Executive
Officer of MidCon Corp. (hereinafter "MidCon"), a wholly-
owned subsidiary of Employer, since April 1, 1986, and
WHEREAS, on October 6, 1997, Employer announced the
proposed divestiture of MidCon (hereinafter, the "MidCon
Divestiture"), and
WHEREAS, the parties now desire to address the specific
duties of Employee up until the date upon which the proposed
MidCon Divestiture is consummated (hereinafter, the "MidCon
Divestiture Date"), including his assistance in the effort
to divest MidCon, and thereafter in a more limited service
role, in each case on the terms and conditions specified
below, and
WHEREAS, the purpose of the Agreement is to specify the
rights and obligations of the parties relating to the
foregoing matters;
NOW, THEREFORE, in consideration of the mutual
covenants and agreements herein set forth, Employer and
Employee hereby agree as follows:
<PAGE>
1. Duties.
(a) Prior to the MidCon Divestiture Date, subject
to the early termination provisions of this Agreement,
Employee shall, for the compensation specified in
Paragraph 3(a) below, (i) serve as and perform the duties of
President and Chief Executive Officer of MidCon, or in such
other capacity and with such other duties for Employer or
any of the subsidiaries of Employer or any corporation
affiliated with Employer as the Chief Executive Officer of
Employer may direct, and (ii) assist Employer in such manner
as may be requested from time to time by the Chief Executive
Officer of Employer in its efforts to divest MidCon. In
performing duties hereunder, Employee shall comply with
Employer's Code of Business Conduct and Corporate Policies,
as the same may be amended from time to time, and shall not
render paid or unpaid services on a self-employed basis or
to any other employer.
(b) In the event that the MidCon Divestiture
occurs during the term of this Agreement and while Employee
is still serving Employer as President and Chief Executive
Officer of MidCon pursuant to Paragraph 1(a) above, then
subsequent to the MidCon Divestiture Date and for the
balance of the term of this Agreement, Employee shall, for
the compensation specified in Clause 3(b)(i) below, make
himself available, as Employer may from time to time request
in writing, on reasonable notice, to consult with Employer
with respect to its business affairs and operations, in Los
Angeles or at such other places as Employer may from time to
time request. During this post-divestiture period, Employee
shall comply with Employer's Code of Business and Corporate
Policies, as the same may be amended from time to time and
shall not accept employment with, or act as a consultant
for, or perform services for any person, firm or corporation
directly or indirectly engaged in any business competitive
with Employer, without the prior written consent of
Employer.
2. Term. The term of this Agreement shall extend for
a period of five (5) years, commencing on November 13, 1997,
and ending midnight November 12, 2002, unless terminated
prior thereto in accordance with the provisions of this
Agreement.
2
<PAGE>
3. Compensation.
(a) For all services performed pursuant to
Paragraph 1(a) above prior to the MidCon Divestiture Date,
subject to the early termination provisions of this
Agreement, Employee shall receive a salary from Employer at
the rate of Five Hundred Ninety Thousand Dollars ($590,000)
per annum, payable semi-monthly. Employee's salary shall be
subject to annual increase (and, as part of across the board
reductions for other officers of Employer, decrease) at the
reasonable discretion of the Board of Directors of Employer
and its Compensation Committee. Employee shall not receive
any salary pursuant to this Paragraph 3(a) after the MidCon
Divestiture Date.
(b) In the event that the MidCon Divestiture
occurs during the term of this Agreement and while Employee
is still serving Employer as President and Chief Executive
Officer of MidCon pursuant to Paragraph 1(a) above, then
subsequent to the MidCon Divestiture Date Employee shall be
entitled to receive:
(i) an Incentive Bonus equal to three times
(3x) his then current salary under Paragraph 3(a)
above, payable in equal semi-monthly installments over
the period from the MidCon Divestiture Date to
November 12, 2002, which Incentive Bonus payments shall
constitute Employee's sole compensation for his
services under Paragraph 1(b) of this Agreement, and
(ii) if, and only if, (A) Employer terminates
Employee following the MidCon Divestiture Date, or
(B) Employee becomes an employee of the entity (or any
subsidiary or affiliate thereof) that acquires MidCon
(the "MidCon Acquiror") and subsequently leaves the
employment of the MidCon Acquiror on or before
November 12, 2002, a Severance Bonus equal to two times
(2x) his then current salary under Paragraph 3(a),
payable within ten (10) business days after Employee
ceases to be employed by either Employer or the MidCon
Acquiror.
During the post-divestiture period described in this
Paragraph 3(b), fifty percent (50%) of all remuneration or
wages earned by Employee, either as an employee, independent
contractor or consultant to any person, firm or corporation,
which is determined by the Chief Executive Officer of
Employer to be a major competitor of Employer, shall be set
off against Employer's duty of compensation to Employee; in
furtherance of the
3
<PAGE>
foregoing, Employee shall promptly notify Employer of his
employment in any capacity during such period and of the
amount of remuneration or wages he has received or will
receive. In the event that Employee becomes entitled to the
bonuses described in this Paragraph 3(b), and thereafter
dies prior to his having received the full amount of such
bonuses, the entire unpaid balance of such bonuses shall
thereupon be paid to his estate.
4. Participation in Benefit Programs.
(a) Prior to the MidCon Divestiture Date, while
Employee is serving under Paragraph 3(a) above, Employee
shall be eligible to participate in (i) all benefit programs
and under the same terms and conditions as are generally
applicable to salaried employees and senior executives of
Employer (including the senior executive deferred
compensation plan and the 1988 deferred compensation plan),
except that Employee shall be eligible to participate in the
MidCon Retirement Plan, Savings Plan and Supplemental
Retirement Plan, rather than Employer's versions of such
plans, (ii) the MidCon ESOP plan, and (iii) Employer's
Incentive Compensation Plan and 1995 Incentive Stock Plan,
in all cases for so long as such programs and plans remain
in effect, and Employee shall also be eligible to receive
awards or grants under such Plans at Employer's sole
discretion.
(b) During the limited service periods specified
in Paragraph 1(b) above and Paragraph 6(c) below,
(i) Employee shall be eligible to
(A) participate in employee benefit programs of
Employer, including the medical and dental programs,
PRA and PSA, under the same terms and conditions as are
generally applicable and available to salaried
employees and senior executives, except for incentive
compensation programs such as the incentive cash bonus
and stock awards and option programs, and (B) exercise
all stock options previously granted to Employee under
Employer's 1987 Stock Option and 1995 Incentive Stock
Plan, which options are or become exercisable under the
provisions of such Plans; and
(ii) Any awards to Employee pursuant to
Employer's 1977 Executive Long-Term Incentive Stock
Purchase Plan and 1995 Incentive Stock Plan shall
continue to vest in the same manner and in the same
amounts as such awards would have vested if Employee
had continued as a full-time employee.
4
<PAGE>
5. Duty of Loyalty. While Employee is receiving any
payment or compensation in accordance with the provisions of
this Agreement, Employee shall not act in a disloyal manner
to Employer.
6. Termination Prior to the MidCon Divestiture.
(a) Cause. Prior to the MidCon Divestiture Date,
notwithstanding the term of this Agreement, Employer may
discharge Employee and terminate this Agreement without
severance or other pay upon one week's written notice or pay
in lieu of such notice for cause, including without
limitation, (i) failure to satisfactorily perform his duties
or responsibilities hereunder or negligence in complying
with Employer's legal obligations, (ii) refusal to carry out
any lawful order of Employer, (iii) breach of any legal duty
to Employer, (iv) breach of Paragraph 5 of the Agreement, or
(v) conduct constituting moral turpitude or conviction of a
crime which may diminish Employee's ability to effectively
act on Employer's behalf or with or on behalf of others, or
(vi) death.
(b) Incapacity. If, prior to the MidCon
Divestiture Date, Employee is incapacitated from performing
the essential functions of his job pursuant to this
Agreement by reason of illness, injury, or disability,
Employer may terminate this Agreement by at least one week's
written notice to Employee, but only in the event that such
conditions shall aggregate not less than one hundred eighty
(180) days during any twelve month period. In the event
Employee shall (i) continue to be incapacitated subsequent
to termination for incapacity pursuant to this Paragraph
6(b), and (ii) be a participant in and shall qualify for
benefits under Employer's Long Term Disability Plan ("LTD"),
then Employer will continue to compensate Employee, for so
long as Employee remains eligible to receive LTD benefits,
in an amount equal to the difference between 60% of
Employer's annual compensation as set forth in Paragraph
3(a) hereof and the maximum annual benefit under the LTD,
payable monthly on a prorated basis.
(c) Without Cause. Prior to the MidCon
Divestiture Date, Employer may at any time terminate the
employment of Employee without cause or designate a
termination for cause as a termination without cause, and in
such event Employer shall, in lieu of continued employment,
compensate Employee at the rate and in the manner provided
in Paragraph 3(a) hereof for a period after termination
equivalent to (i) 2 years,
5
<PAGE>
or (ii) until the expiration of this Agreement, whichever of
(i) or (ii) is shorter in time. At the end of that period,
Employee will receive a salary at the annual rate of
$50,000, payable semi-monthly, until November 12, 2002.
From the date of such termination through November 12, 2002,
Employee shall make himself available, as Employer may from
time to time request in writing, on reasonable notice, as a
source of information to Employer with respect to the
business affairs and operations of MidCon and its affiliates
wherein he has knowledge, or with respect to other matters
deemed by Employer to be within his expertise, in Los
Angeles and at such other places as Employer may from time
to time request. All remuneration or wages earned by
Employee in excess of $590,000, either as an employee,
independent contractor or consultant to any person, firm or
corporation, other than Employer, shall be set off against
Employer's duty of compensation to Employee under this
Paragraph 6(c); in furtherance of the foregoing, Employee
shall promptly notify Employer of his employment in any
capacity during such period and of the amount of
remuneration or wages he has received or will receive.
(d) The divestiture of MidCon shall not
constitute a termination for the purposes of this
Paragraph 6. In the event of a MidCon Divestiture, Employee
shall be entitled to compensation only pursuant to
Paragraph 3(b) of this Agreement.
7. Confidential Information. Employee agrees that he
will not divulge to any person, nor use to the detriment of
Employer or any of its affiliates or subsidiaries, nor use
in any business or process of manufacture competitive with
or similar to any business or process of manufacture of
Employer or any of its affiliates or subsidiaries, at any
time during employment by Employer or thereafter, any trade
secrets or confidential information obtained during the
course of his employment with Employer, without first
obtaining the written permission of Employer. Employee
agrees that, at the time of leaving the employ of Employer,
he will deliver to Employer, and not keep or deliver to
anyone else, any and all credit cards, notes, notebooks,
memoranda, documents and, in general, any and all material
relating to Employer's business, including copies thereof,
whether in paper or electronic format.
6
<PAGE>
8. Relocation. In the event that Employee elects to
relocate and such relocation is not covered by his new
employer at the time of such relocation, then, in such
event, Employee's relocation shall be covered by and subject
to Employer's written relocation policy as effective on
November 13, 1997, but only if such relocation is within the
continental United States.
9. Resignations. Effective on the MidCon Divestiture
Date, Employee shall resign as Executive Vice President of
Employer, as President and Chief Executive Officer of MidCon
and from each other office or directorship in which he
serves subsidiaries or affiliated companies of Employer.
10. Modification. This Agreement contains all the
terms and conditions agreed upon by the parties hereto, and
no other agreements, oral or otherwise, regarding the
subject matter of this Agreement shall be deemed to exist or
bind either of the parties hereto. This Agreement cannot be
modified except by a subsequent writing signed by both
parties.
11. Prior Agreement. This Agreement supersedes and
replaces any and all previous agreements between the
parties.
12. Severability. If any provision of this Agreement
is illegal and unenforceable in whole or in part, the
remainder of the Agreement shall remain enforceable to the
extent permitted by law.
13. Governing Law. This Agreement shall be construed
and enforced in accordance with the laws of the State of
California. In the event that any ambiguity or questions of
intent or interpretation arise, no presumption or binder of
proof shall arise favoring or disfavoring Employer by virtue
of authorship of this Agreement and the terms and provisions
of this Agreement shall be given their meaning under law.
14. Assignment. This Agreement shall be binding upon
Employee, his heirs, executors and assigns and upon
Employer, its successors and assigns.
15. Arbitration. In consideration for entering into
this Agreement and for the position, compensation, benefits
and other promises provided hereunder, Employee and Employer
agree to be bound by the arbitration provisions attached
hereto as Attachment 1 and incorporated herein by this
reference.
[signatures appear on the following page]
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement the day and year first above written.
OCCIDENTAL PETROLEUM CORPORATION
By: RICHARD W. HALLOCK
----------------------------------
J. F. RIORDAN
-------------------------------------
John F. Riordan
8
<PAGE>
Attachment 1
ARBITRATION PROVISIONS ("Provisions")
Incorporated by Reference into and Made a Part of the
Agreement, dated as of November 13, 1997 (the "Agreement"),
between
Occidental Petroleum Corporation (the "Employer")
and John F. Riordan (the "Employee")
In recognition of the fact that differences may arise
between the Employer and the Employee arising out of or
relating to certain aspects of the Employee's employment
with the Employer or the termination of that employment, and
in recognition of the fact that resolution of any
differences in the courts is rarely timely or cost-effective
for either party, the Employer and Employee have agreed to
the incorporation of the Provisions into the Agreement in
order to establish and gain the benefits of a speedy,
impartial and cost-effective dispute resolution procedure.
By so doing, the Employer and the Employee mutually agree to
arbitrate Claims (as defined below) and each knowingly and
voluntarily waive their rights before a jury. Each party's
promise to resolve Claims (as defined below) by arbitration
in accordance with these Provisions is consideration for the
other party's like promise, in addition to any other
consideration.
1. Claims
------
1.1 Except as provided in Paragraph 1.2 below,
"Claims" (collectively called "Claim" or "Claims" in these
Provisions) means all claims or controversies between the
Employer and Employee or between the Employee and others
arising out of, or relating to or concerning the Employee's
employment with the Employer or termination thereof for
which a state or federal court otherwise would be authorized
to grant relief, including, but not limited to, claims based
on any purported breach of contract, tort, state or federal
statute or ordinance, common law, constitution or public
policy, claims for wages or other compensation, or of
discrimination, or violation of public policy of any type.
Claims expressly include the Employee's Claims against the
Employer, and any subsidiary and related or affiliated
entity, successor or assign, and any of their officers,
directors, employees, managers, representatives, attorneys
or agents, and Claims against others arising out of,
relating to or concerning the Employee's employment with the
Employer or termination thereof.
1.2 These Provisions do not apply to or cover: claims
for workers' compensation benefits, claims for unemployment
compensation benefits, or claims for which the National
Labor Relations Board has exclusive jurisdiction; claims by
the Employer for injunctive and/or other equitable relief
for intellectual property, unfair competition and/or the use
and/or unauthorized disclosure of trade secrets or
confidential information; and claims based upon an employee
pension or benefit plan the terms of which contain an
arbitration or other non-judicial resolution procedure, in
which case the provisions of such plan shall apply.
Employee shall further retain the right to seek injunctive
and/or other equitable relief expressly made available by a
statute which forms
<PAGE>
the basis of a Claim which is subject to arbitration under
these Provisions. Where one or more of the included Claims
in a dispute are covered under these Provisions and one or
more of the included Claims in the dispute are not covered
under these Provisions, such covered and non-covered claims
shall be separated and shall be heard separately in the
appropriate forum for each claim.
2. Agreement to Arbitrate All Claims
---------------------------------
2.1 Except for claims excluded from these Provisions
by Paragraph 1.2 above and as otherwise provided in
Paragraph 1.2 and 4.1, the Employer and the Employee hereby
agree to the resolution by exclusive, final and binding
arbitration of all Claims.
2.2 The parties further agree that any issue or
dispute concerning the formation, applicability,
interpretation, or enforceability of these Provisions,
including any
claim or contention that all or any part of these Provisions
is void or voidable, shall be subject to arbitration as
provided herein. The arbitrator, and not any federal, state
or local court or agency, shall have authority to decide any
such issue or dispute.
3. Governing Law
-------------
3.1 Except as modified by these Provisions, the
arbitration shall be conducted pursuant to the rules set
forth in the California Arbitration Act, California Civil
Code or Procedure Section 1281, et. seq.
3.2 The Arbitrator shall apply the substantive law
(and the law of remedies, if applicable) of the State of
California, or federal law, or both, as applicable to the
Claims asserted.
4. Binding Effect
--------------
4.1 The arbitration Award (see Section 10, herein)
shall be final and binding on the parties except that both
parties shall have the right to appeal to the appropriate
court any errors of law in the decision rendered by the
Arbitrator.
4.2 The Award may be entered as a judgment in any
court of competent jurisdiction and shall serve as a bar to
any court action for any Claim or allegation which was, or
could have been, raised in Arbitration.
4.3 For Claims covered by these Provisions,
Arbitration is the exclusive remedy, except as provided by
Paragraph 1.2. The parties shall be precluded from bringing
or raising in court or before any other forum any dispute
which could have been brought or raised pursuant to
Arbitration.
2
<PAGE>
4.4 Nothing in these Provisions shall prevent a party
from pursuing any legal right to bring an action to vacate
or enforce an Award or to compel arbitration pursuant to
applicable California law.
5. Initiating Arbitration
To initiate the arbitration process, the aggrieved
party must provide the other party or parties with: a
written request to arbitrate any covered Claims which states
the Claim or Claims for which arbitration is sought. The
written request to arbitrate must be received within the
limitations periods applicable under the law to such Claims.
6. Selection of the Arbitrator
---------------------------
6.1 All Claims shall be decided by a single neutral
decision-maker, called the "Arbitrator."
6.2 To be qualified to serve, the Arbitrator must be
an attorney in good standing with at least seven years
experience in employment law or a retired judge and be
available to hear the matter within sixty (60) days of
selection and on consecutive days.
6.3 Within fifteen calendar days after receipt of the
written request to arbitrate, the parties will attempt to
agree on the selection of a qualified Arbitrator pursuant to
Paragraph 6.2 above. If the parties fail to agree on the
selection of an Arbitrator within that fifteen calendar day
period, the Employer will designate an alternate dispute
resolution service (by way of example, American Arbitration
Association, National Arbitration Forum, Judicial
Arbitration and Mediation Services/Endispute) which has the
capacity of providing the parties with a list of potential
qualified arbitrators. The parties shall request that
designated alternate dispute resolution service to provide
them with a list of nine persons who meet the requirements
of Paragraph 6.2 above. Each party shall rate the nine
names by giving the most preferred arbitrator the number
nine and using descending successive numbers to rate the
remaining choices in descending order of that party's
preference and returning the list to the alternate dispute
resolution service for calculation. The arbitrator
candidate with the highest combined rating will be the
Arbitrator. The functions of the alternate dispute
resolution service shall be strictly limited to providing
the list of arbitrator candidates and tallying the
respective parties' ratings of the candidates in accordance
with this Section 6 and no rules of that service shall
otherwise apply.
3
<PAGE>
7. Arbitration Procedures:
-----------------------
7.1 All parties may be represented by counsel
throughout the arbitration process, including without
limitation, at the arbitration hearing.
7.2 The Arbitrator shall afford each party a full and
fair opportunity to present relevant and material proof, to
call and cross-examine witnesses, and to present its
argument.
7.3 The Arbitrator shall not be bound by any formal
rules of evidence with the exception of applicable law
regarding the attorney-client privilege and work product
doctrine, and any applicable state or federal law regarding
confidentiality of documents and other information
(including, without limitation, pursuant to rights of
privacy).
7.4 The Arbitrator shall decide the relevance of any
evidence offered, and the Arbitrator's decision on any
question of evidence or argument shall be final and binding.
7.5 The Arbitrator may receive and consider the
evidence of witnesses by affidavit and shall give it such
weight as the Arbitrator deems appropriate after
consideration of any objection made to its admission.
7.6 Either party, at its expense, may arrange and pay
for the cost of a court reporter to provide a stenographic
record of the proceedings. The other party may obtain a
copy of the recording by paying the reporter's normal fee
for such copy. If both parties agree to utilize the
services of a court reporter, the parties shall share the
expense equally and shall be billed and responsible for
payment individually.
7.7 Either party shall have the right to file an pre-
or post-hearing brief. The time for filing such briefs
shall be set by the Arbitrator.
7.8 The Arbitrator has authority to entertain a
written or oral motion to dismiss and motion for summary
judgment, dispositive of all or part of any Claim, to which
the Arbitrator shall apply the standards governing such
motions under the Federal Rules of Civil Procedure.
8. Discovery
---------
8.1 Discovery shall be governed by this Paragraph 8,
notwithstanding Code of Civil Procedure Section 1283.05 to
the contrary.
8.2 Discovery shall be conducted in the most
expeditious and cost-effective manner possible, and shall be
limited to that which is relevant and for which the party
seeking it has substantial, demonstrable need.
4
<PAGE>
8.3 All parties shall be entitled to receive,
reasonably prior to the hearing, copies of relevant
documents which are requested in writing, clearly described
and governed by Paragraph 8.2 above, and sought with
reasonable advance notice given the nature of the requests.
Upon request, Employee shall also be entitled to a true copy
of his or her personnel file kept in the ordinary course of
business and pursuant to the Employer policy. Any other
requests for documents shall be made by subpoena as provided
for in Section 9 herein.
8.4 Except as mutually agreed by the parties, all
parties shall be entitled to submit no more than twenty
interrogatories (including subparts) and twenty requests for
admission (including subparts), on each of the other
parties, which are requested in writing, clearly described
and governed by Paragraph 8.2 above, and sought with
reasonable advance notice given the nature of the requests.
8.5 Upon reasonable request and scheduling, each party
shall be entitled to take three depositions in total of
relevant parties, representative of the opposing party, or
third parties, of up to two days duration each.
8.6 Physical and/or mental examinations may be
conducted in accordance with the standards established by
the Federal Rules of Civil Procedure.
8.7 At a mutually agreeable date, the parties will
exchange lists of experts who will testify at the
arbitration. Each party may depose the other party's
experts and obtain documents they reviewed and relied upon
and these depositions will not be charged against the
party's limit of three depositions.
8.8 Any disputes relative to discovery or requests for
discovery other than specifically provided for herein, shall
be presented to the Arbitrator who shall make final and
binding decisions in accordance with Paragraphs 8.1 and 8.2
herein.
9. Subpoenas
---------
9.1 Subject to formal request and a determination of
both need and relevance by the Arbitrator in accordance with
Paragraphs 8.1 and 8.2 above, each party may issue a
subpoena for production of documents or persons (other than
those provided for in Sections 8.3, 8.5 and 8.7) relevant to
the procedure. The Arbitrator's decision regarding
relevance and the need for subpoenas shall be final and
binding.
9.2 The Arbitrator is empowered to subpoena witnesses
or documents to the extent permitted in a judicial
proceeding, upon his or her own initiative or at the request
of a party.
5
<PAGE>
9.3 The party requesting the production of any witness
or proof shall bear the costs of such production.
10. The Award
---------
10.1 The Arbitrator shall render his or her decision
and award (collectively the "Award") based solely on the
evidence and authorities presented, the applicable policies
of the Employer, any applicable written employment
agreement, the applicable law argued by the parties, and
these Provisions as interpreted by the Arbitrator.
10.2 The Award shall be made promptly by the
Arbitrator, and unless otherwise agreed by the parties, not
later than sixty (60) days from the closing of the hearing,
or the date post-hearing briefs are filed, whichever is
later.
10.3 The Award shall be in writing and signed and dated
by the Arbitrator. The Award shall decide all issues
submitted, shall contain express findings of fact and law
(including findings on each issue of fact and law raised by
a party), and provide the reasons supporting the decision
including applicable law. The Arbitrator shall give signed
and duplicate original copies of the Award to all parties at
the same time.
11. Damages and Relief
------------------
11.1 The Arbitrator shall have the same authority to
award remedies and damages as provided to a judge and/or
jury under applicable state or federal laws, where the
aggrieved party has met his or her burden of proof.
11.2 Both parties have a duty to mitigate their damages
by all reasonable means. The Arbitrator shall take a
party's failure to mitigate into account in granting relief
in accordance with applicable state and federal law.
11.3 Arbitration of damages or other remedies may be
conducted in a bifurcated proceeding.
12. Fees and Expenses
-----------------
12.1 All parties shall share equally the fees of the
Arbitrator. Each party will deposit funds or post other
appropriate security for its share of the Arbitrator's fee,
in an amount and manner determined by the Arbitrator, at
least ten (10) days before the first day of hearing.
Additionally, each party shall pay for its own expenses
associated with the arbitration process and attorneys' fees,
if any. If any party prevails on a statutory claim which
entitles the prevailing party to attorneys' fees, or if
there is a written agreement providing for fees, the
Arbitrator may award reasonable fees to the prevailing party
in accordance with such statute or agreement.
6
<PAGE>
12.2 The Arbitrator may additionally award either party
its reasonable attorneys' fees and costs, including
reasonable expenses associated with production of witnesses
or proof, upon a finding that the other party (a) engaged in
unreasonable delay, or (b) failed to comply with the
Arbitrator's discovery order.
7
<PAGE> 1
<PAGE>
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
--------------------
This Agreement is made as of the 4th day of April, 1994
by and between Occidental Petroleum Corporation, a Delaware
corporation (hereinafter referred to as "Employer"), and
Stephen I. Chazen (hereinafter referred to as "Employee").
WITNESSETH
----------
Employer hereby agrees to employ Employee, and Employee
agrees to perform services and to work for Employer, upon the
following terms and conditions:
1. Duties - Employee shall serve in the capacity of
Executive Vice President - Corporate Development.
In performing his duties, Employee agrees to observe
and follow the reasonable policies and procedures established by
the Employer, which are subject to change by the Employer from
time to time.
2. Term of Employment - The term of employment shall
be for a period of five (5) years (unless terminated prior
thereto in accordance with the provisions of this Agreement, or
unless extended by mutual agreement of the parties), commencing
on May 1, 1994, or such earlier date as Employee may specify. In
order to be valid, any such extension shall be in writing and
signed by the Chairman, President & Chief Executive Officer on
behalf of Employer.
3. Compensation - In consideration for his services
to be performed under this Agreement, Employee shall receive, in
addition to all other benefits provided in this Agreement, an
aggregate salary of no less than three hundred fifty thousand
dollars ($350,000) per year payable by Employer in equal
semimonthly installments or on such basis as is generally
established for principal executives of Employer from time to
time.
4. Participation in Benefit Programs - During the
term of this Agreement, Employee shall be entitled to participate
<PAGE>
in all benefit programs generally applicable to salaried
employees of employer in force or adopted by Employer from time
to time. Employee will be required to participate in the tax
preparation program conducted by Arthur Andersen & Co.
5. Compensation Plans - Employee shall be:
(i) eligible to participate in Employer's Incentive Compensation
Plan according to its terms, and shall be guaranteed to receive a
bonus under such Plan for the year 1994 of forty percent (40%) of
his base salary for 1994 or $140,000 (this bonus shall be payable
in December 1994 or January 1995 in the discretion of the
Company); (ii) eligible to receive annual grants under Employer's
1987 Stock Option Plan and shall receive an option grant of fifty
thousand (50,000) shares under such Plan after Employee's
execution of this Agreement and the commencement of services
pursuant to this Agreement, and (iii) a participant in Employer's
1977 Executive Long Term Incentive Stock Purchase Plan and shall
be guaranteed to receive a grant of forty percent (40%) of
Employee's base salary or $140,000 in January, 1995 under such
Plan. Employee's participation in each of the foregoing Plans
shall be in accordance with and subject to all of the terms and
conditions of such Plans.
6. Additional Payments - In order to compensate
Employee for cost he will incur with this change of employment,
Employer shall pay to Employee an aggregate of $200,000, payable
after Employee's execution of this Agreement.
7. Exclusivity of Services - Employee agrees to
devote his full-time, exclusive services to Employer hereunder,
except for such time as Employee may require in connection with
his personal investments.
8. Vacation - Employee shall be entitled to a total
of four (4) weeks of paid vacation in each contract year.
9. Termination -
a. Cause - Notwithstanding the term of this
Agreement, Employer may discharge Employee and terminate this
Agreement for material cause, upon written notice, in the event
that Employee (i) shall willfully breach this agreement, or (ii)
shall refuse to carry out any lawful order of Employer or act in
a disloyal manner inimical to Employer. In any such event,
Employer shall give Employee notice of such cause and Employee
shall have 30 days to cure such breach.
b. Incapacity - If, during the term of this
Agreement, Employee is materially incapacitated from fully
performing his duties pursuant to this Agreement by reason of
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illness, disability or other incapacity (unless incurred as a
direct result of his assignments hereunder) or by reason of any
statute, law, ordinance, regulation, order, judgment or decree,
Employer may terminate this Agreement without liability by
written notice to Employee, but only in the event that such
conditions shall aggregate not less than one-hundred eighty (180)
days during any one contract year of the term of employment.
c. Without Cause - Either party may terminate
this Agreement without cause at any time, by giving the other
party not less than 6 (six) months written notice of termination.
