<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
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
---------------------
OCCIDENTAL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-4035997
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10889 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
(Address of principal executive offices) (Zip Code)
(310) 208-8800
(Registrant's telephone number, including area code)
---------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at June 30, 1999
--------------------------- ----------------------------
Common stock $.20 par value 348,556,630 shares
<PAGE>
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets --
June 30, 1999 and December 31, 1998 2
Consolidated Condensed Statements of Operations --
Three and six months ended June 30, 1999 and 1998 4
Consolidated Condensed Statements of Cash Flows --
Six months ended June 30, 1999 and 1998 5
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
PART II OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 6. Exhibits and Reports on Form 8-K 20
</TABLE>
1
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998
(Amounts in millions)
<TABLE>
<CAPTION>
1999 1998
================================================================================= ============ =============
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 267 $ 96
Receivables, net 753 531
Inventories 498 500
Prepaid expenses, note receivable and other 240 1,668
------------ -------------
Total current assets 1,758 2,795
LONG-TERM RECEIVABLES, net 138 121
EQUITY INVESTMENTS 1,885 1,959
PROPERTY, PLANT AND EQUIPMENT, at cost, net of
accumulated depreciation, depletion and amortization of $7,325
at June 30, 1999 and $6,774 at December 31, 1998 10,026 9,905
OTHER ASSETS 484 472
------------ -------------
$ 14,291 $ 15,252
================================================================================= ============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998
(Amounts in millions)
<TABLE>
<CAPTION>
1999 1998
================================================================================= ============= ============
<S> <C> <C>
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt and capital lease liabilities $ 5 $ 1,400
Notes payable 25 30
Accounts payable 702 613
Accrued liabilities 928 865
Domestic and foreign income taxes 1 23
------------- ------------
Total current liabilities 1,661 2,931
------------- ------------
LONG-TERM DEBT, net of current maturities and unamortized discount 5,312 5,367
------------- ------------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred and other domestic and foreign income taxes 891 825
Obligation under natural gas delivery commitment 458 503
Other 2,098 2,258
------------- ------------
3,447 3,586
------------- ------------
MINORITY EQUITY IN SUBSIDIARIES AND PARTNERSHIPS 238 5
------------- ------------
OCCIDENTAL OBLIGATED MANDATORILY REDEEMABLE
TRUST PREFERRED SECURITIES OF A SUBSIDIARY
TRUST HOLDING SOLELY SUBORDINATED NOTES OF
OCCIDENTAL 525 --
------------- ------------
STOCKHOLDERS' EQUITY
Nonredeemable preferred stock, stated at liquidation value 238 243
Common stock, at par value 70 69
Additional paid-in capital 3,651 3,814
Retained earnings (deficit) (795) (734)
Accumulated other comprehensive income (56) (29)
------------- ------------
3,108 3,363
------------- ------------
$ 14,291 $ 15,252
================================================================================= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(Amounts in millions, except per-share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
----------------------- -----------------------
1999 1998 1999 1998
=============================================================== ========== =========== =========== ==========
<S> <C> <C> <C> <C>
REVENUES
Net sales
Oil and gas operations $ 944 $ 739 $ 1,690 $ 1,479
Chemical operations 703 804 1,301 1,764
---------- ----------- ----------- ----------
1,647 1,543 2,991 3,243
Interest, dividends and other income 43 72 86 150
Gains (losses) on disposition of assets, net (21) 304 (18) 411
Income from equity investments 15 1 7 8
---------- ----------- ----------- ----------
1,684 1,920 3,066 3,812
---------- ----------- ----------- ----------
COSTS AND OTHER DEDUCTIONS
Cost of sales 1,280 1,200 2,367 2,465
Selling, general and administrative and other
operating expenses 160 213 320 391
Minority interest 11 -- 20 --
Exploration expense 36 29 52 52
Interest and debt expense, net 129 145 255 276
---------- ----------- ----------- ----------
1,616 1,587 3,014 3,184
---------- ----------- ----------- ----------
Income from continuing operations before taxes 68 333 52 628
Provision for domestic and foreign income and
other taxes 56 147 97 303
---------- ----------- ----------- ----------
Income (loss) from continuing operations 12 186 (45) 325
Discontinued operations, net -- -- -- 38
Extraordinary loss, net (3) -- (3) --
Cumulative effect of changes in accounting principles, net -- -- (13) --
---------- ----------- ----------- ----------
NET INCOME (LOSS) 9 186 (61) 363
Preferred dividends (3) (5) (7) (9)
---------- ----------- ----------- ----------
EARNINGS (LOSS) APPLICABLE TO COMMON STOCK $ 6 $ 181 $ (68) $ 354
========== =========== =========== ==========
BASIC EARNINGS PER COMMON SHARE
Income (loss) from continuing operations $ .03 $ .51 $ (.15) $ .90
Discontinued operations, net -- -- -- .11
Extraordinary loss, net (.01) -- (.01) --
Cumulative effect of changes in accounting principles, net -- -- (.04) --
---------- ----------- ----------- ----------
Basic earnings (loss) per common share $ .02 $ .51 $ (.20) $ 1.01
========== =========== =========== ==========
DILUTED EARNINGS PER COMMON SHARE
Income (loss) from continuing operations $ .03 $ .49 $ (.15) $ .88
Discontinued operations, net -- -- -- .10
Extraordinary loss, net (.01) -- (.01) --
Cumulative effect of changes in accounting principles, net -- -- (.04) --
---------- ----------- ----------- ----------
Diluted earnings (loss) per common share $ .02 $ .49 $ (.20) $ .98
========== =========== =========== ==========
DIVIDENDS PER COMMON SHARE $ .25 $ .25 $ .50 $ .50
========== =========== =========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 348.4 359.1 348.1 351.8
=============================================================== ========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(Amounts in millions)
<TABLE>
<CAPTION>
1999 1998
========================================================================================= =========== ===========
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss) from continuing operations $ (45) $ 325
Adjustments to reconcile income (loss) to net cash provided (used) by
operating activities:
Depreciation, depletion and amortization of assets 400 451
Deferred income tax provision 74 237
Other noncash charges to income 4 26
(Gains) losses on disposition of assets, net 18 (411)
Income from equity investments (7) (8)
Exploration expense 52 52
Changes in operating assets and liabilities (217) (531)
Other operating, net (100) (157)
----------- -----------
179 (16)
Operating cash flow from discontinued operations -- (244)
----------- -----------
Net cash provided (used) by operating activities 179 (260)
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (263) (586)
Sale of businesses and disposal of property, plant and equipment, net 17 3,229
Collection of note receivable related to prior year asset sale 1,395 --
Purchase of businesses, net (113) (3,516)
Other investing, net 83 18
----------- -----------
1,119 (855)
Investing cash flow from discontinued operations -- (5)
----------- -----------
Net cash provided (used) by investing activities 1,119 (860)
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from long-term debt 792 901
Net proceeds from (payments on) commercial paper and revolving credit agreements (2,123) 1,448
Proceeds from issuance of trust preferred securities 508 --
Payments on long-term debt and capital lease liabilities (138) (280)
Proceeds from issuance of common stock 12 12
Repurchase of common stock -- (744)
Proceeds (payments) of notes payable 3 (4)
Cash dividends paid (181) (202)
Other financing, net -- 10
----------- -----------
Net cash provided (used) by financing activities (1,127) 1,141
----------- -----------
Increase in cash and cash equivalents 171 21
Cash and cash equivalents--beginning of period 96 113
----------- -----------
Cash and cash equivalents--end of period $ 267 $ 134
========================================================================================= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 1999
1. General
The accompanying unaudited consolidated condensed financial statements have
been prepared by Occidental Petroleum Corporation (Occidental) pursuant to
the rules and regulations of the Securities and Exchange Commission.
Certain information and disclosures normally included in notes to
consolidated financial statements have been condensed or omitted pursuant
to such rules and regulations, but resultant disclosures are in accordance
with generally accepted accounting principles as they apply to interim
reporting. The consolidated condensed financial statements should be read
in conjunction with the consolidated financial statements and the notes
thereto in Occidental's Annual Report on Form 10-K for the year ended
December 31, 1998 (1998 Form 10-K).
In the opinion of Occidental's management, the accompanying consolidated
condensed financial statements contain all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly Occidental's
consolidated financial position as of June 30, 1999 and the consolidated
results of operations for the three and six months then ended and the
consolidated cash flows for the six months then ended. The results of
operations and cash flows for the periods ended June 30, 1999 are not
necessarily indicative of the results of operations or cash flows to be
expected for the full year.
Certain financial statements and notes for the prior year have been changed
to conform to the 1999 presentation.
Reference is made to Note 1 to the consolidated financial statements in the
1998 Form 10-K for a summary of significant accounting policies.
2. Extraordinary Loss and Changes in Accounting Principles
On June 1, 1999 Occidental called for redemption $68.7 million of its 11
1/8 percent senior debentures due June 1, 2019, at a redemption price of
105.563 percent of the principal amount thereof. Occidental recorded an
after-tax extraordinary loss of $3 million in the second quarter of 1999
related to the redemption.
Effective January 1, 1999, Occidental adopted the provisions of Statement
of Position 98-5--"Reporting on the Costs of Start-Up Activities" (SOP
98-5), which requires that costs of start-up activities, including
organizational costs, be expensed as incurred. The initial application of
the statement resulted in a charge to income for costs of previously
capitalized start-up activities that have not yet been fully amortized. The
initial adoption of SOP 98-5 resulted in a first quarter noncash after-tax
charge of $15 million, net of $8 million in taxes, which has been recorded
as a cumulative effect of a change in accounting principle.
Effective January 1, 1999, Occidental adopted the provisions of Emerging
Issues Task Force (EITF) issue No. 98-10--"Accounting for Contracts
Involved in Energy Trading and Risk Management Activities," which
establishes accounting and reporting standards for certain energy trading
contracts. EITF No. 98-10 requires that energy trading contracts must be
marked-to-market with gains and losses included in earnings and separately
disclosed in the financial statements or footnotes thereto. The initial
adoption of EITF No. 98-10 resulted in a first quarter noncash after-tax
benefit of $2 million, recorded as a cumulative effect of a change in
accounting principle.
6
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3. Comprehensive Income
Occidental's comprehensive income is composed primarily of net income or
loss, foreign currency translation adjustments and minimum pension
liability adjustments. Occidental's comprehensive income was a loss of $88
million and income of $356 million for the six months ended June 30, 1999
and 1998, respectively, and a loss of $10 million and income of $181
million for the second quarter of 1999 and 1998, respectively.
The following table presents Occidental's comprehensive income items (in
millions):
<TABLE>
<CAPTION>
Periods Ended June 30
-------------------------------------------------
Three Months Six Months
----------------------- -----------------------
1999 1998 1999 1998
========================================================= ========== =========== =========== ==========
<S> <C> <C> <C> <C>
Net income (loss) $ 9 $ 186 $ (61) $ 363
Other comprehensive income items
Foreign currency translation adjustments (20) (5) (28) (5)
Minimum pension liability adjustments 1 1 1 1
Other -- (1) -- (3)
---------- ----------- ----------- ----------
Other comprehensive income, net of tax (19) (5) (27) (7)
---------- ----------- ----------- ----------
Comprehensive income (loss) $ (10) $ 181 $ (88) $ 356
========== =========== =========== ==========
</TABLE>
4. Asset Acquisitions and Dispositions
In the second quarter of 1999, Occidental and Unocal International
Corporation (Unocal) announced that Occidental agreed to acquire Unocal's
oil and gas interests in Yemen and Unocal agreed to acquire Occidental's
gas interests in Bangladesh. Although the transactions are scheduled to
close in the third quarter of 1999, the second quarter included the
estimated results of the transaction which, after tax credits, is not
expected to have a significant impact on earnings.
Effective April 30, 1999, Occidental and The Geon Company (Geon) formed two
partnerships. Occidental has a 76 percent controlling interest in a
polyvinyl chloride (PVC) resin partnership, which is the larger of the
partnerships, and a 10 percent interest in a PVC powder compounding
partnership. The PVC resin partnership has also entered into long-term
agreements to supply PVC resin to Geon and vinyl chloride monomer (VCM) to
both Occidental and Geon. In addition, as part of the transaction,
Occidental sold its pellet compounding plant in Pasadena, Texas and its
vinyl film assets in Burlington, New Jersey to Geon. As part of the
transaction, Geon realized approximately $104 million through the retention
of working capital and the distribution of cash from the PVC resin
partnership and the PVC resin partnership undertook approximately $180
million in lease obligations for certain plant facilities. Occidental did
not record a significant gain or loss on the transaction.
In May 1998, Occidental contributed its ethylene, propylene, ethylene oxide
(EO), ethylene glycol and EO derivatives businesses to a partnership called
Equistar Chemicals, LP (Equistar), in return for a 29.5 percent equity
interest in the partnership, receipt of approximately $420 million in cash
and the assumption by Equistar of approximately $205 million of Occidental
capital lease liabilities. Occidental did not record a gain or loss on the
transaction.
On February 5, 1998, Occidental acquired the U.S. government's approximate
78 percent interest in the Elk Hills Naval Petroleum Reserve oil and gas
fields for approximately $3.5 billion.
In the first quarter and second quarter of 1998, Occidental sold certain
nonstrategic oil and gas properties located in Venezuela and the United
States for aggregate net proceeds of approximately $1 billion. These
7
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sales resulted in net pretax gains of approximately $395 million, of which
$290 million was recorded in the second quarter of 1998.
On January 31, 1998, Occidental completed the sale of MidCon, its natural
gas transmission and marketing business. In the fourth quarter of 1997,
Occidental classified MidCon and its subsidiaries as a discontinued
operation.
