<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, 1995.
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 1-10145
--------------------
LYONDELL PETROCHEMICAL COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------------------
DELAWARE 95-4160558
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1221 McKINNEY STREET, SUITE 1600
HOUSTON, TEXAS 77010
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 713-652-7200
--------------------
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
---- ----
NUMBER OF SHARES OF COMMON STOCK, $1.00 PAR VALUE, OUTSTANDING AS OF JUNE
30, 1995: 80,000,000.
================================================================================
<PAGE>
PART I. FINANCIAL INFORMATION
LYONDELL PETROCHEMICAL COMPANY
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
-------------------- --------------------
MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS 1995 1994 1995 1994
-------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
SALES AND OTHER OPERATING REVENUES:
Unrelated parties $1,271 $ 818 $2,355 $1,573
Related parties 99 82 189 151
------ ------ ------ ------
1,370 900 2,544 1,724
OPERATING COSTS AND EXPENSES:
Cost of sales:
Unrelated parties 1,021 727 1,873 1,409
Related parties 64 67 119 121
Selling, general and administrative
expenses 48 35 93 69
------ ------ ------ ------
1,133 829 2,085 1,599
------ ------ ------ ------
Operating income 237 71 459 125
Interest expense (21) (19) (39) (37)
Interest income 2 1 5 2
Minority interest in LYONDELL-CITGO
Refining Company Ltd. (3) (2) (8) (5)
------ ------ ------ ------
Income before income taxes 215 51 417 85
Provision for income taxes 80 19 155 31
------ ------ ------ ------
NET INCOME $ 135 $ 32 $ 262 $ 54
====== ====== ====== ======
EARNINGS PER SHARE $ 1.68 $ .40 $ 3.27 $ .68
====== ====== ====== ======
</TABLE>
See notes to consolidated financial statements.
1
<PAGE>
LYONDELL PETROCHEMICAL COMPANY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
MILLIONS OF DOLLARS 1995 1994
------------------- ------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ -- $ 52
Restricted cash and cash
equivalents (Note 2) 35 42
Accounts receivable:
Trade 414 331
Related parties 33 29
Inventories 307 229
Prepaid expenses and other
current assets 13 14
------ ------
Total current assets 802 697
------ ------
Fixed assets:
Property, plant and equipment 3,393 2,810
Less accumulated depreciation
and amortization 1,958 1,930
------ ------
1,435 880
Deferred charges and other assets 83 86
------ ------
Total assets $2,320 $1,663
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade $ 309 $ 287
Related parties 1 1
Income taxes payable 36 28
Notes payable 237 20
Current maturities of long-term
debt 150 10
Other accrued liabilities 81 87
------ ------
Total current liabilities 814 433
------ ------
Long-term debt 588 707
Other liabilities and deferred
credits 97 83
Deferred income taxes 111 109
Commitments and contingencies
(Note 6)
Minority interest 421 268
Stockholders' equity:
Preferred stock, $.01 par value,
80,000,000 shares authorized,
none outstanding
Common stock, $1 par value,
250,000,000 shares authorized,
80,000,000 issued and
outstanding 80 80
Additional paid-in capital 158 158
Retained earnings (deficit) 51 (175)
------ ------
Total stockholders' equity 289 63
------ ------
Total liabilities and stockholders'
equity $2,320 $1,663
====== ======
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
LYONDELL PETROCHEMICAL COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30
--------------------
MILLIONS OF DOLLARS 1995 1994
------------------- ------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 262 $ 54
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 38 29
Deferred taxes (3) 4
Increase in accounts receivable (86) (48)
(Increase) decrease in inventory (78) 7
Increase in accounts payable 36 39
Net change in other working capital accounts 7 (22)
Minority interest 8 5
Other 3 4
------ ------
Net cash provided by operating activities 187 72
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to fixed assets (593) (79)
Purchases of short-term investments - (19)
Proceeds from sales of short-term investments - 13
------ ------
Net cash used in investing activities (593) (85)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Minority owner contribution 145 28
Net change in short-term debt 217 (4)
Proceeds from issuance of long-term debt 31 -
Repayments of long-term debt (10) (8)
Dividends paid (36) (36)
------ ------
Net cash provided by (used in) financing
activities 347 (20)
------ ------
DECREASE IN CASH, RESTRICTED CASH AND CASH EQUIVALENTS (59) (33)
Cash, restricted cash and cash equivalents at beginning
of period 94 113
------ ------
Cash, restricted cash and cash equivalents at end of
period $ 35 $ 80
====== ======
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
LYONDELL PETROCHEMICAL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
1. BASIS OF PREPARATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
only of normal, recurring adjustments considered necessary for a fair
presentation, have been included. For further information, refer to the
consolidated financial statements and notes thereto for the year ended December
31, 1994 included in the Lyondell Petrochemical Company ("Company") 1994 Annual
Report and the Annual Report on Form 10-K pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934. The year-end condensed balance sheet data was
derived from audited financial statements but does not include all disclosures
required by generally accepted accounting principles. Certain amounts from prior
periods have been reclassified to conform to current period presentation.
2. RESTRICTED FUNDS
As of June 30, 1995 and December 31, 1994, cash in the amount of $35 million
and $42 million, respectively, was restricted for use in connection with
LYONDELL-CITGO Refining Company Ltd. ("LCR") capital projects, including the
Refinery upgrade project, and other expenditures as determined by the LCR
owners.
Presented below is a reconciliation of changes in restricted funds for the six-
month period ended June 30, 1995.
<TABLE>
<CAPTION>
<S> <C>
Restricted - cash and cash
equivalents at December 31,
1994 $ 42
Minority owner investments:
Contributions 145
Reinvestments 7
Proceeds from bank loan 31
Interest on restricted funds 1
Additions to fixed assets:
Refinery upgrade project (177)
Refining segment - other (14)
-----
Restricted - cash and cash
equivalents at June 30, 1995 $ 35
=====
</TABLE>
4
<PAGE>
3. INVENTORIES
The categories of inventory and their book values at June 30, 1995 and December
31, 1994 were:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS 1995 1994
------------------------ ----- -----
<S> <C> <C>
Crude oil $ 39 $ 62
Refined products 29 30
Petrochemicals 197 102
Materials and supplies 42 35
----- -----
$ 307 $ 229
===== =====
</TABLE>
4. ACQUISITION OF ALATHON/(R)/ HIGH-DENSITY POLYETHYLENE BUSINESS
On May 1, 1995, the Company acquired the assets associated with Occidental
Chemical Corporation's Alathon/(R)/ high-density polyethylene ("HDPE") business
for $355 million including certain direct costs, plus approximately $64 million
for inventory. Assets involved in the purchase include resin production
facilities at Victoria and Matagorda, Texas, associated research and development
activities and the rights to the Alathon/(R)/ trademark. These facilities have a
combined annual production capacity of approximately 1.5 billion pounds of HDPE.
The Company financed the acquisition from internal cash and by borrowing from
its existing credit facilities.
The following unaudited pro forma information combines the results of operations
of the Company and the Alathon/(R)/ business for the six months ended June 30,
1995 and 1994 and assumes that the acquisition of the Alathon/(R)/ business
occurred on January 1, 1994. This unaudited pro forma information may not be
indicative of results that would have actually resulted if this transaction had
occurred on January 1, 1994 or which may be obtained in the future.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
----------------
MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS 1995 1994
---------------------------------------------- ------- ------
<S> <C> <C>
Revenues $2,738 $1,904
Net income $ 282 $ 58
Earnings per share $ 3.52 $ .72
</TABLE>
5. FINANCING ARRANGEMENTS
LCR entered into two credit facilities, dated as of May 5, 1995, totaling $520
million with a group of banks with The Bank of New York as agent. The first
facility is a $70 million, 364 day revolving credit facility, which replaces
LCR's existing $70 million revolving credit facility, that will be utilized for
general business purposes, including letters of credit, unrelated to the
Refinery upgrade project. The second facility is a $450 million, five year term
credit facility that will be used in connection with the Refinery upgrade
project. Interest for the facilities is based on prime or eurodollar rates at
LCR's option. Prior to the completion of the Refinery upgrade project, all
financing costs related to the $450 million credit facility will be funded by
CITGO Petroleum Corporation, the minority owner of LCR. The facilities contain
covenants which require LCR to maintain a minimum net worth which increases each
year until 1998 and maintenance of certain financial ratios defined in the
agreements. The facilities also contain other customary covenants which limit
LCR's ability to modify certain significant contracts, incur additional debt or
liens, dispose of assets, make restricted payments as defined in the agreements
or merge or consolidate with other entities. As of June 30, 1995, a total of $45
million was outstanding under these facilities.
5
<PAGE>
5. FINANCING ARRANGEMENTS - (CONTINUED)
During June 1995, the Company elected to amend its existing $400 million credit
facility. The amended credit facility includes a provision allowing banks, in
their sole discretion, to make competitive bids for advances to the Company. The
term of the amended credit facility was extended from December 6, 1998 to June
30, 2000. All other terms and conditions remained substantially unchanged. As of
June 30, 1995, $100 million was outstanding under this credit facility.
As of June 30, 1995, the Company also had uncommitted lines of credit totaling
$240 million with banks and other financial institutions. These uncommitted
lines of credit provide the Company with additional borrowing flexibility and
potentially more competitive interest rates. The Company can borrow money on
these uncommitted lines of credit on such terms as may be mutually agreed upon
at the time amounts are borrowed. The lines of credit can be terminated by the
lenders, in their sole discretion, on short notice. As of June 30, 1995, the
Company had $123 million outstanding under these uncommitted lines of credit.
6. COMMITMENTS AND CONTINGENCIES
The Company has various purchase commitments for materials, supplies and
services incident to the ordinary conduct of business. In the aggregate, such
commitments are not at prices in excess of current market.
In connection with the transfer of assets and liabilities from Atlantic
Richfield Company ("ARCO") to the Company, the Company agreed to assume certain
liabilities arising out of the operation of the Company's integrated
petrochemical and petroleum processing business prior to July 1, 1988. In
connection with the transfer of such liabilities, the Company and ARCO entered
into an agreement ("Cross-Indemnity Agreement") whereby the Company has agreed
to defend and indemnify ARCO against certain uninsured claims and liabilities
which ARCO may incur relating to the operation of the business of the Company
prior to July 1, 1988, including certain liabilities which may arise out of
pending and future lawsuits.
ARCO indemnified the Company under the Cross-Indemnity Agreement with respect to
other claims or liabilities and other matters of litigation not related to the
assets or business included in the consolidated financial statements. ARCO has
also indemnified the Company for all federal taxes which might be assessed upon
audit of the operations of the Company included in the consolidated financial
statements prior to January 12, 1989 and for all state and local taxes for the
period prior to July 1, 1988.
In addition to lawsuits for which the Company has indemnified ARCO, the Company
is also subject to various lawsuits and proceedings. Subject to the uncertainty
inherent in all litigation, management believes the resolution of these
proceedings will not have a material adverse effect upon the Company's financial
statements.
The Company's policy is to be in compliance with all applicable environmental
laws. The Company is subject to extensive environmental laws and regulations
concerning emissions to the air, discharges to surface and subsurface waters and
the generation, handling, storage, transportation, treatment and disposal of
waste materials. Some of these laws and regulations are subject to varying and
conflicting interpretations. In addition, the Company cannot accurately predict
future developments, such as increasingly strict requirements of environmental
laws, inspection and enforcement policies and compliance costs therefrom which
might affect the handling, manufacture, use, emission or disposal of products,
other materials or hazardous and non-hazardous waste.