Employer may terminate the employment of Employee without cause
at any time (including a time during such notice period); and in
such event Employer shall compensate Employee (in lieu of said
notice and continued employment and, except for benefits
specified hereunder, in complete satisfaction of all of its
obligations under this Agreement) at his then current rate and in
the manner provided in Paragraph 3 above for a period after
termination equivalent to the shortest of: (i) twenty-four
months; or (ii) until the expiration of the term of this
Agreement. In any event, Employer's maximum liability for any
breach of this Agreement, including but not limited to,
termination without cause and/or notice shall be no more than
twenty-four (24) months compensation plus the benefits specified
hereunder (or a lesser amount as determined in accordance with
subsection (ii) of this paragraph) at the rate set forth above.
During this period of compensation, Employee shall
continue to be eligible to (i) participate in all employee
benefit plans of Employer (except the short and long-term
disability plans unless Employee has already become eligible
under such plans), in which he is participating at the time of
the notice, and (ii) exercise all stock options previously
granted to Employee under Employer's 1987 Stock Option Plan,
which options are or become exercisable under the provisions of
such Plan as though he were still a full time employee. During
the period, any award(s) to Employee pursuant to Employer's
Executive Long-Term Incentive Stock Purchase Plan shall continue
to vest in the same manner and in the same amounts as such
award(s) would have vested if Employee had continued as a full
time employee. However, this employee benefits participation and
stock plan vesting will cease if Employee accepts a full time
position with another employer.
In the event Employer compensates Employee (in
lieu of said notice and continued employment) under the first
paragraph of 9(c) above for a period exceeding twelve months,
then in such event, all remuneration or wages earned during the
second twelve months of such period by Employee, either as
employee, independent contractor or consultant to any person,
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firm or corporation other than employer, shall be a set-off to
Employer's duty of compensation to Employee.
10. Initial Relocation - Employee's relocation from
Madison, New Jersey to Los Angeles, California (including the
sale of Employee's existing residence in Madison, New Jersey),
shall be covered by and subject to Employer's existing written
relocation policy. This will include the movement of household
goods from New Jersey, plus any additional relocation benefits as
approved by the Executive Vice President of Human Resources.
11. Indemnity and Insurance. - In any situation where
under applicable law Employer has the power to indemnify Employee
in respect of any judgments, fines, settlements, loss, cost or
expense (including attorneys' fees) of any nature related to or
arising out of Employee's activities as an agent, employee,
officer or director of Employer or in any other capacity on
behalf of or at the request of Employer, Employer agrees that it
will indemnify Employee to the fullest extent permitted by
applicable law, including but not limited to making such findings
and determinations and taking any and all such actions as
Employer may, under applicable law, be permitted to have the
discretion to take so as to effectuate such indemnification.
Employer further agrees to furnish Employee for the remainder of
his life, with Directors' and Officers' liability insurance
insuring Employee against occurrences which occur during his
employment with Employer, such insurance to have policy limits
aggregating not less than $100 million, and otherwise to be in
substantially the same form and to contain substantially the same
terms, conditions and exceptions as the liability insurance
policies provided for officers and directors of Employer in force
from time to time.
12. Confidential Information - Employee agrees that he
will not divulge to any person, nor use to the detriment of
Employer or any of its affiliates or subsidiaries, nor use in any
business competitive with or similar to any business of Employer
or any of its affiliates or subsidiaries, at any time during
employment by Employer or thereafter, any trade secrets or
confidential information obtained during the course of his
employment with Employer, without first obtaining the written
permission of Employer.
Employee agrees that, at the time of leaving the employ
of Employer, he will deliver to Employer and not keep or deliver
to anyone else any and all notes, notebooks, memoranda, documents
and, in general, any and all material relating to Employer's
business.
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13. Entire Agreement; Modification - This Agreement
constitutes the entire agreement of the parties relating to the
subject matter hereof, and supercedes all previous agreements,
arrangements, and understandings, whether express or implied,
relating to the subject matter hereof. No other agreements,
oral, implied or otherwise, regarding the subject matter of this
Agreement shall be deemed to exist or bind either of the parties
hereto. This Agreement cannot be modified except by a writing
signed by both parties.
14. Severability - If any provision of this Agreement
is illegal and unenforceable in whole or in part, the remainder
of this Agreement shall remain enforceable to the extent
permitted by law.
15. Governing Law - This Agreement shall be construed
and enforced in accordance with the laws of the State of
California.
16. Assignment - This Agreement shall be binding upon
Employee, his heirs, executors and assigns and upon Employer, its
successors and assigns.
17. Sole Contract - Employee represents and warrants
to Employer that he is not barred by or subject to any
contractual or other obligation that would be violated by the
execution or performance of this Agreement.
18. No Waiver - The failure of a party to insist upon
strict adherence to any term of this Agreement on any occasion
shall not be considered a waiver nor deprive that party of the
right to insist upon adherence to that term or any other term of
this Agreement. Any waiver or amendment to this Agreement must
be in writing.
19. Withholdings - All compensation provided by
Employer under this Agreement is subject to any and all
withholding by Employer as required by applicable law.
20. Arbitration - Both parties agree that any and all
disputes that relate to the termination of this Agreement and/or
Employee's employment (including whether Employer had sufficient
cause for termination or the manner in which the termination is
effected) shall be submitted to binding arbitration and judgment
under the Commercial Arbitration Rules of the American
Arbitration Association. Should the arbitrator rule in
Employee's favor on any dispute, the maximum exclusive remedy
shall be that as set forth in Paragraph 9(c) above. The judgment
on the award may be entered in any court having jurisdiction.
The parties to any arbitration under this paragraph shall bear
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the cost of the arbitration and the fee of the neutral arbitrator
in such manner as determined by the arbitrator.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement the day and year first above written.
OCCIDENTAL PETROLEUM CORPORATION
By: DALE R. LAURANCE
----------------------------
By: STEPHEN I. CHAZEN
----------------------------
Stephen I. Chazen
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EXHIBIT 10.9
INDEMNIFICATION AGREEMENT
-------------------------
This Agreement is made and entered into as of February 12,
1998 between Stephen I. Chazen ("Indemnitee") and Occidental
Petroleum Corporation, a Delaware corporation (the "Company").
WHEREAS, it is essential to the Company that it retain and
attract as directors and officers the most capable persons
available;
WHEREAS, Indemnitee is an officer of the Company;
WHEREAS, both the Company and Indemnitee recognize the
increased risk of litigation and other claims being asserted
against directors and officers of public companies in today's
environment;
WHEREAS, in recognition of Indemnitee's need for substantial
protection against personal liability in order to enhance
Indemnitee's continued service to the Company in an effective
manner, and in part to provide Indemnitee with specific
contractual assurance that the indemnification protection
provided by the By-Laws of the Company will be available to
Indemnitee (regardless of, among other things, any amendment to
or revocation of such By-Laws or any change in the composition of
the Company's Board of Directors or any acquisition transaction
relating to the Company), and in order to induce Indemnitee to
continue to provide services to the Company as a director or
officer thereof, the Company wishes to provide in this Agreement
for the indemnification of and the advancing of expenses to
Indemnitee to the fullest extent (whether partial or complete)
permitted by law and as set forth in this Agreement, and, to the
extent insurance is maintained, for the continued coverage of
Indemnitee under the Company's directors' and officers' liability
insurance policies (the "D&O Insurance");
NOW, THEREFORE, in consideration of the premises and of
Indemnitee continuing to serve the Company directly or, at its
request, with another enterprise, and intending to be legally
bound hereby, the parties hereto agree as follows:
1. Certain Definitions.
(a) Change in Control: shall be deemed to have occurred if
(i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended), other
than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned
directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of stock of
the Company, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under said Act), directly or indirectly, of securities
of the Company representing 25% or more of the total voting power
represented by the Company's then outstanding Voting Securities,
or (ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of
Directors of the Company and any new director whose election by
the Board of Directors or nomination for election by the
Company's stockholders was approved by a vote of at least two-
thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease for
any reason to constitute a majority thereof, or (iii) the
stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or
consolidation which would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into Voting Securities of the surviving entity) at least 80% of
the total voting power represented by the Voting Securities of
the Company or such surviving entity outstanding immediately
after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or
an agreement for the sale or disposition by the Company (in one
transaction or a series of transactions) of all or substantially
all the Company's assets.
(b) Claim: any threatened, pending or completed action,
suit, proceeding or alternate dispute resolution mechanism or any
inquiry, hearing or investigation, whether conducted by the
Company or any other party, that Indemnitee in good faith
believes might lead to the institution of any such action,
<PAGE>
suit or proceeding or alternate dispute resolution mechanism,
whether civil, criminal, administrative, investigative or other.
(c) Expenses: include attorneys' fees and all other
costs, travel expenses, fees of experts, transcript costs, filing
fees, witness fees, telephone charges, postage, delivery service
fees, expenses and obligations of any nature whatsoever paid or
incurred in connection with investigating, defending, being a
witness in or participating in (including on appeal), or
preparing to defend, be a witness in or participate in any Claim
relating to any Indemnifiable Event.
(d) Indemnifiable Event: any event or occurrence
related to the fact that Indemnitee is or was a director,
officer, employee, agent or fiduciary of the Company, or is or
was serving at the request of the Company as a director, officer,
employee, agent or fiduciary of another corporation, partnership,
joint venture, employee benefit plan, trust or other enterprise,
or related to anything done or not done by Indemnitee in any such
capacity.
(e) Potential Change in Control: shall be deemed to have
occurred if (i) the Company enters into an agreement or
arrangement, the consummation of which would result in the
occurrence of a Change in Control; (ii) any person (including the
Company) publicly announces an intention to take or to consider
taking actions which if consummated would constitute a Change in
Control; or (iii) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a Potential Change in
Control has occurred.
(f) Reviewing Party: any appropriate person or body
consisting of a member or members of the Company's Board of
Directors or any other person or body appointed by the Board who
is not a party to the particular Claim for which Indemnitee is
seeking indemnification, or Independent Legal Counsel.
(g) Independent Legal Counsel: Independent Legal
Counsel shall refer to an attorney, selected in accordance with
the provisions of Section 3 hereof, who shall not have otherwise
performed services for the Company or Indemnitee within the last
five years (other than in connection with seeking indemnification
under this Agreement). Independent Legal Counsel shall not be
any person who, under the applicable standards of professional
conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to
determine Indemnitee's rights under this Agreement, nor shall
Independent Legal Counsel be any person who has been sanctioned
or censored for ethical violations of applicable standards of
professional conduct.
(h) Voting Securities: any securities of the Company
which vote generally in the election of directors.
2. Basic Indemnification Arrangement.
(a) In the event Indemnitee was, is or becomes a party to
or witness or other participant in, or is threatened to be made a
party to or witness or other participant in, a Claim by reason of
(or arising in part out of) an Indemnifiable Event, the Company
shall indemnify Indemnitee to the fullest extent permitted by law
as soon as practicable but in any event no later than thirty days
after written demand is presented to the Company, against any and
all Expenses, judgments, fines, penalties and amounts paid in
settlement (including all interest, assessments and other charges
paid or payable in connection with or in respect of such
Expenses, judgments, fines, penalties or amounts paid in
settlement) of such Claim and any federal, state, local or
foreign taxes (net of the value to Indemnitee of any tax benefits
resulting from tax deductions or otherwise) imposed on the
Indemnitee as a result of the actual or deemed receipt of any
payments under this Agreement (including the creation of the
trust referred to in Section 4 hereof). If so requested by
Indemnitee, the Company shall advance (within two business days
of such request) any and all Expenses to Indemnitee (an "Expense
Advance"). Notwithstanding anything in this Agreement or in the
By-Laws of the Company to the contrary and except as provided in
Section 5, prior to a Change in Control Indemnitee shall not be
entitled to indemnification pursuant to this Agreement in
connection with any Claim initiated by Indemnitee against the
Company or any director or officer of the Company unless the
Company has joined in or consented to the initiation of such
Claim.
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(b) Notwithstanding the foregoing, (i) the obligations of
the Company under Section 2(a) shall be subject to the condition
that the Reviewing Party shall not have determined (in a written
opinion, in any case in which the Independent Legal Counsel
referred to in Section 3 hereof is involved) that Indemnitee
would not be permitted to be indemnified under applicable law,
and (ii) the obligation of the Company to make an Expense Advance
pursuant to Section 2(a) shall be subject to the condition that,
if, when and to the extent that the Reviewing party determines
that Indemnitee would not be permitted to be so indemnified under
applicable law, the Company shall be entitled to be reimbursed by
Indemnitee (who hereby agrees to reimburse the Company) for all
such amounts theretofore paid; provided, however, that if
Indemnitee has commenced legal proceedings in a court of
competent jurisdiction to secure a determination that Indemnitee
should be indemnified under applicable law, any determination
made by the Reviewing Party that Indemnitee would not be
permitted to be indemnified under applicable law shall not be
binding and Indemnitee shall not be required to reimburse the
Company for any Expense Advance until a final judicial
determination is made with respect thereto (as to which all
rights of appeal therefrom have been exhausted or lapsed).
Indemnitee's obligation to reimburse the Company for Expense
Advances shall be unsecured and no interest shall be charged
thereon. If there has not been a Change in Control, the
Reviewing Party shall be selected by the Board of Directors, and
if there has been such a Change in Control (other than a Change
in Control which has been approved by a majority of the Company's
Board of Directors who were directors immediately prior to such
Change in Control), the reviewing Party shall be the Independent
Legal Counsel referred to in Section 3 hereof. If there has been
no determination by the Reviewing Party or if the Reviewing Party
determines that Indemnitee substantively would not be permitted
to be indemnified in whole or in part under applicable law,
Indemnitee shall have the right to commence litigation in any
court in the State of Delaware having subject matter jurisdiction
thereof and in which venue is proper seeking an initial
determination by the court or challenging any such determination
by the Reviewing Party or any aspect thereof, or the legal or
factual bases therefor and the Company hereby consents to service
of process and to appear in any such proceeding. Any
determination by the Reviewing Party otherwise shall be
conclusive and binding on the Company and Indemnitee.
3. Change in Control. The Company agrees that if there
is a Change in Control of the Company (other than a Change in
Control which has been approved by a majority of the Company's
Board of Directors who were directors immediately prior to such
Change in Control) then Independent Legal Counsel shall be
selected by Indemnitee and approved by the Company (which
approval shall not be unreasonably withheld), and such
Independent Legal Counsel shall determine whether Indemnitee is
entitled to indemnity payments and Expense Advances under this
Agreement or any other agreement or under the Certificate of
Incorporation or By-Laws of the Company now or hereafter in
effect relating to Claims for Indemnifiable Events. Such
Independent Legal Counsel, among other things, shall render its
written opinion to the Company and Indemnitee as to whether and
to what extent the Indemnitee will be permitted to be
indemnified. The Company agrees to pay the reasonable fees of
the Independent legal Counsel and to indemnify fully such
Independent Legal Counsel against any and all expenses (including
attorneys' fees), claims, liabilities and damages arising out of
or relating to this Agreement the engagement of Independent Legal
Counsel pursuant hereto.
4. Establishment of Trust. In the event of a Potential
Change in Control, the Company shall, upon written request by
Indemnitee, create a trust for the benefit of Indemnitee and from
time to time upon written request of Indemnitee shall fund such
trust in an amount (the "Trust Fund Amount") which is the lesser
of (a) the total of all sums sufficient to satisfy any and all
Expenses reasonably anticipated at the time of each such request
to be incurred in connection with investigating, preparing for
and in connection with investigation, preparing for and defending
any Claim relating to an Indemnifiable Event, plus amounts of any
and all Claims relating to an Indemnifiable Event from time to
time actually paid or claimed, reasonably anticipated or proposed
to be paid, or (b) Five Million Dollars ($5,000,000). The Trust
Fund Amount shall be determined by the Company's Board of
Directors provided that no Change in Control shall have occurred
but shall be determined by the Independent Legal Counsel after
the occurrence of a Change in Control. The Company shall
maintain funds in the trust account in the Trust Fund Amount,
depositing such additional amounts as may be appropriate as a
result of disbursements from the account or increases which, from
time to time, may occur in the Trust Fund Amount. The terms of
the trust shall provide that upon a Change in Control (i) the
trust shall not be revoked or the principal thereof invaded,
without the written consent of the Indemnitee, (ii) the trustee
shall advance, within two
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business days of a request by Indemnitee, any and all Expenses to
Indemnitee (and Indemnitee hereby agrees to reimburse the trust
under the circumstances under which the Indemnitee would be
required to reimburse the Company under Section 2(b) of this
Agreement), (iii), the trust shall continue to be funded by the
Company in accordance with the funding obligation set forth
above, (iv) the trustee shall promptly pay to Indemnitee all
amounts for which Indemnitee shall be entitled to indemnification
pursuant to this Agreement or otherwise, and (v) all unexpended
funds in such trust shall revert to the Company upon a final
determination by the Reviewing Party or a court of competent
jurisdiction, as the case may be, that the Indemnitee has been
fully indemnified under the terms of this Agreement. The trustee
shall be chosen by Indemnitee. Nothing in this Section 4 shall
relieve the Company of any of its obligations under this
Agreement. All income earned on the assets held in the trust
shall be reported as income by the Company for federal, state,
local and foreign tax purposes.
5. Indemnification for Additional Expenses. The
Company shall indemnify Indemnitee against any and all expenses
(including attorneys' fees) and, if requested by Indemnitee,
shall (within two business days of such request) advance such
expenses to Indemnitee, which are incurred by Indemnitee in
connection with any Claim asserted against Indemnitee or which
are incurred in connection with any action brought by Indemnitee
for (i) indemnification or advance payment of expenses by the
Company under this Agreement or any other agreement or under the
Certificate of Incorporation or By-Laws of the Company now or
hereafter in effect relating to Claims for Indemnifiable Events
and/or (ii) recovery under any directors' and officers' liability
insurance policies maintained by the Company, regardless of
whether Indemnitee ultimately determined to be entitled to such
indemnification, advance expense payment or insurance recovery,
as the case may be.
6. Partial Indemnity, Etc. If Indemnitee is entitled
under any provision of this Agreement to indemnification by the
Company for some or a portion of the Expenses, judgments, fines,
penalties and amounts paid in settlement of a Claim but not,
however, for all of the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion thereof to
which Indemnitee is entitled. Moreover, notwithstanding any
other provision of this Agreement, to the extent that Indemnitee
has been successful on the merits or otherwise in defense of any
or all Claims relating in whole or in part to an Indemnifiable
Event or in defense of any issue or matter therein, including
dismissal without prejudice, Indemnitee shall be indemnified
against all Expenses incurred in connection therewith. In
connection with any determination by the reviewing Party or
otherwise as to whether Indemnitee is entitled to be indemnified
hereunder, the burden of proof shall be on the Company to
establish that Indemnitee is not so entitled.
7. No Presumption. For purposes of this Agreement, the
termination of any claim, action, suit or proceeding, by
judgment, order, settlement (whether with or without court
approval) or conviction, or upon a plea of nolo contendere or its
equivalent, shall not create a presumption that Indemnitee did
not meet any particular standard of conduct or have any
particular belief or that a court has determined that
indemnification is not permitted by applicable law.
8. Non-exclusivity, Etc. The rights of the Indemnitee
hereunder shall be in addition to any other rights Indemnitee may
have under the Certificate of Incorporation or By-Laws of the
Company or the Delaware General Corporation Law or otherwise. To
the extent that a change in the Delaware General Corporation Law
(whether by statute or judicial decision) permits greater
indemnification by agreement than would be afforded currently
under the Certificate of Incorporation and By-Laws of the Company
and this Agreement, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greatest benefits so
afforded by such change.
9. No Construction as Employment Agreement. Nothing
contained herein shall be construed as giving Indemnitee any
right to be retained in the employ of the Company or any of its
subsidiaries.
10. Liability Insurance. To the extent the Company
maintains an insurance policy or policies providing directors'
and officers' liability insurance, Indemnitee shall be covered by
such policy or policies, in accordance with its or their terms,
to the maximum extent of the coverage provided for any Company
director or officer.
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11. Period of Limitations. No legal action shall be
brought and no cause of action shall be asserted by or in the
right of the Company or any affiliate of the Company against
Indemnitee, Indemnitee's spouse, heirs, executors, administrators
or personal or legal representatives after the expiration of two
years from the date of accrual of such cause of action, and any
claim or cause of action of the Company or its affiliates shall
be extinguished and deemed released unless asserted by the timely
filing of a legal action within such two-year period; provided,
however, that if any shorter period of limitations is otherwise
applicable to any such cause of action such shorter period shall
govern.
12. Amendments, Etc. No supplement, modification or
amendment of this Agreement shall be binding unless executed in
writing by both of the parties hereto. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute
a waiver of any other provisions hereof (whether or not similar)
nor shall such waiver constitute a continuing waiver.
13. Subrogation. In the event of payment under this
Agreement, the Company shall be subrogated to the extent of such
payment to all of the rights of recovery of Indemnitee, who shall
execute all papers required and shall do everything that may be
necessary to secure such rights, including the execution of such
documents as may be necessary to enable the Company effectively
to bring suit to enforce such rights.
14. No Duplication of Payments. The Company shall not be
liable under this Agreement to make any payment in connection
with any claim made against Indemnitee to the extent Indemnitee
has otherwise actually received payment (under any insurance
policy, the Certificate of Incorporation or the By-Laws of the
Company or otherwise) of the amounts otherwise Indemnifiable
hereunder.
15. Indemnification Procedures.
(a) Promptly after receipt by Indemnitee of notice of the
commencement of or the threat of commencement of any action, suit
or proceeding, Indemnitee shall notify the Company of the
commencement or threat thereof; but the omission so to notify or
delay in notifying the Company will not relieve the Company from
any liability which it may have to Indemnitee except to the
extent that the Company is actually prejudiced by any such
omission or delay.
(b) The Company shall give prompt notice of the
commencement of such action, suit or proceeding to the insurers
on the D&O Insurance, if any, in accordance with the procedures
set forth in the respective policies in favor of Indemnitee. The
Company shall thereafter take all necessary or desirable action
to cause such insurers to pay, on behalf of Indemnitee, all
amounts payable as a result of such action, suit or proceeding in
accordance with the terms of such policies.
(c) In the event such action, suit or proceeding is other
than by or in the right of the Company, Indemnitee may, at his
option, either control the defense thereof himself, require the
Company to defend him or accept the defense provided under the
D&O Insurance; provided, however, that Indemnitee may not control
the defense himself or require the Company to defend him if such
decision would jeopardize the coverage provided by the D&O
Insurance to the Company and/or the other directors and officers
covered thereby. In the event that Indemnitee requires the
Company to defend him, or in the event that Indemnitee proceeds
under the D&O Insurance but Indemnitee determines that such
insurers under the D&O Insurance are unable or unwilling to
adequately defend, contest and protect Indemnitee against any
such action, suit or proceeding, the Company shall promptly
undertake to defend any such action, suit or proceeding, at the
Company's sole cost and expense, utilizing counsel of
Indemnitee's choice who has been approved by the Company. If
appropriate, the Company shall have the right to participate in
the defense of such action, suit or proceeding.
(d) In the event such action, suit or proceeding is by or
in the right of the Company, Indemnitee, at his option, may
either control the defense thereof himself or accept the
defense provided under the D&O Insurance; provided, however,
that Indemnitee may not control the defense himself if such
decision would jeopardize the coverage provided by the D&O
Insurance, if any, to the Company and/or the other directors
and officers covered thereby.
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(e) In the event the Company shall fail timely to defend,
contest or otherwise protect Indemnitee against any such action,
suit or proceeding which is not by or in the right of the
Company, Indemnitee shall have the right to do so, including
without limitation, the right to make any compromise or
settlement thereof, and to recover from the Company all
attorneys' fees, reimbursements and all amounts paid as a result
thereof.
16. Binding Effect, Etc. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by
the parties hereto and their respective successors, assigns,
including any direct or indirect successor by purchase, merger,
consolidation or otherwise to all or substantially all of the
business and/or assets of the Company, spouses, heirs, and
personal and legal representatives. The Company shall require
and cause any successor (whether direct or indirect by purchase,
merger, consolidation or otherwise) to all, substantially all, or
a substantial part, of the business and/or assets of the Company,
by written agreement in form and substance satisfactory to
Indemnitee, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the
Company would be required to perform if no such succession had
taken place. This agreement shall continue in effect regardless
of whether Indemnitee continues to serve as a director and
officer of the Company or of any other enterprise at the
Company's request.
17. Severability. The provisions of this Agreement
shall be severable. In the event that any of the provisions
hereof (including any provision within a single section,
paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, the
remaining provisions shall remain enforceable to the fullest
extent permitted by law. Furthermore, to the fullest extent
possible, the provisions of this Agreement (including, without
limitation, each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable,
that is not itself invalid, void or unenforceable) shall be
construed so as to give effect to the intent manifested by the
provision held invalid, illegal or unenforceable.
18. Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the
State of Delaware applicable to contracts made and to be
performed in such state without giving effect to the principles
of conflicts of laws.
IN WITNESS WHEREOF, the parties hereto have duly executed
and delivered this Agreement as of the day and year first written
above.
STEPHEN I. CHAZEN
--------------------------------
Stephen I. Chazen
OCCIDENTAL PETROLEUM CORPORATION
By: DALE R. LAURANCE
--------------------------------
Dale R. Laurance
President and Senior Operating
Officer
6
<PAGE> 1
EXHIBIT 12
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
COMPUTATION OF TOTAL ENTERPRISE RATIOS OF EARNINGS TO FIXED CHARGES
FOR THE FIVE YEARS ENDED DECEMBER 31, 1997
(Amounts in millions, except ratios)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
- ---------------------------------------------------- ----- ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Income (loss) from continuing operations(a) $ 245 $ 486 $ 325 $(236) $(190)
----- ------ ------ ----- -----
Add:
Provision (credit) for taxes on income (other
than foreign oil and gas taxes) 47 9 155 (59) (23)
Interest and debt expense(b) 446 492 591 586 598
Portion of lease rentals representative of
the interest factor 39 38 43 50 49
----- ------ ------ ----- -----
532 629 789 577 624
----- ------ ------ ----- -----
Earnings (loss) before fixed charges $ 777 $1,115 $1,114 $ 341 $ 434
===== ====== ====== ===== =====
Fixed charges
Interest and debt expense including
capitalized interest(b) $ 462 $ 499 $ 595 $ 589 $ 609
Portion of lease rentals representative of
the interest factor 39 38 43 50 49
----- ------ ------ ----- -----
Total fixed charges $ 501 $ 537 $ 638 $ 639 $ 658
===== ====== ====== ===== =====
Ratio of earnings to fixed charges 1.55 2.08 1.75 n/a(c) n/a(c)
- ---------------------------------------------------- ===== ====== ====== ===== =====
</TABLE>
(a) Includes (1) minority interest in net income of majority-owned subsidiaries
having fixed charges and (2) income from less-than-50-percent-owned equity
investments adjusted to reflect only dividends received.
(b) Includes proportionate share of interest and debt expense of
50-percent-owned equity investments.
(c) Not computed due to less than one-to-one coverage. Earnings were inadequate
to cover fixed charges by $298 million in 1994 and $224 million in 1993.
<PAGE> 1
<PAGE> 1
EXHIBIT 13
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA Occidental Petroleum Corporation
Dollar amounts in millions, and Subsidiaries
except per-share amounts
<TABLE>
<CAPTION>
For the years ended December 31, 1997 1996 1995 1994 1993
============================================== ========= ========= ========= ========= =========
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS(a)
Net sales and operating revenues $ 8,016 $ 7,987 $ 8,389 $ 7,128 $ 5,747
Income (loss) from continuing operations $ 217 $ 514 $ 358 $ (223) $ (194)
Net income (loss) $ (390) $ 668 $ 511 $ (36) $ 283
Preferred dividend requirements $ 88 $ 93 $ 93 $ 76 $ 39
Earnings (loss) applicable to common stock $ (478) $ 575 $ 418 $ (112) $ 244
Basic earnings (loss) per common share from
continuing operations $ .39 $ 1.30 $ .83 $ (.96) $ (.76)
Basic earnings (loss) per common share $ (1.43) $ 1.77 $ 1.31 $ (.36) $ .80
Diluted earnings (loss) per common share $ (1.43) $ 1.73 $ 1.31 $ (.36) $ .80
Earnings before special items(b) $ 691 $ 643 $ 603 $ 52 $ 33
FINANCIAL POSITION(a)
Total assets $ 15,282 $ 14,981 $ 15,342 $ 15,376 $ 14,395
Long-term debt, net $ 4,925 $ 4,511 $ 4,819 $ 5,816 $ 5,721
Capital lease liabilities, net $ 235 $ 237 $ 259 $ 291 $ 319
Stockholders' equity $ 4,286 $ 5,140 $ 4,630 $ 4,457 $ 3,958
Dividends per common share $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
AVERAGE SHARES OUTSTANDING (thousands) 334,341 323,782 318,073 310,806 304,852
- ---------------------------------------------- --------- --------- --------- --------- ---------
</TABLE>
(a) See Management's Discussion and Analysis and the Notes to Consolidated
Financial Statements for information regarding accounting changes, asset
acquisitions and dispositions, discontinued operations, and charges for
asset write-downs, litigation matters, environmental remediation and
other costs and other special items affecting comparability.
(b) Earnings before special items reflect adjustments to net income(loss) to
exclude the after-tax effect of certain infrequent transactions that may
affect comparability between years. See the Special Items table for the
specific nature of these items in 1997, 1996 and 1995. For the years
ended December 31, 1997, 1996, 1995, 1994 and 1993, these special items
aggregated charges (benefits) of $1.081 billion, which includes the $750
million charge on the MidCon sale reported in discontinued operations,
($25) million, $92 million, $88 million and ($250) million,
respectively. Management believes the presentation of earnings before
special items provides a meaningful comparison of earnings between years
to the readers of the consolidated financial statements. Earnings before
special items is not considered to be an alternative to operating income
in accordance with generally accepted accounting principles.