5. Supplemental Cash Flow Information
Cash payments during the six months ended June 30, 1999 and 1998 included
federal, foreign and state income taxes of approximately $51 million and
$180 million, respectively. Interest paid (net of interest capitalized)
totaled approximately $219 million and $235 million for the six months
ended June 30, 1999 and 1998, respectively.
6. Cash and Cash Equivalents
Cash equivalents consist of highly liquid money-market mutual funds and
bank deposits with maturities of three months or less when purchased. Cash
equivalents totaled $127 million and $58 million at June 30, 1999 and
December 31, 1998, respectively.
7. Inventories
A portion of inventories is valued under the LIFO method. The valuation of
LIFO inventory for interim periods is based on management's estimates of
year-end inventory levels and costs. Inventories consist of the following
(in millions):
<TABLE>
<CAPTION>
Balance at June 30, 1999 December 31, 1998
======================== ==================== =====================
<S> <C> <C>
Raw materials $ 51 $ 38
Materials and supplies 180 184
Work in process 7 5
Finished goods 256 278
--------- ---------
494 505
LIFO adjustment 4 (5)
========= =========
Total $ 498 $ 500
========= =========
</TABLE>
8. Property, Plant and Equipment
Reference is made to the consolidated balance sheets and Note 1 thereto in
the 1998 Form 10-K for a description of investments in property, plant and
equipment.
9. Trust Preferred Securities
In January 1999, Oxy Capital Trust I, a wholly-owned subsidiary of
Occidental, issued 21,000,000 shares of 8.16 percent Trust Originated
Preferred Securities (Preferred Securities) to the public and 649,485
shares of Trust Originated Common Securities (Common Securities) to
Occidental. The proceeds of such issuances were invested by Oxy Capital
Trust I in $541.2 million aggregate principal amount of Occidental's 8.16
percent Subordinated Deferrable Interest Notes due 2039 (Trust Subordinated
Notes). The Trust Subordinated Notes represent the sole assets of Oxy
Capital Trust I. The Trust Subordinated Notes are unsecured
8
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obligations of Occidental and are junior in right of payment to all present
and future senior indebtedness of Occidental and are also effectively
subordinate to certain indebtedness of Occidental's consolidated
subsidiaries.
Occidental has guaranteed, on a subordinated basis, distributions and other
payments due on the Preferred Securities (the Guarantee). The Guarantee,
when taken together with Occidental's obligations under the Trust
Subordinated Notes and the indenture pursuant to which the Trust
Subordinated Notes were issued and Occidental's obligations under the
Amended and Restated Declaration of Trust governing Oxy Capital Trust I,
provides a full and unconditional guarantee of amounts due on the Preferred
Securities.
The Trust Subordinated Notes and the related Oxy Capital Trust I investment
in the Trust Subordinated Notes have been eliminated in consolidation and
the Preferred Securities are reported as Occidental Obligated Mandatorily
Redeemable Trust Preferred Securities of a Subsidiary Trust Holding Solely
Subordinated Notes of Occidental in the accompanying consolidated condensed
financial statements. Distributions on the Preferred Securities are
reported under the caption minority interest, in the statements of
operations. Total net proceeds to Occidental were $508 million.
10. Retirement Plans and Postretirement Benefits
Reference is made to Note 14 to the consolidated financial statements in
the 1998 Form 10-K for a description of the retirement plans and
postretirement benefits of Occidental and its subsidiaries.
11. 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.
In December 1998, David Croucher and others filed an action in the Federal
District Court in Houston, Texas on behalf of persons claiming to have been
beneficiaries of the MidCon Employee Stock Ownership Plan (ESOP). The
plaintiffs allege that each of the U.S. Trust Company of California (the
ESOP Trustee) and the MidCon ESOP Administrative Committee breached its
fiduciary duty to the plaintiffs by failing to properly value the
securities held by the ESOP, and allege that Occidental actively
participated in such conduct. The plaintiffs claim that, as a result of
this alleged breach, the ESOP participants are entitled to an additional
aggregate distribution of at least $200 million and that Occidental has
been unjustly enriched and is liable for failing to make that distribution.
Based on the joint motion of the parties, in July 1999, the Court entered
an order certifying the case as a class action.
During the course of its operations, Occidental is subject to audit by
taxing authorities for varying periods in various tax jurisdictions.
Occidental has certain other commitments under contracts, guarantees and
joint ventures, and certain other contingent liabilities.
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
9
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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.
Reference is made to Note 10 to the consolidated financial statements in
the 1998 Form 10-K for information concerning Occidental's long-term
purchase obligations for certain products and services.
12. Income Taxes
The provision for taxes based on income for the 1999 and 1998 interim
periods was computed in accordance with Interpretation No. 18 of APB
Opinion No. 28 on reporting taxes for interim periods and was based on
projections of total year pretax income.
At December 31, 1998, Occidental had, for U.S. federal income tax return
purposes, an alternative minimum tax credit carryforward of $85 million
available to reduce future income taxes. The alternative minimum tax credit
carryforward does not expire.
13. Investments
Investments in entities, 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 June 30, 1999, Occidental's equity
investments consisted primarily of a 29.5 percent interest in Equistar
acquired in May 1998, an investment of approximately 29 percent in the
common shares of Canadian Occidental Petroleum Ltd. and interests in
various chemical partnerships and joint ventures. The following table
presents Occidental's proportionate interest in the summarized financial
information of its equity method investments (in millions):
<TABLE>
<CAPTION>
Periods Ended June 30
-----------------------------------------------------------
Three Months Six Months
--------------------------- ---------------------------
1999 1998 1999 1998
=========== =========== =========== ===========
<S> <C> <C> <C> <C>
Revenues $ 548 $ 396 $ 1,052 $ 606
Costs and expenses 533 395 1,045 598
----------- ----------- ----------- -----------
Net income $ 15 $ 1 $ 7 $ 8
=========== =========== =========== ===========
</TABLE>
10
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14. 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 tables present summarized financial information
for OXY USA (in millions):
<TABLE>
<CAPTION>
Periods Ended June 30
-----------------------------------------------------------
Three Months Six Months
--------------------------- ---------------------------
1999 1998 1999 1998
=========== =========== =========== ===========
<S> <C> <C> <C> <C>
Revenues $ 122 $ 448 $ 223 $ 844
Costs and expenses 121 333 224 641
----------- ----------- ----------- -----------
Net income (loss) $ 1 $ 115(a) $ (1) $ 203
=========== =========== =========== ===========
</TABLE>
(a) Includes net gains on the sale of certain nonstrategic assets
of $106 million.
<TABLE>
<CAPTION>
Balance at June 30, 1999 December 31, 1998
================================= =========================== =====================
<S> <C> <C>
Current assets $ 40 $ 67
Intercompany receivable $ 88 $ 170
Noncurrent assets $ 1,607 $ 1,673
Current liabilities $ 181 $ 237
Interest bearing note to parent $ 64 $ 73
Noncurrent liabilities $ 802 $ 909
Stockholders' equity $ 688 $ 691
</TABLE>
15. Industry Segments
The following table presents Occidental's interim industry segment
disclosures (in millions):
<TABLE>
<CAPTION>
Oil and Gas Chemical Corporate Total
======================================== =============== ================ ============= ==============
<S> <C> <C> <C> <C>
Six months ended June 30, 1999
Net sales $ 1,690 $ 1,301 $ -- $ 2,991
=============== ================ ============= ==============
Pretax operating profit (loss) $ 337 $ 43 $ (328)(a) $ 52
Income taxes (109) (5) 17 (b) (97)
Extraordinary loss, net -- -- (3) (3)
Cumulative effect of changes in
accounting principles, net -- -- (13) (13)
--------------- ---------------- ------------- --------------
Net income (loss) $ 228 $ 38 $ (327) $ (61)
======================================== =============== ================ ============= ==============
Six months ended June 30, 1998
Net sales $ 1,479 $ 1,764 $ -- $ 3,243
=============== ================ ============= ==============
Pretax operating profit (loss) $ 694(c) $ 216 $ (282)(a) $ 628
Income taxes (82) 2 (223)(b) (303)
Discontinued operations, net -- -- 38 38
--------------- ---------------- ------------- --------------
Net income (loss) $ 612 $ 218 $ (467) $ 363
======================================== =============== ================ ============= ==============
</TABLE>
(a) Includes unallocated net interest expense, administration expense and
other items.
(b) Includes unallocated income taxes.
(c) Includes net pretax gains of approximately $395 million related to the
sale of nonstrategic assets located in Venezuela and the United States.
11
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16. Subsequent Event
As previously disclosed, in April 1996, Occidental acquired a 64 percent
interest in INDSPEC Holding Corporation (INDSPEC), a leading manufacturer
of resorcinol, a bonding agent principally used in tires, with other flame
retardant applications. In the third quarter of 1999, pursuant to a series
of transactions, Occidental indirectly acquired ownership of INDSPEC
through the issuance of approximately 3.2 million shares of Occidental
common stock at an estimated value of approximately $68 million. As a
result of the transactions, Occidental owns 100 percent of the stock of
INDSPEC, which has approximately $80 million of long-term debt outstanding.
12
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Occidental reported a net loss for the first six months of 1999 of $61 million,
on net sales of $3.0 billion, compared with net income of $363 million, on net
sales of $3.2 billion, for the same period of 1998. Occidental's net income for
the second quarter of 1999 was $9 million, on net sales of $1.6 billion,
compared with net income of $186 million, on net sales of $1.5 billion, for the
same period of 1998. Basic earnings per common share were a loss of $.20 for the
first six months of 1999, compared with earnings per share of $1.01 for the same
period of 1998. Basic earnings per common share were $.02 for the second quarter
of 1999, compared with earnings per share of $.51 for the same period of 1998.
The 1999 second quarter earnings included an after-tax extraordinary loss of $3
million related to the early extinguishment of debt. The 1999 results also
included a second quarter gain of $12 million related to the sale of a chemical
plant by an equity affiliate. Results before special items were earnings of $4
million and a loss of $64 million for the three and six months ended June 30,
1999, respectively, compared with earnings of $47 million and $136 million for
the same periods in 1998, respectively. The decrease in earnings before special
items, in both periods, primarily reflected lower prices for chlorine and
caustic soda, however, the second quarter 1999 earnings, compared with the same
period in 1998, also reflected higher worldwide crude oil prices. The 1998
earnings for the first six months included net pretax gains of approximately
$395 million from the sale of certain nonstrategic oil and gas properties, in
Venezuela and the United States, of which $290 million was recorded in the
second quarter. The 1998 earnings also included $30 million for reorganization
and other charges in the chemical division in the second quarter and an
after-tax benefit of $38 million to reflect the closing of the sale of MidCon
Corp. (MidCon), the natural gas transmission and marketing subsidiary, and the
finalization of the discontinued operations reserve in the first quarter.
The increase in net sales for the three months ended June 30, 1999, compared
with the same period in 1998, primarily reflected higher worldwide crude oil
prices and higher oil and gas trading revenues in the oil and gas division and
revenues related to a new polyvinyl chloride (PVC) resin partnership partially
offset by lower prices for chlorine and caustic soda and also reflected the
absence of revenues related to the petrochemical assets contributed to Equistar
Chemicals, LP (Equistar) in May 1998. The decrease in net sales for the six
months ended June 30, 1999, compared with the same period in 1998, primarily
reflected the absence of revenues related to the petrochemical assets
contributed to Equistar and lower prices for chlorine and caustic soda partially
offset by revenues related to the PVC resin partnership and higher oil and gas
trading revenues.
Interest, dividends and other income for the three and six months ended June 30,
1998 included, among other things, interest earned on a $1.4 billion note
received (the $1.4 billion note receivable) in exchange for a note previously
issued to Occidental by the MidCon Corp. ESOP Trust. Gains on disposition of
assets in 1998, included the sales of certain nonstrategic oil and gas
properties. The loss on disposition of assets for 1999 included the estimated
results related to the announcement that Occidental agreed to acquire Unocal
International Corporation's (Unocal) oil and gas interests in Yemen and that
Unocal agreed to acquire Occidental's gas interests in Bangladesh which, after
tax credits, will not have a significant impact on earnings. The transactions
are scheduled to close in the third quarter of 1999. Income from equity
investments in 1999 included the second quarter gain of $12 million related to
the sale of a chemical plant by an equity affiliate. Minority interest includes
$19 million of distributions on the Trust Preferred Securities and the minority
interest in the net income of subsidiaries and partnerships.