6
<PAGE>
6. COMMITMENTS AND CONTINGENCIES - (CONTINUED)
Subject to the terms of the Cross-Indemnity Agreement, the Company is currently
contributing funds to the cleanup of two waste sites (French Ltd. and Brio, both
of which are located near Houston, Texas) under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") as amended by the Superfund
Amendments and Reauthorization Act of 1986. The Company is also subject to
certain assessment and remedial actions at the Refinery under the Resource
Conservation and Recovery Act ("RCRA"). In addition, the Company has negotiated
an order with the Texas Natural Resource Conservation Commission ("TNRCC"),
formerly the Texas Water Commission, for assessment and remediation of
groundwater and soil contamination at the Refinery.
During July 1994, the Company reported results of an independent investigation
conducted by the Audit Committee of the Board of Directors regarding the
compliance status of two process waste-water streams under the applicable
Benzene National Emissions Standard for Hazardous Air Pollutants ("NESHAPS")
regulations and certain issues raised by an employee. Noncompliance with the
Benzene NESHAPS regulations and the related reporting requirements can result in
civil penalties and, under certain circumstances, substantial civil and,
potentially, criminal penalties. The Company received a notice of violation
regarding the two streams and paid a fine of $10,200 to the TNRCC. The Company
incurred approximately $2 million in capital costs in connection with these
waste water streams to achieve on-going compliance with the Benzene NESHAPS
regulations. The Criminal Enforcement Division of the EPA is conducting a
formal investigation. However, the Company continues to believe that none of
the aspects of the matters described above will subject the Company to criminal
liability or have a material adverse effect on the Company's business or
financial statements.
The Company has accrued $17 million related to future CERCLA, RCRA and TNRCC
assessment and remediation costs, of which $2 million is included in current
liabilities while the remaining amounts are expected to be incurred over the
next two to seven years. In the opinion of management, there is currently no
material range of loss in excess of the amount accrued. However, it is possible
that new information about the sites for which the reserve has been established,
new technology or future developments such as involvement in other CERCLA, RCRA,
TNRCC or other comparable state law investigations, could require the Company to
reassess its potential exposure related to environmental matters.
In the opinion of management, any liability arising from the matters discussed
above will not have a material adverse effect on the consolidated financial
statements or liquidity of the Company, although the adverse resolution in any
reporting period of one or more of these matters discussed in this note could
have a material impact on the Company's results of operations for that period.
7. DIVIDENDS
On June 15, 1995, the Company paid a regular quarterly dividend of $.225 per
share of common stock to stockholders of record on May 25, 1995. Additionally,
on July 21, 1995 the Board of Directors declared a regular quarterly dividend of
$.225 per share of common stock, payable September 15, 1995 to stockholders of
record on August 25, 1995.
8. EARNINGS PER SHARE
Earnings per share for all periods presented are computed based on the weighted
average number of shares outstanding for the periods, which was 80,000,000
shares.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Lyondell Petrochemical Company (the "Company" or "Lyondell") operates in two
business segments: petrochemicals and refining. The petrochemical segment
consists of olefins including ethylene, propylene, butadiene, butylenes and
specialty products; polyolefins including polypropylene, low density
polyethylene and high-density polyethylene ("HDPE"); aromatics produced at the
Channelview petrochemical complex ("Channelview Complex") including benzene and
toluene; methanol; methyl tertiary butyl ether ("MTBE") and refinery blending
stocks. On May 1, 1995, the Company acquired from Occidental Chemical
Corporation resin production facilities at Victoria and Matagorda, Texas, with a
combined annual production capacity of approximately 1.5 billion pounds of HDPE,
associated research and development activities and the rights to the
Alathon/(R)/ trademark. See Note 4 of "NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS."
On July 1, 1993, the Company and CITGO Petroleum Corporation ("CITGO") announced
the commencement of operations of LYONDELL-CITGO Refining Company Ltd. ("LCR"),
a new entity owned by subsidiaries of the Company and CITGO. LCR owns and
operates the refining business formerly owned by the Company, including the
full-conversion refinery ("Refinery"). LCR is undertaking a major upgrade
project at the Refinery to enable the facility to process substantial additional
volumes of very heavy crude oil. CITGO is providing a major portion of the funds
for the upgrade project and has provided in excess of $100 million for funding
other capital projects. At the present time, LCR management anticipates the cost
for the project will be approximately $980 million, which includes an allowance
for contingency costs.
On July 1, 1993, LCR entered into a long-term crude oil supply contract ("Crude
Supply Contract") with LAGOVEN, S.A., an affiliate of CITGO. In addition, under
terms of a long-term product sales agreement ("Products Agreement"), CITGO
purchased approximately 80 to 85 percent of the light refined products produced
at the Refinery. Effective July 1995, CITGO began purchasing approximately 100
percent of the light refined products produced at the Refinery. Both LAGOVEN
and CITGO are subsidiaries of Petroleos de Venezuela, S.A., the national oil
company of Venezuela.
Prior to completion of the upgrade project, the Crude Supply Contract requires
LCR to purchase and LAGOVEN to supply a minimum of 125,000 barrels per day of
heavy Venezuelan crude oil. The contract incorporates a formula price based on
the market value of a slate of refined products deemed to be produced from each
particular crude oil or feedstock, less: (i) certain deemed refining costs,
adjustable for inflation; (ii) certain actual costs, including crude oil
transportation costs, import duties and taxes; and (iii) a deemed margin, which
varies according to the grade of crude oil or other feedstock delivered. Deemed
costs are adjusted periodically based on inflation rates for specific deemed
cost components. Adjustments to margins track, but are less than, inflation
rates. Because deemed operating costs and the slate of refined products deemed
to be produced from a given barrel of crude oil or other feedstock do not
necessarily reflect the actual costs and yields in any period and also because
the market value of the refined products used in the pricing formula does not
necessarily reflect the actual price received for the refined products, the
actual refining margin earned by LCR under the Crude Supply Contract will vary
depending on, among other things, the efficiency with which LCR conducts its
operations during such period.
Notwithstanding the limitations discussed above, however, the Crude Supply
Contract is designed to reduce the inherent volatility of earnings and cash flow
of LCR's refining operations irrespective of market fluctuations of either crude
oil or refined products. Specifically, should the market value of refined
products "deemed" to be produced from the Venezuelan crude oil increase, the
cost of crude oil to LCR will also increase. Alternatively, if
8
<PAGE>
the market value of refined products "deemed" to be produced from the Venezuelan
crude oil decreases, the cost of crude oil to LCR will also decrease. This
results in relatively stable "deemed" margins regardless of the market
volatility of either refined products or crude oil. If the actual yields, costs
or volumes differ substantially from those contemplated by the Crude Supply
Contract, the benefits of this agreement to LCR could be substantially different
than anticipated.
The refining segment consists of refined petroleum products, including gasoline,
heating oil and jet fuel; aromatics produced at the Refinery, including benzene,
toluene, paraxylene and orthoxylene; lubricants, including industrial and motor
oils; olefins feedstocks and crude oil resales. Crude oil resales consist of
revenues from the resale of previously purchased crude oil and from locational
exchanges of crude oil that are settled on a cash basis. Crude oil exchanges
and resales facilitate the operation of the refining segment by allowing the
Company to optimize the crude oil feedstock mix in response to market conditions
and refinery maintenance turnarounds and also to reduce transportation costs.
Crude oil resales amounted to $90 million and $58 million for the three-month
periods ended June 30, 1995 and 1994, respectively and $164 million and $119
million for the six-month periods ended June 30, 1995 and 1994, respectively.
The following table sets forth the Company's major product volumes sold for the
periods indicated. Sales volumes include production, purchases of products for
resale, propylene production from the product flexibility unit and draws from
inventory.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ ----------------
1995 1994 1995 1994
------ ------ ------ -----
<S> <C> <C> <C> <C>
SELECTED PETROCHEMICAL PRODUCTS
(MILLIONS) (EXCLUDING
INTERSEGMENT SALES):
Ethylene, propylene and polyolefins 1,851 1,458 3,364 2,961
(lbs.)
Other olefins (lbs.) 279 249 572 486
Methanol (gallons) 45 46 96 92
Aromatics (gallons) 40 41 79 77
REFINED PRODUCTS (THOUSAND BARRELS PER
DAY) (EXCLUDING INTERSEGMENT SALES):
Gasoline 107 103 106 108
Heating oil (no. 2 distillate) 51 51 53 50
Jet fuel 29 29 30 26
Aromatics 8 7 9 8
Other refined products 57 50 55 47
----- ----- ----- -----
Total refined products volumes 252 240 253 239
===== ===== ===== =====
</TABLE>
Summarized below is the segment data for the Company. Intersegment sales
between the petrochemical and refining segments include olefins feedstocks and
benzene produced at the Refinery and gasoline blending stocks produced at the
Channelview Complex and were made at prices that were based on current market
values.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ -----------------
(MILLIONS OF DOLLARS) 1995 1994 1995 1994
--------------------- --------- --------- ------- --------
SALES AND OTHER OPERATING REVENUES:
<S> <C> <C> <C> <C>
Petrochemical segment $ 769 $ 439 $1,415 $ 823
Refining segment 709 570 1,338 1,105
Intersegment sales (108) (109) (209) (204)
------ ----- ------ ------
$1,370 $ 900 $2,544 $1,724
====== ===== ====== ======
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------- -----------------
(MILLIONS OF DOLLARS) 1995 1994 1995 1994
--------------------- ---------- -------- -------- --------
<S> <C> <C> <C> <C>
COST OF SALES:
Petrochemical segment $ 520 $ 362 $ 957 $ 697
Refining segment 673 541 1,244 1,037
Intersegment purchases (108) (109) (209) (204)
------ ----- ------ ------
$1,085 $ 794 $1,992 $1,530
====== ===== ====== ======
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES:
Petrochemical segment $ 19 $ 9 $ 32 $ 19
Refining segment 14 14 29 27
Unallocated 15 12 32 23
------ ----- ------ ------
$ 48 $ 35 $ 93 $ 69
====== ===== ====== ======
OPERATING INCOME:
Petrochemical segment $ 230 $ 68 $ 426 $ 107
Refining segment 22 15 65 41
Unallocated (15) (12) (32) (23)
------ ----- ------ ------
$ 237 $ 71 $ 459 $ 125
====== ===== ====== ======
Summarized below are intersegment sales
for the two segments.
Petrochemical segment $ 55 $ 53 $ 101 $ 97
Refining segment 53 56 108 107
------ ----- ------ ------
$ 108 $ 109 $ 209 $ 204
====== ===== ====== ======
</TABLE>
RESULTS OF OPERATIONS
OVERVIEW
Net income for the second quarter of 1995 was $135 million or $1.68 per share
compared to a net income of $32 million or $.40 per share for the second quarter
of 1994. The $103 million improvement was primarily due to higher olefins sales
margins and volumes and to a lesser extent to higher profitability for
polyolefins and aromatics.
Net income was $8 million higher for the second quarter of 1995 compared to the
first quarter of 1995. This increase was primarily caused by higher olefins and
polyolefins sales margins and volumes, partially offset by lower margins for
methanol and refined products.
Net income for the first six months of 1995 was $262 million or $3.27 per share
compared to a net income of $54 million or $.68 per share for the first six
months of 1994. The increase of $208 million was primarily caused by higher
olefins sales margins and volumes. Contributing to the improvement were higher
sales margins for aromatics and methanol and higher profitability for
polyolefins.
10
<PAGE>
PETROCHEMICAL SEGMENT
REVENUES Sales and other operating revenues for the second quarter of 1995
were $769 million compared to $439 million for the second quarter of 1994. The
$330 million increase was due primarily to higher olefins sales prices. The
higher sales prices reflected continued strong market conditions for
petrochemicals that resulted from the high U.S. economic growth rate in 1994, an
improved worldwide economy and industry supply disruptions during 1994.