MANAGEMENT'S DISCUSSION AND ANALYSIS
1997 BUSINESS ENVIRONMENT
OIL AND NATURAL GAS INDUSTRY During the year, worldwide crude oil supply
continued to rise and by year-end exceeded the growth in demand. Energy prices
remained strong through the first three quarters as global energy demand
continued to increase sharply. Prices for the benchmark grade West Texas
Intermediate (WTI) remained strong through most of the year. However, prices
began to weaken in December and by the end of the year had reached the lowest
point in two and one-half years.
Among the factors depressing the markets were intensifying economic
difficulties in key Southeast Asian countries, Japan and Korea. In addition, the
slow start to the winter heating season and generally mild weather throughout
the Northern Hemisphere suppressed demand for domestic heating oil and led to
rising inventories and weak fuel oil prices. Also, OPEC decided in late 1997 to
officially raise its production ceiling significantly for the first time in four
years, from 25.0 to 27.5 million barrels per day. Lastly, sizable, delayed
production started up in the North Sea.
Later in the year, the downward pressure on crude oil prices was reinforced
by a sharp sell-off of WTI contracts on the New York Mercantile Exchange (NYMEX)
futures market.
The U.S. natural gas market remained strong throughout 1997 despite the late
onset and mild weather of the 1997 - 1998 winter, but prices weakened at
year-end.
CHEMICAL INDUSTRY Overall chemical industry product demand and prices remained
strong domestically benefiting from strong end-use markets such as construction,
automotive and pulp and paper. International sales and demand were weakened by
economic troubles in the Far East and the strong U.S. dollar in the latter part
of 1997.
Chlorine demand remained strong and pricing for chlorine continued to improve
throughout most of 1997. Caustic soda prices continued to soften during the
first half of 1997 due to high customer inventory levels in certain important
sectors. Caustic soda pricing improved the second half of 1997 as demand
strengthened in key sectors. However, overall, caustic soda prices were lower in
1997 compared with 1996. Polyvinyl chloride (PVC) demand continued to grow from
1996 levels with continued price improvements realized during the first half of
the year. These price improvements eroded in the second half as industry
capacity increased and feedstock costs remained high, resulting in lower
margins.
17
<PAGE> 2
DISCONTINUED OPERATIONS Occidental completed the sale of all of the
issued and outstanding shares of common stock of MidCon Corp. (MidCon), its
natural gas transmission and marketing business, to K N Energy, Inc. (K N
Energy), on January 31, 1998.
Occidental sold the shares to K N Energy in return for a cash payment of $2.1
billion. After payment of the redemption price for the Cumulative MidCon-Indexed
Convertible Preferred Stock (CMIC Preferred Stock), taxes and certain other
expenses of the sale, the estimated net cash proceeds from the transaction were
approximately $1.7 billion. Additionally, in connection with the sale K N Energy
issued a fixed-rate interest bearing note secured by letters of credit, payable
January 4, 1999, to Occidental in the initial principal amount of $1.4 billion,
in exchange for a note previously issued to Occidental by the MidCon Corp. ESOP
Trust (the Trust). K N Energy also assumed responsibility for certain Texas
intrastate pipeline lease obligations of MidCon to an Occidental subsidiary with
a 29-year term and average lease rentals of approximately $30 million per year.
Concurrently with the closing of the sale, Occidental effected the redemption
of all 1,400,000 issued and outstanding shares of Occidental's CMIC Preferred
Stock, par value $1.00 per share, which were issued to and held by the Trust.
As a result of these transactions, in the fourth quarter of 1997 Occidental
classified MidCon and its subsidiaries as a discontinued operation and recorded
an estimated after-tax charge against earnings of approximately $750 million.
1997 INCOME SUMMARY Occidental reported a net loss of $390 million (a loss of
$1.43 per share) in 1997, on net sales and operating revenues of $8.0 billion.
The net loss included the $750 million charge discussed above and net charges of
$277 million for the write-down of various assets and additional environmental
and other reserves and a $75 million pretax charge to amend certain employment
agreements with two senior executives. Earnings before special items were $691
million in 1997 and $643 million in 1996.
The charges of $277 million include charges related to Occidental's intent,
announced in the fourth quarter of 1997, to sell nonstrategic oil and gas and
chemical assets, its decision to idle certain facilities and the impairment of
certain properties.
DIVISIONAL OPERATIONS The following discussion of Occidental's two operating
divisions and corporate items should be read in conjunction with Note 17 to the
Consolidated Financial Statements.
Divisional earnings exclude interest income, interest expense, unallocated
corporate expenses, extraordinary items and income from equity investments, but
include gains and losses from dispositions of divisional assets.
Foreign income and other taxes and certain state taxes are included in
divisional earnings on the basis of operating results. U.S. federal income taxes
are not allocated to divisions except for amounts in lieu thereof that represent
the tax effect of operating charges or credits resulting from purchase
accounting adjustments which arise due to the implementation in 1992 of
Statement of Financial Accounting Standards (SFAS) No. 109 -- "Accounting for
Income Taxes." Divisional earnings in 1997 benefited by $39 million from credits
allocated of $13 million and $26 million in oil and gas and chemical,
respectively. Divisional earnings in 1996 benefited by $41 million from credits
allocated of $15 million and $26 million in oil and gas and chemical,
respectively. Divisional earnings in 1995 benefited by $43 million from net
credits allocated of $16 million and $27 million in oil and gas and chemical,
respectively.
The following table sets forth the sales and earnings of each operating
division and corporate items:
<TABLE>
<CAPTION>
DIVISIONAL OPERATIONS
In millions
For the years ended December 31, 1997 1996 1995
================================ ========= ========= =========
<S> <C> <C> <C>
SALES
Oil and Gas $ 3,667 $ 3,680 $ 3,019
Chemical 4,349 4,307 5,370
--------- --------- ---------
$ 8,016 $ 7,987 $ 8,389
================================ ========= ========= =========
EARNINGS (LOSS)
Oil and Gas $ 401 $ 480 $ 45
Chemical 471 668 1,080
--------- --------- ---------
872 1,148 1,125
Unallocated corporate items
Interest expense, net (407) (454) (548)
Income taxes (60) (109) (162)
Other (188) (71) (57)
--------- --------- ---------
Income (loss) from
continuing operations 217 514 358
Discontinued operations, net (607) 184 153
Extraordinary gain (loss), net -- (30) --
--------- --------- ---------
Net income (loss) $ (390) $ 668 $ 511
================================ ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
OIL AND GAS
In millions, except as indicated 1997 1996 1995
================================ ========= ========= =========
<S> <C> <C> <C>
DIVISIONAL SALES $ 3,667 $ 3,680 $ 3,019
DIVISIONAL EARNINGS $ 401 $ 480 $ 45
EARNINGS BEFORE SPECIAL
ITEMS(a) $ 657 $ 585 $ 249
AVERAGE SALES PRICES
CRUDE OIL PRICES (per barrel)
U.S $ 18.72 $ 18.98 $ 15.78
Other Western Hemisphere $ 11.88 $ 12.66 $ 10.28
Eastern Hemisphere $ 17.21 $ 17.66 $ 15.85
GAS PRICES
(per thousand cubic feet)
U.S $ 2.39 $ 2.11 $ 1.51
Eastern Hemisphere $ 2.40 $ 2.23 $ 2.07
EXPENSED EXPLORATION(b) $ 119 $ 120 $ 106
CAPITAL EXPENDITURES
Development $ 815 $ 540 $ 373
Exploration $ 178 $ 164 $ 130
Acquisitions and other $ 157 $ 58 $ 72
- -------------------------------- --------- --------- ---------
</TABLE>
(a) Earnings before special items represents divisional earnings adjusted
for the effect of certain infrequent transactions that may affect
comparability between years. Earnings before special items is not
considered to be an alternative to operating income in accordance with
generally accepted accounting principles.
(b) Includes amounts previously shown in exploration capital expenditures.
Occidental explores for and produces oil and natural gas, domestically and
internationally. Occidental seeks long-term improvement in profitability and
cash flow through a combination of improved oper-
18
<PAGE> 3
ations in existing fields, enhanced oil recovery (EOR) projects, high-potential
exploration and complementary property acquisitions.
Earnings before special items in 1997 were $657 million, compared with
earnings before special items of $585 million in 1996. The increase primarily
reflected higher natural gas prices, partially offset by lower worldwide crude
oil prices.
The operating results of 1996, compared with 1995, reflected higher worldwide
crude oil prices, increased international oil production and higher domestic
natural gas prices, partially offset by higher exploration costs. The change in
sales for 1996, compared with 1995, largely reflected higher worldwide crude oil
production and prices and increased oil trading revenue. Approximately one-third
of oil and gas sales for 1997, 1996 and 1995 were attributable to oil trading
activity. The results are not significant. Occidental participates in oil
trading to remain aware of the complexities affecting price volatility and
supply/demand fundamentals in order to optimize its long-term global oil
marketing.
The 1997 results included pretax charges of $256 million for the write-down
of various assets and additional environmental and other reserves. For
additional information see Note 3 to the Consolidated Financial Statements.
The 1996 results included a $105 million charge for the write-down of
Occidental's investment in an oil and gas project in the Republic of Komi in the
former Soviet Union. The 1995 results included charges of $95 million related to
reorganization costs and $109 million for settlement of litigation. The
reorganization of the worldwide oil and gas operations in late 1995 allowed
Occidental to redeploy its resources, to reduce costs and to sharpen its focus
on improving performance.
<TABLE>
<CAPTION>
CHEMICAL
In millions, except as indicated 1997 1996 1995
================================= ========= ========= =========
<S> <C> <C> <C>
DIVISIONAL SALES $ 4,349 $ 4,307 $ 5,370
DIVISIONAL EARNINGS $ 471 $ 668 $ 1,080
EARNINGS BEFORE SPECIAL ITEMS(a) $ 618 $ 578 $ 1,040
KEY PRODUCT INDEXES
(1987 through 1990
average price = 1.0)
Chlorine 1.79 1.36 1.36
Caustic soda .77 1.16 1.28
PVC commodity resins .83 .80 1.02
KEY PRODUCT VOLUMES
Chlorine (thousands of tons) 3,201 3,254 3,170
Caustic soda (thousands of tons) 3,436 3,401 3,275
PVC commodity resins
(millions of pounds) 1,441 1,279 1,212
CAPITAL EXPENDITURES
Basic chemicals $ 156 $ 102 $ 121
Polymers and plastics 86 75 33
--------- --------- ---------
Chlorovinyls $ 242 $ 177 $ 154
Petrochemicals $ 40 $ 41 $ 43
Specialty businesses $ 106 $ 39 $ 30
Other $ 8 $ 5 $ 16
- --------------------------------- --------- --------- ---------
</TABLE>
(a) Earnings before special items represents divisional earnings adjusted
for the effect of certain infrequent transactions that may affect
comparability between years. Earnings before special items is not
considered to be an alternative to operating income in accordance with
generally accepted accounting principles.
OxyChem's businesses are highly integrated, both vertically and horizontally.
Chemicals from the chlorovinyls business are used in the specialty business and
chlorine from chlorovinyls is combined with ethylene from petrochemicals to make
the raw material used for PVC. To better manage the company's interrelationships
and to further integrate and focus its chlor-alkali and plastic businesses,
OxyChem combined its basic chemicals and polymers and plastics groups into the
chlorovinyls unit, resulting in improved efficiencies and a stronger competitive
position.
Earnings before special items were $618 million in 1997, compared with $578
million in 1996. The increase reflected higher margins for a number of OxyChem's
key products, primarily chlorine, ethylene dichloride (EDC) and petrochemicals
resulting from higher sales prices and lower feedstock costs. The 1997 results
also benefited from OxyChem's ongoing commitment to controlling costs and
maintaining the reliable operations of its manufacturing facilities.
Additionally, the 1997 results also benefited from the impact of full-year
operations from specialty businesses acquired in 1996, offsetting lower than
expected results in other specialty product areas.
The 1997 earnings included pretax charges of $147 million related to
additional environmental matters and the write-down of various assets. Included
in the 1996 results was a $170 million pretax gain related to favorable
litigation settlements, and a charge of $75 million for additional environmental
reserves relating to various existing sites, and the related state tax effects.
The 1995 results reflected a $40 million pretax gain related to the sale of a
PVC facility at Addis, Louisiana.
CORPORATE The increased costs in unallocated corporate other items in 1997,
compared with 1996, reflected lower equity earnings in 1997, which included
currency devaluations related to Thailand chemical joint ventures and a charge
to extinguish existing liabilities and open-ended financial commitments under
employment agreements with two senior executives.
The 1996 income tax amount included a benefit of approximately $100 million
primarily from a reduction in the deferred tax asset valuation allowance due to
the realization of benefits from operating loss and credit carryforwards in the
United States and Peru.
The increased costs in unallocated corporate other items in 1996, compared
with 1995, primarily reflected lower equity income from unconsolidated chemical
investments and costs associated with the initial establishment of an Employee
Stock Ownership Plan at MidCon.
SPECIAL ITEMS Special items are infrequent transactions that may affect
comparability between years. The special items included in the 1997, 1996 and
1995 results are detailed below. For further information, see Note 3 and Note 17
to the Consolidated Financial Statements and the discussion above.
19
<PAGE> 4
<TABLE>
<CAPTION>
SPECIAL ITEMS
Benefit (Charge) In millions 1997 1996 1995
=============================== ========= ========= =========
<S> <C> <C> <C>
OIL AND GAS
Write-down of various assets $ (140) $ (105) $ --
Environmental reserves (46) -- --
Litigation, reorganization
and other (70) -- (204)
- ------------------------------ --------- --------- ---------
CHEMICAL
Write-down of various assets (82) -- --
Environmental reserves (65) (75) --
Favorable litigation
settlements -- 170 --
Gain on sale of PVC facility -- -- 40
- ------------------------------ --------- --------- ---------
CORPORATE
Charge on MidCon sale(a) (750) -- --
Employment agreements (75) -- --
Tax reserve reversal -- 100 --
Extraordinary loss on debt
redemption(a) -- (30) --
- ------------------------------ --------- --------- ---------
</TABLE>
(a) These amounts are shown after-tax.
CONSOLIDATED OPERATIONS--REVENUES
<TABLE>
<CAPTION>
SELECTED REVENUE ITEMS
In millions 1997 1996 1995
============================== ========= ========= =========
<S> <C> <C> <C>
Net sales and
operating revenues $ 8,016 $ 7,987 $ 8,389
Interest, dividends
and other income $ 88 $ 244 $ 105
Income from equity
investments $ 1 $ 70 $ 94
- ------------------------------ --------- --------- ---------
</TABLE>
Net sales and operating revenues remained about the same in 1997, compared
with 1996, for both operating divisions. The decrease in sales in 1996, compared
with 1995, primarily reflected the absence of revenues from divested assets
partially offset by higher worldwide crude oil prices and production and
increased oil trading activity.
In 1996, interest, dividends and other income included the gain of $170
million related to favorable litigation settlements.
The decrease in income from equity investments in 1997, compared with 1996,
reflected lower income primarily from chemical investments and the effect of
currency devaluations in chemical joint ventures in Thailand. The decrease in
income from equity investments in 1996, compared with 1995, primarily reflected
lower earnings from certain chemical investments.
CONSOLIDATED OPERATIONS--EXPENSES
<TABLE>
<CAPTION>
SELECTED EXPENSE ITEMS
In millions 1997 1996 1995
======================================== ========= ========= =========
<S> <C> <C> <C>
Cost of sales $ 5,060 $ 5,060 $ 5,492
Selling, general and administrative
and other operating expenses $ 1,002 $ 933 $ 996
Environmental remediation $ 136 $ 100 $ 21
Interest and debt expense, net $ 434 $ 482 $ 579
- ---------------------------------------- --------- --------- ---------
</TABLE>
Cost of sales was the same in 1997 compared with 1996. The decrease in cost
of sales from 1995 to 1996 reflected the absence of costs related to divested
assets partially offset by higher prices on oil traded and higher chemical
feedstock costs.
Selling, general and administrative and other operating expenses in 1997
reflected a portion of the asset write-downs and the charge to amend certain
employment agreements. Selling, general and administrative and other operating
expenses in 1995 reflected the charges for reorganization costs and litigation
settlements.
Environmental remediation included charges of $111 million in 1997 and $75
million in 1996, for additional environmental reserves related to various
existing sites.
The decrease in interest and debt expense from 1996 to 1997 and from 1995 to
1996 primarily reflected lower outstanding average debt levels and lower average
interest rates.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
OPERATING ACTIVITIES
In millions 1997 1996 1995
========= ========= =========
<S> <C> <C> <C>
NET CASH PROVIDED $ 1,397 $ 1,987 $ 1,501
</TABLE>
Included in operating activities was net cash provided by operating
activities of discontinued operations of $266 million, $398 million and $139
million in 1997, 1996 and 1995, respectively.
The lower operating cash flow in 1997, compared with 1996, reflects lower
income from continuing operations, higher working capital usage and lower cash
flow from discontinued operations.
Operating assets and liabilities reflect generally higher working capital
usage and the absence of items that were of benefit in 1996 including the sale
of $100 million of accounts receivable and proceeds from litigation settlements.
The 1996 improvement in net cash provided by operating activities, compared
with 1995, reflected higher operating earnings in the oil and gas division,
proceeds from litigation settlements and proceeds from the sale of an additional
$100 million of receivables.
Net cash provided by operating activities in 1995 reflected the proceeds of
$100 million from an advance sale of crude oil, further discussed below.
Other noncash charges in 1997 mainly reflected the special charges taken in
the fourth quarter. See Special Items table above.
Other noncash charges of $298 million in 1996 primarily reflected the $105
million charge for the write-down of Occidental's investment in Komi and
additional environmental reserves. Other noncash charges of $209 million in 1995
primarily reflected the charges of $95 million for reorganization costs at the
oil and gas division. Each of the three years also included charges for employee
benefit plans and other items.
20
<PAGE> 5
<TABLE>
<CAPTION>
INVESTING ACTIVITIES
In millions 1997 1996 1995
========= ========= =========
<S> <C> <C> <C>
NET CASH USED $ (1,505) $ (979) $ (136)
</TABLE>
Included in investing activities was net cash used by investing activities of
discontinued operations of $79 million, $223 million and $143 million in 1997,
1996 and 1995, respectively. The increase in net cash used in investing
activities in 1997, compared with 1996, primarily reflects the increase in
capital expenditures and lower proceeds from disposals of property, plant and
equipment.
Net cash used in investing activities included Occidental's capital
expenditure program as discussed below.
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES
In millions 1997 1996 1995
========================= ========= ========= =========
<S> <C> <C> <C>
Oil and Gas $ 1,150 $ 762 $ 575
Chemical 396 262 243
Corporate and other 3 14 11
--------- --------- ---------
$ 1,549 $ 1,038 $ 829
========================= ========= ========= =========
</TABLE>
The spending in the oil and gas business continues to be the major part of
Occidental's capital expenditure program, underscoring Occidental's commitment
to this core business. Significant capital was also spent on the chemical
business to maintain and upgrade Occidental's businesses and to provide for
expansion. In oil and gas most of the international increase was in Qatar. The
increase in chemicals reflected higher spending in the specialty business and in
chlorovinyls.
Capital expenditures for 1998 are estimated to be approximately $1.2 billion,
with about two-thirds allocated to oil and gas. The capital expenditure amount
does not include the acquisition, in 1998, of the U.S. government's 78 percent
interest in the Elk Hills Naval Petroleum Reserve (Elk Hills field) for $3.5
billion.
The 1997 proceeds from the sale of businesses included the proceeds from the
sale of a chlor-alkali chemical plant located in Tacoma, Washington for
approximately $102 million, which included $97 million in cash and the balance
in the buyer's convertible preferred stock. Also in 1997, Occidental purchased
28,000 shares of preferred stock of Leslie's Poolmart, Inc. (Leslie's), a
customer of OxyChem, for total consideration of $28 million, which consisted of
cash and the exchange of $10 million of Leslie's subordinated debentures held by
Occidental.
The 1996 proceeds from the sale of businesses and disposals of property,
plant and equipment included the sale of a subsidiary which engaged in onshore
drilling and servicing of oil and gas wells and the sale of Occidental's royalty
interest in the Congo.
The 1995 operating lease buyouts of $141 million included $71 million for the
Swift Creek chemical plant. This plant was part of the agricultural chemical
products business sold in the fourth quarter of 1995. The 1995 net proceeds from
the sale of businesses and disposal of property, plant and equipment reflected
the proceeds from the sale of Occidental's high-density polyethylene business
(HDPE), its agricultural chemicals business, its PVC facilities at Addis,
Louisiana and Burlington South, New Jersey, and a portion of Occidental's oil
and gas operation in Pakistan.
<TABLE>
<CAPTION>
FINANCING ACTIVITIES
In millions 1997 1996 1995
========= ========= =========
<S> <C> <C> <C>
NET CASH USED $ (37) $ (1,330) $ (961)
</TABLE>
Included in financing activities was net cash provided by financing
activities of discontinued operations of $53 million and $12 million in 1997 and
1995, respectively, and net cash used of $88 million in 1996.
Cash used for financing activities in 1997 included $119 million used for the
common stock repurchase program. In October 1997, Occidental's board of
directors authorized the repurchase of up to 40 million shares of Occidental's
common stock. The repurchases will be made in the open market or in privately
negotiated transactions at the discretion of Occidental's management, depending
upon financial and market conditions or as otherwise provided by the Securities
and Exchange Commission and New York Stock Exchange rules and regulations. The
repurchase program will be initially funded with temporary financing. As of
December 31, 1997, 4.1 million shares have been repurchased. In 1997, net
proceeds from the issuance of long-term debt and other borrowings and payments
of capital lease liabilities totaled $400 million.
The increase in 1996 cash used for financing activities, compared with 1995,
reflected repayment of high-coupon debt using proceeds from asset sales that
occurred in 1996 and 1995 and cash flow from operations. In 1996, payments of
long-term debt and capital lease liabilities and net proceeds from borrowings
totaled $860 million.
In 1995, payments of long-term debt and capital lease liabilities and net
proceeds from borrowings totaled $602 million.
Occidental paid preferred and common stock dividends of $422 million in 1997,
$415 million in 1996 and $406 million in 1995.
Occidental has a centralized cash-management system that funds the working
capital and capital expenditure requirements of its various subsidiaries. There
are no provisions under existing debt agreements that significantly restrict the
ability to move funds among operating entities.
ANALYSIS OF FINANCIAL POSITION The changes in the following components of
Occidental's balance sheet are discussed below:
<TABLE>
<CAPTION>
SELECTED BALANCE SHEET COMPONENTS
In millions 1997 1996
================================== ========= =========
<S> <C> <C>
Receivables from joint
ventures, partnerships and other $ 210 $ 131
Long-term debt, net $ 4,925 $ 4,511
Deferred credits and other
liabilities $ 4,201 $ 3,493
Stockholders' equity $ 4,286 $ 5,140
- ---------------------------------- --------- ---------
</TABLE>
The increase in receivables from joint ventures, partnerships and other
primarily reflected receivables on insurance claims and receivables from certain
oil and gas joint venture partners.
21
<PAGE> 6
Long-term debt, net of current maturities and unamortized discount, increased
primarily reflecting higher commercial paper borrowing. The table below presents
principal amounts by currency, including any sinking fund requirements, by year
of maturity for Occidental's long-term debt obligations, excluding unamortized
discount, at December 31, 1997:
<TABLE>
<CAPTION>
DEBT CURRENCY DENOMINATIONS AND INTEREST RATES
In millions, except rates
U.S. U.S. Dutch Canadian
Dollar Dollar Guilder Dollar
Year of Fixed Variable Variable Variable Grand
Maturity Rate Rate Rate Rate Total
=========== ========= ========= ========= ========= =========
<S> <C> <C> <C> <C> <C>
1999 $ 169 $ 96 $ -- $ -- $ 265
2000 180 104 104 38 426
2001 516 -- -- -- 516
2002 120 1,775 -- 6 1,901
2003 163 -- -- -- 163
Thereafter 1,679 115 -- -- 1,794
--------- --------- --------- --------- ---------
Total $ 2,827 $ 2,090 $ 104 $ 44 $ 5,065
========= ========= ========= ========= =========
Average
interest
rate 9.91% 5.95% 3.88% 4.76% 8.06%
=========== ========= ========= ========= ========= =========
</TABLE>
The estimated fair value of Occidental's long-term debt at December 31, 1997
was $5.376 billion. Occidental has the option to call certain issues of
long-term debt prior to their maturity dates.
At December 31, 1997, Occidental had available approximately $1.5 billion of
committed credit lines which are utilized, as needed, for daily operating and
other purposes. Occidental also has a $3.2 billion committed line of credit
specifically to fund the purchase of the Elk Hills field subject to periodic
reduction based on proceeds from asset sales. These lines of credit are
primarily used to back up the issuance of commercial paper.
The increase in deferred credits and other liabilities primarily reflected
accruals associated with the sale of MidCon.
The decrease in stockholders' equity primarily reflected the net loss,
dividends declared, common stock repurchases and unfavorable foreign currency
translation adjustments, partially offset by the issuance of common stock to
various employee benefit plans.
ACQUISITIONS AND COMMITMENTS In October 1997, Occidental announced that it
signed an agreement with the U.S. Department of Energy to acquire the Elk Hills
field. The acquisition closed February 5, 1998 and the $3.5 billion purchase
price was funded using a portion of the proceeds from the divestiture of MidCon
together with the proceeds of commercial paper. The Elk Hills field is located
near Bakersfield, California.
Also, in the second quarter of 1997, Occidental acquired certain oil and gas
production and exploration assets from Suemaur Exploration for approximately $50
million. These assets were located onshore in south Texas adjacent to other
Occidental properties.
In August 1996, Occidental acquired three specialty chemical producers in
separate transactions for approximately $149 million through the issuance of
5,512,355 shares of Occidental common stock, with a value of approximately $130
million, and the balance paid in cash. The acquisitions included Laurel
Industries, Inc., North America's largest producer of antimony oxide at its
LaPorte, Texas facility; Natural Gas Odorizing, Inc., the leading U.S. producer
of mercaptan-based warning agents for use in natural gas and propane from its
single plant in Baytown, Texas; and a plant in Augusta, Georgia purchased from
Power Silicates Manufacturing, Inc., which produces sodium silicates for use in
soap and detergent formulating, paper manufacturing and silica-based catalysts.
These acquisitions have been accounted for by the purchase method. Accordingly,
the cost of each acquisition was allocated to the assets acquired, goodwill and
liabilities assumed based upon their estimated respective fair values.
In April 1996, Occidental completed its acquisition of a 64 percent equity
interest (on a fully-diluted basis) in INDSPEC for approximately $92 million
through the issuance of 3,346,421 shares of Occidental common stock, with a
value of approximately $87 million, and the balance paid in cash. INDSPEC is the
world's largest producer of resorcinol, which is used to manufacture rubber
tires, engineered wood products, agricultural chemicals and fire-retardant
plastic additives. Under the terms of the acquisition agreement, INDSPEC's
management and employees have retained voting control of INDSPEC.
In December 1995, Occidental entered into a transaction with Clark USA, Inc.
(Clark) under which Occidental agreed to deliver approximately 17.7 million
barrels of WTI-equivalent oil over a six-year period. In exchange, Occidental
received $100 million in cash and approximately 5.5 million shares of Clark
common stock. As a result of this transaction, Occidental owned approximately a
19 percent voting interest of Clark, accounted for on the cost method. A later
recapitalization resulted in Occidental receiving additional shares which raised
its economic ownership, but not its voting interest, to approximately 30
percent. Occidental has accounted for the consideration received in the
transaction as deferred revenue which is being amortized into revenue as
WTI-equivalent oil is produced and delivered during the term of the agreement.
At December 31, 1997, approximately 12.2 million barrels remain to be delivered.
Commitments at December 31, 1997 for major capital expenditures during 1998
and thereafter were approximately $437 million. Total capital expenditures for
1998 are estimated to be approximately $1.2 billion. These amounts do not
include the $3.5 billion acquisition of the Elk Hills field in 1998. Occidental
believes that, through internally generated funds and financing activity, it
will have sufficient funds to continue its current capital spending programs.
22
<PAGE> 7
HEDGING ACTIVITIES Occidental's market risk exposures relate primarily to
commodity prices, interest rates and foreign currency. Therefore, Occidental
periodically uses commodity futures contracts, options and swaps to hedge the
impact of oil and natural gas price fluctuations; uses interest rate swaps and
futures contracts to hedge interest rates on debt; and uses forward exchange
contracts to hedge the risk associated with fluctuations in foreign currency
exchange rates. Occidental does not engage in activities using complex or highly
leveraged instruments. Gains and losses on commodity futures contracts are
deferred until recognized as an adjustment to sales revenue or purchase costs
when the related transaction being hedged is finalized. Gains and losses on
foreign currency forward exchange contracts that hedge identifiable future
commitments are deferred until recognized when the related item being hedged is
settled. All other contracts are recognized in periodic income. In addition, the
oil and gas division engages in oil and gas trading activity, primarily through
the use of futures contracts. The results are not significant and are included
in periodic income.