13
<PAGE>
The following table sets forth the sales and earnings of each operating division
and corporate items (in millions):
<TABLE>
<CAPTION>
Periods Ended June 30
----------------------------------------------------
Three Months Six Months
------------------------ ------------------------
1999 1998 1999 1998
============================================================= ========== ========== ========== ==========
<S> <C> <C> <C> <C>
DIVISIONAL NET SALES
Oil and Gas $ 944 $ 739 $ 1,690 $ 1,479
Chemical 703 804 1,301 1,764
---------- ---------- ---------- ----------
NET SALES $ 1,647 $ 1,543 $ 2,991 $ 3,243
========== ========== ========== ==========
DIVISIONAL EARNINGS
Oil and Gas $ 165 $ 380 $ 228 $ 612
Chemical 29 60 38 218
---------- ---------- ---------- ----------
194 440 266 830
UNALLOCATED CORPORATE ITEMS
Interest expense, net (123) (118) (239) (230)
Income taxes, administration and other (59) (136) (72) (275)
---------- ---------- ---------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS 12 186 (45) 325
Discontinued operations, net -- -- -- 38
Extraordinary loss, net (3) -- (3) --
Cumulative effect of changes in accounting
principles, net -- -- (13) --
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ 9 $ 186 $ (61) $ 363
============================================================= ========== ========== ========== ==========
</TABLE>
Oil and gas earnings for the first six months of 1999 were $228 million,
compared with $612 million for the same period of 1998. Oil and gas divisional
earnings before special items were $228 million for the first six months of
1999, compared with $217 million for the first six months of 1998. Oil and gas
earnings for the second quarter of 1999 were $165 million, compared with $380
million for the same period of 1998. Oil and gas earnings before special items
were $165 million for the second quarter of 1999, compared with $90 million for
the second quarter of 1998. The increase in earnings before special items for
the three months ended June 30, 1999, compared with the same period in 1998,
reflected the impact of higher worldwide crude oil prices, increased
international production and lower costs, partially offset by higher exploration
expense. The first six months of 1998 earnings included pretax gains of
approximately $395 million related to the sale of nonstrategic assets located in
Venezuela and the United States, of which $290 million was recorded in the
second quarter. The increase in revenues for the three and six months ended June
30, 1999, compared with the same periods in 1998, reflected the impact of higher
oil and gas trading activity and higher worldwide crude oil prices in the second
quarter of 1999. Approximately 38 percent and 30 percent of oil and gas net
sales were attributed to oil and gas trading activity in the first six months of
1999 and 1998, respectively. The results of oil and gas trading were not
significant. Oil and gas prices are sensitive to complex factors, which are
outside the control of Occidental. Accordingly, Occidental is unable to predict
with certainty the direction, magnitude or impact of future trends in sales
prices for oil and gas.
Chemical earnings for the first six months of 1999 were $38 million, compared
with $218 million for the same period of 1998. The 1999 results included a
second quarter gain of $12 million related to the sale of a chemical plant by an
equity affiliate. Chemical earnings before special items were $26 million for
the first six months of 1999, compared with $248 million for the first six
months of 1998. Chemical earnings for the second quarter of 1999 were $29
million, compared with $60 million for the same period of 1998. Chemical
earnings before special items were $17 million for the second quarter of 1999,
compared with $90 million for the second quarter of 1998. The 1998 earnings
reflected a $30 million pretax charge for reorganization and other costs. The
decrease in earnings before special items in both periods primarily reflected
the impact of lower prices for chlorine and caustic
14
<PAGE>
soda. The decrease in sales for both periods reflected the absence of revenues
related to the petrochemical assets contributed to Equistar and lower prices for
chlorine and caustic soda partially offset by revenues related to the PVC resin
partnership. Most of Occidental's chemical products are commodity in nature, the
prices of which are sensitive to a number of complex factors, accordingly,
Occidental is unable to accurately forecast the trend of sales prices for its
commodity chemical products.
Divisional earnings include credits in lieu of U.S. federal income taxes. In the
first six months of 1999 and 1998, divisional earnings benefited by $41 million
and $19 million, respectively, from credits allocated. This included credits of
$33 million and $8 million at oil and gas and chemical, respectively, in the
first six months of 1999 and $6 million and $13 million at oil and gas and
chemical, respectively, for the first six months of 1998. The higher 1999
amounts related to the transactions with Unocal.
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. Occidental has
certain other commitments under contracts, guarantees and joint ventures, and
certain other contingent liabilities.
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.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Occidental's net cash provided by operating activities from continuing
operations was $179 million for the first six months of 1999, compared with net
cash used of $16 million for the same period of 1998. Changes in operating
assets and liabilities reflected lower net working capital usage for the first
six months of 1999, compared with the same period in 1998. Other operating
expenses in 1998 reflected higher payments for non-operating uses such as
litigation, deferred compensation and environmental costs. Included in total
cash flow from operating activities in 1998 was cash used by discontinued
operations of $244 million which included the effect of $250 million of
receivables repurchased in connection with the sale of MidCon.
Occidental's net cash provided by investing activities was $1.1 billion for the
first six months of 1999, compared with net cash used of $860 million for the
same period of 1998. The 1999 amount included the proceeds from the $1.4 billion
note receivable. The 1999 amount also reflected net cash used of $113 million in
connection with the formation of a PVC resin partnership. The 1998 amount
reflected cash used of $3.5 billion for the purchase of the Elk Hills Field and
also reflected proceeds of $3.2 billion, primarily from the sale of MidCon and
certain nonstrategic oil and gas properties, as well as disposals of property,
plant and equipment. Capital expenditures for the first six months of 1999 were
$263 million, including $205 million in oil and gas and $55 million in chemical.
Capital expenditures were $586 million for the first six months of 1998,
including $419 million in oil and gas and $166 million in chemical.
15
<PAGE>
Financing activities used net cash of $1.1 billion in the first six months of
1999, compared with cash provided of $1.1 billion for the same period of 1998.
The 1999 amount reflected the use of the proceeds from the $1.4 billion note
receivable to repay outstanding debt and for the payment of dividends of $181
million. The 1998 amount reflected net cash provided of $2.1 billion primarily
from proceeds from borrowings to fund a portion of the acquisition of the Elk
Hills Field in February 1998. The 1998 amount also included cash used of $744
million for the repurchase of 26.3 million shares of Occidental common stock and
$202 million for the payment of dividends.
Effective April 30, 1999, Occidental and The Geon Company (Geon) formed two
partnerships. Occidental has a 76 percent controlling interest in a PVC resin
partnership which is the larger of the partnerships and a 10 percent interest in
a PVC powder compounding partnership. The PVC resin partnership has also entered
into long-term agreements to supply PVC resin to Geon and vinyl chloride monomer
(VCM) to Occidental and Geon. In addition, as part of the transaction,
Occidental sold its pellet compounding plant in Pasadena, Texas and its vinyl
film assets in Burlington, New Jersey to Geon. As part of the transaction, Geon
realized approximately $104 million through the retention of working capital and
the distribution of cash from the PVC resin partnership and the PVC resin
partnership undertook approximately $180 million in lease obligations for
certain plant facilities. The Geon alliance should further strengthen
Occidental's PVC and VCM position, and Occidental believes that the Geon
alliance will create synergies for its chlorovinyls business. Occidental did not
record a significant gain or loss on the transaction.
As previously disclosed, in April 1996, Occidental acquired a 64 percent
interest in INDSPEC Holding Corporation (INDSPEC), a leading manufacturer of
resorcinol, a bonding agent principally used in tires, with other flame
retardant applications. In the third quarter of 1999, pursuant to a series of
transactions, Occidental indirectly acquired ownership of INDSPEC through the
issuance of approximately 3.2 million shares of Occidental common stock at an
estimated value of approximately $68 million. As a result of the transactions,
Occidental owns 100 percent of the stock of INDSPEC, which has approximately $80
million of long-term debt outstanding.
In May 1998, Occidental contributed its ethylene, propylene, ethylene oxide
(EO), ethylene glycol and EO derivatives businesses to the Equistar partnership,
in return for a 29.5 percent equity interest in the partnership, receipt of
approximately $420 million in cash and the assumption by Equistar of
approximately $205 million of Occidental capital lease liabilities. Occidental
did not record a gain or loss on the transaction.
In January 1999, a subsidiary of Occidental issued $525 million of 8.16 percent
Preferred Securities due in 2039, for net proceeds of $508 million. The net
proceeds were used to repay commercial paper. In February 1999, Occidental
issued $450 million of 7.65 percent senior notes due 2006 and $350 million of
8.45 percent senior notes due 2029 for net proceeds of approximately $792
million. The net proceeds were used to repay all outstanding commercial paper
and will also be used for general corporate purposes which may include, but are
not limited to, the redemption of other debt.
On June 1, 1999 Occidental called for redemption $68.7 million of its 11 1/8
percent senior debentures due June 1, 2019, at a redemption price of 105.563
percent of the principal amount thereof. Occidental recorded an after-tax
extraordinary loss of $3 million in the second quarter of 1999 related to the
redemption.
On June 30, 1999, Occidental established a program under which Occidental may
offer, from time to time, up to $1 billion aggregate initial offering price of
its Medium-Term Senior Notes, Series C and its Medium-Term Subordinated Notes,
Series A.
Occidental expects to have sufficient cash in 1999 for its operating needs,
capital expenditure requirements, dividend payments and debt repayments.
Occidental currently expects to spend, in total, $500 million on its 1999
capital spending program, of which approximately $380 million has been allocated
to oil and gas and approximately $120 million has been allocated to chemical.
Available but unused lines of committed bank credit totaled approximately $2.1
billion at June 30, 1999, compared with $1.5 billion at December 31, 1998.
The balance in cash and cash equivalents at June 30, 1999 included a portion of
the proceeds of the February 1999 issuance of senior notes. The balance in
prepaid expenses, note receivable and other at December 31, 1998 includes
16
<PAGE>
the $1.4 billion note receivable that was collected in January 1999. The higher
balance in receivables at June 30, 1999, compared with December 31, 1998
reflected additional receivables resulting from the accounting consolidation of
the new PVC resin partnership.
Current maturities of long-term debt and capital lease liabilities decreased
reflecting the current portion of long-term debt that was paid in the first
quarter of 1999 using the proceeds of the $1.4 billion note receivable. Minority
equity in subsidiaries and partnerships at June 30, 1999, primarily reflects the
minority interest in the net assets of the newly formed polyvinyl chloride
partnership.
Effective January 1, 1999, Occidental adopted the provisions of Statement of
Position 98-5--"Reporting on the Costs of Start-Up Activities" (SOP 98-5), which
requires that costs of start-up activities, including organizational costs, be
expensed as incurred. The initial application of the statement resulted in a
charge to income for costs of previously capitalized start-up activities that
have not yet been fully amortized. The initial adoption of SOP 98-5 resulted in
a first quarter noncash after-tax charge of $15 million, net of $8 million in
taxes, which has been recorded as a cumulative effect of a change in accounting
principle.
Effective January 1, 1999, Occidental adopted the provisions of Emerging Issues
Task Force (EITF) issue No. 98-10--"Accounting for Contracts Involved in Energy
Trading and Risk Management Activities," which establishes accounting and
reporting standards for certain energy trading contracts. EITF No. 98-10
requires that energy trading contracts must be marked-to-market with gains and
losses included in earnings and separately disclosed in the financial statements
or footnotes thereto. The initial adoption of EITF No. 98-10 resulted in a first
quarter noncash after-tax benefit of $2 million, recorded as a cumulative effect
of a change in accounting principle.
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133--"Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and hedging activities. It requires that an
entity recognize all derivatives in the statement of financial position and
measure those instruments at fair value. Recently the FASB voted to defer the
effective date of SFAS No. 133 for one year. Occidental must implement SFAS No.
133 by the first quarter of 2001 and has not yet made a final determination of
its impact on the financial statements.
YEAR 2000 COMPLIANCE
Most existing computer hardware and software use only the last two digits to
identify a year. Consequently, as the year 2000 approaches, the difference
between a year that begins with "20" instead of "19" may not be recognized.
This, as well as other date related processing issues, may cause computer-driven
hardware and software to fail or malfunction unless corrected.
Occidental's program to address Year 2000 (Y2K) issues began in 1997. In
addressing the issues Occidental has employed a five-step process consisting of:
1) conducting a company-wide inventory; 2) assessing Y2K compliance; 3)
remediating non-compliant software and hardware, particularly hardware that
employs embedded chips such as process controls; 4) testing remediated hardware
and software; and 5) certifying Y2K compliance.
Personnel from operations and from functional disciplines, as well as
information technology professionals, are involved in the process. Outside
consultants have also been retained to participate in the inventory and
assessment process. A Y2K corporate-level manager was appointed to oversee and
provide consistency to the overall process, provide support resources on a
company-wide basis and minimize duplication of efforts. In addition, a committee
of senior corporate executives provides oversight through an extensive monthly
status review of project elements. Additionally, a progress report is made to
Occidental's Board of Directors on Y2K status at each board meeting.
Inventory and assessment activities are complete. This data is continuously
updated as new information becomes available and Occidental expects this to
continue throughout the Y2K effort. Overall remediation efforts are estimated at
approximately 90 percent complete. The coincidental replacement of several major
existing systems is on schedule to be completed prior to January 1, 2000; these
efforts began before the Y2K efforts were initiated and the timing for
completion of these projects has not been accelerated as a result of Y2K issues.
17
<PAGE>
Costs for Y2K efforts are not being accumulated separately. Much of the cost is
being accounted for as part of normal operating budgets. Overall, the costs,
including amounts incurred to date, are estimated to be approximately $40
million. Approximately half the cost is related to control systems while the
remainder relates to information technology software and hardware. Overall, the
costs are not expected to have a significant effect on Occidental's consolidated
financial position or results of operations.
The risks associated with the Y2K issue can be substantial from the standpoint
of reliance on third parties. Communication with customers, suppliers and equity
partners to determine the extent of their Y2K efforts, including selected site
visits with several utilities and some close-linked customers, is an integral
part of the program. Occidental, like most companies, is reliant on third
parties for a wide variety of goods and services - from raw materials to utility
services. Occidental's efforts include addressing the "supply chain" issues to
minimize the potential impact of a major supplier (or customer) experiencing a
Y2K problem that would adversely affect Occidental.
Because of these company-wide efforts, Occidental believes that appropriate
actions are being taken to minimize the risk to its operations and financial
condition.
Contingency plans that address a reasonably likely worst case scenario are
approximately 60 percent complete. These plans address key systems and third
parties that present potential significant risk and analyze the strategies and
resources necessary to restore operations in the unlikely event that an
interruption does occur. The plans also outline a recovery program detailing the
necessary participants, processes and equipment needed to restore operations.