Additionally, sales revenues were higher due to sales of HDPE resulting from the
acquisition of the Alathon/(R)/ business effective May 1, 1995.
Sales and other operating revenues for the first six months of 1995 were $1.4
billion, an increase of $592 million compared to the first six months of 1994.
The increase was due to higher olefins sales prices and volumes and higher
polyolefins sales prices reflecting the improved market conditions and the HDPE
sales from the Alathon/(R)/ business.
COST OF SALES Cost of sales was $520 million in the second quarter of 1995
compared to $362 million in the second quarter of 1994, an increase of $158
million. Cost of sales for the first six months of 1995 were $957 million, an
increase of $260 million compared to the first six months of 1994. These
increases were primarily due to higher olefins feedstock costs resulting from
higher raw material prices and higher olefins production. Olefins raw material
costs were higher due to higher worldwide crude oil and petroleum product
prices. Additionally, cost of sales was higher due to the operation of the
Alathon/(R)/ plants.
SELLING EXPENSES Selling expenses for the second quarter of 1995 compared to
the second quarter of 1994 were $10 million higher. Selling expenses for the
first six months of 1995 were $32 million, an increase of $13 million compared
to the first six months of 1994. These increases were primarily caused by
selling expenses associated with the Alathon/(R)/ business.
OPERATING INCOME Operating income for the second quarter of 1995 was $230
million compared to an operating income of $68 million in the second quarter of
1994. The $162 million improvement was primarily due to higher petrochemical
sales margins and volumes and to a lesser extent to higher profit performance
for polyolefins. The higher olefins sales margins resulted primarily from
higher ethylene and olefins co-product sales prices which more than offset
higher feedstock costs. Olefins sales prices and volumes were higher due to
higher industry-wide demand resulting from the improved worldwide economy and
industry supply disruptions during 1994. Olefins raw material prices were
higher due to the higher crude oil and petroleum product prices. The improved
polyolefins performance resulted from the contribution of the Alathon/(R)/
business and from higher sales prices for other polyolefins products resulting
from the improved economic conditions.
Operating income for the second quarter of 1995 compared to the first quarter of
1995 increased $34 million. The increase was primarily due to higher olefins
sales margins and volumes and higher polyolefins performance, partially offset
by lower methanol sales margins. Olefins sales margins continued to improve
during the second quarter due to sales prices of olefins co-products increasing
faster than feedstock costs. Olefins sales volumes were higher during the
second quarter due, in part, to a ten day shutdown of one of the olefins units
for unscheduled maintenance during the first quarter of 1995. Operating profits
for polyolefins were higher primarily due to the contribution from the
Alathon/(R)/ business during the second quarter. Methanol sales margins were
lower during the second quarter due to a significant decline in prices which
began late in the first quarter of 1995 due to a decline in MTBE related demand
for reformulated gasoline and increasing methanol supply.
Operating income for the first six months of 1995 was $426 million compared to
an operating income of $107 million during the first six months of 1994. The
$319 million improvement was primarily due to higher olefins sales margins and
volumes. Contributing to the improvement was higher profitability for methanol
and polyolefins. Olefins sales margins were higher due to significantly higher
ethylene and olefins co-products sales prices that more than offset increased
raw material prices. Olefins sales prices and volumes were higher due to the
improved economy and supply and demand factors. The improved methanol profit
performance resulted from
11
<PAGE>
higher sales prices caused by higher demand growth
resulting from the improved worldwide economy, increased use of MTBE and
industry supply disruptions in 1994. The improved polyolefins performance
resulted from the contribution of the Alathon/(R)/ business and higher sales
prices for other polyolefins products caused by the improved economic
conditions.
REFINING SEGMENT
REVENUES Sales and other operating revenues for the second quarter of 1995 were
$709 million compared to $570 million for the second quarter of 1994, an
increase of $139 million. Sales and other operating revenues for the first six
months of 1995 were $1.3 billion, an increase of $233 million compared to the
first six months of 1994. These increases were primarily due to higher sales
prices for both refined products and aromatics and higher sales volumes and
prices for crude oil resales. Refined products sales prices were higher
generally due to the higher worldwide crude oil prices. Aromatics sales prices,
particularly for paraxylene and orthoxylene, increased primarily due to higher
demand.
COST OF SALES Cost of sales was $673 million during the second quarter of 1995
compared to $541 million during the second quarter of 1994, an increase of $132
million. Cost of sales was $1.2 billion during the first six months of 1995
compared to $1.0 billion during the first six months of 1994, an increase of
$207 million. These increases were primarily due to higher crude oil and other
feedstock prices and to higher volumes and costs related to crude oil resales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and
administrative expenses were $14 million in the second quarter of 1995,
unchanged from the second quarter of 1994. Selling, general and administrative
expenses were $29 million during the first six months of 1995 compared to $27
million during the first six months of 1994. The $2 million increase was
primarily due to an approximately $1 million increase in each of compensation
and selling expenses. The increase in selling expenses related primarily to
higher sales of aromatics and refined products.
OPERATING INCOME Operating income for the second quarter of 1995 was $22
million compared to $15 million for the second quarter of 1994. The $7 million
increase was primarily due to higher aromatics margins, partially offset by
higher refined products period costs. Aromatics margins were higher due to
higher sales prices, particularly for paraxylene and orthoxylene. Refined
products period costs were higher due to increased maintenance expenses for
scheduled and unscheduled downtime of various manufacturing units.
Operating income for the second quarter of 1995 compared with the first quarter
of 1995 decreased $21 million. The decrease was primarily due to lower refined
products sales margins and higher period costs. Refined products sales margins
were lower due to unscheduled production unit downtime. Additionally, the
volume of Venezuelan crude oil purchased and processed in the second quarter,
while in accordance with the Crude Supply Contract, was significantly lower than
the volume processed in the first quarter. First quarter Venezuelan crude oil
processing was in excess of contract volumes, drawing on crude oil not processed
in the fourth quarter of 1994 due to unit turnarounds at the Refinery. Refined
products period costs were higher due to increased maintenance expenses for
scheduled and unscheduled downtime of various manufacturing units.
Operating income for the first six months of 1995 was $65 million compared to
$41 million for the first six months of 1994. The $24 million increase was
primarily due to higher margins for aromatics and refined products, partially
offset by higher period costs. Aromatics sales margins were higher due to
higher sales prices, particularly for paraxylene and orthoxylene. Refined
products sales margins were higher due to processing higher volumes of
Venezuelan crude oil purchased under the Crude Supply Contract in both the
coking and cracking modes. Refined products period costs were higher due to
increased maintenance expenses for scheduled and unscheduled downtime of various
manufacturing units.
12
<PAGE>
UNALLOCATED
GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses were
$15 million in the second quarter of 1995 compared to $12 million in the second
quarter of 1994, an increase of $3 million. General and administrative expenses
were $32 million in the first six months of 1995 compared to $23 million in the
first six months of 1994, an increase of $9 million. These increases were
primarily due to management incentive compensation related expenses, a
significant portion of which was for a management incentive compensation plan
adopted in 1995 that related to 1994.
INTEREST EXPENSE Interest expense was $21 million during the second quarter of
1995 compared to $19 million during the second quarter of 1994, an increase of
$2 million. Interest expense was $39 million during the first six months of
1995 compared to $37 million during the first six months of 1994, an increase of
$2 million. These interest expense increases resulted from amounts borrowed to
partially finance the Alathon/(R)/ acquisition.
INTEREST INCOME Interest income was $2 million during the second quarter of
1995 compared to $1 million during the second quarter of 1994, an increase of $1
million. Interest income was $5 million during the first six months of 1995
compared to $2 million during the first six months of 1994, an increase of $3
million. These increases in interest income resulted from higher levels of
excess cash invested at higher interest rates prior to the Alathon/(R)/
acquisition.
MINORITY INTEREST IN LYONDELL-CITGO REFINING COMPANY LTD. Minority interest was
$3 million in the second quarter of 1995 and $8 million for the first six months
of 1995, representing the allocated share of LCR's net income to CITGO, the
minority owner of LCR.
INCOME TAX The effective income tax rate during the first six months of 1995
was 37.2 percent. State income tax was the primary difference between the
effective tax rate and the 35 percent federal statutory rate.
FINANCIAL CONDITION
Lyondell's cash flows from operating activities were $187 million and $72
million during the first six months of 1995 and 1994, respectively. This
period-to-period increase was primarily attributable to the $208 million
increase in net income. Cash flows from operations during the first six months
of 1995 was reduced by working capital changes of $121 million, of which $103
million was due to the initial working capital requirements of the Alathon/(R)/
business.
Cash flows associated with investing activities during the first six months
ended June 30, 1995 consisted of capital expenditures of $593 million, of which
$355 million was for the Alathon/(R)/ acquisition, $177 million was for the
upgrade project at the Refinery and $13 million was for environmentally related
projects. As of June 30, 1995, $35 million of cash was restricted for use in
LCR capital projects, including the Refinery upgrade project, and other
expenditures as determined by the LCR owners.
The total expenditures for the Alathon/(R)/ acquisition were $419 million,
including approximately $64 million for inventories. The Company financed the
acquisition with internal cash and borrowings from its existing credit
facilities. At June 30, 1995, $223 million was outstanding under these credit
facilities. Expenditures during the six months ended June 30, 1995 for the
Refinery upgrade project were funded by contributions from CITGO in the amount
of $145 million and $31 million borrowed by LCR under a $450 million term credit
facility described below.
13
<PAGE>
During June 1995, the Company's $400 million revolving credit facility was
amended by extending the term of the facility to the year 2000 and adding a
competitive auction feature wherein the interest rate on borrowings can be based
on competitive bids submitted by the sponsoring banks or at either the
eurodollar, certificate of deposit or prime rates, all at the Company's option.
All other terms and conditions remained substantially unchanged. See Note 5 of
"NOTES TO CONSOLIDATED FINANCIAL STATEMENTS."
In May 1995, LCR entered into two credit facilities totaling $520 million with a
group of banks with The Bank of New York as agent. The first facility was a $70
million, 364 day revolving credit facility, which replaced LCR's former $70
million revolving credit facility, that will be utilized for general business
purposes, including letters of credit, unrelated to the Refinery upgrade
project. The second facility is a $450 million, five year term credit facility
that will be used in connection with the Refinery upgrade project. Interest for
both facilities is based on prime or eurodollar rates at LCR's option. Prior to
the completion of the Refinery upgrade project, all financing costs related to
the $450 million credit facility will be funded by CITGO. See Note 5 of "NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS."
On July 21, 1995, the Board of Directors declared a regular quarterly dividend
of $.225 per share of common stock, payable September 15, 1995 to stockholders
of record on August 25, 1995.
CURRENT BUSINESS OUTLOOK
Lyondell's results for the second quarter and for the six month period ended
June 30, 1995 reflect strong markets for its petrochemical and polyolefins
products and continued strong aromatics performance at LCR. The positive
contribution from the Alathon/(R)/ business since its purchase on May 1, 1995
met management's expectation. However, methanol prices continued to decline, as
expected, during the second quarter from peak levels experienced at the
beginning of 1995.
During the second quarter, sales prices for most petrochemical and polyolefins
products began to level off and even declined for certain products. An increase
in industry ethylene capacity over the past six months, coupled with slower
economic growth, may cause further and broader declines in the prices of olefins
and polyolefins over the latter part of 1995. Although methanol prices appeared
to be stabilizing at the end of the second quarter, new methanol industry
capacity expected to be added during the remainder of the year and uncertainty
with regard to MTBE demand may put additional pressure on methanol prices.