At December 31, 1997, Occidental was a party to futures contracts, which
expire in 1998, related to the selling price of natural gas. The contracts cover
15.5 billion cubic feet of natural gas. The fair market value of the contracts
was approximately $6 million.
Interest rate swaps are entered into as part of Occidental's overall strategy
to maintain part of its debt on a floating-rate basis. Occidental has
outstanding interest rate swaps as of December 31, 1997 on fixed-rate debt for
notional amounts totaling $530 million, converting this fixed-rate debt to
floating-rate debt. The swap rate difference resulted in approximately $2
million, $1 million and $5 million of additional interest expense in 1997, 1996
and 1995, respectively, compared to what interest expense would have been had
the debt remained at fixed rates. The impact of the swaps on the weighted
average interest rates for all debt in 1997, 1996 and 1995 was not significant.
Occidental will continue its strategy of maintaining part of its debt on a
floating-rate basis.
The following table provides information on the interest rate swaps at
December 31, 1997:
<TABLE>
<CAPTION>
INTEREST RATE SWAPS
In millions, except rates
Year of Maturity
----------------------------------- Fair
1998 1999 2000 Value(a)
========================= ========= ========= ========= =========
<S> <C> <C> <C> <C>
Interest rate swaps
Fixed to variable $ 330 $ 96 $ 104 $ (6)
Average receive rate(b) 5.20% 5.60% 5.75%
- ------------------------- --------- --------- --------- ---------
</TABLE>
(a) Represents estimated settlement value.
(b) Current variable pay rate at December 31, 1997 is 5.81 percent.
In December 1997, Occidental entered into two fixed-rate interest rate locks
for a total notional amount of $400 million with a settlement date of March
1998. The interest rate locks were entered into to fix the interest rate on the
expected issuance of long-term debt in 1998 with maturities for up to 10 years.
The fixed reference rate is between 5.84 percent and 5.87 percent. At December
31, 1997, Occidental would be required to pay approximately $3 million to
terminate its interest rate lock agreement.
Many of Occidental's foreign oil and gas operations and foreign chemical
operations are located in countries whose currencies generally depreciate
against the U.S. dollar on a continuing basis. Generally, an effective currency
forward market does not exist for these countries; therefore, Occidental
attempts to manage its exposure primarily by balancing monetary assets and
liabilities and maintaining cash positions only at levels necessary for
operating purposes. Additionally, almost all of Occidental's oil and gas foreign
entities have the U.S. dollar as the functional currency since the cash flows
are mainly denominated in U.S. dollars. The effect of exchange rate transactions
in foreign currencies is included in periodic income. Foreign currencies that
are in a net liability position are thus protected from the unfavorable effects
of devaluation. However, in certain foreign chemical equity basis joint ventures
where the local currency is the functional currency, Occidental has exposure on
joint-venture debt that is denominated in U.S. dollars. Most of Occidental's
1997 foreign exchange devaluation was related to its Thailand chemical joint
ventures. For entities that have a net foreign currency asset position,
Occidental maintains those positions at low levels so that the exposure to
currency devaluation is relatively insignificant.
At December 31, 1997, Occidental had one foreign currency forward exchange
contract that matures in 2000, hedging Canadian dollar denominated debt as shown
below:
<TABLE>
<CAPTION>
FOREIGN CURRENCY RISK
In millions, except
contract rate
Notional Contract Fair
Amount Rate Value(a)
========================= ========= ========= ========
<S> <C> <C> <C>
Canadian dollar forward
exchange contracts 38 1.4282 .40
- ------------------------- --------- --------- ---------
</TABLE>
(a) Equivalent to the unrealized net gain(loss) on existing contracts.
TAXES Deferred tax liabilities were $723 million at December 31, 1997, net of
deferred tax assets of $1.3 billion. The current portion of the deferred tax
assets of $305 million is included in prepaid expenses and other. The net
deferred tax assets are expected to be realized through future operating income
and reversal of taxable temporary differences.
LAWSUITS, CLAIMS, COMMITMENTS, CONTINGENCIES AND RELATED MATTERS Occidental and
certain of its subsidiaries have been named as defendants or as potentially
responsible parties (PRPs) in a substantial number of lawsuits, claims and
proceedings, including governmental proceedings under the Comprehensive
23
<PAGE> 8
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.
Occidental is usually one of many companies in these proceedings, and has to
date been successful in sharing response costs with other financially sound
companies. Occidental has accrued reserves at the most likely cost to be
incurred in those proceedings where it is probable that Occidental will incur
remediation costs which can be reasonably estimated.
During the course of its operations, Occidental is subject to audit by taxing
authorities for varying periods in various tax jurisdictions. It is impossible
at this time to determine the ultimate liabilities that Occidental and its
subsidiaries may incur resulting from the foregoing lawsuits, claims and
proceedings, audits, commitments, contingencies and related matters. Several 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 event
could have a material adverse effect upon Occidental's consolidated financial
position or results of operations. However, in management's opinion, after
taking into account reserves, it is unlikely that any of the foregoing matters
will have a material adverse effect upon Occidental's consolidated financial
position or results of operations. See Note 10 to the Consolidated Financial
Statements.
ENVIRONMENTAL EXPENDITURES Occidental's operations in the United States are
subject to stringent federal, state and local laws and regulations relating to
improving or maintaining the quality of the environment. Foreign operations also
are subject to environmental protection laws. Costs associated with
environmental compliance have increased over time and may continue to rise in
the future. Environmental expenditures, related to current operations, are
factored into the overall business planning process. These expenditures are
mainly considered an integral part of production in manufacturing quality
products responsive to market demand.
ENVIRONMENTAL REMEDIATION The laws which require or address environmental
remediation apply retroactively to previous waste disposal practices. And, in
many cases, the laws apply regardless of fault, legality of the original
activities or ownership or control of sites. Occidental is currently
participating in environmental assessments and cleanups under these laws at
federal Superfund sites, comparable state sites and other remediation sites,
including Occidental facilities and previously owned sites. Also, Occidental and
certain of its subsidiaries have been involved in a substantial number of
governmental and private proceedings involving historical practices at various
sites including, in some instances, having been named as defendants and/or as
PRPs under the federal Superfund law. These proceedings seek funding and/or
remediation and, in some cases, compensation for alleged personal injury or
property damage, punitive damages and civil penalties, aggregating substantial
amounts.
Occidental does not consider the number of Superfund and comparable state
sites at which it has been notified that it has been identified as being
involved to be a relevant measure of exposure. Although the liability of a PRP,
and in many cases its equivalent under state law, may be joint and several,
Occidental is usually one of many companies cited as a PRP at these sites and
has, to date, been successful in sharing cleanup costs with other financially
sound companies. Also, many of these sites are still under investigation by the
Environmental Protection Agency (EPA) or the equivalent state agencies. Prior to
actual cleanup, the parties involved assess site conditions and responsibility
and determine the appropriate remedy. The majority of remediation costs are
incurred after the parties obtain EPA or equivalent state agency approval to
proceed. The ultimate future cost of remediation of certain of the sites for
which Occidental has been notified that it has been identified as involved
cannot be reasonably determined at this time.
As of December 31, 1997, Occidental had been notified by the EPA or
equivalent state agencies or otherwise had become aware that it had been
identified as being involved at 198 Superfund or comparable state sites. (This
number does not include those sites where Occidental has been successful in
resolving its involvement.) The 198 sites include 77 former Diamond Shamrock
Chemical sites as to which Maxus Energy Corporation has retained all liability,
and 2 sites at which the extent of such retained liability is disputed. Of the
remaining 119 sites, Occidental has had no recent or significant communication
or activity with government agencies or other PRPs at 2 sites, has denied
involvement at 16 sites and has yet to determine involvement in 17 sites. With
respect to the remaining 84 of these sites, Occidental is in various stages of
evaluation. For 76 of these sites, where environmental remediation efforts are
probable and the costs can be reasonably estimated, Occidental has accrued
reserves at the most likely cost to be incurred. The 76 sites include 15 sites
as to which present information indicates that it is probable that Occidental's
aggregate exposure is immaterial. 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. For the remaining 8 of the 84 sites being evaluated,
Occidental does not have sufficient information to determine a range of
liability, but Occidental does have sufficient information on which to base the
opinion expressed above in the Lawsuits, Claims, Commitments, Contingencies and
Related Matters section. For management's opinion on lawsuits and proceedings
and on other environmental loss contingencies, see the above noted section.
24
<PAGE> 9
ENVIRONMENTAL COSTS Occidental's costs, some of which may include estimates
relating to compliance with environmental laws and regulations, are shown below
for each division:
<TABLE>
<CAPTION>
In millions 1997 1996 1995
========================= ========= ========= =========
<S> <C> <C> <C>
OPERATING EXPENSES
Oil and Gas $ 33 $ 41 $ 41
Chemical 60 59 63
--------- --------- ---------
$ 93 $ 100 $ 104
========= ========= =========
REMEDIATION EXPENSES
Oil and Gas $ 46 $ -- $ 3
Chemical 90 100 18
--------- --------- ---------
$ 136 $ 100 $ 21
========= ========= =========
CAPITAL EXPENDITURES
Oil and Gas $ 85 $ 54 $ 43
Chemical 31 27 27
--------- --------- ---------
$ 116 $ 81 $ 70
========================= ========= ========= =========
</TABLE>
Operating expenses are incurred on a continuous basis. Remediation expenses
relate to existing conditions caused by past operations and do not contribute to
current or future revenue generation. Capital expenditures relate to longer
lived improvements in facilities. Although total costs may vary in any one year,
over the long term, divisional operating and capital expenditures for
environmental compliance generally are expected to increase. As of December 31,
1997 and 1996, Occidental had environmental reserves of approximately $567
million and $562 million, respectively. The net increase reflects additional
provisions that were partially offset by payments for remediation programs and
settlement agreements.
FOREIGN INVESTMENTS Portions of Occidental's assets are located in countries
outside North America, some of which may be considered politically and
economically unstable. These assets and the related operations are subject to
the risk of actions by governmental authorities and insurgent groups. Occidental
attempts to conduct its financial affairs so as to protect against such risks
and would expect to receive compensation in the event of nationalization. At
December 31, 1997, the carrying value of Occidental's assets in countries
outside North America aggregated approximately $2.6 billion, or approximately 17
percent of Occidental's total assets at that date. Of such assets, approximately
$950 million was located in the Middle East, approximately $950 million was
located in Latin America, and substantially all of the remainder were located in
the Netherlands and the Far East.
1998 OUTLOOK
SUMMARY OF RECENT STRATEGIC DEVELOPMENTS In the fourth quarter of 1997 and in
early 1998, Occidental announced a series of strategic steps that are expected
to provide benefit in 1998 and future years.
DISPOSITION OF MIDCON In October 1997, Occidental announced it would sell its
natural gas pipeline business and focus its attention on its two core businesses
- -- oil and gas and chemicals. As discussed above the sale of MidCon was
completed on January 31, 1998 for net proceeds of $3.1 billion after certain
expenses.
ELK HILLS FIELD ACQUISITION Also in October, Occidental announced it had reached
agreement with the U.S. Department of Energy to purchase the Elk Hills field
also discussed above. The purchase was completed in February 1998. This field is
one of the 11 largest in the lower 48 states and significantly increases both
the size and quality of Occidental's domestic reserves. Occidental believes it
will be able to increase the field's recoverable reserves and add annual
production of oil and gas significantly through the application of improved
drilling and field management techniques. The acquisition was funded using a
portion of the proceeds from the divestiture of MidCon together with the
proceeds of commercial paper. The commercial paper will eventually be repaid
from the proceeds of sales of other nonstrategic assets and issuance of other
debt securities.
In February 1998, Occidental entered into a fifteen-year contract with Tosco
Corporation (Tosco) pursuant to which Tosco will take the majority of
Occidental's oil production from the Elk Hills field. Tosco, who recently
purchased Unocal's downstream assets in California, is the second largest
refiner in California and the nation's largest independent refiner.
SALES OF NONSTRATEGIC ASSETS Occidental also announced in October that it
planned to sell $1.6 billion of nonstrategic oil and gas and chemical assets.
The first major asset sale of this program was announced in February 1998 when
Occidental sold its Venezuela oilfield development for approximately $205
million in cash plus contingent payments of up to $90 million over six years
based on oil prices.
PREFERRED STOCK REDEMPTION PROGRAM In early 1998, Occidental stated it will
redeem all 15,106,444 outstanding shares of its $3.875 voting and non-voting
Cumulative Convertible Preferred Stock. If all the shares of the preferred stock
were converted into common stock, Occidental would issue approximately 33
million shares of common stock. Annual preferred dividends related to these
shares are approximately $58 million.
25
<PAGE> 10
COMMON STOCK REPURCHASE PROGRAM In October, Occidental began a program to
repurchase up to 40 million shares of its common stock for approximately $1
billion dollars. Since then, approximately 10 million shares have been
repurchased. The program is continuing and is expected to be completed in 1998.
NEW ENHANCED OIL RECOVERY PROJECT IN QATAR Occidental was awarded a contract in
late 1997 by the Emirate of Qatar to perform EOR in Qatar's Idd el Shargi South
Dome field (ISSD field). Ultimate gross recovery is expected to be approximately
300 million barrels from this field using EOR techniques similar to those being
successfully employed by Occidental on the Idd el Shargi North Dome field (ISND
field) pursuant to a contract awarded to Occidental in 1994. Because of the
proximity of the two fields, Occidental will operate the ISSD field as a
satellite of the ISND field.
OIL AND NATURAL GAS The petroleum industry is a highly competitive business
subject to significant volatility due to numerous external market forces. Oil
prices have continued to decline in the first quarter of 1998. Occidental is
unable to accurately predict the future trend of oil prices.
Crude oil and natural gas prices will continue to be affected by market
fundamentals such as weather, inventory levels, competing fuel prices, overall
demand and the availability of supply. While fundamentals are a decisive factor
affecting crude oil prices over the longer term, day-to-day prices may be more
volatile due to futures trading on the NYMEX and other exchanges.
Occidental completed the acquisition of Elk Hills in February 1998 and
expects to complete the sale of certain nonstrategic assets by the end of 1998.
With the completion of these transactions, Occidental will focus on growing its
core operations in the United States, Latin America and the Middle East. Outside
these core areas, Occidental will pursue selected growth opportunities through
focused exploration, EOR projects and high-return acquisitions. Improvements in
production at Elk Hills and successful development of the new Qatar field are
expected to be key to the near-term success of Occidental's oil and gas
business.
Occidental continues to look to exploration as a growth vehicle in the oil
and gas business. During 1998, Occidental expects to drill or participate in
over 30 exploratory wells, of which approximately 80 percent will be in the
international arena. The number of exploration wells in the United States is
expected to increase in future years as preliminary geological and geophysical
studies are completed in Elk Hills and the Gulf of Mexico.
EOR activities are expected to continue to provide a major impetus for growth
in 1998 and beyond. Occidental will continue to build on its successes in
applying engineering and technological skills to assist foreign governments in
maximizing production from their oil fields.
In addition, Occidental and its partners are moving ahead with plans to
develop large, long-lived natural gas reserves discovered in the Far East.
Through business partnerships with multinational and national oil companies,
work is proceeding to develop domestic gas markets in Bangladesh and the
Philippines and to enter liquid natural gas export markets from projects to be
completed in Malaysia and Indonesia.
CHEMICAL
CHLOROVINYLS In 1997, demand for chlorine and chlorine-related derivatives
continued to be strong. Caustic soda demand recovered during the second half of
1997, which led to price improvements.
A strong integrated position in the vinyls chain offers the strongest outlet
for chlorine production via EDC, vinyl chloride monomer (VCM) and PVC. Demand
for EDC, which is principally exported, remained strong through 1997, as did
chlorine consumption for VCM and other end uses. However, pressure resulting
from the Asian economic crisis could negatively affect pricing in the
chlorovinyls chain in 1998.
Due to strong demand, the chlorine and caustic soda industry operated
essentially at capacity in 1997. Some new capacity will become available in
1998, primarily in the United States and Asia Pacific.
Chlorine markets will continue to experience pressure from various
environmental groups and regulatory authorities seeking alternatives to, or
substitutes for, compounds containing chlorine. While there has been less demand
for chlorine in some market segments, such as pulp and paper, demand from the
PVC industry has more than offset those reductions. Occidental continues to
believe that the overall market for chlorine will remain strong, led by PVC
demand.
Overall, chlorine prices in 1997 were higher than average 1996 prices.
Chlorine prices are expected to soften in 1998, while caustic soda prices should
strengthen due to stronger demand for caustic soda in all key markets.
Demand in North America for PVC resin grew 4 percent in 1997 after a robust
1996 growth of 13 percent. This solid growth continues to be led primarily by
strong construction markets. North American export sales increased to 1.4
billion pounds and represents 10 percent of annual North American production.
PVC resin prices improved during the first half of 1997, but margins were
held in check by higher feedstock prices. Margins eroded in the second half due
to continued capacity additions in the global market, as well as weak export
markets in Southeast Asia that affected domestic margins. Operating rates are
expected to stabilize in 1998 and rise in 1999 as capacity additions slow. North
American demand is expected to remain solid with a growth rate of approximately
4 percent.
26
<PAGE> 11
OxyChem's 450-million-pound-per-year PVC expansion started up during the
fourth quarter of 1997 and is currently operating at planned rates for 1998. In
addition, a 700-million-pound-per-year VCM expansion, owned equally by OxyChem
and Marubeni Corporation and managed by OxyChem, came on stream as scheduled
during 1997. OxyChem's strategy of maximizing the benefits of the vertical
integration of its chlorovinyls business has provided the basis for a successful
marketing effort. The business is well positioned and has long-standing
relationships with key customers in major PVC markets including: pipe, vinyl
siding and building profiles, flooring, compounds and formulators.
OxyChem's international presence also provides a solid operational base for
strategic exports to Asian and Latin American markets. However, the global
market outlook currently is uncertain due to Asian economic problems.
PETROCHEMICALS The primary petrochemicals -- ethylene, propylene, butadiene and
benzene -- are precursors to a wide variety of consumer and industrial products
that include fibers, tires and plastics. Petrochemicals account for
approximately 20 percent of all world chemical trade, and changes in global
economic conditions have an immediate effect on the domestic petrochemical
industry. The cycles in the petrochemical business have been characterized by
periods of high profitability, as demonstrated in the late 1980s, followed by
large capacity increases and subsequent depressed margins as experienced in 1991
through 1993.
The petrochemicals business experienced increased profitability in 1997 as
feedstock costs moderated and unanticipated industry operating problems
occurred. The tighter supply/demand situation, coupled with continued growth in
most world economies, allowed producers to increase margins on most
petrochemical products.
OxyChem continued to operate its plants at capacity as ethylene demand was
sustained by strong performances in OxyChem's chlorovinyls and ethylene oxide
and derivative businesses.
Across the industry, demand for polyethylene and polyethylene terephthalate
(PET) resins led to record demand for ethylene. Propylene continued its growth,
primarily in new polypropylene applications such as carpets, automobiles and
high-performance fabrics. Propylene derivative capacity grew 4 percent in 1997
and demand grew at 5 percent. Overall, OxyChem expects a growth rate of
approximately 4 percent in ethylene and propylene for 1998.
The demand for ethylene glycol is expected to result in strong growth
globally in both the polyester fabrics and PET bottle resins markets in 1998.
These markets are expected to grow in excess of 6 percent annually as technology
improvements lead to expanding market share.
SPECIALTY BUSINESSES The Specialty Business Group was formed in 1995 to
emphasize OxyChem's leadership position in many smaller-volume chemical markets.
Specialty chemical products are less cyclical than commodity chemicals and
provide a more steady source of earnings.
The Specialty Business Group is funding research and development, in keeping
with its strategy of alignment with customer-driven new product requirements and
higher utilization of existing equipment. Capital spending increased
substantially in 1997 for plant expansion and revitalization of under-utilized
facilities. This investment was less costly than what would have been required
if new, stand-alone capacity had been installed.
Among these investments are several specialty chemical projects totaling $85
million under way at the Niagara Falls, New York chemicals complex, and
scheduled for completion by the end of 1998. An additional $42 million is
planned at the same location for new facilities to serve customers with chemical
intermediates for crop protection, pharmaceutical, coating and solvent
applications.
OxyChem is continuing an aggressive expansion and acquisition program and has
targeted the Specialty Business Group for substantial growth in the coming years
through volume expansion in existing products, development of new products, and
acquisitions of synergistic businesses and product lines.
Several additional investments were undertaken in 1997 to effect product-line
extensions and strengthen the business. Major capacity expansions at OxyChem's
two isocyanurate production facilities in 1997 increased capacity by 25 percent,
and an additional expansion is under way in 1998. Debottlenecking of the sodium
silicate plant acquired last year in Augusta, Georgia was successfully
completed, and an expansion is planned at the silicates facility in Mobile,
Alabama. OxyChem and Sumitomo Bakelite began production at a new glass-filled
phenolic molding compound facility in Fort Erie, Ontario.
Late in the year, OxyChem acquired the Thermoguard antimony oxide/sodium
antimonate and Pyronil brominated plasticizer product lines of flame retardants
from Elf Atochem North America, Inc.
SFAS NO. 128 In February 1997, the Financial Accounting Standards Board (FASB)
issued SFAS No. 128 -- "Earnings per Share," which establishes standards for
computing and presenting earnings per share (EPS). The statement requires dual
presentation of basic and diluted EPS on the face of the income statement for
all entities with complex capital structures and requires a reconciliation of
the numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. Occidental's adoption of SFAS No.
128, effective for the year ended December 31, 1997, did not have a material
impact on Occidental's earnings per share.
27
<PAGE> 12
STATEMENT OF POSITION NO. 96-1 In October 1996, the American Institute of
Certified Public Accountants issued Statement of Position No. 96-1 --
"Environmental Remediation Liabilities" (SOP 96-1), which provides authoritative
guidance on specific accounting issues that are present in the recognition,
measurement, display and disclosure of environmental remediation liabilities.
Occidental's implementation of SOP 96-1, effective January 1, 1997, did not have
a material impact on Occidental's financial position or results of operations.
SFAS NO. 125 In June 1996, the FASB issued SFAS No. 125 -- "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities."
The statement provides consistent standards for distinguishing transfers of
financial assets that are sales, from transfers that are secured borrowings.
Occidental's implementation of SFAS No. 125, effective January 1, 1997, did not
have an impact on Occidental's financial position or results of operations.
SFAS NO. 123 In October 1995, the FASB issued SFAS No. 123 -- "Accounting for
Stock-Based Compensation." This statement defines, among other things, a
fair-value based method of accounting for options under an employee stock option
plan. However, it also allows an entity to continue to account for such items
using Accounting Principles Board (APB) Opinion No. 25 -- "Accounting for Stock
Issued to Employees," under which no compensation expense is recognized.
Occidental elected this option, which alternatively requires pro forma
disclosures of net income and earnings per share, as if compensation expense had
been recognized. As permitted by SFAS No. 123, Occidental will continue to use
the accounting prescribed by APB Opinion No. 25. Effective for the year ended
December 31, 1996, the required pro forma disclosures have been made as
indicated above at Note 12 to the Consolidated Financial Statements.
SFAS NO. 121 In March 1995, the FASB issued SFAS No. 121 -- "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
The statement requires a review of long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. If it is determined that an impairment loss has occurred
based on expected future cash flows, then a loss will be recognized in the
income statement using a fair-value based model. Occidental's adoption of SFAS
No. 121, effective January 1, 1996, did not have a material impact on
Occidental's financial position or results of operations.
YEAR 2000 COMPLIANCE Occidental has completed a preliminary assessment of its
information systems to determine what modifications, if any, are necessary for
proper functioning of these systems in the year 2000. Costs related to
maintenance or modification of these systems will be expensed as incurred.
Occidental does not anticipate the related costs will be significant.
SAFE HARBOR STATEMENT REGARDING OUTLOOK AND OTHER FORWARD-LOOKING DATA Portions
of the Annual Report, including the Letter to Stockholders, Oil and Gas and
Chemical divisional discussions and Management's Discussion and Analysis, are
forward-looking and involve risks and uncertainties that could significantly
affect expected results. Factors that could cause results to differ materially
include, but are not limited to: global commodity pricing fluctuations;
competitive pricing pressures; higher than expected costs including feedstocks;
the supply/demand considerations for Occidental's products; any general economic
recession domestically or internationally; regulatory uncertainties; and not
successfully completing any development of new fields, expansion, capital
expenditure, efficiency improvement, acquisition or disposition.
REPORT OF MANAGEMENT The management of Occidental Petroleum Corporation is
responsible for the integrity of the financial data reported by Occidental and
its subsidiaries. Fulfilling this responsibility requires the preparation and
presentation of consolidated financial statements in accordance with generally
accepted accounting principles. Management uses internal accounting controls,
corporate-wide policies and procedures and judgment so that such statements
reflect fairly the consolidated financial position, results of operations and
cash flows of Occidental.