Contingency plans are expected to be finalized during the third quarter of 1999.
ENVIRONMENTAL MATTERS
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 varied
environmental protection laws. Costs associated with environmental compliance
have increased over time and may continue to rise in the future.
The laws which require or address environmental remediation may 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.
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 potentially
responsible party (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.
As of June 30, 1999, Occidental had been notified by the Environmental
Protection Agency (EPA) or equivalent state agencies or otherwise had become
aware that it had been identified as being involved at 155 Superfund or
comparable state sites. (This number does not include those sites where
Occidental has been successful in resolving its involvement.) The 155 sites
include 58 former Diamond Shamrock Chemical sites as to which Maxus Energy
Corporation has retained all liability. Of the remaining 97 sites, Occidental
has denied involvement at 11 sites and has yet to determine involvement in 19
sites. With respect to the remaining 67 of these sites, Occidental is in various
stages of evaluation, and the extent of liability retained by Maxus Energy
Corporation is disputed at 2 of these sites. For 60 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 60 sites include 13 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.
18
<PAGE>
For the remaining 7 of the 67 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 under
the caption "Results of Operations."
SAFE HARBOR STATEMENT REGARDING OUTLOOK AND FORWARD-LOOKING INFORMATION
Portions of this report contain forward-looking statements and involve risks and
uncertainties that could significantly affect expected results of operations,
liquidity and cash flows. 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. Forward-looking
statements are generally accompanied by words such as "estimate", "project",
"predict", "believes" or "expect", that convey the uncertainty of future events
or outcomes. Occidental undertakes no obligation to publicly update or revise
any forward-looking statements, whether as a result of new information or
otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed might not occur.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For the period ended June 30, 1999 there were no material changes in the
information provided under Item 305 of Regulation S-K included under the caption
"Hedging Activities" as part of Occidental's Management's Discussion and
Analysis section of Occidental's 1998 Annual Report on Form 10-K.
19
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
GENERAL
There is incorporated by reference herein the information regarding legal
proceedings in Item 3 of Part I of Occidental's 1998 Annual Report on Form 10-K,
Item 3 of Part II of Occidental's 1999 First Quarter Report on Form 10-Q and
Note 9 to the consolidated condensed financial statements in Part I hereof.
In 1996, a judgment of $742 million was entered in favor of Occidental's OXY USA
Inc. subsidiary against Chevron USA (Chevron) by a state district court in
Tulsa, Oklahoma. The unanimous jury 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. On March 2, 1999, the Oklahoma
Supreme Court affirmed the trial court judgment in all respects. On June 22,
1999, the Oklahoma Supreme Court denied Chevron's petition for rehearing. As of
July 31, 1999, the total amount of the award, including accrued interest, had
increased to approximately $970 million. Chevron has until September 20, 1999 to
file a petition to the United States Supreme Court to review the judgment and
Chevron has indicated it will do so.
ENVIRONMENTAL PROCEEDINGS
In April 1998, a civil action was filed on behalf of the U.S. Environmental
Protection Agency against OxyChem relating to the Centre County Kepone Superfund
Site at State College, Pennsylvania. The lawsuit seeks approximately $12 million
in penalties and governmental response costs, a declaratory judgment that
OxyChem is a liable party under CERCLA, and an order requiring OxyChem to carry
out the remedy that is being performed by the site owner. In October 1998, the
U.S. District Court for the Middle District of Pennsylvania granted OxyChem's
motion to dismiss the United States' case. In February 1999, the United States
filed an appeal to the United States Court of Appeals for the Third Circuit. In
July 1999, oral argument was held before the Third Circuit.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.(i)(d) Certificate of Elimination of the $3.875 Cumulative
Convertible Preferred Stock of Occidental Petroleum
Corporation dated July 16, 1999
3.(i)(e) Certificate of Elimination of the $3.875 Cumulative
Convertible Voting Preferred Stock of Occidental
Petroleum Corporation dated July 16, 1999
3.(i)(f) Certificate of Elimination of the Cumulative MidCon-
Indexed Convertible Preferred Stock of Occidental
Petroleum Corporation dated July 16, 1999
4.1* Officers' Certificate, dated June 30, 1999, pursuant to
the Indenture (Senior Debt Securities), dated as of
April 1, 1998, between Occidental and The Bank of New
York, as trustee, and the Indenture (Subordinated Debt
Securities), dated as of January 20, 1999, between
Occidental and The Bank of New York, as trustee,
including the forms of the Notes (filed as Exhibit 4.1
to Occidental's Current Report on Form 8-K dated June
30, 1999 (date of earliest event reported), filed July
5, 1999, File No. 1-9210)
10.1 Occidental Petroleum Corporation 1996 Restricted Stock
Plan for Non-Employee Directors (as Amended April 29,
1999)
20
<PAGE>
10.2 Form of Incentive Stock Option Agreement under
Occidental Petroleum Corporation 1996 Restricted Stock
Plan for Non-Employee Directors
10.3 Form of Nonqualified Stock Option Agreement under
Occidental Petroleum Corporation 1996 Restricted Stock
Plan for Non-Employee Directors
10.4* Distribution Agreement, dated June 30, 1999, among
Occidental Petroleum Corporation and Chase Securities
Inc., Credit Suisse First Boston Corporation, Lehman
Brothers Inc., Merrill, Lynch, Pierce, Fenner & Smith
Incorporated and Morgan Stanley & Co. (filed as Exhibit
1.1 to Occidental's Current Report on Form 8-K dated
June 30, 1999 (date of earliest event reported), filed
July 5, 1999, File No. 1-9210)
11 Statement regarding the computation of earnings per
share for the three and six months ended June 30, 1999
and 1998
12 Statement regarding the computation of total enterprise
ratios of earnings to fixed charges for the six months
ended June 30, 1999 and 1998 and the five years ended
December 31, 1998
27 Financial data schedule for the six-month period ended
June 30, 1999 (included only in the copy of this report
filed electronically with the Securities and Exchange
Commission)
*Incorporated herein by reference
(b) Reports on Form 8-K
During the quarter ended June 30, 1999, Occidental filed the
following Current Reports on Form 8-K:
1. Current Report on Form 8-K dated April 20, 1999 (date of
earliest event reported), filed on April 21, 1999, for the
purpose of reporting, under Item 5, Occidental's results of
operations for the first quarter ended March 31, 1999.
From June 30, 1999 to the date hereof, Occidental filed the
following Current Reports on Form 8-K:
1. Current Report on Form 8-K dated June 30, 1999 (date of
earliest event reported), filed on July 6, 1999, for the
purpose of reporting, under Item 5, the commencement of a $1
billion medium-term note program and under Item 7, certain
exhibits related to the program.
2. Current Report on Form 8-K dated July 20, 1999 (date of
earliest event reported), filed on July 21, 1999, for the
purpose of reporting, under Item 5, Occidental's results of
operations for the quarter ended June 30, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OCCIDENTAL PETROLEUM CORPORATION
DATE: August 13, 1999 S. P. Dominick, Jr.
-----------------------------------------
S. P. Dominick, Jr., Vice President and
Controller (Chief Accounting and Duly
Authorized Officer)
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EXHIBIT INDEX
EXHIBITS
- --------
3.(i)(d) Certificate of Elimination of the $3.875 Cumulative Convertible
Preferred Stock of Occidental Petroleum Corporation dated July
16, 1999
3.(i)(e) Certificate of Elimination of the $3.875 Cumulative Convertible
Voting Preferred Stock of Occidental Petroleum Corporation dated
July 16, 1999
3.(i)(f) Certificate of Elimination of the Cumulative MidCon-Indexed
Convertible Preferred Stock of Occidental Petroleum Corporation
dated July 16, 1999
4.1* Officers' Certificate, dated June 30, 1999, pursuant to the
Indenture (Senior Debt Securities), dated as of April 1, 1998,
between Occidental and The Bank of New York, as trustee, and the
Indenture (Subordinated Debt Securities), dated as of January 20,
1999, between Occidental and The Bank of New York, as trustee,
including the forms of the Notes (filed as Exhibit 4.1 to
Occidental's Current Report on Form 8-K dated June 30, 1999 (date
of earliest event reported), filed July 5, 1999, File No.
1-9210)
10.1 Occidental Petroleum Corporation 1996 Restricted Stock Plan for
Non-Employee Directors (as Amended April 29, 1999)
10.2 Form of Incentive Stock Option Agreement under Occidental
Petroleum Corporation 1996 Restricted Stock Plan for Non-Employee
Directors
10.3 Form of Nonqualified Stock Option Agreement under Occidental
Petroleum Corporation 1996 Restricted Stock Plan for Non-Employee
Directors
10.4* Distribution Agreement, dated June 30, 1999, among Occidental
Petroleum Corporation and Chase Securities Inc., Credit Suisse
First Boston Corporation, Lehman Brothers Inc., Merrill, Lynch,
Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co.
(filed as Exhibit 1.1 to Occidental's Current Report on Form 8-K
dated June 30, 1999 (date of earliest event reported), filed July
5, 1999, File No. 1-9210)
11 Statement regarding the computation of earnings per share for the
three and six months ended June 30, 1999 and 1998
12 Statement regarding the computation of total enterprise ratios of
earnings to fixed charges for the six months ended June 30, 1999
and 1998 and the five years ended December 31, 1998
27 Financial data schedule for the six-month period ended June 30,
1999 (included only in the copy of this report filed
electronically with the Securities and Exchange Commission)
*Incorporated herein by reference
<PAGE>
EXHIBIT 3.(I)(D)
CERTIFICATE OF ELIMINATION OF THE
$3.875 CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF OCCIDENTAL PETROLEUM CORPORATION
-------------------
Pursuant to Section 151 of the General Corporation Law of the State of Delaware
-------------------
Occidental Petroleum Corporation, a corporation organized and existing
under the General Corporation Law of the State of Delaware (this "Corporation"),
does hereby certify, pursuant to the provisions of Section 151(g) of the General
Corporation Law of the State of Delaware, the Board of Directors of this
corporation, at a meeting duly held on July 15, 1999, at which a quorum was
present and acting throughout, duly adopted the following resolutions, which
resolutions remain in full force and effect on the date hereof:
WHEREAS, a Certificate of Designation of the $3.875 Cumulative
Convertible Preferred Stock, dated February 16, 1993 (the "$3.875
Cumulative Convertible Preferred Certificate"), of this Corporation was
duly filed by this Corporation in the Office of the Secretary of State of
the State of Delaware (the "Office of the Secretary of State") on February
17, 1993, and a certified copy thereof was duly recorded by this
Corporation with the Recorder of New Castle County, Delaware, on February
19, 1993, and pursuant to the $3.875 Cumulative Convertible Preferred
Certificate there was established a series of the authorized preferred
stock of this corporation, having a par value of $1.00 per share, which
series was designated as "$3.875 Cumulative Convertible Preferred Stock"
(the "$3.875 Cumulative Convertible Preferred Stock") and consisted of
11,500,000 shares; and
WHEREAS, the $3.875 Cumulative Convertible Preferred Stock and the
$3.875 Cumulative Convertible Voting Preferred Stock Redemption Committee
(the "Redemption Committee") of the Board of Directors of this Corporation,
pursuant to a written consent dated February 10, 1998, redeemed all
outstanding shares of the $3.875 Cumulative Convertible Preferred Stock on
March 13, 1998; and
WHEREAS, the Board of Directors of this Corporation wishes to
eliminate from the Restated Certificate of Incorporation, as amended (the
"Restated Certificate of Incorporation"), of this Corporation all matters
set forth in the $3.875 Cumulative Convertible Preferred Certificate with
respect to the $3.875 Cumulative Convertible Preferred Stock, and wishes
that the 11,500,000 shares which constituted the $3.875 Cumulative
Convertible Preferred Stock shall constitute authorized but unissued shares
of preferred stock, par value $1.00 per share, of this Corporation;
eae\elimination\3875non-c
<PAGE>
NOW, THEREFORE, BE IT RESOLVED, that none of the authorized shares of
the $3.875 Cumulative Convertible Preferred Stock are outstanding, and that
none will be issued subject to the $3.875 Cumulative Convertible Preferred
Certificate; and be it
FURTHER RESOLVED, that the Chairman of the Board of Directors, the
President, any Executive Vice President, any Vice President, the Secretary
or any Assistant Secretary of this Corporation be, and each of them hereby
is, authorized and empowered to cause a certificate pursuant to the
provisions of Section 151(g) of the General Corporation Law of the State of
Delaware to be executed and acknowledged with respect to these resolutions,
and to cause such certificate to be filed and recorded in accordance with
Section 103 of the General Corporation Law of the State of Delaware, which
certificate, when it becomes effective, shall have the effect of
eliminating from the Restated Certificate of Incorporation all matters set
forth in the $3.875 Cumulative Convertible Certificate with respect to the
$3.875 Cumulative Convertible Preferred Stock.
IN WITNESS WHEREOF, Occidental Petroleum Corporation has caused this
Certificate to be made under the seal of this corporation and signed by Donald
P. de Brier, its Executive Vice President and Secretary, this 16th day of July,
1999.