During the second quarter, LCR margins remained above refining industry margins
due to the benefits of the Crude Supply Contract, although results continued to
be adversely impacted by operating problems. Early in the third quarter,
refining industry coking and cracking margins have declined compared to the
average second quarter levels, affecting LCR's profitability on the
approximately 40 percent of crude oil runs not covered by the Crude Supply
Contract. A fire that occurred in the coker on July 28, and the subsequent
repair work, caused the coker to be down for approximately two weeks, negatively
affecting total crude oil runs and LCR's ability to maximize the upgrading of
products. The aromatics business remains strong, particularly for paraxylene,
although orthoxylene prices have declined. Although management expects LCR to
continue to benefit from the stabilization of cash flows and reduction in market
volatility provided by the Crude Supply Contract, the keys to improved
profitability for LCR continue to be maximizing the amount of heavy Venezuelan
crude oil processed in the coking mode, optimizing the efficient utilization of
the remaining cracking capacity and maintaining low cost operations.
Profitability and cash flows for the petrochemical and refining businesses are
affected by industry supply and demand, feedstock cost volatility, capital
expenditures required to meet more stringent environmental standards, repair and
maintenance costs and downtime of production units due to turnarounds.
Turnarounds on major units can have significant financial impacts due to the
repair and maintenance costs incurred as well as the associated loss of
production, resulting in lower profitability during the period of the
turnaround. The Company currently intends to perform a turnaround on one of its
two olefins units beginning in October 1995. During this
14
<PAGE>
turnaround, which is expected to last six to eight weeks, work will be completed
to debottleneck the unit which will increase its capacity by approximately 120
million pounds per year.
The Company believes that business conditions will be such that cash balances,
cash generated from operating activities and existing lines of credit will be
adequate to meet future cash requirements for scheduled debt repayments,
necessary capital expenditures and to sustain for the reasonably foreseeable
future the regular quarterly dividend. However, the Company continually
evaluates its cash requirements and allocates cash in order to maximize
stockholder returns.
--------------------------
Management cautions against projecting any future results based on present or
prior earnings levels because of the cyclical nature of the refining and
petrochemical industries and uncertainties associated with the United States and
worldwide economies and current and potential United States governmental
regulatory actions.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the disclosure on page 21 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1994 and the
disclosure on page 14 of the Company's Quarterly Report on Form 10-Q
for the period ended March 31, 1995 relating to the Benzene NESHAPS
compliance issue. The Criminal Enforcement Division of the EPA is
conducting a formal investigation. However, the Company continues to
believe that none of the aspects of the matters described above will
subject the Company to criminal liability or have a material adverse
effect on the Company's business or financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The Company's annual meeting of stockholders was held June 2, 1995.
The stockholders elected all of the Company's seven nominees for
director, approved the adoption of the Value Share Plan, approved the
adoption of the Restricted Stock Plan and approved the appointment of
Coopers & Lybrand L.L.P. as the Company's independent auditors for
1995. The votes were as follows:
1. Election of Directors:
<TABLE>
<CAPTION>
Nominee For Withheld
------- ---------- --------
<S> <C> <C>
William T. Butler 73,404,905 233,484
D. Travis Engen 73,383,095 255,294
Bob G. Gower 73,338,385 300,004
Stephen F. Hinchliffe, Jr. 73,411,097 227,292
Dudley C. Mecum II 73,401,604 236,785
Dan F. Smith 73,328,644 309,745
Paul R. Staley 73,387,555 250,834
</TABLE>
2. Adoption of the Value Share Plan:
<TABLE>
<CAPTION>
<S> <C>
For 69,048,550
Against 4,267,061
Abstain 322,778
</TABLE>
3. Adoption of the Restricted Stock Plan:
<TABLE>
<CAPTION>
<S> <C>
For 69,895,800
Against 3,399,351
Abstain 343,238
</TABLE>
4. Appointment of Coopers & Lybrand L.L.P.:
<TABLE>
<CAPTION>
<S> <C>
For 73,454,092
Against 83,957
Abstain 100,340
</TABLE>
16
<PAGE>
ITEM 5. OTHER INFORMATION
On July 21, 1995 the size of the Company's Board of Directors was
increased to eight and Curtis J. Crawford was elected to the Company's
Board of Directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Amended and Restated Lyondell Petrochemical Company $400,000,000
Credit Agreement, dated as of June 27, 1995.
10.2 Amendment No. 1, effective as of July 1, 1993 to the Lyondell
Petrochemical Company Supplementary Executive Retirement Plan.
10.3 Amendment No. 1, effective as of July 1, 1993 to the Lyondell
Petrochemical Company Executive Deferral Plan.
10.4 Amendment No. 1, effective as of May 31, 1993 to the Lyondell
Petrochemical Company Executive Long-Term Disability Plan.
10.5 Amendment No. 1, dated as of July 21, 1995 to the Lyondell
Petrochemical Company Value Share Plan.
10.6 Form of Letter Amendment to the Lyondell Petrochemical Company
Executive Severance Agreement effective as of July 21, 1995
27 Financial Data Schedule
(b) Reports on Form 8-K
The following Current Report on Form 8-K/A was filed during the
quarter ended June 30, 1995 and through the date hereof:
Date of Report Item No. Financial Statements
-------------- -------- --------------------
June 26, 1995 2 Yes
17
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Lyondell Petrochemical Company
(Registrant)
Dated: August 11, 1995 JOSEPH M. PUTZ
-------------------------------
(Signature)
Joseph M. Putz
Vice President and Controller
(Duly Authorized Officer and
Principal Accounting Officer)
18
<PAGE>
EXHIBIT 10.1
--------------------------------------------------------------------------------
LYONDELL PETROCHEMICAL COMPANY
$400,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF JUNE 27, 1995
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AS ADMINISTRATIVE AGENT
AND
BANK OF AMERICA ILLINOIS
AS CO-AGENT
AND
CHEMICAL BANK
AS AUCTION AGENT
--------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<TABLE>
<CAPTION>
SECTION
<C> <S> <C>
1.01. Definitions................................................... 2
1.02. Accounting Terms and Determinations........................... 16
1.03. Types of Loans and Borrowings................................. 16
</TABLE>
ARTICLE II
THE CREDITS
<TABLE>
<CAPTION>
SECTION
<C> <S> <C>
2.01. Commitments to Lend........................................... 17
2.02. Notice of Committed Borrowings................................ 17
2.03. Letters of Credit............................................. 18
2.04. Notice to Banks; Funding of Committed Loans................... 23
2.05. Committed Notes............................................... 24
2.06. Maturity of Committed Loans................................... 25
2.07. Interest Rates................................................ 25
2.08. Conversions and Continuances.................................. 27
2.09. Pro Rata Committed Borrowings................................. 28
2.10. Competitive Borrowings........................................ 28
2.11. Optional Termination or Reduction of Commitments.............. 32
2.12. Mandatory Termination of Commitments.......................... 32
2.13. Optional Prepayments.......................................... 32
2.14. General Provisions as to Payments............................. 33
2.15. Funding Losses................................................ 34
2.16. Fees.......................................................... 34
2.17. Computation of Interest and Fees.............................. 35
2.18. Maximum Interest Rate......................................... 35
2.19. Withholding Tax Exemption..................................... 38
</TABLE>
ARTICLE III
CONDITIONS
<TABLE>
<CAPTION>
SECTION
<C> <S> <C>
3.01. Effectiveness................................................. 39
3.02. Credit Events................................................. 40
</TABLE>
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
<TABLE>
<CAPTION>
SECTION
<C> <S> <C>
4.01. Representations and Warranties of the Borrower................ 42
</TABLE>
ARTICLE V
COVENANTS
<TABLE>
<CAPTION>
SECTION
<C> <S> <C>
5.01. Certain Information to be Furnished by the Borrower........... 47
5.02. Maintenance of Property; Insurance............................ 50
5.03. Limitation on Liens........................................... 50
5.04. Consolidation, Merger, Disposition of Assets.................. 52
5.05. Use of Proceeds............................................... 53
5.06. Payment of Taxes.............................................. 53
5.07. LCR Matters................................................... 53
5.08. Financial and Other Covenants................................. 54
</TABLE>
ARTICLE VI
DEFAULTS AND REMEDIES
<TABLE>
<CAPTION>
SECTION
<C> <S> <C>
6.01. Defaults...................................................... 58
6.02. Other Remedies................................................ 60
6.03. Rights of Setoff.............................................. 60
</TABLE>
ARTICLE VII
THE AGENTS
<TABLE>
<CAPTION>
SECTION
<C> <S> <C>
7.01. Appointment and Authorization.................................. 62
7.02. Agents and Affiliates.......................................... 62
7.03. Action by Agents............................................... 62
7.04. Consultation with Experts...................................... 62
7.05. Liability of Agents............................................ 62
7.06. Indemnification................................................ 63
7.07. Credit Decision................................................ 63
7.08. Successor Agents............................................... 63
</TABLE>
ii
<PAGE>
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
<TABLE>
<CAPTION>
SECTION
<C> <S> <C>
8.01. Basis for Determining Interest Rate Inadequate or Unfair....... 65
8.02. Illegality..................................................... 66
8.03. Increased Cost and Reduced Return.............................. 66
8.04. Substitute Loans............................................... 68
8.05. Regulation D Compensation...................................... 69
8.06. Substitution of Bank........................................... 69
</TABLE>
ARTICLE IX
MISCELLANEOUS
<TABLE>
<CAPTION>
SECTION
<C> <S> <C>
9.01. Notices........................................................ 70
9.02. No Waiver...................................................... 70
9.03. Governing Law.................................................. 70
9.04. Expenses; Documentary Taxes; Indemnification................... 70
9.05. Amendments, Etc................................................ 72
9.06. Counterparts; Integration...................................... 72
9.07. Successors and Assigns......................................... 72
9.08. Survival....................................................... 74
9.09. Acknowledgement................................................ 74
9.10. Headings....................................................... 74
9.11. Sharing of Setoffs............................................. 74
9.12. Collateral..................................................... 75
9.13. Consent to Jurisdiction........................................ 75
</TABLE>
SCHEDULE 2.07 - Rates Adjustments
SCHEDULE 2.16 - Facility Fees
SCHEDULE 5.03(c) - Existing and Contemplated Liens
EXHIBIT 2.02 - Form of Notice of Committed Borrowing
EXHIBIT 2.03 - Form of Letter of Credit Request
EXHIBIT 2.05 - Form of Committed Note
EXHIBIT 2.08 - Form of Notice of Conversion
EXHIBIT 2.10(a) - Form of Competitive Bid Request
EXHIBIT 2.10(b) - Form of Notice of Competitive Bid Request
EXHIBIT 2.10(c) - Form of Competitive Bid
EXHIBIT 2.10(d) - Form of Competitive Note
EXHIBIT 3.01(ii) - Form of Certificate of Incumbency
EXHIBIT 3.01(iv) - Form of Opinion of Counsel for the Borrower
EXHIBIT 3.01(v) - Form of Opinion of Special Counsel for the Agents
iii
<PAGE>
THIS AMENDED AND RESTATED CREDIT AGREEMENT (the "Agreement") dated as
of June 27, 1995 among LYONDELL PETROCHEMICAL COMPANY, a Delaware corporation,
the BANKS listed on the signature pages hereof and TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, as Administrative Agent, BANK OF AMERICA ILLINOIS (formerly known
as Continental Bank N.A.), as Co-Agent and CHEMICAL BANK, as Auction Agent.
The Borrower, the Administrative Agent, the Co-Agent and certain of
the Banks entered into a Credit Agreement dated as of December 6, 1993 (the
"Original Credit Agreement") under the terms of which such Banks agreed to make
loans to the Borrower and issue letters of credit for the account of the
Borrower not to exceed in the aggregate $400,000,000 at any time outstanding.