28
<PAGE> 13
CONSOLIDATED STATEMENTS OF OPERATIONS Occidental Petroleum Corporation
In millions, except per-share amounts and Subsidiaries
<TABLE>
<CAPTION>
For the years ended December 31, 1997 1996 1995
========================================================== ========= ========= =========
<S> <C> <C> <C>
REVENUES
Net sales and operating revenues
Oil and gas operations $ 3,667 $ 3,680 $ 3,019
Chemical operations 4,349 4,307 5,370
--------- --------- ---------
8,016 7,987 8,389
Interest, dividends and other income 88 244 105
Gains on disposition of assets, net (Note 4) (4) 11 45
Income from equity investments (Note 15) 1 70 94
--------- --------- ---------
8,101 8,312 8,633
--------- --------- ---------
COSTS AND OTHER DEDUCTIONS
Cost of sales 5,060 5,060 5,492
Selling, general and administrative and other
operating expenses 1,002 933 996
Depreciation, depletion and amortization of assets 822 761 768
Environmental remediation 136 100 21
Exploration expense 119 120 106
Interest and debt expense, net 434 482 579
--------- --------- ---------
7,573 7,456 7,962
--------- --------- ---------
INCOME(LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES 528 856 671
Provision for domestic and foreign income and other
taxes (Note 11) 311 342 313
--------- --------- ---------
INCOME(LOSS) FROM CONTINUING OPERATIONS 217 514 358
Discontinued operations, net (Note 4) (607) 184 153
Extraordinary gain(loss), net (Note 5) -- (30) --
--------- --------- ---------
NET INCOME(LOSS) $ (390) $ 668 $ 511
========= ========= =========
EARNINGS(LOSS) APPLICABLE TO COMMON STOCK $ (478) $ 575 $ 418
========= ========= =========
BASIC EARNINGS PER COMMON SHARE
Income(loss) from continuing operations $ .39 $ 1.30 $ .83
Discontinued operations, net (1.82) .56 .48
Extraordinary gain(loss), net -- (.09) --
--------- --------- ---------
BASIC EARNINGS(LOSS) PER COMMON SHARE (Note 13) $ (1.43) $ 1.77 $ 1.31
========= ========= =========
DILUTED EARNINGS(LOSS) PER COMMON SHARE (Note 13) $ (1.43) $ 1.73 $ 1.31
========================================================== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE> 14
CONSOLIDATED BALANCE SHEETS
In millions, except share amounts
<TABLE>
<CAPTION>
Assets at December 31, 1997 1996
========================================================================== ========= =========
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (Note 1) $ 113 $ 258
Trade receivables, net of reserves of $24 in both 1997 and 1996 603 626
Receivables from joint ventures, partnerships and other 210 131
Inventories (Notes 1 and 6) 604 582
Prepaid expenses and other (Note 11) 386 313
--------- ---------
TOTAL CURRENT ASSETS 1,916 1,910
--------- ---------
LONG-TERM RECEIVABLES, NET 153 153
--------- ---------
EQUITY INVESTMENTS (Notes 1 and 15) 921 985
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, AT COST (Notes 1, 4 and 9)
Oil and gas operations 9,039 8,554
Chemical operations 6,077 5,893
Corporate and other 1,441 1,439
--------- ---------
16,557 15,886
Accumulated depreciation, depletion and amortization (7,967) (7,690)
--------- ---------
8,590 8,196
OTHER ASSETS (Note 1) 470 416
--------- ---------
NET ASSETS OF DISCONTINUED OPERATIONS (Note 4) 3,232 3,321
--------- ---------
$ 15,282 $ 14,981
========================================================================== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
30
<PAGE> 15
Occidental Petroleum Corporation
and Subsidiaries
<TABLE>
<CAPTION>
Liabilities and Equity at December 31, 1997 1996
========================================================================== ========= =========
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt and capital lease liabilities
(Notes 7 and 9) $ 6 $ 27
Notes payable (Note 1) 35 20
Accounts payable 717 617
Accrued liabilities (Note 1) 957 970
Dividends payable 106 107
Domestic and foreign income taxes (Note 11) 49 96
--------- ---------
TOTAL CURRENT LIABILITIES 1,870 1,837
--------- ---------
LONG-TERM DEBT, NET OF CURRENT MATURITIES AND UNAMORTIZED DISCOUNT (Note 7) 4,925 4,511
--------- ---------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred and other domestic and foreign income taxes (Note 11) 1,028 839
Other (Notes 1, 8, 9 and 14) 3,173 2,654
--------- ---------
4,201 3,493
--------- ---------
CONTINGENT LIABILITIES AND COMMITMENTS (Notes 7, 9 and 10)
STOCKHOLDERS' EQUITY (Notes 1, 4, 7, 12 and 19)
Nonredeemable preferred stock, $1.00 par value; authorized 50 million
shares; outstanding shares: 1997--22,491,478 and 1996--26,493,209;
stated at liquidation value of $50 per share 1,125 1,325
ESOP preferred stock, $1.00 par value; authorized and outstanding shares:
1997 and 1996 -- 1,400,000 1,400 1,400
Unearned ESOP shares (1,348) (1,394)
Common stock, $.20 par value; authorized 500 million shares; outstanding
shares: 1997--341,126,546 and 1996--329,227,688 68 66
Additional paid-in capital 4,149 4,463
Retained earnings(deficit) (1,094) (726)
Cumulative foreign currency translation adjustments (14) 6
--------- ---------
4,286 5,140
--------- ---------
$ 15,282 $ 14,981
========================================================================== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE> 16
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Occidental Petroleum Corporation
In millions and Subsidiaries
<TABLE>
<CAPTION>
Cumulative
Non- Additional Retained Foreign
redeemable ESOP Unearned Common Paid-in Earnings Currency
Preferred Preferred ESOP Stock Capital (Deficit) Translation
Stock Stock Shares (Notes 4 (Notes 7 (Notes 7, Adjustments
(Note 12) (Note 12) (Note 12) and 12) and 12) 12 and 14) (Note 1)
============================ ========= ========= ========= ========= ========= ========= =========
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 $ 1,325 $ -- $ -- $ 63 $ 5,004 $ (1,929) $ (6)
Net income -- -- -- -- -- 511 --
Dividends on common stock -- -- -- -- (318) -- --
Dividends on preferred
stock -- -- -- -- (93) -- --
Issuance of common stock -- -- -- 1 28 -- --
Pension liability
adjustment -- -- -- -- -- 16 --
Exercises of options and
other, net -- -- -- -- 10 -- 18
- ---------------------------- --------- --------- --------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 1995 $ 1,325 $ -- $ -- $ 64 $ 4,631 $ (1,402) $ 12
Net income -- -- -- -- -- 668 --
Dividends on common stock -- -- -- -- (325) -- --
Dividends on preferred
stock -- -- -- -- (93) -- --
Issuance of common stock -- -- -- 2 240 -- --
Issuance of preferred
stock -- 1,400 (1,394) -- (6) -- --
Pension liability
adjustment -- -- -- -- -- 8 --
Exercises of options and
other, net -- -- -- -- 16 -- (6)
- ---------------------------- --------- --------- --------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 1996 $ 1,325 $ 1,400 $ (1,394) $ 66 $ 4,463 $ (726) $ 6
Net income(loss) -- -- -- -- -- (390) --
Dividends on common stock -- -- -- -- (335) -- --
Dividends on preferred
stock -- -- -- -- (88) -- --
Issuance of common stock -- -- -- -- 23 -- --
Release of ESOP shares -- -- 46 -- (29) -- --
Repurchase and retirement
of common stock -- -- -- (1) (118) -- --
Preferred stock
conversions (200) -- -- 3 197 -- --
Pension liability
adjustment -- -- -- -- -- 17 --
Exercises of options and
other, net -- -- -- -- 36 5 (20)
- ---------------------------- --------- --------- --------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 1997 $ 1,125 $ 1,400 $ (1,348) $ 68 $ 4,149 $ (1,094) $ (14)
============================ ========= ========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
32
<PAGE> 17
CONSOLIDATED STATEMENTS OF CASH FLOWS Occidental Petroleum Corporation
In millions and Subsidiaries
<TABLE>
<CAPTION>
For the years ended December 31, 1997 1996 1995
================================================================================= ========= ========= =========
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Income(loss) from continuing operations, after extraordinary gain(loss), net $ 217 $ 484 $ 358
Adjustments to reconcile income to net cash provided by operating activities:
Extraordinary (gain)loss, net -- 30 --
Depreciation, depletion and amortization of assets 822 761 768
Amortization of debt discount and deferred financing costs 11 7 32
Deferred income tax provision (9) (3) 70
Other noncash charges (credits) to income 426 298 209
Gains on disposition of assets, net 4 (11) (45)
Income from equity investments (1) (70) (94)
Exploration expense 119 120 106
Changes in operating assets and liabilities:
Decrease(increase) in accounts and notes receivable (125) 201 117
Decrease(increase) in inventories (20) (32) (85)
Increase in prepaid expenses and other assets (75) (6) (33)
Increase(decrease) in accounts payable and accrued liabilities 13 (65) (34)
Increase(decrease) in current domestic and foreign income taxes (66) 39 44
Other operating, net (185) (164) (51)
--------- --------- ---------
1,131 1,589 1,362
Operating cash flow from discontinued operations 266 398 139
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,397 1,987 1,501
--------- --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (1,549) (1,038) (829)
Proceeds from disposal of property, plant and equipment, net (Note 4) 25 229 178
Buyout of operating leases (21) -- (141)
Purchase of businesses, net (22) (18) (7)
Sale of businesses, net (Note 4) 95 31 756
Equity investments, net 46 40 50
--------- --------- ---------
(1,426) (756) 7
Investing cash flow from discontinued operations (79) (223) (143)
--------- --------- ---------
NET CASH USED BY INVESTING ACTIVITIES (1,505) (979) (136)
--------- --------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from long-term debt 107 65 322
Net proceeds from commercial paper and revolving credit agreements 667 645 (528)
Payments of long-term debt and capital lease liabilities (374) (1,570) (396)
Proceeds from issuance of common stock 21 25 28
Repurchase of common stock (119) -- --
Proceeds (payments) of notes payable, net 17 (1) (5)
Cash dividends paid (422) (415) (406)
Other financing, net 13 9 12
--------- --------- ---------
(90) (1,242) (973)
Financing cash flow from discontinued operations 53 (88) 12
--------- --------- ---------
NET CASH USED BY FINANCING ACTIVITIES (37) (1,330) (961)
--------- --------- ---------
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS (145) (322) 404
CASH AND CASH EQUIVALENTS--BEGINNING OF YEAR 258 580 176
--------- --------- ---------
CASH AND CASH EQUIVALENTS--END OF YEAR $ 113 $ 258 $ 580
================================================================================= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
33
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
NATURE OF OPERATIONS Occidental is a multinational organization whose principal
lines of business are oil and gas exploration and production and chemicals.
Internationally, Occidental has oil and gas production in 11 countries and
exploration projects in 19 countries. Additionally, Occidental has oil and gas
exploration and production in the United States, including the Gulf of Mexico.
Occidental also is one of the world's largest chemical producers, with interests
in chlorovinyls (basic chemicals and polymers and plastics), specialty chemicals
and petrochemicals.
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of Occidental Petroleum Corporation, all subsidiaries where the Company
has majority ownership of voting stock and Occidental's proportionate interests
in oil and gas exploration and production ventures (Occidental). All material
intercompany accounts and transactions have been eliminated. Investments in less
than majority-owned enterprises, including a joint-interest pipeline, but
excluding oil and gas exploration and production ventures, are accounted for on
the equity method (see Note 15).
The consolidated financial statements have been restated to reflect the
natural gas transmission and marketing business as a discontinued operation as
further discussed in Note 4. Unless indicated otherwise, all financial
information in the Notes to Consolidated Financial Statements excludes
discontinued operations.
In addition, certain financial statements, notes and supplementary data for
prior years have been changed to conform to the 1997 presentation.
RISKS AND UNCERTAINTIES The process of preparing consolidated 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 consolidated 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 Occidental's
financial position and results of operations.
Included in the accompanying balance sheet is net property, plant and
equipment at a carrying value of $8.59 billion as of December 31, 1997. These
carrying values are based on Occidental's plans and intentions to continue to
operate, maintain and, where it is economically desirable, to expand its
businesses. If future economic conditions result in changes in management's
plans or intentions, the carrying values of the affected assets will be reviewed
again and any appropriate adjustments made.
Included in the accompanying consolidated balance sheet are deferred tax
assets of $1.3 billion as of December 31, 1997, the noncurrent portion of which
is netted against deferred income tax liabilities. Realization of these assets
is dependent upon Occidental generating sufficient future taxable income.
Occidental expects to realize the recorded deferred tax assets through future
operating income and reversal of taxable temporary differences.
The accompanying consolidated balance sheet includes assets of approximately
$2.6 billion as of December 31, 1997 relating to Occidental's operations in
countries outside North America. Some of these countries may be considered
politically and economically unstable. These assets and the related operations
are subject to the risk of actions by governmental authorities and insurgent
groups. Occidental attempts to conduct its financial affairs so as to protect
against such risks and would expect to receive compensation in the event of
nationalization.
Since Occidental's major products are commodities, significant changes in the
prices of oil and gas and chemical products could have a significant impact on
Occidental's results of operations for any particular year.
FOREIGN CURRENCY TRANSLATION The functional currency applicable to Occidental's
foreign oil and gas operations, except for operations in the Dutch sector of the
North Sea, is the U.S. dollar since cash flows are denominated principally in
U.S. dollars. Chemical operations in Latin America, which historically have been
subject to high inflation rates, use the U.S. dollar as the functional currency.
The effect of exchange-rate changes on transactions denominated in nonfunctional
currencies generated a gain of approximately $7 million in 1997, a loss of
approximately $3 million in 1996 and a gain of approximately $1 million in 1995.
The currency devaluation in Thailand and the strength of the U.S. dollar
relative to other currencies negatively impacted the cumulative foreign currency
translation adjustment and income from equity investments in 1997.
CASH AND CASH EQUIVALENTS Cash equivalents consist of highly liquid money-market
mutual funds and bank deposits with initial maturities of three months or less.
Cash equivalents totaled approximately $50 million and $205 million at December
31, 1997 and 1996, respectively.
34
<PAGE> 19
TRADE RECEIVABLES In 1992, Occidental entered into an agreement to sell, under a
revolving sale program, an undivided percentage ownership interest in a
designated pool of domestic trade receivables, with limited recourse. Under this
program, Occidental serves as the collection agent with respect to the
receivables sold. An interest in new receivables is sold as collections are made
from customers. As of December 31, 1997, Occidental had received cash proceeds
totaling $600 million, all of which was received prior to 1997. After MidCon is
removed from the program the balance of Occidental's receivables program will be
$350 million. Fees and expenses under this program are included in Selling,
general and administrative and other operating expenses. During the years ended
December 31, 1997, 1996 and 1995, the cost of this program amounted to
approximately 5.9 percent, 5.8 percent and 6.3 percent, respectively, of the
weighted average amount of proceeds received.
INVENTORIES Product and raw material inventories, except certain domestic
chemicals, are stated at cost determined on the first-in, first-out (FIFO) and
average-cost methods and did not exceed market value. The remaining product and
raw material inventories are stated at cost using the last-in, first-out (LIFO)
method and also did not exceed market value. Inventories of materials and
supplies are valued at cost or less (see Note 6).
PROPERTY, PLANT AND EQUIPMENT Property additions and major renewals and
improvements are capitalized at cost. Interest costs incurred in connection with
major capital expenditures are capitalized and amortized over the lives of the
related assets (see Note 17). Depreciation and depletion of oil and gas
producing properties is determined principally by the unit-of-production method
and is based on estimated recoverable reserves. The unit-of-production method of
depreciation, based on estimated total productive life, also is used for certain
chemical plant and equipment. Depreciation of other plant and equipment has been
provided primarily using the straight-line method.
Oil and gas properties are accounted for using the successful-efforts method.
Costs of acquiring nonproducing acreage, costs of drilling successful
exploration wells and development costs are capitalized. Producing and
nonproducing properties are evaluated periodically and, if conditions warrant,
an impairment reserve is provided. Annually, a determination is made whether it
is probable that significant impairment of the carrying cost for individual
fields or groups of fields has occurred, considering a number of factors,
including profitability, political risk and Occidental's estimate of future oil
and gas prices. If impairment is believed probable, a further analysis is
performed using Occidental's estimate of future oil and gas prices to determine
any impairment to be recorded for specific properties. Annual lease rentals and
exploration costs, including geologic and geophysical costs and exploratory
dry-hole costs, are expensed as incurred.
At December 31, 1997 corporate property, plant and equipment and accumulated
depreciation, depletion and amortization included $1.2 billion and $353 million,
respectively, for an intrastate pipeline owned by Occidental.
OTHER ASSETS Other assets include tangible and intangible assets, certain of
which are amortized over the estimated periods to be benefited.
NOTES PAYABLE Notes payable at December 31, 1997 and 1996 consisted of
short-term notes due to financial institutions and other corporations. The
weighted average interest rate on short-term borrowings outstanding as of
December 31, 1997 and 1996 was 10.2 percent and 5.4 percent, respectively.
ACCRUED LIABILITIES -- CURRENT Accrued liabilities include the following (in
millions):
<TABLE>
<CAPTION>
Balance at December 31, 1997 1996
================================================= ========= =========
<S> <C> <C>
Accrued payroll, commissions and related expenses $ 116 $ 158
Accrued interest expense $ 90 $ 93
- ------------------------------------------------- --------- ---------
</TABLE>
ENVIRONMENTAL 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. Probable recoveries or reimbursements are
recorded as an asset. The environmental reserves are included in accrued
liabilities and other noncurrent liabilities and amounted to $117 million and
$450 million, respectively, at December 31, 1997 and $137 million and $425
million, respectively, at December 31, 1996.
Environmental reserves are discounted only when the aggregate amount of the
estimated costs for a specific site and the timing of cash payments are reliably
determinable. As of December 31, 1997 and 1996, reserves that were recorded on a
discounted basis were not material.
35
<PAGE> 20
DISMANTLEMENT, RESTORATION AND RECLAMATION COSTS The estimated future
abandonment costs of oil and gas properties and removal costs for offshore
production platforms, net of salvage value, are accrued over their operating
lives. Such costs are calculated at unit-of-production rates based upon
estimated proved recoverable reserves and are taken into account in determining
depreciation, depletion and amortization. For all other operations, appropriate
reserves are provided when a decision is made to dispose of a property, since
Occidental makes capital renewal expenditures on a continual basis while an
asset is in operation. Reserves for dismantlement, restoration and reclamation
costs are included in accrued liabilities and other noncurrent liabilities and
amounted to $11 million and $202 million, respectively, at December 31, 1997 and
$9 million and $215 million, respectively, at December 31, 1996.
HEDGING ACTIVITIES Occidental periodically uses commodity futures contracts,
options and swaps to hedge the impact of oil and natural gas price fluctuations
and uses forward exchange contracts to hedge the risk associated with
fluctuations in foreign currency exchange rates. Gains and losses on commodity
futures contracts are deferred until recognized as an adjustment to sales
revenue or purchase costs when the related transaction being hedged is
finalized. Gains and losses on foreign currency forward exchange contracts that
hedge identifiable future commitments are deferred until recognized when the
related item being hedged is settled. All other contracts are recognized in
periodic income. The cash flows from such contracts are included in operating
activities in the consolidated statements of cash flows.
Interest rate swaps and futures are entered into, from time to time, on
specific debt as part of Occidental's overall strategy to maintain part of its
debt on a floating-rate basis and to fix interest rates on anticipated future
debt issuances.
SUPPLEMENTAL CASH FLOW INFORMATION Excluding MidCon, cash payments during the
years 1997, 1996 and 1995 included federal, foreign and state income taxes of
approximately $182 million, $216 million and $148 million, respectively.
Interest paid (net of interest capitalized) totaled approximately $404 million,
$486 million and $544 million for the years 1997, 1996 and 1995, respectively.
See Note 4 for detail of noncash investing and financing activities regarding
certain acquisitions.
Note 2 FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------------
COMMODITY FUTURES AND FORWARD CONTRACTS Occidental's oil and gas segment has,
from time to time, engaged in some form of commodity derivative activity,
generally limited to hedging arrangements. The oil and gas division engages in
oil and gas trading activity primarily through the use of futures contracts. The
results are not significant and are included in periodic income.
FORWARD EXCHANGE AND INTEREST RATE CONTRACTS Occidental is engaged in both oil
and gas and chemical activities internationally. International oil and gas
transactions are mainly denominated in U.S. dollars; consequently, foreign
currency exposure is not deemed material. Many of Occidental's foreign oil and
gas operations and foreign chemical operations are located in countries whose
currencies generally depreciate against the U.S. dollar on a continuing basis.
An effective currency forward market does not exist for these countries;
therefore, Occidental attempts to manage its exposure primarily by balancing
monetary assets and liabilities and maintaining cash positions only at levels
necessary for operating purposes. Additionally, almost all of Occidental's oil
and gas foreign entities have the U.S. dollar as the functional currency since
the cash flows are mainly denominated in U.S. dollars. The effect of exchange
rate transactions in foreign currencies is included in periodic income. Foreign
currencies which are in a net liability position are thus protected from the
unfavorable effects of devaluation. For entities that have a net foreign
currency asset position, Occidental maintains those positions at low levels so
that the exposure to currency devaluation is relatively insignificant. At
December 31, 1997, Occidental had one foreign currency forward purchase exchange
contract totaling $38 million which hedged foreign currency denominated debt.
This contract matures in 2000.
From time to time, Occidental enters into interest rate swaps and futures
contracts to hedge interest rates on debt. In November 1993, Occidental entered
into interest rate swaps on newly issued fixed-rate debt for notional amounts
totaling $530 million. This converted fixed-rate debt into variable-rate debt,
based on the London Interbank Offered Rate (LIBOR), with interest rates ranging
from 6.41 percent to 6.64 percent at December 31, 1997. These agreements mature
at various dates from 1998 through 2000. Notional amounts do not represent cash
flow. Credit risk exposure, which is not material, is limited to the net
interest differentials. The swap rate difference resulted in approximately $2
million, $1 million and $5 million of additional interest expense in 1997, 1996
and 1995, respectively, compared to what interest expense would have been had
the debt remained at fixed rates. The impact of the swaps on the weighted
average interest rates for all debt in 1997, 1996 and 1995 was not significant.
In December 1997, Occidental entered into two fixed-rate interest rate locks
for a total notional amount of $400 million with a settlement date of March
1998. The interest rate locks were entered into to fix the interest rate on the
expected issuance of long-term debt in 1998. The fixed reference rate is between
5.84 percent and 5.87 percent. The interest rate locks are accounted for under
hedge accounting.
36
<PAGE> 21
FAIR VALUE OF FINANCIAL INSTRUMENTS Occidental values financial instruments as
required by Statement of Financial Accounting Standards (SFAS) No. 107. The
carrying amounts of cash and cash equivalents and short-term notes payable
approximate fair value because of the short maturity of those instruments.
Occidental estimates the fair value of its long-term debt based on the quoted
market prices for the same or similar issues or on the yields offered to
Occidental for debt of similar rating and similar remaining maturities. The
estimated fair value of Occidental's long-term debt at December 31, 1997 and
1996 was $5.376 billion and $4.968 billion, respectively, compared with a
carrying value of $4.925 billion and $4.511 billion, respectively. The fair
value of interest rate swaps and futures is the amount at which they could be
settled, based on estimates obtained from dealers. Based on these estimates at
December 31, 1997 and 1996, Occidental would be required to pay approximately $9
million and $10 million, respectively, to terminate its interest rate swap and
futures agreements. Occidental will continue its strategy of maintaining part of
its debt on a floating-rate basis.
The carrying value of other on-balance sheet financial instruments
approximates fair value and the cost, if any, to terminate off-balance sheet
financial instruments is not significant.
Note 3 1997 SPECIAL CHARGES
- --------------------------------------------------------------------------------
In the fourth quarter of 1997, Occidental announced its intent to sell
nonstrategic oil and gas and chemical assets. Also, a decision was made to idle
certain facilities. In connection with these decisions, and the impairment of
certain properties, certain oil and gas and chemical assets were written down.
The related charges for these write-downs amounting to $222 million are included
in cost of sales and selling, general and administrative and other operating
expenses in the accompanying Consolidated Statement of Operations. The asset
write-downs included the Austin Chalk oil and gas property for $88 million and
the Garden Banks oil and gas property for $44 million. The operating results
from these properties were not significant.
The total fourth quarter charges were $478 million which included the
write-downs mentioned above as well as additional environmental and other
reserves and a charge to amend certain employment agreements with two senior
executives.
Note 4 BUSINESS COMBINATIONS, ASSET ACQUISITIONS AND DISPOSITIONS, AND
DISCONTINUED OPERATIONS
- --------------------------------------------------------------------------------
Occidental completed the sale of all of the issued and outstanding shares of
common stock of MidCon, its natural gas transmission and marketing business, to
K N Energy, Inc. (K N Energy), on January 31, 1998.
Occidental sold the shares to K N Energy in return for a cash payment of $2.1
billion. After payment of the redemption price for the Cumulative MidCon-Indexed
Convertible Preferred Stock (CMIC Preferred Stock), taxes and certain other
expenses of the sale, the estimated net cash proceeds from the transaction were
approximately $1.7 billion. Additionally, in connection with the sale K N Energy
issued a fixed-rate interest bearing note secured by letters of credit, payable
January 4, 1999, to Occidental in the initial principal amount of $1.4 billion,
in exchange for a note previously issued to Occidental by the MidCon Corp. ESOP
Trust (the Trust). K N Energy also assumed responsibility for certain Texas
intrastate pipeline lease obligations of MidCon to an Occidental subsidiary with
a 29-year term and average lease rentals of approximately $30 million per year.
Concurrently with the closing of the sale, Occidental effected the redemption
of all 1,400,000 issued and outstanding shares of Occidental's CMIC Preferred
Stock, par value $1.00 per share, which were issued to and held by the Trust.
As a result of these transactions, in the fourth quarter of 1997 Occidental
classified MidCon and its subsidiaries as a discontinued operation and recorded
an estimated after-tax charge against earnings of approximately $750 million.
The $607 million net loss in 1997 from discontinued operations included the
charge on the sale and $143 million in net income from the operation for the
year.
As of December 31, 1997 and 1996, the operating assets and liabilities of
MidCon have been reclassified as net assets of discontinued operations on the
balance sheet. The balance at December 31, 1997 consisted of current assets of
$428 million; net property, plant and equipment of $5.536 billion; other assets
of $64 million; current liabilities of $442 million and long-term liabilities of
$2.354 billion.
In 1997, Occidental sold a chlor-alkali chemical plant located in Tacoma,
Washington for approximately $102 million, which included $97 million in cash
and the balance in the buyer's convertible preferred stock. Also in 1997,
Occidental purchased 28,000 shares of preferred stock of Leslie's Poolmart, Inc.
(Leslie's), a customer of OxyChem, for total consideration of $28 million, which
consisted of cash and the exchange of $10 million of Leslie's subordinated
debentures held by Occidental.
In addition, in the second quarter of 1997, Occidental acquired certain oil
and gas production and exploration assets from Suemaur Exploration for
approximately $50 million. These assets were located onshore in south Texas
adjacent to other Occidental properties.
37
<PAGE> 22
In August 1996, Occidental acquired three specialty chemical producers in
separate transactions for approximately $149 million through the issuance of
5,512,355 shares of Occidental common stock, with a value of approximately $130
million, and the balance paid in cash. The acquisitions included Laurel
Industries, Inc., North America's largest producer of antimony oxide at its
LaPorte, Texas facility; Natural Gas Odorizing, Inc., the leading U.S. producer
of mercaptan-based warning agents for use in natural gas and propane from its
single plant in Baytown, Texas; and a plant in Augusta, Georgia purchased from
Power Silicates Manufacturing, Inc., which produces sodium silicates for use in
soap and detergent formulating, paper manufacturing and silica-based catalysts.
These acquisitions have been accounted for by the purchase method. Accordingly,
the cost of each acquisition was allocated to the assets acquired, goodwill and
liabilities assumed based upon their estimated respective fair values.
In April 1996, Occidental completed its acquisition of a 64 percent equity
interest (on a fully-diluted basis) in INDSPEC Chemical Corporation (INDSPEC)
for approximately $92 million through the issuance of 3,346,421 shares of
Occidental common stock, with a value of approximately $87 million, and the
balance paid in cash. INDSPEC is the world's largest producer of resorcinol
which is used to manufacture rubber tires, engineered wood products,
agricultural chemicals and fire-retardant plastic additives. Under the terms of
the agreement, INDSPEC's management and employees have retained voting control
of INDSPEC.
In April 1996, Occidental completed the sale of its subsidiary which engaged
in onshore drilling and servicing of oil and gas wells for approximately $32
million. Also in April 1996, certain assets of an international phosphate
fertilizer trading operation were sold for approximately $20 million in
interest-bearing notes. In July 1996, Occidental sold its royalty interest in
the Congo for $215 million to the Republic of the Congo.
In October 1995, Occidental sold its agricultural chemicals business. During
May 1995, Occidental sold its high-density polyethylene business. Occidental
also sold its polyvinyl chloride (PVC) facilities at Addis, Louisiana and
Burlington South, New Jersey. In addition, Occidental sold certain Canadian oil
and gas assets, which were acquired as part of the purchase of Placid Oil
Company (Placid) in December 1994, and a portion of the oil and gas operation in
Pakistan. The combined cash proceeds from these asset dispositions were in
excess of $900 million.
During the second quarter of 1995, Occidental and Canadian Occidental
Petroleum Ltd. (CanadianOxy) formed partnerships into which they contributed
primarily sodium chlorate manufacturing facilities. Occidental retained a direct
interest of less than 20 percent in these partnerships accounted for on the
equity method.
Note 5 EXTRAORDINARY GAIN(LOSS) AND ACCOUNTING CHANGES
- --------------------------------------------------------------------------------
The 1996 results included a net extraordinary loss of $30 million, which
resulted from the early extinguishment of all the then outstanding $955 million
principal amount of the 11.75% Senior Debentures.
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128 -- "Earnings per Share," which establishes standards for computing and
presenting earnings per share (EPS). The statement requires dual presentation of
basic and diluted EPS on the face of the income statement for all entities with
complex capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. Occidental's adoption of SFAS No. 128, effective for
the year ended December 31, 1997, did not have a material impact on Occidental's
earnings per share.
In October 1996, the American Institute of Certified Public Accountants
issued Statement of Position No. 96-1 -- "Environmental Remediation Liabilities"
(SOP 96-1), which provides authoritative guidance on specific accounting issues
that are present in the recognition, measurement, display and disclosure of
environmental remediation liabilities. Occidental's implementation of SOP 96-1,
effective January 1, 1997, did not have a material impact on Occidental's
financial position or results of operations.
Note 6 INVENTORIES
- --------------------------------------------------------------------------------
Inventories of approximately $243 million and $215 million were valued under
the LIFO method at December 31, 1997 and 1996, respectively. Inventories
consisted of the following (in millions):
<TABLE>
<CAPTION>
Balance at December 31, 1997 1996
================================================ ========= =========
<S> <C> <C>
Raw materials $ 102 $ 135
Materials and supplies 189 173
Work in process 22 17
Finished goods 342 304
--------- ---------
655 629
LIFO reserve (51) (47)
--------- ---------
TOTAL $ 604 $ 582
================================================ ========= =========
</TABLE>
38
<PAGE> 23
Note 7 LONG-TERM DEBT
- --------------------------------------------------------------------------------
Long-term debt consisted of the following (in millions):
<TABLE>
<CAPTION>
Balance at December 31, 1997 1996
========================================================================================= ========= =========
<S> <C> <C>
OCCIDENTAL PETROLEUM CORPORATION
11.125% senior debentures due 2019, callable June 1, 1999 at 105.563 $ 144 $ 144
10.125% senior debentures due 2009 276 276
9.25% senior debentures due 2019, putable August 1, 2004 at par 300 300
10.125% senior notes due 2001 330 330
9.375% to 9.75% medium-term notes due 1998 through 2001 34 99
8.5% medium-term notes due 2004, callable September 15, 1999 at par 250 250
11.125% senior notes due 2010 150 150
8.5% senior notes due 2001 150 150
8.75% medium-term notes due 2023 100 100
5.76% to 11% medium-term notes due 1998 through 2008 965 1,180
10.42% senior notes due 2003, callable December 1, 1998 at par 50 50
5.969% to 7.353% commercial paper 1,079 567
6.03% to 6.5% revolving credits 235 80
7.3% to 8.8% retail medium-term notes due 1998 through 2004, callable at various dates 97 139
--------- ---------
4,160 3,815
--------- ---------
OXY USA INC.
7% debentures due 2011, callable anytime at par 274 274
7.2% unsecured notes due 2020 (Note 16) 7 7
6.625% debentures due 1998 through 1999, callable anytime at par (Note 16) 55 55
6.125% debentures due 1997 (Note 16) -- 15
5.7% to 7.8% unsecured notes due 1998 through 2007 53 56
--------- ---------
389 407
--------- ---------
OTHER SUBSIDIARY DEBT
3.65% to 8.5% unsecured notes due 1998 through 2030 513 432
6% secured notes due 1998 through 2007 8 10
--------- ---------
521 442
--------- ---------
5,070 4,664
Less:
Unamortized discount, net (140) (148)
Current maturities (5) (5)
========= =========
TOTAL $ 4,925 $ 4,511
========================================================================================= ========= =========
</TABLE>
At December 31, 1997, $1.85 billion of notes due in 1998 were classified as
non-current since it is management's intention to refinance this amount on a
long-term basis, initially utilizing available lines of bank credit with
maturities extending to 2002.