By: Donald P. de Brier
---------------------------------
Name: Donald P. de Brier
Title: Executive Vice President
and Secretary
eae\elimination\3875non-c
<PAGE>
EXHIBIT 3.(I)(E)
CERTIFICATE OF ELIMINATION OF THE
$3.875 CUMULATIVE CONVERTIBLE VOTING PREFERRED STOCK
OF OCCIDENTAL PETROLEUM CORPORATION
-------------------
Pursuant to Section 151 of the General Corporation Law of the State of Delaware
-------------------
Occidental Petroleum Corporation, a corporation organized and existing
under the General Corporation Law of the State of Delaware (this "Corporation"),
does hereby certify, pursuant to the provisions of Section 151(g) of the General
Corporation Law of the State of Delaware, the Board of Directors of this
corporation, at a meeting duly held on July 15, 1999, at which a quorum was
present and acting throughout, duly adopted the following resolutions, which
resolutions remain in full force and effect on the date hereof:
WHEREAS, a Certificate of Designations of the $3.875 Cumulative
Convertible Voting Preferred Stock, dated December 22, 1994 (the "$3.875
Cumulative Convertible Voting Preferred Stock Certificate"), of this
Corporation was duly filed by this Corporation in the Office of the
Secretary of State on December 23, 1994, and a certified copy thereof was
duly recorded by this corporation with the Recorder of Kent County,
Delaware, on January 4, 1995, and pursuant to the $3.875 Cumulative
Convertible Voting Preferred Certificate there was established a series of
the authorized preferred stock of this corporation, having a par value of
$1.00 per share, which series was designated as "$3.875 Cumulative
Convertible Voting Preferred Stock" (the "$3.875 Cumulative Convertible
Voting Preferred Stock") and consisted of 4,000,000 shares; and
WHEREAS, the Redemption Committee, pursuant to a written consent dated
February 10, 1998, redeemed all outstanding shares of the $3.875 Cumulative
Convertible Voting Preferred Stock on March 13, 1998; and
WHEREAS, the Board of Directors of this Corporation wishes to
eliminate from the Restated Certificate of Incorporation of this
Corporation all matters set forth in the $3.875 Cumulative Convertible
Voting Preferred Certificate with respect to the $3.875 Cumulative
Convertible Voting Preferred Stock, and wishes that the 4,000,000 shares
which constituted the $3.875 Cumulative Convertible Voting Preferred Stock
shall constitute authorized but unissued shares of preferred stock, par
value $1.00 per share, of this Corporation;
NOW, THEREFORE, BE IT RESOLVED, that none of the authorized shares of
the $3.875 Cumulative Convertible Voting Preferred Stock are outstanding,
and that none will be issued subject to the $3.875 Cumulative Convertible
Voting Preferred Certificate; and be it
eae\elimination\3875vot-c
<PAGE>
FURTHER RESOLVED, that the Chairman of the Board of Directors, the
President, any Executive Vice President, any Vice President, the Secretary
or any Assistant Secretary of this Corporation be, and each of them hereby
is, authorized and empowered to cause a certificate pursuant to the
provisions of Section 151(g) of the General Corporation Law of the State of
Delaware to be executed and acknowledged with respect to these resolutions,
and to cause such certificate to be filed and recorded in accordance with
Section 103 of the General Corporation Law of the State of Delaware, which
certificate, when it becomes effective, shall have the effect of
eliminating from the Restated Certificate of Incorporation all matters set
forth in the $3.875 Cumulative Convertible Voting Preferred Certificate
with respect to the $3.875 Cumulative Convertible Voting Preferred Stock.
IN WITNESS WHEREOF, Occidental Petroleum Corporation has caused this
Certificate to be made under the seal of this corporation and signed by Donald
P. de Brier, its Executive Vice President and Secretary, this 16th day of July,
1999.
By: Donald P. de Brier
---------------------------------
Name: Donald P. de Brier
Title: Executive Vice President
and Secretary
eae\elimination\3875vot-c
<PAGE>
EXHIBIT 3.(I)(F)
CERTIFICATE OF ELIMINATION OF THE
CUMULATIVE MIDCON-INDEXED CONVERTIBLE PREFERRED STOCK
OF OCCIDENTAL PETROLEUM CORPORATION
-------------------
Pursuant to Section 151 of the General Corporation Law of the State of Delaware
-------------------
Occidental Petroleum Corporation, a corporation organized and existing
under the General Corporation Law of the State of Delaware (this "Corporation"),
does hereby certify, pursuant to the provisions of Section 151(g) of the General
Corporation Law of the State of Delaware, the Board of Directors of this
corporation, at a meeting duly held on July 15, 1999, at which a quorum was
present and acting throughout, duly adopted the following resolutions, which
resolutions remain in full force and effect on the date hereof:
WHEREAS, a Certificate of Designations of the Cumulative
MidCon-Indexed Convertible Preferred Stock (Par Value $1.00 Per Share) of
Occidental Petroleum Corporation, dated November 20, 1996 (the "CMIC
Preferred Certificate"), of this Corporation was duly filed by this
Corporation in the Office of the Secretary of State on November 20, 1996,
and a certified copy thereof was duly recorded by this corporation with the
Recorder of New Castle County, Delaware, on December 26, 1996, and pursuant
to the CMIC Preferred Certificate there was established a series of the
authorized preferred stock of this Corporation, having a par value of $1.00
per share, which series was designated as "Cumulative MidCon-Indexed
Convertible Preferred Stock" (the "CMIC Preferred Stock") and consisted of
1,400,000 shares; and
WHEREAS, this Corporation, pursuant to Sections 8(b) and 8(e) of the
CMIC Preferred Certificate, redeemed all of the issued and outstanding
shares of the CMIC Preferred Stock on January 31, 1998; and
WHEREAS, the Board of Directors of this Corporation wishes to
eliminate from the Restated Certificate of Incorporation of this
Corporation all matters set forth in the CMIC Preferred Certificate with
respect to the CMIC Preferred Stock, and wishes that the 1,400,000 shares
which constituted the CMIC Preferred Stock shall constitute authorized but
unissued shares of Preferred Stock, par value $1.00 per share, of this
Corporation;
NOW, THEREFORE, BE IT RESOLVED, that none of the authorized shares of
the CMIC Preferred Stock are outstanding, and that none will be issued
subject to the CMIC Preferred Certificate; and be it
FURTHER RESOLVED, that all acts and things heretofore done by any of
the officers of this Corporation, on or prior to the date of the foregoing
resolutions, in connection with matters contemplated by such resolutions
be, and the same hereby are, in
eae\elimination\cmic-c
<PAGE>
all respects ratified, confirmed, approved and adopted as acts on behalf of
this Corporation; and be it
FURTHER RESOLVED, that the Chairman of the Board of Directors, the
President, any Executive Vice President, any Vice President, the Secretary
or any Assistant Secretary of this corporation be, and each of them hereby
is, authorized and empowered to cause a certificate pursuant to the
provisions of Section 151(g) of the General Corporation Law of the State of
Delaware to be executed and acknowledged with respect to these resolutions,
and to cause such certificate to be filed and recorded in accordance with
Section 103 of the General Corporation Law of the State of Delaware, which
certificate, when it becomes effective, shall have the effect of
eliminating from the Restated Certificate of Incorporation all matters set
forth in the CMIC Preferred Certificate with respect to the CMIC Preferred
Stock.
IN WITNESS WHEREOF, Occidental Petroleum Corporation has caused this
Certificate to be made under the seal of this corporation and signed by Donald
P. de Brier, its Executive Vice President and Secretary, this 16th day of July,
1999.
By: Donald P. de Brier
---------------------------------
Name: Donald P. de Brier
Title: Executive Vice President
and Secretary
eae\elimination\cmic-c
<PAGE>
EXHIBIT 10.1
OCCIDENTAL PETROLEUM CORPORATION
1996 RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
(AS AMENDED APRIL 29, 1999)
1. Purpose. The purpose of the Occidental Petroleum Corporation 1996
Restricted Stock Plan for Non-Employee Directors (the "Plan") is to provide
ownership of Occidental Petroleum Corporation's ("Occidental") Common Stock to
non-employee directors in order to more closely align director and stockholder
interests, to provide a competitive compensation program for directors and to
enhance Occidental's ability to attract and retain top-quality directors.
2. Administration of the Plan.
(a) Members of the Committee. The Plan shall be administered by the
Compensation Committee of the Board (the "Committee"). Members of the Committee
shall be appointed from time to time by the Board and shall serve at the
pleasure of the Board. Any Committee member may resign at any time upon written
notice to the Board.
(b) Authority of the Committee. The Committee shall adopt such rules as
it may deem appropriate in order to carry out the purpose of the Plan. All
questions of interpretation, administration, and application of the Plan shall
be determined by a majority of the members of the Committee then in office,
except that the Committee may authorize any one or more of its members, or any
officer of Occidental, to execute and deliver documents on behalf of the
Committee. The determination of such majority shall be final and binding in all
matters relating to the Plan. Determinations made with respect to any individual
Non-Employee Director shall be made without participation by such Non-Employee
Director in such determination. No member of the Committee shall be liable for
any act done or omitted to be done by such member or by any other member of the
Committee in connection with the Plan, except for such member's own willful
misconduct or as expressly provided by statute.
3. Stock Reserved for the Plan. The number of shares of Common Stock
authorized for issuance under the Plan is 50,000, subject to adjustment pursuant
to Section 8 hereof. Shares of Common Stock delivered hereunder may be Common
Stock of original issuance or Common Stock held in treasury, or a combination
thereof.
4. Awards of Restricted Stock.
(a) Annual Awards. On the first business day following each annual
meeting commencing with the 1999 Annual Meeting, each Non-Employee Director who
is then a member of the Board shall be awarded two thousand (2,000) whole shares
of Restricted Stock.
(b) Special Awards. On the first business day following each annual
meeting, each Non-Employee Director who is then serving as a Chairman of one or
more committees of the Board shall be awarded two hundred (200) whole shares of
Restricted Stock with respect to each such Chairmanship, in addition to any
Award he or she may be granted pursuant to Section 4(a) above.
(c) Effectiveness of Grants. Notwithstanding anything in this Plan to
the contrary, no Award made pursuant to the Plan or any amendment to the Plan
shall be effective prior to the requisite approval of the Plan or such amendment
by the stockholders of Occidental. In the event requisite stockholder approval
is not obtained, the Plan, and any Award thereunder, shall be null and void."
5. Terms and Conditions of Awards. Restricted Stock awarded to a
Non-Employee Director under the Plan shall be subject to the following
restrictions:
(a) During the period of the Director's service as a member of the
Board (the "Restriction Period"), any shares of Common Stock awarded under the
Plan shall not be sold, assigned, pledged, hypothecated or otherwise transferred
or encumbered. During the Restriction Period, the certificate representing such
shares of Common Stock shall contain a statement referring to the restrictions
contained in this Section 5(a) and such certificate shall be held by the
Company. Except as provided in Section 9, as soon as practicable after the lapse
of restrictions applicable to Restricted Stock, all shares of Restricted
<PAGE>
Stock held by the Company for the benefit of a Non-Employee Director shall be
given to such Non-Employee Director, free and clear of any restrictions
applicable thereto during the Restriction Period.
(b) Whenever cash dividends are paid by Occidental on outstanding
Common Stock, each Non-Employee Director will receive in cash all dividends paid
on the Restricted Stock then held by the Company for the benefit of such
Non-Employee Director on the record date for the dividend. Common Stock
distributed in connection with a stock split or stock dividend, and other
property distributed as a dividend, shall be subject to restrictions to the same
extent as the Restricted Stock with respect to which such Common Stock or other
property has been distributed.
(c) Each Non-Employee Director hereunder may designate from time to
time any beneficiary or beneficiaries (who may be designated concurrently,
contingently or successively) to whom any shares of Restricted Stock and any
cash amounts are to be paid in case of the Non-Employee Director's death before
receipt of any part or all of such Restricted Stock and cash. Each designation
will revoke all prior designations by the Non-Employee Director, shall be in a
form prescribed by the Committee, and will be effective only when filed by the
Non-Employee Director, in writing, with the Secretary of Occidental. Reference
in the Plan to a Non-Employee Director's "beneficiary" at any date shall include
such persons designated as concurrent beneficiaries on the Non-Employee
Director's beneficiary designation form then in effect. In the absence of any
such designation, any shares of Restricted Stock being held by the Company for
the benefit of such Non-Employee Director at the time of his or her death may,
in the sole discretion of the Committee, be paid to such Non-Employee Director's
estate in a cash lump sum.
6. Foreign Participants. In order to facilitate the making of an Award, the
Board may provide for such special terms for Awards to Non-Employee Directors
who are foreign nationals, as the Board may consider necessary or appropriate to
accommodate differences in local law, tax policy or custom. Moreover, the Board
may approve such supplements to, or amendments, restatements or alternative
versions of, the Plan as it may consider necessary or appropriate for such
purposes without thereby affecting the terms of the Plan as in effect for any
other purpose, and the Secretary or other appropriate officer of Occidental may
certify any such document as having been approved and adopted in the same manner
as the Plan; provided that, no such supplements, amendments, restatements or
alternative versions shall include any provisions that are inconsistent with the
terms of the Plan, as then in effect, unless the Plan could have been amended to
eliminate the inconsistency without further approval by the stockholders of
Occidental.
7. Change in Control. Upon the occurrence of a Change in Control, all
restrictions affecting Restricted Shares shall lapse and such shares shall be
delivered to each Non-Employee Director as soon as practicable thereafter;
provided that, the Committee may, in its sole discretion authorize the payment
of cash, in lieu of the issuance of such shares.