The Borrower has requested that the Banks amend and restate the
Original Credit Agreement (a) to provide that a Bank or Banks may, in their sole
discretion, make Competitive Bids to make advances to the Borrower, together
with committed loans not to exceed in the aggregate $400,000,000 at any time
outstanding, (b) extend the terms of the Original Credit Agreement from December
6, 1998 to June 30, 2000 and (c) make certain other changes to the terms
thereof.
The Borrower, the Administrative Agent, the Co-Agent, the Auction
Agent and the Banks have agreed, upon the terms and conditions specified herein,
to amend and restate the Original Credit Agreement.
1
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. In addition to terms defined elsewhere in
this Agreement, as used in this Agreement the following terms have the following
meanings (all terms defined in this Agreement in the singular to have the same
meanings when used in the plural and vice versa):
"Adjusted CD Rate" has the meaning set forth in Section 2.07(b).
"Administrative Questionnaire" means, with respect to each Bank, the
administrative questionnaire in the form submitted to such Bank by the
Administrative Agent and submitted to the Administrative Agent (with a copy to
the Borrower) duly completed by such Bank.
"Administrative Agent" means Texas Commerce Bank National Association in
its capacity as administrative and syndication agent for the Banks hereunder and
its successors in such capacity.
"Affiliate" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with such Person.
"Agents" means the Administrative Agent, the Co-Agent and the Auction
Agent, in their capacity as agents for the Banks hereunder, and their successors
in such capacity.
"Agreement" has the meaning specified in the introduction to this
Agreement, including all amendments, extensions and modifications thereto.
"Alternate Competitive Loan" means any Competitive Loan bearing interest at
a fixed percentage rate per annum specified by the Bank making such Loan in its
Competitive Bid.
"Applicable Lending Office" means, with respect to any Bank, (i) in the
case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its
Euro-Dollar Committed Loans and Euro-Dollar Competitive Loans, its Euro-Dollar
Lending Office, and, (iii) with respect to the Issuing Bank, its Domestic
Lending Office.
2
<PAGE>
"Assessment Rate" has the meaning set forth in Section 2.07(b).
"Assignee" has the meaning set forth in Section 9.07(c).
"Auction Agent" means Chemical Bank ("Chemical").
"Authorized Officer" and "Authorized Representative" of the Borrower shall
mean an officer or other representative of the Borrower designated in the latest
Certificate of Incumbency of the Borrower. The Agents and the Banks shall be
conclusively entitled to rely on the latest such Certificate of Incumbency of
the Borrower delivered to the Administrative Agent.
"Bank" means each bank which is listed on the signature pages hereof as
having a Commitment and which has executed and delivered this Agreement, each
Assignee which becomes a Bank pursuant to Section 9.07(c) and their respective
successors.
"Base Rate" means, for any day, a rate per annum equal to the lesser of (i)
the higher of (x) the Prime Rate for such day plus the Base Rate Margin or (y)
the Federal Funds Rate for such day plus 1/2 of 1 percent plus the Base Rate
Margin, or (ii) the Highest Lawful Rate.
"Base Rate Loan" means a Committed Loan to be made by a Bank as a Base Rate
Loan in accordance with the applicable Notice of Committed Borrowing or pursuant
to Article VIII.
"Base Rate Margin" means the highest applicable basis points set forth in
Schedule 2.07(a) hereto.
"Borrower" means Lyondell Petrochemical Company, a Delaware corporation,
and its successors.
"Borrowing" has the meaning set forth in Section 1.03.
"Borrowing Date" means with respect to each Borrowing, the Domestic
Business Day or Euro-Dollar Business Day upon which the proceeds of such
Borrowing are to be made available to the Borrower.
"CD Base Rate" has the meaning set forth in Section 2.07(b).
"CD Loan" means a Committed Loan to be made by a Bank as a CD Loan in
accordance with the applicable Notice of Committed Borrowing.
3
<PAGE>
"CD Margin" has the meaning set forth in Section 2.07(b).
"CD Reference Banks" means Texas Commerce Bank National Association and
Bank of America Illinois and each such other bank as may be appointed pursuant
to Section 9.07(e).
"Certificate of Incumbency" shall mean a Certificate of Incumbency
described in clause (ii) of Section 3.01 and any successor or replacement
Certificate of Incumbency delivered hereunder.
"CITGO" means CITGO Petroleum Corporation, a Delaware corporation, and its
successors and assigns.
"CITGO Refining", means CITGO Refining Investment Company, an Oklahoma
corporation, and its successors (including, without limitation, any entity that
assumes Citgo Refining's obligations under the Company Regulations).
"Co-Agent" means Bank of America Illinois in its capacity as co-agent for
the Banks hereunder and its successors in such capacity.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute.
"Commitment" means, as to each Bank, the amount set forth opposite its name
on the signature pages hereof under the heading "Commitment" or as set forth in
an instrument signed by all appropriate parties in accordance with Section
9.07(c) (as such amount may be reduced from time to time as provided in Section
2.11 or as the aggregate amount of the Commitments may be reduced from time to
time as provided in Section 2.10 or Section 2.11).
"Committed Borrowing" is a Borrowing under Sections 2.01 and 2.02.
"Commitment Percentage" of any Bank means, at any time, the ratio which its
Commitment bears to the aggregate of all the Banks' Commitments or, if the
Commitments have been terminated, the ratio which the aggregate outstanding
principal amount of the Committed Loans made by such Bank bears to the aggregate
outstanding principal amount of all Committed Loans made by the Banks.
"Committed Loan" means a Loan made pursuant to Section 2.01.
"Company Regulations" means the amended and restated limited liability
company regulations of LCR dated as of July 1, 1993, as amended by Amendment No.
1 dated as of March 28, 1995.
4
<PAGE>
"Competitive Bid" means an offer by a Bank to the Borrower to make a
Competitive Loan in the form of Exhibit 2.10(c).
"Competitive Bid Request" has the meaning set forth in Section 2.10(a).
"Competitive Borrowing" is a Borrowing under Section 2.10.
"Competitive Loan" means a Loan made pursuant to Section 2.10.
"Consolidated Capital Expenditures" means, for any period, the gross
additions to fixed assets attributable to cash flows from investing activities
as reflected on the consolidated statement of cash flows of the Borrower and its
Consolidated Subsidiaries for such period.
"Consolidated Debt" means, as of the date of any determination thereof, a
consolidated computation of all Debt of the Borrower and its Consolidated
Subsidiaries.
"Consolidated Interest Expense" means, for any period, the Interest Expense
reflected on the consolidated statement of income of the Borrower and its
Consolidated Subsidiaries for such period.
"Consolidated Net Income or Loss" means, for any period, the net income
(loss) reflected on the consolidated statement of income of the Borrower and its
Consolidated Subsidiaries for such period.
"Consolidated Net Tangible Assets" means the total amount of assets (less
applicable reserves and other properly deductible items) after deducting
therefrom (i) all current liabilities (excluding any liabilities that are by
their terms extendible or renewable at the option of the obligor thereon to a
time more than 12 months after the time as of which the amount thereof is being
computed), and (ii) all goodwill, trade names, trademarks, patents, purchased
technology, unamortized debt discount and other like intangible assets, all as
set forth on the most recent quarterly consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries.
"Consolidated Subsidiary" means at any date any Subsidiary or other entity
(including, without limitation, LCR) the accounts of which would be consolidated
with those of the Borrower in its consolidated financial statements as of such
date.
"Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the Borrower, are treated as a single employer under
Section 414(b) or 414(c) of the Code.
5
<PAGE>
"Credit Event" means the making of a Loan or the occasion of any Borrowing
hereunder or the issuance, renewal or extension of any Letter of Credit
hereunder.
"Debt" of any Person means without duplication, as of the date of any
determination thereof (i) the aggregate outstanding principal amounts of all
indebtedness for borrowed money of such Person, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments
(including letters of credit), (iii) all obligations of such Person to pay the
deferred purchase price of property or services, except trade accounts payable
arising in the ordinary course of business, (iv) all obligations of such Person
as lessee under capital leases, (v) all Debt of others to the extent secured by
a Lien on any asset of such Person, whether or not such Debt is assumed by such
Person, and (vi) all Debt of others to the extent Guaranteed by such Person.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Dividend" means any cash dividend paid or declared by the board of
directors of the Borrower in respect of the Borrower's stock now or hereafter
outstanding.
"Domestic Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in Houston, Texas are authorized by law to close.
"Domestic Lending Office" means, as to each Bank including the Issuing
Bank, its office, branch or affiliate located at its address set forth in its
Administrative Questionnaire (or identified in its Administrative Questionnaire
as its Domestic Lending Office) or such other office, branch or affiliate as
such Bank may from time to time specify to the Administrative Agent and the
Borrower as its Domestic Lending Office; provided, however, that any Bank may
from time to time by notice to the Borrower and the Administrative Agent
designate separate Domestic Lending Offices for its Base Rate Loans, on the one
hand, and its CD Loans, on the other hand, in which case all references herein
to the Domestic Lending Office of such Bank shall be deemed to refer to either
or both of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in Section 2.07(b).
"Drawing" means any drawing under a Letter of Credit.
6
<PAGE>
"EBITDA" means, for any period, the Borrower's Consolidated Net Income or
Loss for such period, minus interest income, plus Consolidated Interest Expense,
plus depreciation, amortization and provisions for taxes and plus or minus any
Non-Operating Special Items; provided, however, that for any fiscal quarter in
which the Borrower or any of its Consolidated Subsidiaries shall incur downtime
at or with respect to any plant or manufacturing or processing unit (as
determined by the Borrower in its sole discretion), the Borrower shall have the
right to add up to the lesser of (i) the estimated amount by which EBITDA is
impacted by such downtime or (ii) $20,000,000 to the amount of EBITDA calculated
for such fiscal quarter; provided further, that such addition of up to
$20,000,000 may only be made in the calculation of EBITDA for each of two fiscal
quarters during the term of this Agreement and that any such addition may only
be made for one fiscal quarter during any four consecutive fiscal quarters.
"Effective Date" means the date on which this Agreement becomes effective
in accordance with Section 3.01.
"Environmental Laws" means federal, state or local laws, rules or
regulations, including any administrative order, permit or approval pertaining
to health, safety or the environment in effect in the applicable jurisdiction at
the time in question, including the Clean Air Act, as amended, the Comprehensive
Environmental Response, Compensation and Liability Act, as amended ("CERCLA"),
the Federal Water Pollution Control Act, as amended, the Occupational Safety and
Health Act, as amended, the Resource Conservation and Recovery Act, as amended,
the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as
amended, the Superfund Amendment and Reauthorization Act of 1986, as amended,
the Hazardous Materials Transportation Act, as amended, comparable state and
local laws, and other environmental conservation and protection laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office, branch or
affiliate located at its address set forth in its Administrative Questionnaire
(or identified in its Administrative Questionnaire as its Euro-Dollar Lending
Office) or such other office, branch or affiliate of such Bank as it may from
time to time specify to the Administrative Agent and the Borrower as its Euro-
Dollar Lending Office.
7
<PAGE>
"Euro-Dollar Committed Loan" means a Committed Loan to be made by a Bank as
a Euro-Dollar Committed Loan in accordance with the applicable Notice of
Committed Borrowing.
"Euro-Dollar Competitive Loan" means a Competitive Loan to be made by a
Bank as a Euro-Dollar Competitive Loan in accordance with the applicable
Competitive Bid.
"Euro-Dollar Margin" has the meaning set forth in Section 2.07(c).
"Euro-Dollar Rate" has the meaning set forth in Section 2.07(c).