At December 31, 1997, minimum principal payments on long-term debt, including
sinking fund requirements, subsequent to December 31, 1998 aggregated $5.065
billion, of which $265 million is due in 1999, $426 million in 2000, $516
million in 2001, $1.901 billion in 2002, $163 million in 2003 and $1.794 billion
thereafter. Unamortized discount is generally being amortized to interest
expense on the effective interest method over the lives of the related issues.
At December 31, 1997, under the most restrictive covenants of certain
financing agreements, the capacity for the payment of cash dividends and other
distributions on, and for acquisitions of, Occidental's capital stock was
approximately $1.5 billion, assuming that such dividends, distributions and
acquisitions were made without incurring additional borrowings.
At December 31, 1997, Occidental had available lines of committed bank credit
of approximately $1.5 billion. Occidental also has a $3.2 billion committed line
of credit specifically to fund the purchase of the Elk Hills Naval Petroleum
Reserve (Elk Hills field) subject to periodic reduction based on proceeds from
asset sales. Bank fees on these committed lines of credit ranged from 0.04
percent to 0.1875 percent.
39
<PAGE> 24
Note 8 ADVANCE SALE OF CRUDE OIL
- --------------------------------------------------------------------------------
In December 1995, Occidental entered into a transaction with Clark USA, Inc.
(Clark) under which Occidental agreed to deliver approximately 17.7 million
barrels of West Texas Intermediate (WTI)-equivalent oil over a six-year period.
In exchange, Occidental received $100 million in cash and approximately 5.5
million shares of Clark common stock. As a result of this transaction,
Occidental owned approximately a 19 percent voting interest of Clark, accounted
for on the cost method. A later recapitalization resulted in Occidental
receiving additional shares which raised its economic ownership, but not its
voting interest, to approximately 30 percent. Occidental has accounted for the
consideration received in the transaction as deferred revenue, which is being
amortized into revenue as WTI-equivalent oil is produced and delivered during
the term of the agreement. Reserves dedicated to the transaction are excluded
from the estimate of proved oil and gas reserves (see Supplemental Oil and Gas
Information). At December 31, 1997, 12.2 million barrels remain to be delivered.
Note 9 LEASE COMMITMENTS
- --------------------------------------------------------------------------------
The present value of net minimum lease payments, net of the current portion,
totaled $235 million and $237 million at December 31, 1997 and 1996,
respectively. These amounts are included in Other liabilities.
Operating and capital lease agreements frequently include renewal and/or
purchase options and require Occidental to pay for utilities, taxes, insurance
and maintenance expense.
At December 31, 1997, future net minimum lease payments for capital and
operating leases (excluding oil and gas and other mineral leases) were the
following (in millions):
<TABLE>
<CAPTION>
CAPITAL OPERATING
=================================================================== ========= =========
<S> <C> <C>
1998 $ 17 $ 85
1999 17 61
2000 212 54
2001 3 53
2002 1 34
Thereafter 43 234
--------- ---------
TOTAL MINIMUM LEASE PAYMENTS 293 $ 521
=========
Less:
Executory costs (4)
Imputed interest (52)
Current portion (2)
---------
PRESENT VALUE OF NET MINIMUM LEASE PAYMENTS, NET OF CURRENT PORTION $ 235
=================================================================== =========
</TABLE>
Rental expense for operating leases, net of sublease rental income, was $113
million in 1997, $114 million in 1996 and $127 million in 1995.
Included in the 1997 and 1996 property, plant and equipment accounts were
$410 million and $429 million, respectively, of property leased under capital
leases and $156 million and $144 million, respectively, of related accumulated
amortization.
Note 10 LAWSUITS, CLAIMS, COMMITMENTS, CONTINGENCIES AND RELATED MATTERS
- --------------------------------------------------------------------------------
Occidental and certain of its subsidiaries have been named as defendants or
as potentially responsible parties in a substantial 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.
Occidental is usually one of many companies in these proceedings, and has to
date been successful in sharing response costs with other financially sound
companies. Occidental has accrued reserves at the most likely cost to be
incurred in those proceedings where it is probable that Occidental will incur
remediation costs which can be reasonably estimated.
During the course of its operations, Occidental is subject to audit by taxing
authorities for varying periods in various tax jurisdictions.
At December 31, 1997, commitments for major capital expenditures during 1998
and thereafter were approximately $437 million.
40
<PAGE> 25
Occidental has entered into agreements providing for future payments to
secure terminal and pipeline capacity, drilling services, electrical power,
steam and certain chemical raw materials. At December 31, 1997, the net present
value of the fixed and determinable portion of the obligations under these
agreements aggregated $93 million, which was payable as follows (in millions):
1998 -- $14, 1999 -- $12, 2000 -- $10, 2001 -- $9, 2002 -- $9 and 2003 through
2014 -- $39. Payments under these agreements, including any variable component,
were $16 million in 1997, $18 million in 1996 and $22 million in 1995.
Occidental has certain other commitments under contracts, guarantees and
joint ventures, and certain other contingent liabilities. Additionally,
Occidental agreed to participate in the development of certain natural gas
reserves and construction of a liquefied natural gas plant in Malaysia.
It is impossible at this time to determine the ultimate liabilities that
Occidental and its subsidiaries may incur resulting from the foregoing lawsuits,
claims and proceedings, audits, commitments, contingencies and related matters.
Several 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 event
could have a material adverse effect upon Occidental's consolidated financial
position or results of operations. However, in management's opinion, after
taking into account reserves, it is unlikely that any of the foregoing matters
will have a material adverse effect upon Occidental's consolidated financial
position or results of operations.
Note 11 DOMESTIC AND FOREIGN INCOME AND OTHER TAXES
- --------------------------------------------------------------------------------
The domestic and foreign components of income (loss) from continuing
operations before domestic and foreign income and other taxes were as follows
(in millions):
<TABLE>
<CAPTION>
For the years ended December 31, Domestic Foreign Total
================================ ========= ========= =========
<S> <C> <C> <C>
1997 $ (184) $ 712 $ 528
========= ========= =========
1996 $ 254 $ 602 $ 856
========= ========= =========
1995 $ 183 $ 488 $ 671
================================ ========= ========= =========
</TABLE>
The provisions (credits) for domestic and foreign income and other taxes
consisted of the following (in millions):
<TABLE>
<CAPTION>
For the years U.S. State
ended December 31, Federal and Local Foreign Total
====================== ========= ========= ========= =========
<S> <C> <C> <C> <C>
1997
Current $ 52 $ 28 $ 240 $ 320
Deferred (12) (23) 26 (9)
--------- --------- --------- ---------
$ 40 $ 5 $ 266 $ 311
====================== ========= ========= ========= =========
1996
Current $ 67 $ 21 $ 257 $ 345
Deferred (6) 2 1 (3)
--------- --------- --------- ---------
$ 61 $ 23 $ 258 $ 342
====================== ========= ========= ========= =========
1995
Current $ 21 $ 47 $ 175 $ 243
Deferred 95 (17) (8) 70
--------- --------- --------- ---------
$ 116 $ 30 $ 167 $ 313
====================== ========= ========= ========= =========
</TABLE>
41
<PAGE> 26
The following is a reconciliation, stated as a percentage of pretax income,
of the U.S. statutory federal income tax rate to Occidental's effective tax rate
on income (loss) from continuing operations:
<TABLE>
<CAPTION>
For the years ended December 31, 1997 1996 1995
============================================================ ========= ========= =========
<S> <C> <C> <C>
U.S. federal statutory tax rate 35% 35% 35%
Operations outside the United States(a) 22 16 15
State taxes, net of federal benefit 1 2 7
State tax benefit from operating loss carryforwards -- -- (4)
Reserves not previously benefited -- -- (7)
Nondeductible depreciation and other expenses 2 2 1
Reduction in deferred tax asset valuation allowance -- (12) --
Other (1) (3) --
--------- --------- ---------
Tax rate provided by Occidental 59% 40% 47%
============================================================ ========= ========= =========
</TABLE>
(a) Included in these figures is the impact of not providing U.S. taxes on
the unremitted earnings of certain foreign subsidiaries. The effect of
this is to reduce the U.S. federal tax rate by approximately 13 percent
in 1997, 6 percent in 1996 and 5 percent in 1995.
The tax effects of temporary differences and carryforwards resulting in
deferred income taxes at December 31, 1997 and 1996 were as follows (in
millions):
<TABLE>
<CAPTION>
1997 1996
---------------------- ----------------------
DEFERRED DEFERRED
DEFERRED TAX DEFERRED TAX
TAX LIABIL- TAX LIABIL-
Items resulting in temporary differences and carryforwards ASSETS ITIES ASSETS ITIES
========================================================== ========= ========= ========= =========
<S> <C> <C> <C> <C>
Property, plant and equipment differences $ 172 $ 1,542 $ 197 $ 1,650
Discontinued operations -- loss accruals and sale 147 165 160 --
Equity investments and partnerships -- 118 -- 153
Environmental reserves 255 -- 224 --
Postretirement benefit accruals 154 -- 153 --
State income taxes 74 -- 84 --
Tax credit carryforwards 165 -- 200 --
All other 425 208 445 189
--------- --------- --------- ---------
Subtotal 1,392 2,033 1,463 1,992
Valuation allowance (82) -- (85) --
--------- --------- --------- ---------
Total deferred taxes $ 1,310 $ 2,033 $ 1,378 $ 1,992
========================================================== ========= ========= ========= =========
</TABLE>
Included in total deferred tax assets was a current portion aggregating $305
million and $225 million as of December 31, 1997 and 1996, respectively, that
was reported in Prepaid expenses and other.
A deferred tax liability of approximately $80 million at December 31, 1997
has not been recognized for temporary differences related to Occidental's
investment in certain foreign subsidiaries primarily as a result of unremitted
earnings of consolidated subsidiaries, as it is Occidental's intention,
generally, to reinvest such earnings permanently.
The pension liability adjustments recorded directly to retained earnings were
net of an income tax charge of $10 million in 1997, $6 million in 1996 and $9
million in 1995.
The foreign currency translation adjustment credited directly to retained
earnings was net of an income tax benefit of $6 million in 1997 and $2 million
in 1996 and an income tax charge of $10 million in 1995.
The charge to additional paid-in capital relative to the MidCon ESOP in 1997
was net of an income tax benefit of $15 million.
42
<PAGE> 27
The extraordinary loss that resulted from the early extinguishment of
high-coupon debt was reduced by an income tax benefit of $16 million in 1996.
Discontinued operations included income tax charges of $240 million in 1997,
$112 million in 1996 and $89 million in 1995.
At December 31, 1997, Occidental had, for U.S. federal income tax return
purposes, an alternative minimum tax credit carryforward of $165 million
available to reduce future income taxes. The alternative minimum tax credit
carryforward does not expire.
Note 12 NONREDEEMABLE PREFERRED STOCK, ESOP PREFERRED STOCK AND COMMON STOCK
- --------------------------------------------------------------------------------
The following is an analysis of nonredeemable preferred stock and common
stock (shares in thousands):
<TABLE>
<CAPTION>
Non-
redeemable
Preferred Common
Stock Stock
============================================ ========= =========
<S> <C> <C>
BALANCE, DECEMBER 31, 1994 26,495 316,853
Issued -- 1,523
Options exercised and other, net -- 335
- -------------------------------------------- --------- ---------
BALANCE, DECEMBER 31, 1995 26,495 318,711
Issued -- 10,145
Options exercised and other, net (2) 372
- -------------------------------------------- --------- ---------
BALANCE, DECEMBER 31, 1996 26,493 329,228
Issued -- 1,079
Preferred stock conversions (4,002) 14,276
Repurchase program -- (4,148)
Options exercised and other, net -- 692
- -------------------------------------------- --------- ---------
BALANCE, DECEMBER 31, 1997 22,491 341,127
============================================ ========= =========
</TABLE>
NONREDEEMABLE PREFERRED STOCK Occidental has authorized 50,000,000 shares of
preferred stock with a par value of $1.00 per share. In February 1994,
Occidental issued 11,388,340 shares of $3.00 cumulative CXY-indexed convertible
preferred stock in a public offering for net proceeds of approximately $557
million. The shares are convertible into Occidental common stock in accordance
with a conversion formula that is indexed to the market price of the common
shares of CanadianOxy. The shares of CXY-indexed convertible preferred stock are
redeemable on or after January 1, 1999, in whole or in part, at the option of
Occidental, at a redemption price of $51.50 per share declining ratably to
$50.00 per share on or after January 1, 2004, in each case plus accumulated and
unpaid dividends to the redemption date. In 1997, 4,001,691 shares of
CXY-indexed convertible preferred stock were converted by the holders into
14,275,974 shares of Occidental's common stock. As of December 31, 1997, the
aggregate number of shares of Occidental common stock issuable upon conversion
of all of the remaining outstanding shares of the CXY-indexed convertible
preferred stock was 19,954,361, based on the conversion ratio then in effect of
2.702.
In February 1993, Occidental issued 11,500,000 shares of $3.875 cumulative
convertible preferred stock. In December 1994, Occidental issued 3,606,484
shares of $3.875 cumulative convertible voting preferred stock in connection
with the Placid acquisition. The shares of both series are redeemable on or
after February 18, 1998, in whole or in part, at the option of Occidental, at a
redemption price of $51.9375 per share declining ratably to $50.00 per share on
or after February 18, 2003, in each case plus accumulated and unpaid dividends
to the redemption date. Each series of $3.875 preferred stock is convertible at
the option of the holder into common stock of Occidental at a conversion price
of $22.76 per share, subject to adjustment in certain events. See Note 19 for a
discussion of subsequent events.
43
<PAGE> 28
ESOP PREFERRED STOCK In November 1996, Occidental established the MidCon Corp.
Employee Stock Ownership Plan (MidCon ESOP) for the benefit of employees of
MidCon. Pursuant to the MidCon ESOP, Occidental issued 1,400,000 shares of its
CMIC Preferred Stock to the MidCon Corp. ESOP Trust. The CMIC Preferred Stock
was convertible into Occidental common stock based on the value of MidCon. The
MidCon ESOP paid for the CMIC Preferred Stock with a $1.4 billion 30-year
promissory note (ESOP Note), with interest at 7.9 percent per annum, guaranteed
by MidCon. Generally, the shares held by the MidCon ESOP were released and
allocated to participant accounts based on the proportion of the payment on the
note for the respective period compared to the total remaining payments due on
the note. Dividends on the CMIC Preferred Stock were payable at an annual rate
of $21 per share, when and as declared by Occidental's Board of Directors. As a
result of the sale of MidCon the CMIC Preferred Stock was redeemed. The effects
of the MidCon ESOP are included in discontinued operations.
COMMON STOCK REPURCHASE PROGRAM In October 1997, the Occidental board of
directors authorized the repurchase of up to 40 million shares of Occidental's
common stock. The repurchases will be made in the open market or in privately
negotiated transactions at the discretion of Occidental's management, depending
upon financial and market conditions or as otherwise provided by the Securities
and Exchange Commission and New York Stock Exchange rules and regulations. As of
December 31, 1997, 4.1 million shares were repurchased and retired for a total
cost of $119 million.
STOCK INCENTIVE PLANS
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS Options to purchase common stock of
Occidental have been granted to officers and employees under stock option plans
adopted in 1987 and 1995. During 1997, options for 1,362,022 shares became
exercisable, and options for 4,004,510 shares were exercisable at December 31,
1997 at a weighted-average exercise price of $22.25. Generally, these options
vest over three years with a maximum term of ten years and one month. At
December 31, 1997, options with stock appreciation rights (SAR) for 811,000
shares were outstanding, all of which options were exercisable.
The following is a summary of stock option transactions during 1997, 1996 and
1995 (shares in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---------------------- ---------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
=================== ========= ========= ========= ========= ========= =========
<S> <C> <C> <C> <C> <C> <C>
BEGINNING BALANCE 5,952 $ 22.637 5,481 $ 22.263 5,098 $ 22.121
Granted or issued 1,789 $ 25.058 1,335 $ 24.375 1,127 $ 23.125
Exercised (845) $ 22.219 (483) $ 21.276 (431) $ 19.230
Canceled or expired (127) $ 25.582 (381) $ 24.958 (313) $ 27.222
--------- --------- ---------
ENDING BALANCE 6,769 $ 23.274 5,952 $ 22.637 5,481 $ 22.263
========= ========= =========
OPTIONS EXERCISABLE
AT YEAR-END 4,005 3,589 3,517
=================== ========= ========= =========
</TABLE>
For options outstanding at December 31, 1997 the exercise prices were between
$17.75 and $29.625 and the weighted average remaining contractual life was
approximately 7 years.
RESTRICTED STOCK AWARDS Pursuant to the 1995 Incentive Stock Plan, employees may
be awarded Occidental restricted common stock at the par value of $.20 per
share, with such shares vesting after four years (five years for awards issued
prior to December 1995) or earlier under certain conditions. The related expense
is amortized over the vesting period. In 1997, 149,885 shares were awarded at a
weighted-average grant-date value of $23.375 per share; 171,649 shares were
awarded in 1996 at a weighted-average grant-date value of $21.431 per share; and
21,339 shares were awarded in 1995 at a weighted-average grant-date value of
$20.875 per share.
44
<PAGE> 29
PERFORMANCE STOCK AWARDS AND OPTIONS Performance stock awards were made to
various executive officers in January 1997 pursuant to the 1995 Incentive Stock
Plan. The number of shares of common stock to be received, under these awards,
by such officers at the end of the performance period will depend on the
attainment of performance objectives based on a peer company comparison of total
stockholder return for such period. Based on Occidental's ranking among its
peers, the grantees will receive shares of common stock in an amount ranging
from zero to 175 percent of the Target Share Award (as such amount is defined in
the grant). The shares vest or fail to vest by the end of the four-year
performance term. In 1997, 97,832 shares were awarded at a weighted-average
grant-date value of $23.375 per share; and 101,630 shares were awarded in 1996
at a weighted-average grant date value of $21.375 per share.
In 1997, 4,655,000 Performance Stock Options were granted to certain
executive officers at an exercise price of $25.375. These options expire 10
years from the grant date and have no value unless and until one of the
following events occur, at which time the grants become fully vested and
exercisable: for twenty consecutive trading days, the New York Stock Exchange
closing price of the common stock must be a) $30 or more per share within the
first three years after grant date; b) $35 or more per share after the third
year and through the fifth year; or c) $40 or more per share from the sixth year
until expiration. None of the options were exercisable at December 31, 1997. Any
income effect will be recognized at the time the options are exercisable.
Under the 1995 Stock Incentive Plan, a total of approximately 10,000,000
shares may be awarded. At December 31, 1997, 1,700,898 shares were available for
the granting of all future awards under these plans, all of which were available
to issue stock options, SARs, restricted stocks and performance stock awards.
Occidental accounts for these plans under Accounting Principles Board Opinion
No. 25. Had the compensation expense for these plans been determined in
accordance with SFAS No. 123 -- "Accounting for Stock Based Compensation" (SFAS
No. 123), Occidental's pro forma net income would have been a loss of $396
million in 1997, and net income of $666 million and $510 million in 1996 and
1995, respectively. Basic and diluted earnings per share would have been a loss
of $1.44 for 1997 and would not have changed for 1996 and 1995. The method of
accounting under SFAS No. 123 has not been applied to options granted prior to
January 1, 1995; therefore, the resulting pro forma compensation expense may not
be representative of that to be expected in future years. The fair value of each
option grant, for pro forma calculation purposes, is estimated using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1997, 1996 and 1995, respectively: dividend yield
of 3.94, 4.20 and 4.32 percent; expected volatility of 22.36, 23.92 and 24.19
percent; risk-free rate of return 6.27, 6.79 and 6.93 percent; and expected
lives of 5, 5 and 7 years.
1996 RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS Under the 1996 Restricted
Stock Plan for Non-Employee Directors, each non-employee Director of the Company
will receive awards of restricted common stock each year as additional
compensation for their services as a member of the Board of Directors. A maximum
of 50,000 shares of common stock may be awarded under the Directors Plan and
3,500 and 3,250 shares of common stock were awarded during 1997 and 1996,
respectively. At December 31, 1997, 43,250 shares of common stock were available
for the granting of future awards.
Note 13 EARNINGS PER SHARE
- --------------------------------------------------------------------------------
In 1997, Occidental adopted SFAS No. 128, which establishes standards for
computing and presenting earnings per share. As a result, earnings per share for
1996 and 1995 were restated as indicated below. Basic earnings per share was
computed by dividing net income, less preferred dividend requirements, by the
weighted average number of common shares outstanding during each year. The
computation of diluted earnings per share further assumes the dilutive effect of
stock options and the conversion of preferred stocks. The adoption of SFAS No.
128 resulted in changing only the previously reported fully diluted earnings per
share for 1995 from $1.30 per share to $1.31 per share.
45
<PAGE> 30
The following is a calculation of earnings per share for the years ended
December 31 (in thousands, except per-share amounts):
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------------- ----------------------------------- -----------------------------------
PER-SHARE PER-SHARE PER-SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT INCOME SHARES AMOUNT
================== ========= ========= ========= ========= ========= ========= ========= ========= =========
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BASIC EARNINGS
- --------------
PER SHARE
- ---------
Income from
continuing
operations $ 216,970 $ 514,088 $ 357,959
Preferred stock
dividends (87,736) (92,701) (92,703)
--------- --------- ---------
Earnings(loss)
from continuing
operations
applicable to
common stock 129,234 334,341 $ .39 421,387 323,782 $ 1.30 265,256 318,073 $ .83
Discontinued
operations, net (606,625) (1.82) 183,733 .56 152,992 .48
Extraordinary
gain(loss), net -- -- (29,836) (0.09) -- --
--------- --------- --------- --------- --------- ---------
Earnings(loss)
applicable to
common stock $(477,391) $ (1.43) $ 575,284 $ 1.77 $ 418,248 $ 1.31
========= ========= ========= ========= ========= =========
DILUTED EARNINGS
- ----------------
PER SHARE
- ---------
Earnings(loss)
from continuing
operations
applicable to
common stock $ 129,234 334,341 $ 421,387 323,782 $ 265,256 318,073
Dilutive effect of
exercise of op-
tions outstanding -- 575 -- 363 -- 158
Dilutive effect of
convertible
preferred stock -- -- 34,164 28,068 -- --
--------- --------- --------- --------- --------- ---------
Earnings(loss) from
continuing
operations
applicable
to common stock 129,234 334,916 $ .39 455,551 352,213 $ 1.29 265,256 318,231 $ .83
Discontinued
operations, net (606,625) (1.82) 183,733 .52 152,992 .48
Extraordinary
gain(loss), net -- -- (29,836) (0.08) -- --
--------- --------- --------- --------- --------- ---------
Earnings(loss)
applicable to
common stock $(477,391) $ (1.43) $ 609,448 $ 1.73 $ 418,248 $ 1.31
================== ========= ========= ========= ========= ========= =========
</TABLE>
The following items were not included in the computation of diluted earnings
per share because their effect was anti-dilutive for the years ended
December 31:
<TABLE>
<CAPTION>
1997 1996 1995
==================================== =================== =================== ===================
<S> <C> <C> <C>
Stock Options
Number of shares 508 1,188 2,134
Price range $ 26.000 - $ 29.625 $ 24.875 - $ 29.625 $ 22.000 - $ 31.125
Expiration range 8/21/98 - 12/1/07 3/31/97 - 8/18/00 8/16/96 - 4/28/03
Convertible Preferred Stock $3.875
Number of shares 33,186 33,186 33,186
Dividends paid $ 58,538 $ 58,538 $ 58,538
Convertible Preferred Stock $3.00
Number of shares 19,954 -- 30,566
Dividends paid $ 29,199 $ -- $ 34,165
- ------------------------------------ ------------------- ------------------- -------------------
</TABLE>
Note 14 RETIREMENT PLANS AND POSTRETIREMENT BENEFITS
- --------------------------------------------------------------------------------
Occidental has various defined contribution retirement plans for its
salaried, domestic union and nonunion hourly, and certain foreign national
employees that provide for periodic contributions by Occidental based on
plan-specific criteria, such as base pay, age level and/or employee
contributions. Occidental contributed and expensed $53 million in both 1997 and
1996 and $58 million in 1995 under the provisions of these plans.
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
46
<PAGE> 31
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 total cost
of these benefits was approximately $79 million in 1997, $89 million in 1996
and $78 million in 1995. The 1997, 1996 and 1995 costs included $31 million, $37
million and $17 million, respectively, for postretirement costs, as discussed
below.
Occidental's 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 Occidental's defined benefit pension plans,
determined by independent actuarial valuations, are funded by payments to trust
funds, which are administered by independent trustees. The components of the net
pension cost for 1997, 1996 and 1995 were as follows (in millions):
<TABLE>
<CAPTION>
For the years ended December 31, 1997 1996 1995
========================================================= ========= ========= =========
<S> <C> <C> <C>
Service cost -- benefits earned during the period $ 8 $ 9 $ 9
Interest cost on projected benefit obligation 25 23 23
Actual return on plan assets (46) (31) (43)
Net amortization and deferral 26 21 32
Curtailments and settlements (1) 1 12
--------- --------- ---------
Net pension cost $ 12 $ 23 $ 33
========================================================= ========= ========= =========
</TABLE>
In 1997, 1996 and 1995, Occidental recorded adjustments to retained earnings
of credits of $17 million, $8 million and $16 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 Occidental's consolidated balance sheets at December 31,
1997 and 1996 (in millions):
<TABLE>
<CAPTION>
1997 1996
---------------------- ----------------------
ASSETS ACCUMU- ASSETS ACCUMU-
EXCEED LATED EXCEED LATED
ACCUMU- BENEFITS ACCUMU- BENEFITS
LATED EXCEED LATED EXCEED
Balance at December 31, BENEFITS ASSETS BENEFITS ASSETS
=========================================== ========= ========= ========= =========
<S> <C> <C> <C> <C>
PRESENT VALUE OF THE ESTIMATED PENSION
BENEFITS TO BE PAID IN THE FUTURE
Vested benefits $ 187 $ 90 $ 75 $ 208
Nonvested benefits 12 3 4 11
--------- --------- --------- ---------
Accumulated benefit obligations 199 93 79 219
Effect of projected future salary
increases(a) 13 6 12 9
--------- --------- --------- ---------
Total projected benefit obligations 212 99 91 228
Plan assets at fair value 231 65 95 169
--------- --------- --------- ---------
PROJECTED BENEFIT OBLIGATION IN EXCESS
OF(LESS THAN) PLAN ASSETS $ (19) $ 34 $ (4) $ 59
=========================================== ========= ========= ========= =========
Projected benefit obligation in excess
of (less than) plan assets $ (19) $ 34 $ (4) $ 59
Unrecognized net asset(obligation) (1) (4) 1 (8)
Unrecognized prior service (cost) benefit (3) (4) -- (9)
Unrecognized net gain (loss) (13) 5 (4) (25)
Additional minimum liability(b) -- 4 -- 39
--------- --------- --------- ---------
PENSION LIABILITY(ASSET) $ (36) $ 35 $ (7) $ 56
=========================================== ========= ========= ========= =========
</TABLE>
(a) The effect of salary increases related primarily to international
salary-based plans.
(b) 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 retained earnings.
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 percent and 5.5
percent in both 1997 and 1996. The expected long-term rate of return on assets
was 8 percent in 1997 and 1996.
47
<PAGE> 32
POSTRETIREMENT BENEFITS The postretirement benefit obligation as of December 31,
1997 and 1996 was determined by application of the terms of medical and dental
benefits and life insurance coverage, including the effect of established
maximums on covered costs, together with relevant actuarial assumptions and
health care cost trend rates projected at a CPI increase of 3 percent in 1997
and 1996 (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 1
percent annual increase in these assumed cost trend rates would increase the
accumulated postretirement benefit obligation by approximately $14 million in
1997; the annual service and interest costs would not be materially affected.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation as of December 31, 1997 and 1996 was 7.5
percent. Occidental's funding policy generally is to pay claims as they come
due.
The following table sets forth the postretirement plans' combined status,
reconciled with the amounts included in the consolidated balance sheets at
December 31, 1997 and 1996 (in millions):
<TABLE>
<CAPTION>
Balance at December 31, 1997 1996
=========================================================== ========= =========
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees $ 220 $ 255
Fully eligible active plan participants 48 49
Other active plan participants 69 73
--------- ---------
Total accumulated postretirement benefit obligation $ 337 $ 377
========= =========
Unfunded status $ 337 $ 377
Unrecognized prior service cost (2) (5)
Unrecognized net gain (loss) 73 40
--------- ---------
Accrued postretirement benefit cost $ 408 $ 412
=========================================================== ========= =========
</TABLE>
Net periodic postretirement benefit cost for 1997, 1996 and 1995 included the
following components (in millions):
<TABLE>
<CAPTION>
For the years ended December 31, 1997 1996 1995
================================================================== ========= ========= =========
<S> <C> <C> <C>
Service cost -- benefits attributed to service during the period $ 6 $ 6 $ 7
Interest cost on accumulated postretirement benefit obligation 27 29 34
Net amortization and deferral 1 2 2
Curtailments and settlements (3) -- (26)
--------- --------- ---------
Net periodic postretirement benefit cost $ 31 $ 37 $ 17
================================================================== ========= ========= =========
</TABLE>
Note 15 INVESTMENTS
- --------------------------------------------------------------------------------
Investments in companies, other than oil and gas exploration and production
companies, in which Occidental has a voting stock interest of at least 20
percent, but not more than 50 percent, and certain partnerships are accounted
for on the equity method. At December 31, 1997, Occidental's equity investments
consisted primarily of a pipeline in the Dutch sector of the North Sea, an
investment of approximately 30 percent in the common shares of CanadianOxy and
various chemical partnerships and joint ventures. Equity investments paid
dividends of $50 million, $48 million and $34 million to Occidental in 1997,
1996 and 1995, respectively. Cumulative undistributed earnings since
acquisition, in the amount of $204 million, of 50-percent-or-less-owned
companies have been accounted for by Occidental under the equity method. At
December 31, 1997 and 1996, Occidental's investment in equity investees exceeded
the historical underlying equity in net assets by approximately $226 million and
$258 million, respectively, which is being amortized into income over periods
not exceeding 40 years. The aggregate market value of the investment in
CanadianOxy, based on the quoted market price for CanadianOxy common shares, was
$910 million at December 31, 1997, compared with an aggregate book value of $263
million.