8. Adjustments. The Board may make or provide for such adjustments in the
number of shares of Restricted Stock awarded under the Plan, as the Board may in
good faith determine to be required in order to prevent dilution or expansion of
the rights of Non-Employee Directors that otherwise would result from (i) any
stock dividend, stock split, combination of shares recapitalization or other
change in the capital structure of the Company or (ii) any merger,
consolidation, spin-off, spin-out, split-off, split-up, reorganization, partial
or complete liquidation or other distribution of assets, issuance of warrants or
other rights to purchase securities or any other corporate transaction or event
having an effect similar to any of the foregoing. In the event of any such
transaction or event, the Board may provide in substitution for any or all
outstanding Restricted Stock Awards under the Plan such alternative
consideration as it may in good faith determine to be appropriate under the
circumstances and may require the surrender of all Awards so replaced. Moreover,
the Board may, on or after the date of any Award, provide in the agreement
evidencing such Award that the Non-Employee Director may elect to receive an
equivalent Award in respect of securities of the surviving entity of any merger,
consolidation or other transaction or event having similar effect, or the Board
may provide that the Non-Employee Director will automatically be entitled to
receive such an equivalent Award. The Board may also provide for such
adjustments in the maximum number of shares of Common Stock specified in Section
3 as the Board, in good faith, determines to be appropriate in order to reflect
any transaction or event described in this Section 8.
2
<PAGE>
9. Withholding. Occidental shall defer making payments or deliveries under
the Plan until satisfactory arrangements have been made for the payment of any
federal, state, local or foreign taxes (whether or not required to be withheld)
with respect to such payment or delivery. At the discretion of the Committee,
any such arrangements may without limitation include relinquishment of a portion
of any such payment or benefit or the surrender of outstanding Common Stock, and
any agreement pertaining to an Award may make such relinquishment the mandatory
form of satisfying such taxes. The Committee may also make similar arrangements
with respect to the payment of any taxes with respect to which withholding is
not required.
10. Rights of Non-Employee Directors.
(a) Retention as Non-Employee Director. Nothing contained in the Plan
or with respect to any Award shall interfere with or limit in any way the right
of the stockholders of Occidental to remove any Non-Employee Director from the
Board, nor confer upon any Non-Employee Director any right to continue in the
service of Occidental as a Non-Employee Director.
(b) Nontransferability. No right or interest of any Non-Employee
Director in any Award shall be assignable or transferable during the lifetime of
the Non-Employee Director, either voluntarily or involuntarily, or subjected to
any lien, directly or indirectly, by operation of law, or otherwise, including
execution, levy, garnishment, attachment, pledge or bankruptcy. In the event of
a Non-Employee Director's death, a Non-Employee Director's rights and interests
in his or her Award shall be transferable by testamentary will or the laws of
descent and distribution. If in the opinion of the Committee a person entitled
to payments or to exercise rights with respect to the Plan is disabled from
caring for his or her affairs because of mental condition, physical condition or
age, payment due such person may be made to, and such rights shall be exercised
by, such person's guardian, conservator or other legal personal representative
upon furnishing the Committee with evidence satisfactory to the Committee of
such status.
(c) Except to the extent restricted under the terms of an agreement
evidencing a grant of Restricted Stock, a Non-Employee Director awarded such
stock shall have all of the rights of a stockholder, including, without
limitation, the right to vote Restricted Stock and the right to receive
dividends thereon.
11. Amendment; Termination. The Board may at any time and from time to time
alter, amend, suspend or terminate the Plan in whole or in part; provided that,
no amendment which requires stockholder approval in order for the exemptions
available under Rule 16b-3 to be applicable to the Plan and the Non-Employee
Directors shall be effective unless the same shall be approved by the
stockholders of Occidental entitled to vote thereon. Notwithstanding the
foregoing, no amendment shall affect adversely any of the rights of any
Non-Employee Director, without such Non-Employee Director's consent.
12. General Restrictions.
(a) Regulations and Offer Approvals. The obligation of Occidental to
deliver Common Stock with respect to any Award under the Plan shall be subject
to all applicable laws, rules and regulations, including all applicable federal
and state securities laws, and the obtaining of all such approvals by
governmental agencies as may be deemed necessary or appropriate by the
Committee.
(b) Each Award granted under the Plan is subject to the requirement
that, if at any time the Committee determines, in its absolute discretion, that
the listing, registration or qualification of Common Stock issuable pursuant to
the Plan is required by any securities exchange or under any state or federal
law, or the consent or approval of any governmental regulatory body is necessary
or desirable as a condition of, or in connection with, such Award or the
issuance of Common Stock, no such Award or payment shall be made or Common Stock
issued, in whole or in part, unless listing, registration, qualification,
consent or approval has been effected or obtained free of any conditions not
acceptable to the Committee. Nothing herein shall be deemed to require
Occidental to apply for or to obtain such listing, registration or
qualification.
(c) In the event that the disposition of Common Stock acquired pursuant
to the Plan is not covered by a then current registration statement under the
Securities Act and is not otherwise exempt from such registration, such Common
Stock shall be restricted against transfer to the extent required by the
3
<PAGE>
Securities Act or regulations thereunder, and Occidental may require any
Non-Employee Director to whom Common Stock is granted, as a condition of
receiving such Common Stock, to give written assurances in substance and form
satisfactory to Occidental and its counsel to the effect that such person is
acquiring the Common Stock for his or her own account and not with any present
intention of selling or otherwise distributing the same, and to such other
effects as Occidental deems necessary or appropriate in order to comply with
federal and applicable state securities laws.
13. Governing Law. The Plan and all rights hereunder shall be construed in
accordance with and governed by the laws of the State of Delaware.
14. Plan Interpretation. The Plan is intended to comply with Rule 16b-3 and
shall be construed to so comply.
15. Headings. The headings of sections and subsections herein are included
solely for convenience of reference and shall not affect the meaning of any of
the provisions of the Plan.
16. Term of Plan. This Plan shall become effective on the Effective Date,
and shall remain in effect for ten (10) years from such date, unless sooner
terminated by the Board.
17. Definitions. For purposes of the Plan, the following terms shall have
the following meanings:
(a) "Award" means any award of Restricted Stock under the Plan.
(b) "Board" means the Board of Directors of Occidental.
(c) "Change in Control" means a change in control of Occidental, which
shall be deemed to have occurred if:
(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of Occidental or any
company owned, directly or indirectly, by the stockholders of Occidental in
substantially the same proportions as their ownership of the Common Stock of
Occidental), is or becomes, after the Effective Date of the Plan, the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of Occidental (not including in the securities
beneficially owned by such person any securities acquired directly from
Occidental or its affiliates) representing 50 percent (50%) or more of the
combined voting power of Occidental's then-outstanding securities; or
(ii) during any period of two consecutive years (not including
any period prior to the Effective Date), individuals who at the beginning of
such period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with Occidental to
effect a transaction described in clause (i), (iii), or (iv) of this definition)
whose election by the Board or nomination for election by Occidental'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
such period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority of the Board;
or
(iii) the stockholders of Occidental approve a merger or
consolidation of Occidental with any other corporation, other than (A) a merger
or consolidation which would result in the voting securities of Occidental
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or other
fiduciary holding securities under any employee benefit plan of Occidental, at
least 50 percent of the combined voting power of the voting securities of
Occidental or such surviving entity outstanding immediately after such merger or
consolidation or (B) a merger or consolidation effected to implement a
recapitalization of Occidental (or similar transaction) in which no person
acquires more than 50 percent (50%) of the combined voting power of Occidental's
then-outstanding securities; or
(iv) the stockholders of Occidental approve a plan of complete
liquidation of Occidental or an agreement for the sale or disposition of all or
substantially all of Occidental's assets; provided that, prior
4
<PAGE>
to the occurrence of any of the events described in clauses (i) through (iii)
above, the Board may determine that such an event shall not constitute a Change
of Control for purposes of the Plan.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor thereto.
(e) "Common Stock" means shares of the common stock, par value $.20 per
share, of Occidental.
(f) "Company" means Occidental Petroleum Corporation and its
subsidiaries, collectively.
(g) "Effective Date" means April 26, 1996 or the date of approval of
the Plan by the stockholders of Occidental, whichever comes first.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as now or
hereafter construed, interpreted and applied by regulations, rulings and cases.
(i) "Fair Market Value" means the per share fair market value of Common
Stock as determined by such methods or procedures as shall be established from
time to time by the Committee. Unless otherwise determined by the Committee in
good faith, the per share Fair Market Value of Common Stock as of a particular
date shall mean (i) the closing sales price per share of Common Stock on the
national securities exchange on which the Common Stock is principally traded,
for the last preceding date on which there was a sale of such Common Stock on
such exchange, or (ii) if the shares of Common Stock are then traded in an
over-the-counter market, the average of the closing bid and asked prices for the
shares of Common Stock in such over-the-counter market for the last preceding
date on which there was a sale of such Common Stock in such market, or (iii) if
the shares of Common Stock are not then listed on a national securities exchange
or traded in an over-the-counter market, such value as the Committee, in its
sole discretion, shall determine.
(j) "Non-Employee Director" means a member of the Board who is neither
an officer nor employee of the Company.
(k) "Plan" means this Occidental Petroleum Corporation 1996 Restricted
Stock Plan For Non-Employee Directors.
(l) "Restriction Period" means, in respect of Restricted Stock, the
period referenced in Section 5(a).
(m) "Restricted Stock" means a grant of shares of Common Stock, which
shares are subject to the restrictions on transfer described in Section 5(a).
(n) "Rule 16b-3" means Rule 16b-3, as promulgated and amended from time
to time by the Securities and Exchange Commission under the Exchange Act, or any
successor rule to the same effect.
5
<PAGE>
EXHIBIT 10.2
OCCIDENTAL PETROLEUM CORPORATION
INCENTIVE STOCK OPTION AGREEMENT
(WITH ACCELERATED PERFORMANCE VESTING)
Name of Optionee: ________________________________________________________
Date of Grant: ___________________________________________________________
Number of Optioned Shares: _______________________________________________
Option Price: ____________________________________________________________
Vesting Percentage: ________________ Percent
AGREEMENT (the "Agreement") made as of the Date of Grant by and between
OCCIDENTAL PETROLEUM CORPORATION, a Delaware corporation (hereinafter called
"Occidental," and, collectively with its Subsidiaries, the "Company"), and
Optionee.
1. GRANT OF STOCK OPTION. Subject to and upon the terms, conditions, and
restrictions set forth in this Agreement and in the Occidental Petroleum
Corporation 1995 Incentive Stock Plan (the "Plan"), Occidental hereby grants to
the Optionee as of the Date of Grant a stock option (the "Option") to purchase
up to the number of Optioned Shares. The Option may be exercised from time to
time in accordance with the terms of this Agreement. The Option is intended to
be an "incentive stock option" within the meaning of that term under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), or any successor
provision thereto; this Agreement shall be construed in a manner that will
enable this Option to be so qualified.
2. TERM OF OPTION. The term of the Option shall commence on the Date of
Grant and, unless earlier terminated in accordance with Section 6 hereof, shall
expire ten (10) years from the Date of Grant.
3. RIGHT TO EXERCISE. Subject to the expiration or earlier termination of
the Option, unless the Common Stock has attained the Fair Market Value per Share
set forth in the next sentence, on each anniversary of the Date of Grant the
number of Optioned Shares equal to the Vesting Percentage multiplied by the
initial number of Optioned Shares specified in this Agreement shall become
exercisable on a cumulative basis until the Option is fully exercisable. If, at
any time prior to the third anniversary of the Date of Grant, the Fair Market
Value per Share for twenty consecutive trading days is twenty-five dollars
($25.00) or more, then, on the first trading day following such twenty day
period, the Optionee's rights in and to the Option shall become fully vested to
the extent not then
799Incent
<PAGE>
vested and the Option shall become fully exercisable. For the purposes of this
paragraph 3, "trading day" means any day on which securities trading is
conducted on the New York Stock Exchange. To the extent the Option is
exercisable, it may be exercised in whole or in part.
4. OPTION NONTRANSFERABLE. The Option granted hereby shall be neither
transferable nor assignable by the Optionee other than by will or by the laws of
descent and distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee, or in the event of his or her legal incapacity,
by his or her guardian or legal representative acting on behalf of the Optionee
in a fiduciary capacity under state law and court supervision.
5. NOTICE OF EXERCISE; PAYMENT. To the extent then exercisable, the Option
shall be exercised by oral or written notice to Occidental stating the number of
Optioned Shares for which the Option is being exercised and the intended manner
of payment. Payment equal to the aggregate Option Price of the Optioned Shares
shall be: (a) in cash in the form of currency or check or other cash equivalent
acceptable to Occidental, (b) by actual or constructive transfer to Occidental
of nonforfeitable, nonrestricted shares of Common Stock that have been owned by
the Optionee for (i) more than one year prior to the date of exercise and for
more than two years from the date on which the option was granted, if they were
originally acquired by the Optionee pursuant to the exercise of an incentive
stock option, or (ii) more than six months prior to the date of exercise, if
they were originally acquired by the Optionee other than pursuant to the
exercise of an incentive stock option, or (c) by any combination of the
foregoing methods of payment. Nonforfeitable, nonrestricted shares of Common
Stock that are transferred by the Optionee in payment of all or any part of the
Option Price shall be valued on the basis of their Fair Market Value per Share.
The requirement of payment in cash shall be deemed satisfied if the Optionee
makes arrangements that are satisfactory to Occidental with a broker that is a
member of the National Association of Securities Dealers, Inc. to sell a
sufficient number of the shares of Common Stock, which are being purchased
pursuant to the exercise, so that the net proceeds of the sale transaction will
at least equal the amount of the aggregate Option Price, plus interest at the
"applicable Federal rate" within the meaning of that term under Section 1274 of
the Code, or any successor provision thereto, for the period from the date of
exercise to the date of payment, and pursuant to which the broker undertakes to
deliver to Occidental the amount of the aggregate Option Price not later than
the date on which the sale transaction will settle in the ordinary course of
business. The date of such notice shall be the exercise date. Any oral notice of
exercise shall be confirmed in writing to Occidental before the close of
business the same day.