"Euro-Dollar Reserve Percentage" means with respect to any Bank for any day
that percentage (expressed as a decimal) which is in effect on such day as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the reserve requirement (including without limitation
any basic, supplemental or emergency reserves) imposed on such Bank in respect
of "Euro-currency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Committed Loans is determined or in respect of any category of
extensions of credit or other assets which includes loans by a non-United States
office of such Bank to United States residents).
"Event of Default" has the meaning set forth in Section 6.01.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/1OOth of 1 percent) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of Dallas on the Domestic Business
Day next succeeding such day; provided, however, that (i) if such day is not a
Domestic Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Domestic Business Day as so published on
the next succeeding Domestic Business Day, and (ii) if no such rate is so
published on such next succeeding Domestic Business Day, the Federal Funds Rate
for such day shall be the average rate quoted to Texas Commerce Bank National
Association on such day for such transactions as determined by the
Administrative Agent.
"Financial Letter of Credit" means a Letter of Credit on which the
beneficiary thereof can draw due to the failure of a party to perform a payment
obligation for the benefit of the beneficiary.
"Fixed Rate Loans" means CD Loans or Euro-Dollar Committed Loans or any
combination of the foregoing.
8
<PAGE>
"Guarantee", in respect of any Person, means to guarantee or act, directly
or indirectly, as a surety for any Debt or other obligation of any other Person
and, without limiting the generality of the foregoing, to incur or assume any
obligation, direct or indirect, contingent or otherwise, (i) to purchase or pay
(or advance or supply funds for the purchase or payment of) such Debt or other
obligation (whether arising by virtue of partnership arrangements, by binding
agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or (ii)
entered into for the purpose of assuring in any other manner the obligee of such
Debt or other obligation of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part); provided, however, that
the term "Guarantee" shall not include to endorse for collection or deposit in
the ordinary course of business.
"Hazardous Materials" means any pollutant, contaminant, solid waste,
asbestos, petroleum product, crude oil or a fraction thereof, any toxic or
hazardous substance, material or waste, any flammable, explosive or radioactive
material or any other material or substance not mentioned above which is
regulated under any Environmental Law.
"Highest Lawful Rate" has the meaning set forth in Section 2.17.
"Interest Expense" means, for any period and for any Person, without
duplication, the total interest expense of such Person as reflected on an income
statement of such Person for such period.
"Interest Period" means: (1) with respect to each Euro-Dollar Committed
Borrowing, the period commencing on the date of such Committed Borrowing and
ending one through seven days (subject to market availability), or one, two,
three or six months thereafter, as the Borrower may elect in the applicable
Notice of Committed Borrowing; provided, however, that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clause (c) below, end on the last Euro-Dollar Business
Day of a calendar month; and
9
<PAGE>
(c) any Interest Period applicable to any Euro-Dollar Committed Loan
of any Bank which begins before the Termination Date and would otherwise
end after the Termination Date shall end on the Termination Date;
(2) with respect to each CD Borrowing, the period commencing on the date of
such Committed Borrowing and ending 30, 60, 90 or 180 days thereafter, as the
Borrower may elect in the applicable Notice of Committed Borrowing; provided,
however, that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (b) below) which would otherwise end on a day which is
not a Domestic Business Day shall be extended to the next succeeding
Domestic Business Day; and
(b) any Interest Period applicable to any CD Loan of any Bank which
begins before the Termination Date and would otherwise end after the
Termination Date shall end on the Termination Date;
(3) with respect to each Base Rate Borrowing, the period commencing on the
date of such Committed Borrowing and ending 90 days thereafter; provided,
however, that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (b) below) which would otherwise end on a day which is
not a Domestic Business Day shall be extended to the next succeeding
Domestic Business Day; and
(b) any Interest Period applicable to any Base Rate Loan of any Bank
which begins before the Termination Date and would otherwise end after the
Termination Date shall end on the Termination Date; and
(4) with respect to each Competitive Borrowing, the period commencing on
the date of such Competitive Borrowing and ending on such date as the Borrower
may elect in the applicable Competitive Bid Request, provided, however, that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (c) below) applicable to a Alternative Competitive Loan
which would otherwise end on a day which is not a Domestic Business Day
shall be extended to the next succeeding Domestic Business Day;
(b) any Interest Period (other than an Interest Period determined
pursuant to clause (c) below) applicable to a Euro-Dollar Competitive Loan
which would
10
<PAGE>
otherwise end on a day which is not a Euro-Dollar Business Day shall be
extended to the next succeeding Euro-Dollar Business Day unless such Euro-
Dollar Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Euro-Dollar Business Day;
and
(c) any Interest Period applicable to any Competitive Borrowing which
begins before the Termination Date and would otherwise end after the
Termination Date shall end on the Termination Date.
"Investment" means any capital contribution or loan made by the Borrower or
any of its Subsidiaries to LCR in accordance with the Company Regulations.
"Issuing Bank" means Texas Commerce Bank National Association, or such
other Bank as the Borrower may have requested and which has consented to serve
as Issuing Bank that issues a Letter of Credit.
"LCR" means LYONDELL-CITGO Refining Company Ltd., a Texas limited liability
company and its successors.
"LRC" means Lyondell Refining Company, a Delaware corporation and a wholly-
owned subsidiary of the Borrower, and its successors (including, without
limitation any entity that assumes LRC's obligations under the Company
Regulations).
"Letter of Credit" has the meaning set forth in Section 2.03(a).
"Letter of Credit Application" has the meaning set forth in Section
2.03(a).
"Letter of Credit Fee" has the meaning set forth in Section 2.03(n).
"Letter of Credit Limit" means $75,000,000.
"Letter of Credit Margin" means the highest applicable basis points set
forth in Schedule 2.07(b).
"Letter of Credit Outstandings" means, at any time, the sum of (a) the
aggregate Stated Amount of all outstanding Letters of Credit and (b) the amount
of all Unpaid Drawings in respect of all Letters of Credit.
"Letter of Credit Request" has the meaning set forth in Section 2.03(a).
"Letter of Credit Termination Date" means June 30, 2000 or the earlier date
of acceleration of the Obligations of the Borrower hereunder and under the Notes
pursuant to Section 6.01.
11
<PAGE>
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, the Borrower or any Subsidiary shall be
deemed to own subject to a Lien any asset which it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset.
"Loan" means a Committed Loan or a Competitive Loan and "Loans" means
Committed Loans or Competitive Loans or any combination of the foregoing.
"Loan Documents" means this Agreement (including all exhibits), the Notes
and the Letter of Credit Applications.
"Material Adverse Effect" means relative to the occurrence of any event and
after taking into account existing or reasonably anticipated insurance coverage
and indemnification rights with respect to such occurrence, a material adverse
effect (i) on the business, operations, affairs, assets, condition (financial or
otherwise) or results of operations of the Borrower and its Consolidated
Subsidiaries, considered as a whole or (ii) on the ability of the Borrower to
perform its obligations hereunder and under the Notes.
"Net Interest" means the sum of (i) interest on Replacement Debt minus any
interest earned on the proceeds from Replacement Debt plus (ii) interest on
Replaced Debt.
"Non-Operating Special Item" means (i) any item resulting from a change in
one or more accounting principles, (ii) any extraordinary or non-recurring item
or (iii) any material operating item which is unusual in nature or infrequent in
occurrence; provided, however, that with respect to the designation of any item
(other than non-cash items) described in clause (iii), Borrower must obtain the
agreement of the Administrative Agent and the Co-Agent that such designation is
appropriate, which agreement shall not be unreasonably withheld.
"Notes" means Committed Notes of the Borrower, substantially in the form of
Exhibit 2.05 and Competitive Notes of the Borrower, substantially in the form of
Exhibit 2.10(d) hereto, evidencing the obligation of the Borrower to repay the
Loans, and "Note" means any one of such Committed Notes or Competitive Notes
issued hereunder.
"Notice of Committed Borrowing" means a Notice of Committed Borrowing made
pursuant to Section 2.02 in the form of Exhibit 2.02.
12
<PAGE>
"Notice of Competitive Bid Request" means a Notice of Competitive Bid
Request made pursuant to Section 2.10(a) in the form of Exhibit 2.10(b).
"Notice of Conversion" has the meaning set forth in Section 2.08.
"Obligations" means all of the obligations of the Borrower now or hereafter
existing under the Loan Documents, whether for principal, Unpaid Drawings,
interest, fees, expenses, indemnification or otherwise.
"Parent" means, with respect to any Bank, any Person controlling such Bank.
"Participant" has the meaning set forth in Section 9.07(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Performance Letter of Credit" means a Letter of Credit on which the
beneficiary thereof can draw due to the failure of a party to perform any
contractual duty or obligation, other than a payment obligation, for the benefit
of the beneficiary.
"Person" means an individual, a corporation, a limited liability company, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Plan" means at any time an employee pension benefit plan which is covered
by Title IV of ERISA or subject to the minimum funding standards under Section
412 of the Code and is either (i) maintained by a member of the Controlled Group
for employees of a member of the Controlled Group or (ii) maintained pursuant to
a collective bargaining agreement or any other arrangement under which more than
one employer makes contributions and to which a member of the Controlled Group
is then making or accruing an obligation to make contributions or has within the
preceding five plan years made contributions.
"Prime Rate" means the prime rate of interest most recently determined by
Texas Commerce Bank National Association and thereafter entered in the minutes
of its Loan and Discount Committee, automatically fluctuating upward and
downward with and at the time specified in each such determination without
notice to the Borrower or any other Person which prime rate may not necessarily
represent the lowest or best rate actually charged to a customer.
"Reference Bank" means Texas Commerce Bank National Association.
13
<PAGE>
"Refunding Borrowing" means a Committed Borrowing which, after application
of the proceeds thereof, results in no net increase in the outstanding principal
amount of Loans made by any Bank.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time (including any successor
provision thereto or any other United States law or regulation imposing reserves
on deposits or loans).
"Regulation G" shall mean Regulation G of the Board of Governors of the
Federal Reserve System, as in effect from time to time (including any successor
provision thereto).
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time (including any successor
provision thereto).
"Regulation X" shall mean Regulation X of the Board of Governors of the
Federal Reserve System, as in effect from time to time (including any successor
provision thereto).
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the environment (including the abandonment or discarding of barrels, containers
and other closed receptacles).
"Required Banks" means at any date Banks holding at least 66 2/3 percent of
the then aggregate unpaid principal amount of the Committed Loans and/or
participations in at least 66 2/3 percent of the Letter of Credit Outstandings
held by the Banks, or, if no such principal amount is then outstanding and no
Letter of Credit Outstandings exist, then Banks having at least 66 2/3 percent
of the Commitments; if no such principal amount is then outstanding and no
Letter of Credit Outstandings exist and all Commitments have been terminated,
then Banks holdling at least 66 2/3 percent of the then aggregate unpaid
principal amount of the Competitive Loans held by the Banks.
"Requirements of Environmental Laws" means, as to any Person, the
requirements of any Environmental Laws applicable to such Person or the
condition or operation of such Person's business or its properties, both real
and personal.
14
<PAGE>
"Restricted Property" means:
(a) any plant (including fixtures and equipment) for the refining of
petroleum or the production of petrochemicals owned by the Borrower, or a
Subsidiary, except (i) related facilities which in the opinion of the Board
of Directors of the Borrower are transportation or marketing facilities and
(ii) any plant for the refining of petroleum or the production of
petrochemicals which in the reasonable opinion of the Board of Directors of
the Borrower is not a principal plant of the Borrower and its Subsidiaries;
(b) any inventory of the Borrower or a Subsidiary;
(c) any trade accounts receivable of the Borrower or a Subsidiary; and
(d) any shares of capital stock or indebtedness of a Restricted
Subsidiary owned by the Borrower or a Subsidiary (excluding any of such
shares that constitute "margin stock" as defined in Regulation U).