Occidental and its subsidiaries' purchases from certain chemical partnerships
were $232 million, $183 million and $192 million in 1997, 1996 and 1995,
respectively. Occidental and its subsidiaries' sales to certain chemical
partnerships were $328 million, $245 million and $263 million, in 1997, 1996 and
1995, respectively.
48
<PAGE> 33
The following table presents Occidental's proportional interest in the
summarized financial information of its equity method investments (in millions):
<TABLE>
<CAPTION>
For the years ended December 31, 1997 1996 1995
===================================== ========= ========= =========
<S> <C> <C> <C>
Revenues $ 959 $ 849 $ 764
Costs and expenses 958 779 670
--------- --------- ---------
Net income $ 1 $ 70 $ 94
===================================== ========= ========= =========
Balance at December 31, 1997 1996
===================================== ========= =========
Current assets $ 297 $ 257
Noncurrent assets $ 1,564 $ 1,108
Current liabilities $ 252 $ 156
Noncurrent liabilities $ 1,113 $ 657
Stockholders' equity $ 496 $ 552
- ------------------------------------- --------- ---------
</TABLE>
Investments also include certain cost method investments, in which Occidental
owns less than 20 percent of the voting stock. At December 31, 1997, these
investments consisted primarily of the shares in Clark (see Note 8).
Note 16 SUMMARIZED FINANCIAL INFORMATION OF WHOLLY-OWNED SUBSIDIARY
- --------------------------------------------------------------------------------
Occidental has guaranteed the payments of principal of, and interest on,
certain publicly traded debt securities of its subsidiary, OXY USA Inc. (OXY
USA).
The following table presents summarized financial information for OXY USA (in
millions):
<TABLE>
<CAPTION>
For the years ended December 31, 1997 1996 1995
======================================= ========= ========= =========
<S> <C> <C> <C>
Revenues $ 1,004 $ 982 $ 709
Costs and expenses 1,004 882 778
--------- --------- ---------
Net income (loss) $ -- $ 100 $ (69)
======================================= ========= ========= =========
Balance at December 31, 1997 1996
======================================= ========= =========
Current assets $ 150 $ 183
Intercompany receivable $ 29(a) $ 428
Noncurrent assets $ 2,024 $ 2,028
Current liabilities $ 259 $ 277
Interest bearing note to parent $ 89 $ 105
Noncurrent liabilities $ 1,106 $ 1,221
Stockholders' equity $ 749(a) $ 1,036
- --------------------------------------- --------- ---------
</TABLE>
(a) Includes effect of dividend distribution of an intercompany receivable.
Note 17 INDUSTRY SEGMENTS AND GEOGRAPHIC AREAS
- --------------------------------------------------------------------------------
Occidental conducts its continuing operations through two industry segments:
oil and gas and chemical. The oil and gas segment explores for, develops,
produces and markets crude oil and natural gas domestically and internationally.
The chemical segment manufactures and markets, domestically and internationally,
a variety of chlorovinyls (basic chemicals and polymers and plastics) specialty
chemicals and petrochemicals.
Earnings of industry segments and geographic areas exclude interest income,
interest expense, unallocated corporate expenses, discontinued operations,
extraordinary items and income from equity investments, but include gains from
dispositions of segment and geographic area assets (see Note 4). Intersegment
sales and transfers between geographic areas are made at prices approximating
current market values and are not significant.
Foreign income and other taxes and certain state taxes are included in
segment earnings on the basis of operating results. U.S. federal income taxes
are not allocated to segments except for amounts in lieu thereof that represent
the tax effect of operating charges or credits resulting from purchase
accounting adjustments which arise due to the implementation in 1992 of SFAS No.
109 -- "Accounting for Income Taxes."
Identifiable assets are those assets used in the operations of the segments.
Corporate assets consist of cash, short-term investments, certain corporate
receivables, an intrastate pipeline, other assets and net assets of discontinued
operations.
49
<PAGE> 34
INDUSTRY SEGMENTS
In millions
<TABLE>
<CAPTION>
Oil
and Gas Chemical Corporate Total
================================================== ========= ========= ========= =========
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
TOTAL REVENUES $ 3,680 $ 4,353 $ 68 $ 8,101
========= ========= ========= =========
Pretax operating profit (loss)(a,b) $ 664 $ 497 $ (633) $ 528
Income taxes (263) (26) (22) (311)
Discontinued operations, net -- -- (607) (607)
--------- --------- --------- ---------
NET INCOME (LOSS) $ 401(c) $ 471(d) $ (1,262)(e)$ (390)
========= ========= ========= =========
Property, plant and equipment additions, net(f) $ 1,040 $ 396 $ 3 $ 1,439
========= ========= ========= =========
Depreciation, depletion and amortization $ 528 $ 261 $ 33 $ 822
========= ========= ========= =========
TOTAL ASSETS $ 4,789 $ 5,486 $ 5,007 $ 15,282
================================================== ========= ========= ========= =========
YEAR ENDED DECEMBER 31, 1996
TOTAL REVENUES $ 3,695 $ 4,484 $ 133 $ 8,312
========= ========= ========= =========
Pretax operating profit (loss)(a,b) $ 739 $ 683 $ (566) $ 856
Income taxes (259) (15) (68) (342)
Discontinued operations, net -- -- 184 184
Extraordinary gain (loss), net -- -- (30) (30)
--------- --------- --------- ---------
NET INCOME (LOSS) $ 480(g) $ 668(h) $ (480)(i)$ 668
========= ========= ========= =========
Property, plant and equipment additions, net(f) $ 651 $ 262 $ 14 $ 927
========= ========= ========= =========
Depreciation, depletion and amortization $ 493 $ 236 $ 32 $ 761
========= ========= ========= =========
TOTAL ASSETS $ 4,496 $ 5,429 $ 5,056 $ 14,981
================================================== ========= ========= ========= =========
YEAR ENDED DECEMBER 31, 1995
TOTAL REVENUES $ 3,043 $ 5,410 $ 180 $ 8,633
========= ========= ========= =========
Pretax operating profit (loss)(a,b) $ 211 $ 1,107 $ (647) $ 671
Income taxes (166) (27) (120) (313)
Discontinued operations, net -- -- 153 153
--------- --------- --------- ---------
NET INCOME (LOSS) $ 45(j) $ 1,080(k) $ (614) $ 511
========= ========= ========= =========
Property, plant and equipment additions, net(f) $ 480 $ 243 $ 11 $ 734
========= ========= ========= =========
Depreciation, depletion and amortization $ 451 $ 262 $ 55 $ 768
========= ========= ========= =========
TOTAL ASSETS $ 4,594 $ 5,181 $ 5,567 $ 15,342
================================================== ========= ========= ========= =========
</TABLE>
(a) Research and development costs were $16 million in 1997 and 1996 and $21
million in 1995.
(b) Divisional earnings include charges and credits in lieu of U.S. federal
income taxes. In 1997, the amounts allocated to the divisions were
credits of $13 million and $26 million in oil and gas and chemical,
respectively. In 1996, the amounts allocated to the divisions were
credits of $15 million and $26 million in oil and gas and chemical,
respectively. In 1995, the amounts allocated to the divisions were
credits of $16 million and $27 million in oil and gas and chemical,
respectively.
(c) Includes pretax charges of $256 million for the write-down of various
nonstrategic and impaired assets including assets expected to be sold
and related costs and additional environmental and other reserves.
(d) Includes pretax charges of $147 million related to additional
environmental matters and the write-down of various idled assets.
(e) Includes a pretax charge of $75 million for the extinguishment of
existing liabilities and open-ended financial commitments under
employment agreements with two senior executives and an after-tax charge
of $750 million for the discontinued natural gas transmission operation.
(f) Excludes acquisitions of other businesses of $29 million in chemical in
1997, $58 million in chemical in 1996 and $11 million in oil and gas in
1995. Includes capitalized interest of $14 million in 1997, $5 million
in 1996 and $4 million in 1995.
(g) Includes a charge of $105 million for the write-down of investment in
the Republic of Komi.
(h) Includes a pretax gain of $170 million related to favorable litigation
settlements and a charge of $75 million for additional environmental
reserves, and the related state tax effects.
(i) Includes a $100 million reduction in the deferred tax asset valuation
allowance.
(j) Includes charges of $109 million for settlement of litigation and $95
million for reorganization costs.
(k) Includes a pretax gain of $40 million from the sale of a PVC facility at
Addis, Louisiana.
50
<PAGE> 35
GEOGRAPHIC AREAS(a,b)
In millions
<TABLE>
<CAPTION>
Other
United Western Eastern
States Hemisphere Hemisphere Corporate Total
=================================== ========= ========= ========= ========= =========
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
TOTAL REVENUES $ 6,261(c) $ 678 $ 1,094 $ 68 $ 8,101
========= ========= ========= ========= =========
Geographic earnings (loss) before
taxes $ 564 $ 191 $ 406 $ (633) $ 528
Income taxes (18) (64) (207) (22) (311)
Discontinued operations, net -- -- -- (607) (607)
--------- --------- --------- --------- ---------
NET INCOME (LOSS) $ 546 $ 127 $ 199 $ (1,262) $ (390)
========= ========= ========= ========= =========
TOTAL ASSETS $ 7,584 $ 997 $ 1,694 $ 5,007 $ 15,282
=================================== ========= ========= ========= ========= =========
YEAR ENDED DECEMBER 31, 1996
TOTAL REVENUES $ 6,379(c) $ 769 $ 1,031 $ 133 $ 8,312
========= ========= ========= ========= =========
Geographic earnings (loss) before
taxes $ 922 $ 260 $ 240 $ (566) $ 856
Income taxes (15) (90) (169) (68) (342)
Discontinued operations, net -- -- -- 184 184
Extraordinary gain (loss), net -- -- -- (30) (30)
--------- --------- --------- --------- ---------
NET INCOME (LOSS) $ 907 $ 170 $ 71 $ (480) $ 668
========= ========= ========= ========= =========
TOTAL ASSETS $ 7,659 $ 897 $ 1,369 $ 5,056 $ 14,981
=================================== ========= ========= ========= ========= =========
YEAR ENDED DECEMBER 31, 1995
TOTAL REVENUES $ 6,985(c) $ 672 $ 796 $ 180 $ 8,633
========= ========= ========= ========= =========
Geographic earnings (loss) before
taxes $ 913 $ 182 $ 223 $ (647) $ 671
Income taxes (24) (56) (113) (120) (313)
Discontinued operations, net -- -- -- 153 153
--------- --------- --------- --------- ---------
NET INCOME (LOSS) $ 889 $ 126 $ 110 $ (614) $ 511
========= ========= ========= ========= =========
TOTAL ASSETS $ 7,446 $ 783 $ 1,546 $ 5,567 $ 15,342
=================================== ========= ========= ========= ========= =========
</TABLE>
(a) Included in the consolidated balance sheets were liabilities of
approximately $336 million, $254 million and $285 million at December
31, 1997, 1996 and 1995, respectively, which pertained to operations
based outside the United States and Canada.
(b) Investments in foreign countries are subject to the actions of those
countries, which could significantly affect Occidental's operations and
investments in those countries.
(c) Includes export sales, consisting of chemical products, of approximately
$438 million, $673 million and $1.039 billion in 1997, 1996 and 1995,
respectively.
51
<PAGE> 36
Note 18 COSTS AND RESULTS OF OIL AND GAS PRODUCING ACTIVITIES
- --------------------------------------------------------------------------------
Capitalized costs relating to oil and gas producing activities and related
accumulated depreciation, depletion and amortization, were as follows (in
millions):
<TABLE>
<CAPTION>
Other
United Western Eastern Total
States Hemisphere Hemisphere Worldwide
======================================================= ========= ========= ========= =========
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Proved properties $ 4,806 $ 1,765 $ 1,801 $ 8,372
Unproved properties 71 12 80 163
--------- --------- --------- ---------
TOTAL PROPERTY COSTS(a) 4,877 1,777 1,881 8,535
Support facilities 13 143 60 216
--------- --------- --------- ---------
TOTAL CAPITALIZED COSTS 4,890 1,920 1,941 8,751
Accumulated depreciation, depletion and amortization (2,916) (1,390) (685) (4,991)
--------- --------- --------- ---------
NET CAPITALIZED COSTS $ 1,974 $ 530 $ 1,256 $ 3,760
========= ========= ========= =========
Share of equity investees' net capitalized costs(b) $ 84 $ 432 $ 133 $ 649
======================================================= ========= ========= ========= =========
DECEMBER 31, 1996
Proved properties $ 4,695 $ 1,891 $ 1,274 $ 7,860
Unproved properties 64 33 97 194
--------- --------- --------- ---------
TOTAL PROPERTY COSTS(a) 4,759 1,924 1,371 8,054
Support facilities 11 125 54 190
--------- --------- --------- ---------
TOTAL CAPITALIZED COSTS 4,770 2,049 1,425 8,244
Accumulated depreciation, depletion and amortization (2,760) (1,554) (522) (4,836)
--------- --------- --------- ---------
NET CAPITALIZED COSTS $ 2,010 $ 495 $ 903 $ 3,408
========= ========= ========= =========
Share of equity investees' net capitalized costs(b) $ 76 $ 80 $ 152 $ 308
======================================================= ========= ========= ========= =========
DECEMBER 31, 1995
Proved properties $ 4,614 $ 1,754 $ 1,224 $ 7,592
Unproved properties 78 36 184 298
--------- --------- --------- ---------
TOTAL PROPERTY COSTS(a) 4,692 1,790 1,408 7,890
Support facilities 21 119 50 190
--------- --------- --------- ---------
TOTAL CAPITALIZED COSTS 4,713 1,909 1,458 8,080
Accumulated depreciation, depletion and amortization (2,680) (1,474) (381) (4,535)
--------- --------- --------- ---------
NET CAPITALIZED COSTS $ 2,033 $ 435 $ 1,077 $ 3,545
========= ========= ========= =========
Share of equity investees' net capitalized costs(b) $ 68 $ 66 $ 164 $ 298
======================================================= ========= ========= ========= =========
</TABLE>
(a) Includes costs related to leases, exploration costs, lease and well
equipment, pipelines and terminals, gas plants and other equipment.
(b) Excludes amounts applicable to synthetic fuels.
52
<PAGE> 37
Costs incurred relating to oil and gas producing activities, whether
capitalized or expensed, were as follows (in millions):
<TABLE>
<CAPTION>
Other
United Western Eastern Total
States Hemisphere Hemisphere Worldwide
=================================== ========= ========= ========= =========
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Acquisition of properties
Proved $ 50 $ -- $ 50 $ 100
Unproved 41 -- -- 41
Exploration costs 19 37 122 178
Development costs 270 102 443 815
--------- --------- --------- ---------
$ 380 $ 139 $ 615 $ 1,134
========= ========= ========= =========
Share of equity investees' costs $ 35 $ 514 $ 51 $ 600
=================================== ========= ========= ========= =========
DECEMBER 31, 1996
Acquisition of properties
Proved $ 8 $ -- $ 28 $ 36
Unproved 9 -- -- 9
Exploration costs 30 55 80 165
Development costs 212 118 244 574
--------- --------- --------- ---------
$ 259 $ 173 $ 352 $ 784
========= ========= ========= =========
Share of equity investees' costs $ 35 $ 36 $ 54 $ 125
=================================== ========= ========= ========= =========
DECEMBER 31, 1995
Acquisition of properties
Proved $ 4 $ -- $ 55 $ 59
Unproved 7 -- 4 11
Exploration costs 29 34 70 133
Development costs 173 110 118 401
--------- --------- --------- ---------
$ 213 $ 144 $ 247 $ 604
========= ========= ========= =========
Share of equity investees' costs $ 28 $ 23 $ 25 $ 76
=================================== ========= ========= ========= =========
</TABLE>
53
<PAGE> 38
The results of operations of Occidental's oil and gas producing activities,
which exclude oil trading activities and items such as asset dispositions,
corporate overhead and interest, were as follows (in millions):
<TABLE>
<CAPTION>
Other
Western Eastern
United Hemi- Hemi- Total
States sphere(a) sphere Worldwide
======================================================== ========= ========= ========= =========
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1997
Revenues $ 920 $ 478 $ 969(b) $ 2,367
Production costs 246 154 172 572
Exploration expenses 17 19 83 119
Other operating expenses 50 49 105 204
Other expense -- asset write-downs 132 -- -- 132
Depreciation, depletion and amortization 246(c) 85 178 509
--------- --------- --------- ---------
PRETAX INCOME (LOSS) 229 171 431 831
Income tax expense (benefit)(d) 46 56 206(b) 308
--------- --------- --------- ---------
RESULTS OF OPERATIONS $ 183 $ 115 $ 225 $ 523
========= ========= ========= =========
Share of equity investees' results of operations $ 8 $ (4) $ 25 $ 29
======================================================== ========= ========= ========= =========
FOR THE YEAR ENDED DECEMBER 31, 1996
Revenues $ 906 $ 571 $ 912(b) $ 2,389
Production costs 241 157 184 582
Exploration expenses 25 28 67 120
Other operating expenses 49 51 124 224
Other expense -- write-down of investment in Komi -- -- 105 105
Depreciation, depletion and amortization 234(c) 83 164 481
--------- --------- --------- ---------
PRETAX INCOME (LOSS) 357 252 268 877
Income tax expense (benefit)(d) 81 89 169(b) 339
--------- --------- --------- ---------
RESULTS OF OPERATIONS $ 276 $ 163 $ 99 $ 538
========= ========= ========= =========
Share of equity investees' results of operations $ 8 $ 3 $ 25 $ 36
======================================================== ========= ========= ========= =========
FOR THE YEAR ENDED DECEMBER 31, 1995
Revenues $ 702 $ 467 $ 679(b) $ 1,848
Production costs 238 157 141 536
Exploration expenses 22 30 54 106
Other operating expenses 51 67 118 236
Depreciation, depletion and amortization 249(c) 69 128 446
--------- --------- --------- ---------
PRETAX INCOME (LOSS) 142 144 238 524
Income tax expense (benefit)(d) 16 52 113(b) 181
--------- --------- --------- ---------
RESULTS OF OPERATIONS(e) $ 126 $ 92 $ 125 $ 343
========= ========= ========= =========
Share of equity investees' results of operations $ 6 $ 1 $ 25 $ 32
======================================================== ========= ========= ========= =========
</TABLE>
(a) Includes amounts applicable to operating interests in which Occidental
receives an agreed-upon fee per barrel of crude oil produced.
(b) Revenues and income tax expense include taxes owed by Occidental but
paid by governmental entities on its behalf.
(c) Includes a credit of $13 million, $15 million and $16 million in 1997,
1996 and 1995, respectively, under the method of allocating amounts in
lieu of taxes.
(d) U.S. federal income taxes reflect expense allocations related to oil and
gas activities, including allocated interest and corporate overhead.
Foreign income taxes were included in geographic areas on the basis of
operating results.
(e) The 1995 amounts have been restated as a result of cost
reclassifications to be on a consistent basis with 1997 and 1996. The
new presentation reflects the current cost structure of the oil and gas
producing activities of Occidental.
54
<PAGE> 39
Note 19 SUBSEQUENT EVENTS
- --------------------------------------------------------------------------------
On January 31, 1998 Occidental completed the sale of MidCon as discussed in
Note 4.
In February 1998, Occidental announced that it will redeem in March 1998, all
of the 15,106,444 outstanding voting and nonvoting shares of its $3.875
preferred stock at a call price of $51.9375 per share plus accumulated and
unpaid dividends to but not including the redemption date. Each share of
preferred stock is convertible at the option of the holder, until the close of
business on the redemption date, into approximately 2.2 shares of Occidental
common stock. If all the shares of preferred stock were converted into common
stock, Occidental would issue approximately 33.2 million shares of common stock.
Also in February 1998, Occidental sold its entire interest in an oilfield
development project in Venezuela for approximately $205 million cash plus
contingent payments of up to $90 million over six years based on oil prices. The
gain on the sale was not material.
On February 5, 1998, Occidental acquired the U.S. government's 78 percent
interest in the Elk Hills field for $3.5 billion. The Elk Hills field
acquisition was funded using a portion of the proceeds from the sale of MidCon,
together with proceeds of commercial paper borrowings.
From January 1, 1998 through February 16, 1998 Occidental repurchased 6.1
million shares of its common stock under the common stock repurchase program.
See Note 12 for a discussion of the common stock repurchase program.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Stockholders and Board of Directors, Occidental Petroleum Corporation:
We have audited the accompanying consolidated balance sheets of OCCIDENTAL
PETROLEUM CORPORATION (a Delaware corporation) and consolidated subsidiaries as
of December 31, 1997 and 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1997 (included on pages 29 through 56). These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Occidental Petroleum
Corporation and consolidated subsidiaries as of December 31, 1997 and 1996, and
the results of their operations and their 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
ARTHUR ANDERSEN LLP
Los Angeles, California
February 16, 1998
56
<PAGE> 40
1997 QUARTERLY FINANCIAL DATA (Unaudited) Occidental Petroleum Corporation
In millions, except per-share amounts and Subsidiaries
<TABLE>
<CAPTION>
Three months ended MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL YEAR
============================== ========= ========= ============ =========== ==========
<S> <C> <C> <C> <C> <C>
Divisional net sales
Oil and gas $ 842 $ 1,055 $ 883 $ 887 $ 3,667
Chemical 1,075 1,103 1,124 1,047 4,349
--------- --------- --------- --------- ---------
Net sales $ 1,917 $ 2,158 $ 2,007 $ 1,934 $ 8,016
========= ========= ========= ========= =========
Gross profit $ 589 $ 554 $ 560 $ 469 $ 2,172
========= ========= ========= ========= =========
Divisional earnings
Oil and gas $ 228 $ 133 $ 136 $ (96) $ 401
Chemical 92 184 223 (28) 471
--------- --------- --------- --------- ---------
320 317 359 (124) 872
Unallocated corporate items
Interest expense, net (101) (101) (100) (105) (407)
Income taxes (85) (62) (17) 104 (60)
Other (7) (16) (112) (53) (188)
--------- --------- --------- --------- ---------
Income (loss) from continuing
operations 127 138 130 (178) 217
Discontinued operations, net 52 20 27 (706) (607)
Extraordinary gain(loss), net -- -- -- -- --
--------- --------- --------- --------- ---------
Net income (loss) $ 179 $ 158 $ 157(a) $ (884)(b) $ (390)
========= ========= ========= ========= =========
Basic earnings per common
share
Income (loss) from
continuing operations $ .32 $ .35 $ .32 $ (.58) $ .39
Discontinued operations,
net .16 .06 .08 (2.07) (1.82)
Extraordinary gain (loss),
net -- -- -- -- --
--------- --------- --------- --------- ---------
Basic earnings (loss) per
common share $ .48 $ .41 $ .40 $ (2.65) $ (1.43)
========= ========= ========= ========= =========
Diluted earnings per common
share
Income (loss) from
continuing operations $ .31 $ .34 $ .31 $ (.58) $ .39
Discontinued operations,
net .15 .05 .07 (2.07) (1.82)
Extraordinary gain (loss),
net -- -- -- -- --
--------- --------- --------- --------- ---------
Diluted earnings (loss) per
common share $ .46 $ .39 $ .38 $ (2.65) $ (1.43)
========= ========= ========= ========= =========
Dividends per common share $ .25 $ .25 $ .25 $ .25 $ 1.00
========= ========= ========= ========= =========
Market price per common share
High $ 26 3/4 $ 25 7/8 $ 26 1/4 $ 30 3/4
Low $ 23 1/8 $ 21 3/4 $ 23 3/8 $ 25 7/8
============================== ========= ========= ========= =========
</TABLE>
(a) Includes a pretax charge of $75 million for the extinguishment of
existing liabilities and open-ended financial commitments under
employment agreements with two senior executives.
(b) Includes pretax charges of $256 million for the write-down of various
nonstrategic and impaired assets including assets expected to be sold
and related costs and additional environmental and other reserves in the
oil and gas division, $147 million related to additional environmental
matters and the write-down of various idled assets in the chemical
division and an after-tax charge of $750 million for the discontinued
natural gas transmission operation.
57
<PAGE> 41
1996 QUARTERLY FINANCIAL DATA (Unaudited) Occidental Petroleum Corporation
In millions, except per-share amounts and Subsidiaries
<TABLE>
<CAPTION>
Three months ended MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL YEAR
============================== ========= ========= ============ =========== ==========
<S> <C> <C> <C> <C> <C>
Divisional net sales
Oil and gas $ 753 $ 879 $ 1,149 $ 899 $ 3,680
Chemical 1,068 1,058 1,084 1,097 4,307
--------- --------- --------- --------- ---------
Net sales $ 1,821 $ 1,937 $ 2,233 $ 1,996 $ 7,987
========= ========= ========= ========= =========
Gross profit $ 481 $ 544 $ 550 $ 616 $ 2,191
========= ========= ========= ========= =========
Divisional earnings
Oil and gas $ 161 $ 144 $ 20 $ 155 $ 480
Chemical 118 212 228 110 668
--------- --------- --------- --------- ---------
279 356 248 265 1,148
Unallocated corporate items
Interest expense, net (132) (113) (107) (102) (454)
Income taxes (44) (83) 36 (18) (109)
Other (17) (11) (13) (30) (71)
--------- --------- --------- --------- ---------
Income (loss) from continuing
operations 86 149 164 115 514
Discontinued operations, net 78 32 30 44 184
Extraordinary gain(loss), net (30) -- -- -- (30)
--------- --------- --------- --------- ---------
Net income (loss) $ 134 $ 181(a) $ 194(b) $ 159 $ 668
========= ========= ========= ========= =========
Basic earnings per common
share
Income (loss) from
continuing operations $ .20 $ .39 $ .44 $ .28 $ 1.30
Discontinued operations,
net .24 .10 .09 .13 .56
Extraordinary gain (loss),
net (.09) -- -- -- (.09)
--------- --------- --------- --------- ---------
Basic earnings (loss) per
common share $ .35 $ .49 $ .53 $ .41 $ 1.77
========= ========= ========= ========= =========
Diluted earnings per common
share
Income (loss) from
continuing operations $ .20 $ .39 $ .42 $ .28 $ 1.29
Discontinued operations,
net .24 .09 .09 .13 .52
Extraordinary gain (loss),
net (.09) -- -- -- (.08)
--------- --------- --------- --------- ---------
Diluted earnings (loss) per
common share $ .35 $ .48 $ .51 $ .41 $ 1.73
========= ========= ========= ========= =========
Dividends per common share $ .25 $ .25 $ .25 $ .25 $ 1.00
========= ========= ========= ========= =========
Market price per common share
High $ 27 $ 27 1/4 $ 25 7/8 $ 25 5/8
Low $ 20 1/8 $ 24 1/4 $ 21 1/2 $ 20 1/2
============================== ========= ========= ========= =========
</TABLE>
(a) Includes a $130 million benefit related to a favorable litigation
settlement, and a charge of $75 million for additional environmental
reserves relating to various existing sites, and the related state tax
effects in the chemical division.
(b) Includes a charge of $105 million for the write-down of an investment in
an oil and gas project in the Republic of Komi, a $40 million benefit
related to a favorable litigation settlement in the chemical division
and a $100 million benefit for a reduction in the deferred tax asset
valuation allowance.
58
<PAGE> 42
SUPPLEMENTAL OIL AND GAS INFORMATION (Unaudited)
The following tables set forth Occidental's net interests in quantities of
proved developed and undeveloped reserves of crude oil, condensate and natural
gas and changes in such quantities. Crude oil reserves include condensate. The
reserves are stated after applicable royalties. Estimates of reserves have been
made by Occidental engineers. These estimates include reserves in which
Occidental holds an economic interest under service contracts and other
arrangements.