6. TERMINATION OF AGREEMENT. The Agreement and the Option granted hereby
shall terminate automatically and without further notice on the earliest of the
following dates:
(a) The remaining term of the Option after the date the Optionee
ceases to be an employee of the Company by reason of the Optionee's (i) death,
(ii)
2
<PAGE>
permanent disability or (iii) retirement under a retirement plan of the Company
at or after the earliest voluntary retirement age provided for in such
retirement plan or retirement at an earlier age with the consent of the Board;
(b) Immediately upon the voluntary or involuntary resignation of the
Optionee other than in connection with retirement as provided in 6(a)(iii)
above; or
(c) Ten years from the Date of Grant.
In the event that the Optionee commits an act that the Committee determines to
have been intentionally committed and materially inimical to the interests of
the Company, the Agreement shall terminate at the time of that determination
notwithstanding any other provision of this Agreement. This Agreement shall not
be exercisable for any number of Optioned Shares in excess of the number of
Optioned Shares for which this Agreement is then exercisable on the date of
termination of employment. For the purposes of this Agreement, the continuous
employment of the Optionee with the Company shall not be deemed to have been
interrupted, and the Optionee shall not be deemed to have ceased to be an
employee of the Company, by reason of the transfer of his or her employment
among the Company and its Subsidiaries or an approved leave of absence.
7. ACCELERATION OF OPTION. In the event of a Change of Control, the Option
granted hereby shall become immediately exercisable in full. For purposes of
this Agreement, "Change of Control" means the occurrence of any of the following
events:
(a) any "person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than
the Company, any trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any company owned, directly or indirectly, by the
stockholders of Occidental in substantially the same proportions as their
ownership of the Common Stock of Occidental), is or becomes after the effective
date of the Plan as provided in Section 16 of the Plan (the "Effective Date")
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of Occidental (not including in the
securities beneficially owned by such person any securities acquired directly
from Occidental or its affiliates) representing 50 percent or more of the
combined voting power of Occidental's then-outstanding securities;
(b) during any period of two consecutive years (not including any
period prior to the Effective Date), individuals who at the beginning of such
period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clause (a), (c), or (d) of this definition)
whose election by the Board or nomination for election by Occidental'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 at least a majority of the Board;
3
<PAGE>
(c) the stockholders of Occidental approve a merger or consolidation
of Occidental with any other corporation, other than (i) a merger or
consolidation that would result in the voting securities of Occidental
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the Company, at
least 50 percent of the combined voting power of the voting securities of
Occidental or such surviving entity outstanding immediately after such merger or
consolidation or (ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person
acquires more than 50 percent of the combined voting power of Occidental's
then-outstanding securities; or
(d) the stockholders of Occidental approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition of all or
substantially all of the Company's assets;
provided, however, that prior to the occurrence of any of the events described
in clauses (a) through (d) above, the Board may determine that such event shall
not constitute a Change of Control for purposes of this Agreement.
8. NO EMPLOYMENT CONTRACT. Nothing contained in this Agreement shall confer
upon the Optionee any right with respect to continuance of employment by the
Company, nor limit or affect in any manner the right of the Company to terminate
the employment or adjust the compensation of the Optionee.
9. TAXES AND WITHHOLDING. If the Company shall be required to withhold any
federal, state, local or foreign tax in connection with the exercise of the
Option, the Optionee shall pay the tax or make provisions that are satisfactory
to the Company for the payment thereof. The Optionee may elect to satisfy all or
any part of any such withholding obligation by surrendering to the Company a
portion of the shares of Common Stock that are issued or transferred to the
Optionee upon the exercise of the Option, and the shares of Common Stock so
surrendered by the Optionee shall be credited against any such withholding
obligation at the Fair Market Value per Share of such shares on the date of such
surrender; provided, however, if the Optionee is subject to Section 16 of the
Exchange Act, such election shall be made in accordance with Rule 16b-3 and
subject to approval by the Committee if such approval is then required by Rule
16b-3.
10. COMPLIANCE WITH LAW. The Company shall make reasonable efforts to
comply with all applicable federal and state securities laws; provided, however,
notwithstanding any other provision of this Agreement, the Option shall not be
exercisable if the exercise thereof would result in a violation of any such law.
4
<PAGE>
11. ADJUSTMENTS. The Committee shall make such adjustments in the Option
Price and the number or kind of shares of stock covered by the Option that the
Committee may in good faith determine to be required in order to prevent
dilution or expansion of the Optionee's rights under this Agreement that
otherwise would result from (a) any stock dividend, stock split, combination of
shares, recapitalization or other change in the capital structure of the
Company, or (b) any merger, consolidation, spin-off, spin-out, split-off,
split-up, reorganization, partial or complete liquidation or other distribution
of assets, issuance of warrants or other rights to purchase securities, or any
other corporate transaction or event having an effect similar to any of the
foregoing; provided, however, that no adjustment may be made without the prior
written consent of the Optionee if the adjustment would constitute a
"modification" within the meaning of Section 424(h) of the Code or any successor
provision thereto. In the event of any such transaction or event, the Committee
may provide in substitution for all or any portion of the Optionee's rights
under this Agreement such alternative consideration as the Committee may in good
faith determine to be appropriate under the circumstances and may require the
surrender of all rights so replaced.
12. MANDATORY NOTICE OF DISQUALIFYING DISPOSITION. Without limiting any
other provision hereof, the Optionee hereby agrees that if the Optionee disposes
(whether by sale, exchange, gift or otherwise) of any of the Optioned Shares
within two (2) years of the Date of Grant or within one (1) year after the
transfer of such share or shares to the Optionee, the Optionee shall notify
Occidental of such disposition in writing within thirty (30) days from the date
of such disposition. Such written notice shall state the principal terms of such
disposition, including without limitation the date of such disposition and the
type and amount of the consideration received for such share or shares by the
Optionee in connection therewith.
13. RELATION TO OTHER BENEFITS. Any economic or other benefit to the
Optionee under this Agreement shall not be taken into account in determining any
benefits to which the Optionee may be entitled under any profit-sharing,
retirement or other benefit or compensation plan maintained by the Company and
shall not affect the amount of any life insurance coverage available to any
beneficiary under any life insurance plan covering employees of the Company.
14. AMENDMENTS. Any amendment to the Plan shall be deemed to be an
amendment to this Agreement to the extent that the amendment is applicable
hereto; provided, however, that no amendment shall adversely affect the rights
of the Optionee under this Agreement without the Optionee's consent.
15. SEVERABILITY. In the event that one or more of the provisions of this
Agreement shall be invalidated for any reason by a court of competent
jurisdiction, any provision so invalidated shall be deemed to be separable from
the other provisions hereof, and the remaining provisions hereof shall continue
to be valid and fully enforceable.
5
<PAGE>
16. RELATION TO PLAN. This Agreement is subject to the terms and conditions
of the Plan. In the event of any inconsistent provisions between this Agreement
and the Plan, the Plan shall govern. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Plan.
17. SUCCESSORS AND ASSIGNS. Without limiting Section 4 hereof, the
provisions of this Agreement shall inure to the benefit of, and be binding upon,
the successors, administrators, heirs, legal representatives and assigns of the
Optionee, and the successors and assigns of the Company.
18. GOVERNING LAW. The interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of Delaware.
19. NOTICES. Any notice to the Company provided for herein shall be given
to its Secretary at 10889 Wilshire Boulevard, Los Angeles, California 90024, and
any notice to the Optionee shall be addressed to said Optionee at his or her
address currently on file with the Company. Except as otherwise provided herein,
any written notice shall be deemed to be duly given if and when delivered
personally or deposited in the United States mail, first class registered mail,
postage and fees prepaid, and addressed as aforesaid. Any party may change the
address to which notices are to be given hereunder by written notice to the
other party as herein specified (provided that for this purpose any mailed
notice shall be deemed given on the third business day following deposit on the
same in the United States mail).
20. EFFECT OF PERFORMANCE VESTING. IN THE EVENT ALL OR ANY PORTION OF THE
OPTIONED SHARES BECOME EXERCISABLE BECAUSE THE COMMON STOCK HAS ATTAINED THE
FAIR MARKET VALUE PER SHARE SET FORTH IN PARAGRAPH 3 OF THIS AGREEMENT, THEN,
FOR TAX PURPOSES, (I) ONLY THAT NUMBER OF OPTIONED SHARES, THE VALUE OF WHICH
WHEN ADDED TO THE VALUE (BASED ON THE EXERCISE PRICE) OF SHARES OF COMMON STOCK
UNDER ANY INCENTIVE STOCK OPTION GRANTED TO THE OPTIONEE PRIOR TO THE DATE OF
THIS AGREEMENT THAT BECOMES EXERCISABLE IN THE SAME YEAR AS THE OPTIONED SHARES
DOES NOT EXCEED ONE HUNDRED THOUSAND DOLLARS ($100,000) SHALL BE ELIGIBLE FOR
INCENTIVE STOCK OPTION TREATMENT AND (II) THE BALANCE OF THE OPTIONED SHARES
SHALL BE DEEMED TO BE NONQUALIFIED STOCK OPTIONS.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf by its duly authorized officer and Optionee has also executed this
Agreement in duplicate, as of the day and year first above written.
OCCIDENTAL PETROLEUM CORPORATION
By:
-----------------------------
--------------------------------
Optionee
6
<PAGE>
EXHIBIT 10.3
OCCIDENTAL PETROLEUM CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
(WITH ACCELERATED PERFORMANCE VESTING)
Name of Optionee: ________________________________________________________
Date of Grant: ___________________________________________________________
Number of Optioned Shares: _______________________________________________
Option Price: ____________________________________________________________
Vesting Percentage: ________________ Percent
AGREEMENT (the "Agreement") made as of the Date of Grant by and between
OCCIDENTAL PETROLEUM CORPORATION, a Delaware corporation (hereinafter called
"Occidental," and, collectively with its Subsidiaries, the "Company"), and
Optionee.
1. GRANT OF STOCK OPTION. Subject to and upon the terms, conditions, and
restrictions set forth in this Agreement and in the Occidental Petroleum
Corporation 1995 Incentive Stock Plan (the "Plan"), Occidental hereby grants to
the Optionee as of the Date of Grant a stock option (the "Option") to purchase
up to the number of Optioned Shares. The Option may be exercised from time to
time in accordance with the terms of this Agreement. The Option is intended to
be a nonqualified stock option and shall not be treated as an "incentive stock
option" within the meaning of that term under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or any successor provision
thereto.
2. TERM OF OPTION. The term of the Option shall commence on the Date of
Grant and, unless earlier terminated in accordance with Section 6 hereof, shall
expire ten (10) years from the Date of Grant.
3. RIGHT TO EXERCISE. Subject to the expiration or earlier termination of
the Option, unless the Common Stock has attained the Fair Market Value per Share
set forth in the next sentence, on each anniversary of the Date of Grant the
number of Optioned Shares equal to the Vesting Percentage multiplied by the
initial number of Optioned Shares specified in this Agreement shall become
exercisable on a cumulative basis until the Option is fully exercisable. If, at
any time prior to the third anniversary of the Date of Grant, the Fair Market
Value per Share for twenty consecutive trading days is twenty-five dollars
($25.00) or more, then, on the first trading day following such twenty day
period,
799Nonqual
<PAGE>
the Optionee's rights in and to the Option shall become fully vested to the
extent not then vested and the Option shall become fully exercisable. For the
purposes of this paragraph 3, "trading day" means any day on which securities
trading is conducted on the New York Stock Exchange. To the extent the Option is
exercisable, it may be exercised in whole or in part.
4. OPTION NONTRANSFERABLE. The Option granted hereby shall be neither
transferable nor assignable by the Optionee other than by will or by the laws of
descent and distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee, or in the event of his or her legal incapacity,
by his or her guardian or legal representative acting on behalf of the Optionee
in a fiduciary capacity under state law and court supervision.
5. NOTICE OF EXERCISE; PAYMENT. To the extent then exercisable, the Option
shall be exercised by oral or written notice to Occidental stating the number of
Optioned Shares for which the Option is being exercised and the intended manner
of payment. Payment equal to the aggregate Option Price of the Optioned Shares
shall be (a) in cash in the form of currency or check or other cash equivalent
acceptable to Occidental, (b) by actual or constructive transfer to Occidental
of nonforfeitable, nonrestricted shares of Common Stock that have been owned by
the Optionee for (i) more than one year prior to the date of exercise and for
more than two years from the date on which the option was granted, if they were
originally acquired by the Optionee pursuant to the exercise of an incentive
stock option, or (ii) more than six months prior to the date of exercise, if
they were originally acquired by the Optionee other than pursuant to the
exercise of an incentive stock option, or (c) by any combination of the
foregoing methods of payment. Nonforfeitable, nonrestricted shares of Common
Stock that are transferred by the Optionee in payment of all or any part of the
Option Price shall be valued on the basis of their Fair Market Value per Share.
The requirement of payment in cash shall be deemed satisfied if the Optionee
makes arrangements that are satisfactory to Occidental with a broker that is a
member of the National Association of Securities Dealers, Inc. to sell a
sufficient number of the shares of Common Stock, which are being purchased
pursuant to the exercise, so that the net proceeds of the sale transaction will
at least equal the amount of the aggregate Option Price, and pursuant to which
the broker undertakes to deliver to Occidental the amount of the aggregate
Option Price not later than the date on which the sale transaction will settle
in the ordinary course of business. The date of such notice shall be the
exercise date. Any oral notice of exercise shall be confirmed in writing to
Occidental before the close of business the same day.