"Restricted Subsidiary" shall mean any Subsidiary of the Borrower which
owns any Restricted Property.
"Stated Amount" means, with respect to each Letter of Credit, at any time,
the maximum amount then available to be drawn thereunder.
"Subsidiary" means any corporation or other entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other Persons performing similar functions (whether or
not any other class of securities has or might have voting power by reason of
the happening of a contingency) are at the time owned or controlled directly or
indirectly by the Borrower. Without in any other way limiting the foregoing,
LCR shall not be deemed to be a Subsidiary.
"Termination Date" means June 30, 2000, or such earlier date of
acceleration if the Obligations of the Borrower hereunder and under the Notes
are accelerated pursuant to Section 6.01 or, if such day is not a Euro-Dollar
Business Day, the next succeeding Euro-Dollar Business Day unless such Euro-
Dollar Business Day falls in another calendar month, in which case the
Termination Date shall be the next preceding Euro-Dollar Business Day.
"34 Act Report" has the meaning set forth in Section 4.01(d).
15
<PAGE>
"Unfunded Vested Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which (i) the present value of all vested nonforfeitable
benefits under such Plan exceeds (ii) the fair market value of all Plan assets
allocable to such benefits, all determined as of the then most recent valuation
date for such Plan, but only to the extent that such excess represents a
potential liability of a member of the Controlled Group to the PBGC or the Plan
under Title IV of ERISA.
"Unpaid Drawing" has the meaning specified in Section 2.03(g).
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a basis consistent (except for changes concurred in by the Borrower's
independent public accountants) with the most recent audited consolidated
financial statements of the Borrower and its Consolidated Subsidiaries delivered
to the Administrative Agent.
SECTION 1.03. Types of Loans and Borrowings. The term "Borrowing" denotes
the aggregation of Loans of one or more Banks to be made to the Borrower
pursuant to Article II on a single date and for a single Interest Period. Loans
and Borrowings are classified for purposes of this Agreement by reference to the
Loans comprising such Borrowings and the pricing of such Loans (e.g., a "Euro-
Dollar Committed Borrowing" is a Borrowing comprised of Committed Euro-Dollar
Loans).
16
<PAGE>
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend. Each Bank severally agrees, on the
terms and conditions set forth in this Agreement, from time to time to make
loans to the Borrower pursuant to this Section 2.01 in amounts such that the
aggregate principal amount of Committed Loans by such Bank plus its Commitment
Percentage of the Letter of Credit Outstandings at any one time outstanding
shall not exceed the amount of its Commitment. Without in any way limiting the
foregoing, at no time will the sum of (A) the Letter of Credit Outstandings plus
(B) the aggregate outstanding principal amount of the Committed Loans plus (c)
the aggregate outstanding principal amount of the Competitive Loans exceed the
aggregate amount of the Commitments. Each Committed Borrowing under this
Section 2.01 shall be in an aggregate principal amount of $10,000,000 or any
larger multiple of $1,000,000 (except that any such Committed Borrowing may be
in an aggregate amount such that, immediately after giving effect to such
Borrowing, the sum of (A) the Letter of Credit Outstandings plus (B) the
aggregate outstanding principal amount of the Committed Loans plus (C) the
aggregate outstanding principal amount of the Competitive Loans will equal the
aggregate amount of the Commitments) and shall be made from the several Banks
ratably in proportion to their respective Commitments. Within the foregoing
limits, the Borrower may borrow under this Section 2.01, repay, or to the extent
permitted by Section 2.13, prepay Committed Loans and re-borrow at any time.
SECTION 2.02. Notice of Committed Borrowings. The Borrower shall give the
Administrative Agent notice (a "Notice of Committed Borrowing") substantially in
the form of Exhibit 2.02 hereto not later than 10:00 A.M. (Houston time) on (i)
the date of each Base Rate Borrowing or each Euro-Dollar Committed Borrowing
with an Interest Period of seven days or less (ii) the second Domestic Business
Day before each CD Borrowing and (iii) the third Euro-Dollar Business Day before
each Euro-Dollar Committed Borrowing with an Interest Period greater than seven
days, specifying:
(a) the date of such Committed Borrowing, which shall be a Domestic
Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business
Day in the case of a Euro-Dollar Committed Borrowing;
(b) the aggregate amount of such Committed Borrowing;
(c) whether the Loans comprising such Committed Borrowing are to be
CD Loans, Base Rate Loans or Euro-Dollar Committed Loans or a combination
thereof;
17
<PAGE>
(d) in the case of a Fixed Rate Committed Borrowing, the duration of
the Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period; and
(e) the aggregate outstanding principal amount of Debt of the Borrower
and its Subsidiaries incurred after the Effective Date and, if required, a
calculation as of the date of such Notice of Committed Borrowing pursuant
to Section 5.08(a).
SECTION 2.03. Letters of Credit.
(a) Subject to and upon the terms and conditions hereof and the execution
and delivery of a letter of credit application ("Letter of Credit Application"),
and a letter of credit request ("Letter of Credit Request") substantially in the
form of Exhibit 2.03(b) hereto, the Issuing Bank agrees that it will, at any
time and from time to time on or after the Effective Date and prior to the
Letter of Credit Termination Date, renew, extend and issue for the account of
the Borrower (in support of its obligations and the obligations of its
Consolidated Subsidiaries) one or more irrevocable standby letters of credit
(all such letters of credit collectively, the "Letters of Credit"); provided,
however, that the Issuing Bank shall not extend, renew or issue any Letter of
Credit if at the time of such issuance, extension or renewal:
(i) the Stated Amount of such Letter of Credit shall be greater than
an amount which when added to the Letter of Credit Outstandings at such
time and the aggregate principal amount of all Loans then outstanding or
requested would exceed the aggregate amount of the Banks' Commitments; or
(ii) the Stated Amount of such Letter of Credit shall be greater than
an amount which when added to the Letter of Credit Outstandings at such
time, would exceed the Letter of Credit Limit; or
(iii) the expiry date or, in the case of any Letter of Credit
containing an expiry date that is extendible at the option of the Issuing
Bank, the initial expiry date of such Letter of Credit, is a date that is
later than the Letter of Credit Termination Date; or
(iv) such issuance, renewal or extension shall be prohibited by
applicable law.
(b) The Issuing Bank shall neither renew nor permit the renewal of any
Letter of Credit if any of the conditions precedent to such renewal set forth in
Section 3.02 are not satisfied or, after giving effect to such renewal, the
expiry date of such Letter of Credit would be a date that is later than the
Letter of Credit Termination Date.
18
<PAGE>
(c) Whenever the Borrower requests that a Letter of Credit be issued or
renewed for its account or an existing expiry date be extended, it shall forward
an executed Letter of Credit Request and Letter of Credit Application to the
Issuing Bank (with copies to be sent to the Administrative Agent (if different
from the Issuing Bank)) (i) in the case of a Letter of Credit to be issued or
renewed at least four Domestic Business Days' prior to the proposed date of
issuance or renewal and (ii) in the case of the extension of the existing expiry
date of any Letter of Credit, at least five Domestic Business Days prior to the
date on which the Issuing Bank must notify the beneficiary thereof that the
Issuing Bank does not intend to extend such existing expiry date. Each Letter
of Credit shall be denominated in U.S. dollars, shall expire no later than the
date specified in paragraph (a) above, shall not be in an amount greater than is
permitted under this Section 2.03 and shall be in such form as may be approved
from time to time by the Issuing Bank and the Borrower. At the time of
issuance, the Issuing Bank shall designate the Letter of Credit as either a
Financial Letter of Credit or a Performance Letter of Credit, which designation
shall be final.
(d) The making of each Letter of Credit Request shall be deemed to be a
representation and warranty by the Borrower that such Letter of Credit may be
renewed, extended or issued in accordance with, and will not violate the
requirements of this Agreement. Unless the Issuing Bank has received notice
from the Administrative Agent (if different from the Issuing Bank) before it
issues or renews the respective Letter of Credit or extends the existing expiry
date of a Letter of Credit that one or more of the conditions specified in
Article III are not then satisfied, or that the renewal, extension or issuance
of such Letter of Credit would violate any of the terms of this Agreement, then
the Issuing Bank may renew, extend or issue the requested Letter of Credit for
the account of the Borrower (in support of its obligations and the obligations
of its Consolidated Subsidiaries) in accordance with the Issuing Bank's usual
and customary practices. Upon its issuance or renewal of any Letter of Credit
or the extension of the existing expiry date of any Letter of Credit, as the
case may be, the Issuing Bank shall promptly notify the Borrower, the
Administrative Agent and each Bank of such issuance, renewal or extension, which
notice shall be accompanied by a copy of the Letter of Credit actually issued or
renewed or a copy of any amendment extending the existing expiry date of any
Letter of Credit, as the case may be.
(e) Upon the renewal, extension or issuance by the Issuing Bank of each
Letter of Credit, the Issuing Bank shall be deemed to have sold and transferred
to each Bank, and each Bank shall be deemed irrevocably and unconditionally to
have purchased and received from the Issuing Bank, without recourse or warranty,
an undivided interest and participation, to the extent of such Bank's Commitment
Percentage in each such Letter of Credit (including extensions of the expiry
date thereof), each substitute letter of credit, each drawing made thereunder
and the
19
<PAGE>
Obligations of the Borrower under this Agreement and the other Loan Documents
with respect thereto and any security, if any, therefor.
(f) In determining whether to pay under any Letter of Credit, the Issuing
Bank shall have no obligation relative to the Banks other than to confirm that
any documents required to be delivered under such Letter of Credit appear to
have been delivered and that they appear to comply on their face with the
requirements of such Letter of Credit.
(g) Upon the receipt by the Issuing Bank of any documentation presented for
a drawing from a beneficiary under a Letter of Credit, the Issuing Bank promptly
will provide the Administrative Agent (if different from the Issuing Bank), the
Banks and the Borrower with telecopy notice thereof and the Issuing Bank will
promptly examine the documentation presented for such drawing in accordance with
its customary procedures for conformity to the requirements of such Letter of
Credit. The Borrower hereby agrees to reimburse the Issuing Bank by making
payment to the Administrative Agent in immediately available funds (which
payment may be made by application of the proceeds of Loans made to the Borrower
in accordance with this Agreement) for any payment so made by the Issuing Bank
under any Letter of Credit issued by it (each such amount so paid until
reimbursed by the Borrower, including by application of the proceeds of Loans to
the Borrower in accordance with this Agreement, an "Unpaid Drawing") upon demand
on or after the date of such payment, with interest on the amount so paid by the
Issuing Bank, to the extent not reimbursed prior to 2:00 p.m. (Houston time) on
the date of such payment, from and including the date paid to but excluding the
date reimbursement is made as provided above, at a rate per annum equal to the
lesser of (i) the sum of 2 percent plus the Base Rate or (ii) the Highest Lawful
Rate.