RESERVES
Oil in millions of barrels, natural gas in billions of cubic feet
<TABLE>
<CAPTION>
Other
United Western Eastern Total
States Hemisphere Hemisphere Worldwide
---------------------- ---------------------- ---------------------- ----------------------
Oil Gas Oil(a) Gas Oil Gas Oil Gas
=========================== ========= ========= ========= ========= ========= ========= ========= =========
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PROVED DEVELOPED AND
UNDEVELOPED RESERVES
BALANCE AT DECEMBER 31, 1994 218 1,979 418 -- 282 354 918 2,333
Revisions of previous
estimates 6 25 14 -- 51 (14) 71 11
Improved recovery 6 6 24 -- 12 -- 42 6
Extensions and
discoveries 5 35 8 -- 12 373 25 408
Purchases of proved
reserves -- 4 -- -- -- 9 -- 13
Sales of proved
reserves (16)(b) (5) -- -- (9)(b) (37) (25) (42)
Production (23) (223) (47) -- (31) (46) (101) (269)
- ---------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
BALANCE AT DECEMBER 31, 1995 196 1,821 417 -- 317 639 930 2,460
Revisions of
previous estimates 11 26 (19) -- 77 200 69 226
Improved recovery 1 -- -- -- 18 -- 19 --
Extensions and
discoveries 16 105 3 -- 11 40 30 145
Purchases of proved
reserves 1 18 -- -- -- 3 1 21
Sales of proved
reserves (1) (6) -- -- (46) -- (47) (6)
Production (21) (220) (47) -- (37) (42) (105) (262)
- ---------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
BALANCE AT DECEMBER 31, 1996 203 1,744 354 -- 340 840 897 2,584
Revisions of
previous estimates (1) 23 3 -- 14 (2) 16 21
Improved recovery 11 -- -- -- 2 -- 13 --
Extensions and
discoveries 6 58 -- -- 34 22 40 80
Purchases of
proved reserves 1 38 -- -- 36 10 37 48
Sales of proved
reserves (2) (10) -- -- -- (7) (2) (17)
Production (21) (218) (41) -- (39) (40) (101) (258)
- ---------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
BALANCE AT DECEMBER 31, 1997 197 1,635 316 -- 387 823 900 2,458
============================ ========= ========= ========= ========= ========= ========= ========= =========
PROPORTIONAL
INTEREST IN EQUITY
INVESTEES' RESERVES
December 31, 1994 5 32 11 84 25 46 41 162
========= ========= ========= ========= ========= ========= ========= =========
December 31, 1995 5 36 12 81 21 39 38 156
========= ========= ========= ========= ========= ========= ========= =========
December 31, 1996 5 47 14 77 20 30 39 154
========= ========= ========= ========= ========= ========= ========= =========
DECEMBER 31, 1997 5 45 45 168 27 25 77 238
============================ ========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
See footnotes on following page.
59
<PAGE> 43
RESERVES continued
Oil in millions of barrels, natural gas in billions of cubic feet
<TABLE>
<CAPTION>
Other
United Western Eastern Total
States Hemisphere Hemisphere Worldwide
---------------------- ---------------------- ---------------------- ----------------------
Oil Gas Oil(a) Gas Oil Gas Oil Gas
======================== ========= ========= ========= ========= ========= ========= ========= =========
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PROVED DEVELOPED
RESERVES
December 31, 1994 169 1,851 258 -- 173 264 600 2,115
========= ========= ========= ========= ========= ========= ========= =========
December 31, 1995 149 1,747 283 -- 195 235 627 1,982
========= ========= ========= ========= ========= ========= ========= =========
December 31, 1996 153 1,677 260 -- 213 205 626 1,882
========= ========= ========= ========= ========= ========= ========= =========
DECEMBER 31, 1997 151 1,571 235 -- 251 207 637 1,778
======================== ========= ========= ========= ========= ========= ========= ========= =========
PROPORTIONAL
INTEREST IN EQUITY
INVESTEES' RESERVES
December 31, 1994 4 27 7 77 24 38 35 142
========= ========= ========= ========= ========= ========= ========= =========
December 31, 1995 5 30 10 75 16 31 31 136
========= ========= ========= ========= ========= ========= ========= =========
December 31, 1996 4 41 13 69 15 25 32 135
========= ========= ========= ========= ========= ========= ========= =========
DECEMBER 31, 1997 4 31 38 140 21 20 63 191
======================== ========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
(a) Portions of these reserves are being produced pursuant to exclusive
service contracts.
(b) Includes approximately 14 million and 6 million barrels of oil (which
approximate 17.7 million barrels of WTI-equivalent oil) in the United
States and Eastern Hemisphere, respectively, associated with the advance
sale of crude oil (see Note 8).
STANDARDIZED MEASURE, INCLUDING YEAR-TO-YEAR CHANGES THEREIN, OF DISCOUNTED
FUTURE NET CASH FLOWS For purposes of the following disclosures, estimates were
made of quantities of proved reserves and the periods during which they are
expected to be produced. Future cash flows were computed by applying year-end
prices to Occidental's share of estimated annual future production from proved
oil and gas reserves, net of royalties. Future development and production costs
were computed by applying year-end costs to be incurred in producing and further
developing the proved reserves. Future income tax expenses were computed by
applying, generally, year-end statutory tax rates (adjusted for permanent
differences, tax credits, allowances and foreign income repatriation
considerations) to the estimated net future pretax cash flows. The discount was
computed by application of a 10 percent discount factor. The calculations
assumed the continuation of existing economic, operating and contractual
conditions at each of December 31, 1997, 1996 and 1995. However, such arbitrary
assumptions have not necessarily proven to be the case in the past. Other
assumptions of equal validity would give rise to substantially different
results.
60
<PAGE> 44
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
In millions
<TABLE>
<CAPTION>
Other
Western Eastern
United Hemi- Hemi- Total
States sphere(a) sphere Worldwide
====================================================== ========= ========= ========= =========
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1997
Future cash flows $ 7,462 $ 3,335 $ 7,197 $ 17,994
Future costs
Production costs and other operating expenses (2,863) (1,661) (3,172) (7,696)
Development costs(b) (456) (230) (1,485) (2,171)
--------- --------- --------- ---------
FUTURE NET CASH FLOWS BEFORE INCOME TAXES 4,143 1,444 2,540 8,127
Future income tax expense (1,246) (458) (249) (1,953)
--------- --------- --------- ---------
FUTURE NET CASH FLOWS 2,897 986 2,291 6,174
Ten percent discount factor (1,215) (352) (917) (2,484)
--------- --------- --------- ---------
STANDARDIZED MEASURE 1,682 634 1,374 3,690
Share of equity investees' standardized measure 89 202 179 470
--------- --------- --------- ---------
$ 1,771 $ 836 $ 1,553 $ 4,160
====================================================== ========= ========= ========= =========
AT DECEMBER 31, 1996
Future cash flows $ 8,887 $ 4,642 $ 8,399 $ 21,928
Future costs
Production costs and other operating expenses (3,296) (1,853) (3,139) (8,288)
Development costs(b) (514) (289) (1,184) (1,987)
--------- --------- --------- ---------
FUTURE NET CASH FLOWS BEFORE INCOME TAXES 5,077 2,500 4,076 11,653
Future income tax expense (1,646) (875) (457) (2,978)
--------- --------- --------- ---------
FUTURE NET CASH FLOWS 3,431 1,625 3,619 8,675
Ten percent discount factor (1,462) (555) (1,418) (3,435)
--------- --------- --------- ---------
STANDARDIZED MEASURE 1,969 1,070 2,201 5,240
Share of equity investees' standardized measure 117 104 234 455
--------- --------- --------- ---------
$ 2,086 $ 1,174 $ 2,435 $ 5,695
====================================================== ========= ========= ========= =========
AT DECEMBER 31, 1995
Future cash flows $ 6,110 $ 4,206 $ 5,639 $ 15,955
Future costs
Production costs and other operating expenses (2,479) (1,824) (2,303) (6,606)
Development costs(b) (496) (269) (689) (1,454)
--------- --------- --------- ---------
FUTURE NET CASH FLOWS BEFORE INCOME TAXES 3,135 2,113 2,647 7,895
Future income tax expense (916) (655) (234) (1,805)
--------- --------- --------- ---------
FUTURE NET CASH FLOWS 2,219 1,458 2,413 6,090
Ten percent discount factor (979) (564) (957) (2,500)
--------- --------- --------- ---------
STANDARDIZED MEASURE 1,240 894 1,456 3,590
Share of equity investees' standardized measure 76 53 239 368
--------- --------- --------- ---------
$ 1,316 $ 947 $ 1,695 $ 3,958
====================================================== ========= ========= ========= =========
</TABLE>
(a) Includes amounts applicable to operating interests in which Occidental
receives an agreed-upon fee per barrel of crude oil produced.
(b) Includes dismantlement and abandonment costs.
61
<PAGE> 45
CHANGES IN THE STANDARDIZED MEASURE OF DISCOUNTED FUTURE
NET CASH FLOWS FROM PROVED RESERVE QUANTITIES
In millions
<TABLE>
<CAPTION>
For the years ended December 31, 1997 1996 1995
===================================================================== ========= ========= =========
<S> <C> <C> <C>
BEGINNING OF YEAR $ 5,240 $ 3,590 $ 3,302
--------- --------- ---------
Sales and transfers of oil and gas produced, net of production
costs and other operating expenses (1,561) (1,640) (1,169)
Net change in prices received per barrel, net of production
costs and other operating expenses (2,071) 2,604 672
Extensions, discoveries and improved recovery, net of future
production and development costs 379 576 170
Change in estimated future development costs (455) (620) (110)
Revisions of quantity estimates 132 863 394
Development costs incurred during the period 798 573 401
Accretion of discount 498 305 369
Net change in income taxes 795 (655) (195)
Purchases and sales of reserves in place, net 92 (403) (247)
Changes in production rates and other (157) 47 3
--------- --------- ---------
NET CHANGE (1,550) 1,650 288
--------- --------- ---------
END OF YEAR $ 3,690 $ 5,240 $ 3,590
===================================================================== ========= ========= =========
</TABLE>
The information set forth below does not include information with respect to
operations of equity investees.
The following table sets forth, for each of the three years in the period
ended December 31, 1997, Occidental's approximate average sales prices and
average production costs of oil and gas. Production costs are the costs incurred
in lifting the oil and gas to the surface and include gathering, treating,
primary processing, field storage, property taxes and insurance on proved
properties, but do not include depreciation, depletion and amortization,
royalties, income taxes, interest, general and administrative and other
expenses.
AVERAGE SALES PRICES AND AVERAGE PRODUCTION COSTS OF OIL AND GAS
<TABLE>
<CAPTION>
Other
Western Eastern
United Hemi- Hemi-
For the years ended December 31, States sphere(a,b) sphere(a)
=================================================== ========= ========= =========
<S> <C> <C> <C>
1997
Oil -- Average sales price ($/bbl.) $ 18.72 $ 11.88 $ 17.21
Gas -- Average sales price ($/Mcf) $ 2.39 $ -- $ 2.40
Average oil and gas production cost ($/bbl.)(c) $ 4.17 $ 3.73 $ 3.63
- --------------------------------------------------- --------- --------- ---------
1996
Oil -- Average sales price ($/bbl.) $ 18.98 $ 12.66 $ 17.66
Gas -- Average sales price ($/Mcf) $ 2.11 $ -- $ 2.23
Average oil and gas production cost ($/bbl.)(c) $ 4.05 $ 3.37 $ 4.09
- --------------------------------------------------- --------- --------- ---------
1995
Oil -- Average sales price ($/bbl.) $ 15.78 $ 10.28 $ 15.85
Gas -- Average sales price ($/Mcf) $ 1.51 $ -- $ 2.07
Average oil and gas production cost ($/bbl.)(c) $ 4.16 $ 3.35 $ 3.61
- --------------------------------------------------- --------- --------- ---------
</TABLE>
(a) Sales prices include royalties with respect to certain of Occidental's
interests.
(b) Sales prices include fees received under service contracts.
(c) Natural gas volumes have been converted to equivalent barrels based on
energy content of six Mcf of gas to one barrel of oil.
62
<PAGE> 46
The following table sets forth, for each of the three years in the period
ended December 31, 1997, Occidental's net productive and dry exploratory and
development wells drilled.
NET PRODUCTIVE AND DRY--EXPLORATORY AND DEVELOPMENT WELLS DRILLED
<TABLE>
<CAPTION>
Other
Western Eastern
United Hemi- Hemi- Total
For the years ended December 31, States sphere sphere Worldwide
====================================================== ========= ========= ========= =========
<S> <C> <C> <C> <C>
1997
Oil-- Exploratory -- 2.3 1.0 3.3
Development 98.8 15.6 43.6 158.0
Gas-- Exploratory 1.2 -- 1.4 2.6
Development 76.0 -- 2.1 78.1
Dry-- Exploratory 5.6 -- 10.2 15.8
Development 18.1 1.0 1.1 20.2
- ------------------------------------------------------ --------- --------- --------- ---------
1996
Oil-- Exploratory -- 2.8 3.6 6.4
Development 61.6 23.2 18.4 103.2
Gas-- Exploratory 2.6 -- 2.0 4.6
Development 103.2 -- 1.7 104.9
Dry-- Exploratory 5.5 2.5 6.2 14.2
Development 15.6 0.5 2.1 18.2
- ------------------------------------------------------ --------- --------- --------- ---------
1995
Oil-- Exploratory 1.4 0.7 2.0 4.1
Development 79.3 20.6 26.8 126.7
Gas-- Exploratory 9.0 -- 1.7 10.7
Development 90.1 -- 4.7 94.8
Dry-- Exploratory 5.5 2.7 7.9 16.1
Development 14.5 0.4 -- 14.9
- ------------------------------------------------------ --------- --------- --------- ---------
</TABLE>
The following table sets forth, as of December 31, 1997, Occidental's
productive oil and gas wells (both producing wells and wells capable of
production). The numbers in parentheses indicate the number of wells with
multiple completions.
PRODUCTIVE OIL AND GAS WELLS
<TABLE>
<CAPTION>
Other
United Western Eastern Total
Wells at December 31, 1997 States Hemisphere Hemisphere Worldwide
==================================== ================== ================== ================== ==================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Oil-- Gross(a) 8,634 (250) 411 (-) 798 (46) 9,843 (296)
Net(b) 4,955 (57) 282 (-) 421 (34) 5,658 (91)
Gas-- Gross(a) 3,531 (179) -- (-) 115 (-) 3,646 (179)
Net(b) 2,489 (46) -- (-) 37 (-) 2,526 (46)
- ------------------------------------ ------------------ ------------------ ------------------ ------------------
</TABLE>
(a) The total number of wells in which interests are owned or which are
operated under service contracts.
(b) The sum of fractional interests.
The following table sets forth, as of December 31, 1997, Occidental's
participation in exploratory and development wells being drilled.
PARTICIPATION IN EXPLORATORY AND DEVELOPMENT WELLS BEING DRILLED
<TABLE>
<CAPTION>
Other
Western Eastern
United Hemi- Hemi- Total
Wells at December 31, 1997 States sphere sphere Worldwide
====================================================== ========= ========= ========= =========
<S> <C> <C> <C> <C>
Exploratory and development wells-- Gross 34 5 15 54
Net 27 4 7 38
- ------------------------------------------------------ --------- --------- --------- ---------
</TABLE>
At December 31, 1997, Occidental was participating in 43 pressure maintenance
and waterflood projects in the United States, 4 in Latin America, 10 in the
Middle East and 2 in Russia.
63
<PAGE> 47
The following table sets forth, as of December 31, 1997, Occidental's
holdings of developed and undeveloped oil and gas acreage.
OIL AND GAS ACREAGE
<TABLE>
<CAPTION>
Other
Western Eastern
United Hemi- Hemi- Total
Thousands of acres States sphere sphere Worldwide
====================================================== ========= ========= ========= =========
<S> <C> <C> <C> <C>
Developed(a) -- Gross(b) 2,587 129 11,389 14,105
Net(c) 1,544 120 5,451 7,115
- ------------------------------------------------------ --------- --------- --------- ---------
Undeveloped(d) -- Gross(b) 1,625 2,857 32,472 36,954
Net(c) 851 2,649 16,382 19,882
- ------------------------------------------------------ --------- --------- --------- ---------
</TABLE>
(a) Acres spaced or assigned to productive wells.
(b) Total acres in which interests are held.
(c) Sum of the fractional interests owned, based on working interests or
shares of production, if under production-sharing agreements.
(d) Acres on which wells have not been drilled or completed to a point that
would permit the production of commercial quantities of oil and gas,
regardless of whether the acreage contains proved reserves.
The following table sets forth, for each of the three years in the period
ended December 31, 1997, Occidental's domestic oil and natural gas production.
OIL AND NATURAL GAS PRODUCTION--DOMESTIC
<TABLE>
<CAPTION>
Oil Production Natural Gas Production
Thousands of barrels per day Millions of cubic feet per day
----------------------------------- -----------------------------------
1997 1996 1995 1997 1996 1995
======================================= ========= ========= ========= ========= ========= =========
<S> <C> <C> <C> <C> <C> <C>
California 1 2 5 -- -- --
Gulf of Mexico 12 10 11 138 154 157
Kansas 6 6 6 190 186 193
Louisiana 5 6 7 39 43 39
Mississippi -- 1 1 5 3 4
New Mexico 2 3 3 28 24 22
Oklahoma 4 4 5 50 52 57
Texas 22 21 21 123 126 128
Wyoming -- -- -- 9 9 8
Other States 5 4 5 14 4 4
--------- --------- --------- --------- --------- ---------
TOTAL 57 57 64 596 601 612
======================================= ========= ========= ========= ========= ========= =========
</TABLE>
The following table sets forth, for each of the three years in the period
ended December 31, 1997, Occidental's international oil and natural gas
production.
OIL AND NATURAL GAS PRODUCTION--INTERNATIONAL
<TABLE>
<CAPTION>
Oil Production Natural Gas Production
Thousands of barrels per day Millions of cubic feet per day
----------------------------------- -----------------------------------
1997 1996 1995 1997 1996 1995
======================================= ========= ========= ========= ========= ========= =========
<S> <C> <C> <C> <C> <C> <C>
Colombia 24 29 30 -- -- --
Congo -- 4 9 -- -- --
Ecuador 15 18 20 -- -- --
Netherlands -- -- -- 72 72 78
Oman 14 13 12 -- -- --
Pakistan 7 6 6 38 43 49
Peru 50 54 58 -- -- --
Qatar 45 38 20 -- -- --
Russia 26 25 23 -- -- --
Venezuela 25 27 21 -- -- --
Yemen 14 15 15 -- -- --
--------- --------- --------- --------- --------- ---------
TOTAL 220 229 214 110 115 127
======================================= ========= ========= ========= ========= ========= =========
</TABLE>
64
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES
The following is a list of the Registrant's subsidiaries at December 31,
1997, other than certain subsidiaries that did not in the aggregate constitute a
significant subsidiary.
<TABLE>
<CAPTION>
JURISDICTION OF
NAME FORMATION
- ---- ---------------
<S> <C>
B & D Cogen Funding Corp. Delaware
Compania Occidental de Hidrocarburos, Inc. California
Glenn Springs Holdings, Inc. Delaware
Laurel Industries, Inc. Ohio
MC Exploration Corporation Delaware
MC Leasing, Inc. Delaware
MC Panhandle, Inc. Delaware
MidCon Texas Pipeline, L.P. Delaware
Natural Gas Odorizing, Inc. Oklahoma
Occidental C.O.B. Partners Delaware
Occidental Chemical Chile S.A.I. Chile
Occidental Chemical Corporation New York
Occidental Chemical Europe, S.A. Belgium
Occidental Chemical Holding Corporation California
Occidental Chemical International, Inc. California
Occidental Crude Sales, Inc. Delaware
Occidental de Colombia, Inc. Delaware
Occidental Exploration and Production Company California
Occidental International Exploration and Production Company California
Occidental International Holdings Ltd. Bermuda
Occidental Netherlands, Inc. Delaware
Occidental of Oman, Inc. Nevis
Occidental of Russia Ltd. Bermuda
Occidental Oil and Gas Corporation California
Occidental Peninsula, Inc. Delaware
Occidental Peruana, Inc. California
Occidental Petroleum (Malaysia) Ltd. Bermuda
Occidental Petroleum (Pakistan), Inc. Delaware
Occidental Petroleum (South America), Inc. Delaware
Occidental Petroleum Investment Co. California
Occidental Petroleum of Qatar Ltd. Bermuda
Occidental Philippines, Inc. California
Occidental Quimica do Brasil Ltda. Brazil
Occidental Receivables, Inc. California
Occidental Tower Corporation Delaware
Oxy CH Corporation California
Oxy Chemical Corporation California
Oxy Durez Holding Company Ltd. Canada
Oxy Petrochemicals Inc. Delaware
OXY USA Inc. Delaware
Oxy VCM Corporation Delaware
Oxy Westwood Corporation California
OxyChem (Canada), Inc. Canada
PDG Chemical Inc. Delaware
Placid Oil Company Delaware
Repsol Occidental Corporation Delaware
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference of (a) our report, dated February 16, 1998, appearing in Occidental
Petroleum Corporation's Annual Report for the year ended December 31, 1997, and
(b) our report, dated February 16, 1998, appearing in Occidental Petroleum
Corporation's Annual Report on Form 10-K for the year ended December 31, 1997,
into Occidental Petroleum Corporation's previously filed Registration Statements
Nos. 33-5487, 33-5490, 33-14662, 33-23798, 33-40054, 33-44791, 33-47636,
33-60492, 33-59395, 33-64719, 333-11897 and 333-17879.
Los Angeles, California ARTHUR ANDERSEN LLP
March 26, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 113
<SECURITIES> 0
<RECEIVABLES> 627
<ALLOWANCES> 24
<INVENTORY> 604
<CURRENT-ASSETS> 1,916
<PP&E> 16,557
<DEPRECIATION> 7,967
<TOTAL-ASSETS> 15,282
<CURRENT-LIABILITIES> 1,870
<BONDS> 5,160
0
2,525
<COMMON> 68
<OTHER-SE> 1,693
<TOTAL-LIABILITY-AND-EQUITY> 15,282
<SALES> 8,016
<TOTAL-REVENUES> 8,101
<CGS> 5,844
<TOTAL-COSTS> 5,844
<OTHER-EXPENSES> 255
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 434
<INCOME-PRETAX> 527
<INCOME-TAX> 311
<INCOME-CONTINUING> 217
<DISCONTINUED> (607)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (390)
<EPS-PRIMARY> (1.43)
<EPS-DILUTED> (1.43)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1995, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 580
<SECURITIES> 0
<RECEIVABLES> 659
<ALLOWANCES> 19
<INVENTORY> 563
<CURRENT-ASSETS> 2,259
<PP&E> 15,449
<DEPRECIATION> 7,251
<TOTAL-ASSETS> 15,342
<CURRENT-LIABILITIES> 2,300
<BONDS> 5,078
0
1,325
<COMMON> 64
<OTHER-SE> 3,241
<TOTAL-LIABILITY-AND-EQUITY> 15,342
<SALES> 8,389
<TOTAL-REVENUES> 8,633
<CGS> 6,221
<TOTAL-COSTS> 6,221
<OTHER-EXPENSES> 127
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 579
<INCOME-PRETAX> 577
<INCOME-TAX> 313
<INCOME-CONTINUING> 358
<DISCONTINUED> 153
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 511
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 1.31
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 258
<SECURITIES> 0
<RECEIVABLES> 650
<ALLOWANCES> 24
<INVENTORY> 582
<CURRENT-ASSETS> 1,910
<PP&E> 15,886
<DEPRECIATION> 7,690
<TOTAL-ASSETS> 14,981
<CURRENT-LIABILITIES> 1,837
<BONDS> 4,748
0
2,725
<COMMON> 66
<OTHER-SE> 2,349
<TOTAL-LIABILITY-AND-EQUITY> 14,981
<SALES> 7,987
<TOTAL-REVENUES> 8,312
<CGS> 5,796
<TOTAL-COSTS> 5,796
<OTHER-EXPENSES> 220
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 482
<INCOME-PRETAX> 786
<INCOME-TAX> 342
<INCOME-CONTINUING> 514
<DISCONTINUED> 184
<EXTRAORDINARY> (30)
<CHANGES> 0
<NET-INCOME> 668
<EPS-PRIMARY> 1.77
<EPS-DILUTED> 1.73
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31, 1996,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 148
<SECURITIES> 0
<RECEIVABLES> 769
<ALLOWANCES> 18
<INVENTORY> 572
<CURRENT-ASSETS> 1,918
<PP&E> 15,564
<DEPRECIATION> 7,352
<TOTAL-ASSETS> 14,906
<CURRENT-LIABILITIES> 1,702
<BONDS> 5,216
0
1,325
<COMMON> 64
<OTHER-SE> 3,280
<TOTAL-LIABILITY-AND-EQUITY> 14,906
<SALES> 1,821
<TOTAL-REVENUES> 1,865
<CGS> 1,340
<TOTAL-COSTS> 1,340
<OTHER-EXPENSES> 22
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 140
<INCOME-PRETAX> 169
<INCOME-TAX> 100
<INCOME-CONTINUING> 86
<DISCONTINUED> 78
<EXTRAORDINARY> (30)
<CHANGES> 0
<NET-INCOME> 134
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.35
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 30, 1996,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 145
<SECURITIES> 0
<RECEIVABLES> 649
<ALLOWANCES> 15
<INVENTORY> 544
<CURRENT-ASSETS> 1,892
<PP&E> 15,671
<DEPRECIATION> 7,466
<TOTAL-ASSETS> 14,963
<CURRENT-LIABILITIES> 1,710
<BONDS> 5,051
0
1,325
<COMMON> 64
<OTHER-SE> 3,450
<TOTAL-LIABILITY-AND-EQUITY> 14,963
<SALES> 3,758
<TOTAL-REVENUES> 3,965
<CGS> 2,732
<TOTAL-COSTS> 2,732
<OTHER-EXPENSES> 135
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 260
<INCOME-PRETAX> 427
<INCOME-TAX> 229
<INCOME-CONTINUING> 235
<DISCONTINUED> 110
<EXTRAORDINARY> (30)
<CHANGES> 0
<NET-INCOME> 315
<EPS-PRIMARY> 0.84
<EPS-DILUTED> 0.84
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 172
<SECURITIES> 0
<RECEIVABLES> 720
<ALLOWANCES> 22
<INVENTORY> 546
<CURRENT-ASSETS> 1,821
<PP&E> 15,695
<DEPRECIATION> 7,616
<TOTAL-ASSETS> 14,843
<CURRENT-LIABILITIES> 1,755
<BONDS> 4,821
0
1,325
<COMMON> 66
<OTHER-SE> 3,678
<TOTAL-LIABILITY-AND-EQUITY> 14,843
<SALES> 5,991
<TOTAL-REVENUES> 6,273
<CGS> 4,416
<TOTAL-COSTS> 4,416
<OTHER-EXPENSES> 171
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 373
<INCOME-PRETAX> 596
<INCOME-TAX> 251
<INCOME-CONTINUING> 399
<DISCONTINUED> 140
<EXTRAORDINARY> (30)
<CHANGES> 0
<NET-INCOME> 509
<EPS-PRIMARY> 1.37
<EPS-DILUTED> 1.33
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31, 1997,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 303
<SECURITIES> 0
<RECEIVABLES> 606
<ALLOWANCES> 25
<INVENTORY> 537
<CURRENT-ASSETS> 1,856
<PP&E> 16,094
<DEPRECIATION> 7,870
<TOTAL-ASSETS> 15,130
<CURRENT-LIABILITIES> 1,793
<BONDS> 4,875
0
2,725
<COMMON> 66
<OTHER-SE> 2,426
<TOTAL-LIABILITY-AND-EQUITY> 15,130
<SALES> 1,917
<TOTAL-REVENUES> 1,950
<CGS> 1,327
<TOTAL-COSTS> 1,327
<OTHER-EXPENSES> 31
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 108
<INCOME-PRETAX> 270
<INCOME-TAX> 161
<INCOME-CONTINUING> 127
<DISCONTINUED> 52
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 179
<EPS-PRIMARY> .48
<EPS-DILUTED> .46
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 30, 1997,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 315
<SECURITIES> 0
<RECEIVABLES> 645
<ALLOWANCES> 25
<INVENTORY> 574
<CURRENT-ASSETS> 1,917
<PP&E> 16,314
<DEPRECIATION> 7,974
<TOTAL-ASSETS> 15,283
<CURRENT-LIABILITIES> 1,851
<BONDS> 4,980
0
2,707
<COMMON> 66
<OTHER-SE> 2,513
<TOTAL-LIABILITY-AND-EQUITY> 15,283
<SALES> 4,075
<TOTAL-REVENUES> 4,138
<CGS> 2,931
<TOTAL-COSTS> 2,931
<OTHER-EXPENSES> 60
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 216
<INCOME-PRETAX> 524
<INCOME-TAX> 289
<INCOME-CONTINUING> 265
<DISCONTINUED> 72
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 337
<EPS-PRIMARY> .88
<EPS-DILUTED> .84
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30,
1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 164
<SECURITIES> 0
<RECEIVABLES> 561
<ALLOWANCES> 25
<INVENTORY> 563
<CURRENT-ASSETS> 1,686
<PP&E> 16,286
<DEPRECIATION> 7,812
<TOTAL-ASSETS> 15,132
<CURRENT-LIABILITIES> 1,673
<BONDS> 5,021
0
2,611
<COMMON> 68
<OTHER-SE> 2,678
<TOTAL-LIABILITY-AND-EQUITY> 15,132
<SALES> 6,082
<TOTAL-REVENUES> 6,170
<CGS> 4,379
<TOTAL-COSTS> 4,379
<OTHER-EXPENSES> 84
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 323
<INCOME-PRETAX> 734
<INCOME-TAX> 364
<INCOME-CONTINUING> 395
<DISCONTINUED> 99
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 494
<EPS-PRIMARY> 1.29
<EPS-DILUTED> 1.23
</TABLE>