6. TERMINATION OF AGREEMENT. The Agreement and the Option granted hereby
shall terminate automatically and without further notice on the earliest of the
following dates:
(a) The remaining term of the Option after the date the Optionee
ceases to be an employee of the Company by reason of the Optionee's (i) death,
(ii) permanent disability or (iii) retirement under a retirement plan of the
Company at or after
2
<PAGE>
the earliest voluntary retirement age provided for in such retirement plan or
retirement at an earlier age with the consent of the Board;
(b) Immediately upon the voluntary or involuntary resignation of the
Optionee other than in connection with retirement as provided in 6(a)(iii)
above; or
(c) Ten years from the Date of Grant.
In the event that the Optionee commits an act that the Committee determines to
have been intentionally committed and materially inimical to the interests of
the Company, the Agreement shall terminate at the time of that determination
notwithstanding any other provision of this Agreement. This Agreement shall not
be exercisable for any number of Optioned Shares in excess of the number of
Optioned Shares for which this Agreement is then exercisable on the date of
termination of employment. For the purposes of this Agreement, the continuous
employment of the Optionee with the Company shall not be deemed to have been
interrupted, and the Optionee shall not be deemed to have ceased to be an
employee of the Company, by reason of the transfer of his or her employment
among the Company and its Subsidiaries or an approved leave of absence.
7. ACCELERATION OF OPTION. In the event of a Change of Control, the Option
granted hereby shall become immediately exercisable in full. For purposes of
this Agreement, "Change of Control" means the occurrence of any of the following
events:
(a) any "person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than
the Company, any trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any company owned, directly or indirectly, by the
stockholders of Occidental in substantially the same proportions as their
ownership of the Common Stock of Occidental), is or becomes after the effective
date of the Plan as provided in Section 16 of the Plan (the "Effective Date")
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of Occidental (not including in the
securities beneficially owned by such person any securities acquired directly
from Occidental or its affiliates) representing 50 percent or more of the
combined voting power of Occidental's then-outstanding securities;
(b) during any period of two consecutive years (not including any
period prior to the Effective Date), individuals who at the beginning of such
period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clause (a), (c), or (d) of this definition)
whose election by the Board or nomination for election by Occidental'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 at least a majority of the Board;
3
<PAGE>
(c) the stockholders of Occidental approve a merger or consolidation
of Occidental with any other corporation, other than (i) a merger or
consolidation that would result in the voting securities of Occidental
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the Company, at
least 50 percent of the combined voting power of the voting securities of
Occidental or such surviving entity outstanding immediately after such merger or
consolidation or (ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person
acquires more than 50 percent of the combined voting power of Occidental's
then-outstanding securities; or
(d) the stockholders of Occidental approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition of all or
substantially all of the Company's assets;
provided, however, that prior to the occurrence of any of the events described
in clauses (a) through (d) above, the Board may determine that such event shall
not constitute a Change of Control for purposes of this Agreement.
8. NO EMPLOYMENT CONTRACT. Nothing contained in this Agreement shall confer
upon the Optionee any right with respect to continuance of employment by the
Company, nor limit or affect in any manner the right of the Company to terminate
the employment or adjust the compensation of the Optionee.
9. TAXES AND WITHHOLDING. If the Company shall be required to withhold any
federal, state, local or foreign tax in connection with the exercise of the
Option, the Optionee shall pay the tax or make provisions that are satisfactory
to the Company for the payment thereof. The Optionee may elect to satisfy all or
any part of any such withholding obligation by surrendering to the Company a
portion of the shares of Common Stock that are issued or transferred to the
Optionee upon the exercise of the Option, and the shares of Common Stock so
surrendered by the Optionee shall be credited against any such withholding
obligation at the Fair Market Value per Share of such shares on the date of such
surrender; provided, however, if the Optionee is subject to Section 16 of the
Exchange Act, such election shall be made in accordance with Rule 16b-3 and
subject to approval by the Committee if such approval is then required by Rule
16b-3.
10. COMPLIANCE WITH LAW. The Company shall make reasonable efforts to
comply with all applicable federal and state securities laws; provided, however,
notwithstanding any other provision of this Agreement, the Option shall not be
exercisable if the exercise thereof would result in a violation of any such law.
11. ADJUSTMENTS. The Committee shall make such adjustments in the Option
Price and the number or kind of shares of stock covered by the Option that the
Committee
4
<PAGE>
may in good faith determine to be required in order to prevent dilution or
expansion of the Optionee's rights under this Agreement that otherwise would
result from (a) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company, or (b)
any merger, consolidation, spin-off, spin-out, split-off, split-up,
reorganization, partial or complete liquidation or other distribution of assets,
issuance of warrants or other rights to purchase securities, or any other
corporate transaction or event having an effect similar to any of the foregoing.
In the event of any such transaction or event, the Committee may provide in
substitution for all or any portion of the Optionee's rights under this
Agreement such alternative consideration as the Committee may in good faith
determine to be appropriate under the circumstances and may require the
surrender of all rights so replaced.
12. RELATION TO OTHER BENEFITS. Any economic or other benefit to the
Optionee under this Agreement shall not be taken into account in determining any
benefits to which the Optionee may be entitled under any profit-sharing,
retirement or other benefit or compensation plan maintained by the Company and
shall not affect the amount of any life insurance coverage available to any
beneficiary under any life insurance plan covering employees of the Company.
13. AMENDMENTS. Any amendment to the Plan shall be deemed to be an
amendment to this Agreement to the extent that the amendment is applicable
hereto; provided, however, that no amendment shall adversely affect the rights
of the Optionee under this Agreement without the Optionee's consent.
14. SEVERABILITY. In the event that one or more of the provisions of this
Agreement shall be invalidated for any reason by a court of competent
jurisdiction, any provision so invalidated shall be deemed to be separable from
the other provisions hereof, and the remaining provisions hereof shall continue
to be valid and fully enforceable.
15. RELATION TO PLAN. This Agreement is subject to the terms and conditions
of the Plan. In the event of any inconsistent provisions between this Agreement
and the Plan, the Plan shall govern. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Plan.
16. SUCCESSORS AND ASSIGNS. Without limiting Section 4 hereof, the
provisions of this Agreement shall inure to the benefit of, and be binding upon,
the successors, administrators, heirs, legal representatives and assigns of the
Optionee, and the successors and assigns of the Company.
17. GOVERNING LAW. The interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of Delaware.
18. NOTICES. Any notice to the Company provided for herein shall be given
to its Secretary at 10889 Wilshire Boulevard, Los Angeles, California 90024, and
any notice to the Optionee shall be addressed to said Optionee at his or her
address currently on file
5
<PAGE>
with the Company. Except as otherwise provided herein, any written notice shall
be deemed to be duly given if and when delivered personally or deposited in the
United States mail, first class registered mail, postage and fees prepaid, and
addressed as aforesaid. Any party may change the address to which notices are to
be given hereunder by written notice to the other party as herein specified
(provided that for this purpose any mailed notice shall be deemed given on the
third business day following deposit on the same in the United States mail).
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf by its duly authorized officer and Optionee has also executed this
Agreement in duplicate, as of the day and year first above written.
OCCIDENTAL PETROLEUM CORPORATION
By:
-----------------------------
--------------------------------
Optionee
6
<PAGE>
EXHIBIT 11
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(Amounts in millions, except per-share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
----------------------------- -----------------------------
1999 1998 1999 1998
- ------------------------------------------------------ ------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE
Income (loss) from continuing operations $ 12 $ 186 $ (45) $ 325
Preferred stock dividends (3) (5) (7) (9)
------------- ------------ -------------- ------------
Earnings (loss) from continuing operations
applicable to common stock 9 181 (52) 316
Discontinued operations, net -- -- -- 38
Extraordinary loss, net (3) -- (3) --
Cumulative effect of changes in
accounting principles, net -- -- (13) --
------------- ------------ -------------- ------------
Earnings (loss) applicable to common stock $ 6 $ 181 $ (68) $ 354
============= ============ ============== ============
Weighted average common shares outstanding 348.4 359.1 348.1 351.8
============= ============ ============== ============
Basic earnings per share
Income (loss) from continuing operations $ .03 $ .51 $ (.15) $ .90
Discontinued operations, net -- -- -- .11
Extraordinary loss, net (.01) -- (.01) --
Cumulative effect of changes in
accounting principles, net -- -- (.04) --
------------- ------------ -------------- ------------
Basic earnings (loss) per common share $ .02 $ .51 $ (.20) $ 1.01
============= ============ ============== ============
DILUTED EARNINGS PER SHARE
Earnings (loss) from continuing operations
applicable to common stock $ 9 $ 181 $ (52) $ 316
Dividends applicable to dilutive preferred stock -- 5 -- 9
------------- ------------ -------------- ------------
9 186 (52) 325
Discontinued operations, net -- -- -- 38
Extraordinary loss, net (3) -- (3) --
Cumulative effect of changes in
accounting principles, net -- -- (13) --
------------- ------------ -------------- ------------
Earnings (loss) applicable to common stock $ 6 $ 186 $ (68) $ 363
============= ============ ============== ============
Weighted average common shares outstanding 348.4 359.1 348.1 351.8
Dilutive effect of exercise of options outstanding .1 .8 -- .7
Dilutive effect of convertible preferred stock -- 16.5 -- 16.5
------------- ------------ -------------- ------------
348.5 376.4 348.1 369.0
============= ============ ============== ============
Diluted earnings per share
Income (loss) from continuing operations $ .03 $ .49 $ (.15) $ .88
Discontinued operations, net -- -- -- .10
Extraordinary loss, net (.01) -- (.01) --
Cumulative effect of changes in
accounting principles, net -- -- (.04) --
------------- ------------ -------------- ------------
Diluted earnings (loss) per common share $ .02 $ .49 $ (.20) $ .98
====================================================== ============= ============ ============== ============
</TABLE>
<PAGE>
EXHIBIT 11 (CONTINUED)
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(Amounts in millions, except per-share amounts)
The following items were not included in the computation of diluted earnings per
share because their effect was antidilutive:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-------------------------------------------- --------------------------------------------
1999 1998 1999 1998
---------------------- -------------------- ---------------------- --------------------
<S> <C> <C> <C> <C>
STOCK OPTIONS
Number of shares 3.3 .2 4.4 .2
Price range per share $21.250 -- $29.625 $28.375 -- $29.625 $17.750 -- $29.625 $28.375 -- $29.625
Expiration range 8/20/99 -- 4/29/08 8/20/99 -- 1/14/00 8/20/99 -- 4/29/08 8/20/99 -- 1/14/00
CONVERTIBLE PREFERRED
STOCK $3.00
Number of shares 11.5 -- 11.5 --
Dividends paid $3 -- $7 --
- --------------------------- ---------------------- -------------------- ---------------------- --------------------
</TABLE>
<PAGE>
EXHIBIT 12
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
COMPUTATION OF TOTAL ENTERPRISE RATIOS OF EARNINGS TO FIXED CHARGES
(Amounts in millions, except ratios)
<TABLE>
<CAPTION>
Six Months Ended
June 30 Year Ended December 31
-------------------- --------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
- ---------------------------------------- ---------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) from continuing
operations(a) $ 17 $ 338 $ 400 $ 245 $ 486 $ 325 $ (236)
---------- --------- --------- --------- --------- --------- ---------
Add:
Provision (credit) for taxes on
income (other than foreign
and gas taxes) 16 167 204 47 99 155 (59)
Interest and debt expense(b) 263 284 576 446 492 591 586
Portion of lease rentals
representative of the interest
factor 17 17 36 39 38 43 50
---------- --------- --------- --------- --------- --------- ---------
296 468 816 532 629 789 577
---------- --------- --------- --------- --------- --------- ---------
Earnings before fixed charges $ 313 $ 806 $ 1,216 $ 777 $ 1,115 $ 1,114 $ 341
========== ========= ========= ========= ========= ========= =========
Fixed charges
Interest and debt expense
including capitalized
interest(b) $ 268 $ 292 $ 594 $ 462 $ 499 $ 595 $ 589
Portion of lease rentals
representative of the interest
factor 17 17 36 39 38 43 50
---------- --------- --------- --------- --------- --------- ---------
Total fixed charges $ 285 $ 309 $ 630 $ 501 $ 537 $ 638 $ 639
========== ========= ========= ========= ========= ========= =========
Ratio of earnings to fixed charges 1.10 2.61 1.93 1.55 2.08 1.75 n/a(c)
- ---------------------------------------- ========== ========= ========= ========= ========= ========= =========
</TABLE>
(a) Includes (1) minority interest in net income of majority-owned subsidiaries
and partnerships 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 for the year ended December 31,
1994.
<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 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 267
<SECURITIES> 0
<RECEIVABLES> 577
<ALLOWANCES> 22
<INVENTORY> 498
<CURRENT-ASSETS> 1,758
<PP&E> 17,351
<DEPRECIATION> 7,325
<TOTAL-ASSETS> 14,291
<CURRENT-LIABILITIES> 1,661
<BONDS> 5,347
0
238
<COMMON> 70
<OTHER-SE> 2,800
<TOTAL-LIABILITY-AND-EQUITY> 14,291
<SALES> 2,991
<TOTAL-REVENUES> 3,066
<CGS> 2,367
<TOTAL-COSTS> 2,367
<OTHER-EXPENSES> 52
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 255
<INCOME-PRETAX> 45
<INCOME-TAX> 97
<INCOME-CONTINUING> (45)
<DISCONTINUED> 0
<EXTRAORDINARY> (3)
<CHANGES> (13)
<NET-INCOME> (61)
<EPS-BASIC> (.20)
<EPS-DILUTED> (.20)
</TABLE>