(h) In the event that the Issuing Bank makes any payment under any Letter
of Credit and the Borrower shall not have reimbursed such amount in full to the
Issuing Bank (including by any application of the proceeds of Loans) pursuant to
paragraph (g) above, the Issuing Bank shall promptly notify the Administrative
Agent (if different from the Issuing Bank) and the Administrative Agent, shall
promptly notify each Bank of such failure, and each Bank shall promptly and
unconditionally pay the Administrative Agent for the account of the Issuing Bank
the amount of such Bank's Commitment Percentage of such unreimbursed payment in
dollars and in funds immediately available in Houston. If the Administrative
Agent so notifies, prior to 11:00 a.m. (Houston time) on any Domestic Business
Day, any Bank required to fund a payment under a Letter of Credit, such Bank
shall make available to the Administrative Agent for the account of the Issuing
Bank such Bank's Commitment Percentage of the amount of such payment on such
Domestic Business Day in funds immediately available in Houston. If and to the
extent such Bank shall not have so made its Commitment Percentage of the amount
of such payment available to the
20
<PAGE>
Administrative Agent for the account of the Issuing Bank, such Bank agrees to
pay to the Administrative Agent for the account of the Issuing Bank, forthwith
on demand such amount, together with the interest thereon, for each day from
such date until the date such amount is paid to the Administrative Agent for the
account of the Issuing Bank at the Federal Funds Rate. The failure of any Bank
to make available to the Administrative Agent for the account of the Issuing
Bank, its Commitment Percentage of any payment under any Letter of Credit shall
not relieve any other Bank of its obligation hereunder to make available to the
Administrative Agent for the account of the Issuing Bank its Commitment
Percentage of any payment under any Letter of Credit on the date required, as
specified above, but no Bank shall be responsible for the failure of any other
Bank to make available to the Administrative Agent for the account of the
Issuing Bank such other Bank's Commitment Percentage of any such payment.
(i) Whenever the Issuing Bank receives a payment of a reimbursement
obligation as to which the Administrative Agent has received for the account of
the Issuing Bank any payments from a Bank pursuant to paragraph (h) above, the
Issuing Bank shall pay to the Administrative Agent (if different from the
Issuing Bank) and the Administrative Agent shall promptly pay to each Bank which
has paid its Commitment Percentage thereof, in dollars and in same day funds, an
amount equal to such Bank's Commitment Percentage thereof together with any
interest on such reimbursement obligation allocable to such Bank's Commitment
Percentage paid by the Borrower to the Issuing Bank and received by the
Administrative Agent pursuant to paragraph (g) above.
(j) The obligations of the Banks to make payments to the Administrative
Agent for the account of the Issuing Bank with respect to Letters of Credit
shall be irrevocable and not subject to any qualification or exception
whatsoever (except for the gross negligence or willful misconduct of the Issuing
Bank) and shall be made in accordance with the terms and conditions of this
Agreement under all circumstances, including any of the following circumstances:
(1) any lack of validity or enforceability of this Agreement or any of
the other Loan Documents;
(2) the existence of any claim, setoff, defense or other right which
the Borrower may have at any time against a beneficiary named in a Letter
of Credit, any transferee of Letter of Credit, any Agent, the Issuing Bank,
any other Bank, or any other Person, whether in connection with this
Agreement, any Letter of Credit, the transactions contemplated herein or
any unrelated transactions;
21
<PAGE>
(3) any draft, certificate or any other document presented under the
Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect;
(4) the surrender or impairment of any security for the performance or
observance of any of the terms of any of the Loan Documents; or
(5) the occurrence of any Default or Event of Default.
(k) The Borrower also agrees with the Issuing Bank and the Banks that the
Issuing Bank shall not be responsible for, and the Borrower's reimbursement
obligations under paragraph (g) above are absolute and unconditional and shall
not be affected by any of the following (absent any gross negligence, willful
misconduct or violation of law on the part of any of the Issuing Bank, the
Agents and the other Banks): the validity or genuineness of documents or any
endorsements thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged, or any dispute between or among the Borrower and
the beneficiary of any letter of Credit or any other party to which such Letter
of Credit may be transferred or any claims whatsoever of the Borrower against
any beneficiary of such Letter of Credit or any such transferee or any other
matter or event similar to any of the foregoing or any setoff, counterclaim or
defense to payment which the Borrower may have.
(l) The Issuing Bank, its officers, directors, agents and employees, shall
not be liable for any error, omission, interruption or delay in transmission,
dispatch or delivery of any message or advice, however transmitted, in
connection with any Letter of Credit, except for errors, omissions,
interruptions or delays caused by the Issuing Bank's gross negligence or willful
misconduct or violation of law. IT IS THE EXPRESS INTENTION OF THE PARTIES
HERETO THAT THE ISSUING BANK SHALL BE INDEMNIFIED AND HELD HARMLESS AGAINST ANY
AND ALL LOSSES, LIABILITIES, CLAIMS, DEFICIENCIES, JUDGMENTS OR REASONABLE
EXPENSES ARISING OUT OF OR RESULTING FROM THE ORDINARY NEGLIGENCE (WHETHER SOLE
OR CONTRIBUTORY) OF THE ISSUING BANK IN CONNECTION WITH ANY SUCH ERROR,
OMISSION, INTERRUPTION OR DELAY AS AFORESAID. The Borrower agrees that any
action taken or omitted by the Issuing Bank under or in connection with any
Letter of Credit or the related drafts or documents if done in accordance with
the standards of care specified in the Uniform Customs and Practice for
Documentary Credits, International Chamber of Commerce, as in effect from time
to time, and, to the extent not inconsistent therewith, the Uniform Commercial
Code of the State of Texas, shall not result in any liability of the Issuing
Bank to the Borrower.
(m) To the extent that any provision of any Letter of Credit Application
related to any Letter of Credit is inconsistent with the provisions of this
Agreement, the provisions of this Agreement shall control and no Letter of
Credit Application or
22
<PAGE>
any other document relating to any Letter of Credit shall give the Agents or the
Banks any additional rights than they would otherwise have under this Agreement.
(n) The Borrower shall, on the date of issuance or any extension or renewal
of any Letter of Credit and at such other time or times as such charges are
customarily made by the Issuing Bank, pay an upfront fee (in each case, a
"Letter of Credit Fee") to the Administrative Agent in respect of each
Performance Letter of Credit or Financial Letter of Credit so issued equal to
the Letter of Credit Margin for such Performance Letter of Credit or Financial
Letter of Credit, as the case may be, (the applicable basis points set forth on
Schedule 2.07(b) computed on an annualized basis) plus a fronting fee for the
benefit of the Issuing Bank equal to 12.5 basis points (computed on an
annualized basis) plus the Issuing Bank's issuance, amendment and other
administrative fees and charges customarily charged to its customers similarly
situated. Such Letter of Credit Fee (but not such customary issuance, amendment
fee or other administrative fees and charges, or the fronting fee, all of which
shall be solely for the account of the Issuing Bank) shall be for the accounts
of the Banks in accordance with their respective Commitment Percentages. Such
upfront fees and fronting fees shall be based on a 360-day year, except that if
the use of a 360-day year would cause any such fees constituting interest
(within the meaning of all applicable laws) to exceed the Highest Lawful Rate,
then such interest and fees will be computed on the basis of a year of 365 days
(or 366 in a leap year).
SECTION 2.04. Notice to Banks; Funding of Committed Loans.
(a) Upon receipt of a Notice of Committed Borrowing, the Administrative
Agent shall promptly notify each Bank of the contents thereof and of such Bank's
share (if any) of such Committed Borrowing and such Notice of Committed
Borrowing shall not thereafter be revocable by the Borrower.
(b) Not later than 12:00 Noon (Houston time) on the date of each Committed
Borrowing, each Bank participating therein shall (except as provided in
subsection (c) of this Section) make available its share of such Committed
Borrowing, in funds immediately available in Houston, to the Administrative
Agent at its address specified in or pursuant to Section 9.01. Unless the
Administrative Agent determines that any applicable condition specified in
Article III has not been satisfied, the Administrative Agent will make the funds
so received from the Banks available to the Borrower at the Administrative
Agent's aforesaid address.
(c) If any Bank makes a new Committed Loan hereunder on a day on which the
Borrower is to repay all or any part of an outstanding Committed Loan from such
Bank, such Bank shall apply the proceeds of its new Committed Loan to make such
repayment and only an amount equal to the difference (if any) between the amount
being borrowed and the principal amount being repaid shall be made available by
such
23
<PAGE>
Bank to the Administrative Agent as provided in subsection (b), or remitted by
the Borrower to the Administrative Agent as provided in Section 2.14, as the
case may be.
(d) Unless the Administrative Agent shall have received notice from a Bank
prior to or on the date of any Committed Borrowing that such Bank will not make
available to the Administrative Agent such Bank's share of such Committed
Borrowing, the Administrative Agent may assume that such Bank has made such
share available to the Administrative Agent on the date of such Committed
Borrowing in accordance with subsections (b) and (c) of this Section 2.04 and
the Administrative Agent may, in reliance upon such assumption, make available
to the Borrower on such date a corresponding amount. If and to the extent that
such Bank shall not have so made such share available to the Administrative
Agent, such Bank and the Borrower severally agree to repay to the Administrative
Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to the
Borrower until the date such amount is repaid to the Administrative Agent, at
(i) in the case of the Borrower, a rate per annum equal to the higher of the
Federal Funds Rate and the interest rate applicable thereto pursuant to Section
2.07 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank
shall repay to the Administrative Agent such corresponding amount, such amount
so repaid shall constitute such Bank's Committed Loan included in such Committed
Borrowing for purposes of this Agreement. In no event shall any payment by the
Administrative Agent, or repayment by the Borrower, of any amount pursuant to
this subsection (d) relieve the Bank that failed to make available its share of
the related Committed Borrowing of its obligations hereunder.
SECTION 2.05. Committed Notes. (a) The Committed Loans of each Bank
shall be evidenced by a single Committed Note payable to the order of such Bank
for the account of its Applicable Lending Office in an amount equal to such
Bank's Commitment.
(b) Upon receipt of each Bank's Committed Note pursuant to Section
3.01(viii), the Administrative Agent shall send by overnight mail such Committed
Note to such Bank. Each Bank shall record the date, amount and maturity of each
Committed Loan made by it and the date and amount of each payment of principal
made by the Borrower with respect thereto, and prior to any transfer of its
Committed Note shall endorse on the schedule forming a part thereof appropriate
notations to evidence the foregoing information with respect to each such
Committed Loan then outstanding; provided, however, that the failure of any Bank
to make any such recordation or endorsement shall not affect the obligations of
the Borrower hereunder or under the Committed Notes. Each Bank is hereby
irrevocably authorized by the Borrower so to endorse its Committed Note and to
attach to and make a part of its Committed Note a continuation of any such
schedule as and when required.
24
<PAGE>
SECTION 2.06. Maturity of Committed Loans. Subject to any rights of the
Borrower under Section 2.08, each Committed Loan included in any Committed
Borrowing shall mature, and the principal amount thereof shall be due and
payable, on the last day of the Interest Period applicable to such Committed
Borrowing.
SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the date
such Committed Loan is made until it becomes due, at a rate per annum equal to
the Base Rate for such day (as described on Schedule 2.07(a)). Such interest
shall be payable for each Interest Period on the last day thereof. Any overdue
principal of and, to the extent permitted by law, overdue interest on any Base
Rate Loan shall bear interest, payable on demand, for each day until paid at a
rate per annum equal to the lesser of (i) the sum of 2 percent plus the rate
otherwise applicable to Base Rate Loans for such day or (ii) the Highest Lawful
Rate.
(b) Each CD Loan shall bear interest on the outstanding principal amount
thereof, for the Interest Period applicable thereto, at a rate per annum equal
to the lesser of (i) the sum of the CD Margin (as in effect on the first day of
such Interest Period) plus the applicable Adjusted CD Rate or (ii) the Highest
Lawful Rate. Such interest shall be payable for each Interest Period on the
last day thereof and, if such Interest Period is longer than 90 days, at
intervals of 90 days after the first day thereof. Any overdue principal of and,
to the extent permitted by law, overdue interest on any CD Loan shall bear
interest, payable on demand, for each day until paid at a rate per annum equal
to the lesser of (i) the sum of 2 percent plus the rate applicable to Base Rate
Loans for such day or (ii) the Highest Lawful Rate.
"CD Margin" means the applicable basis points set forth in Schedule 2.07(a)
hereto.
The "Adjusted CD Rate" applicable to any Interest Period means a rate per
annum determined pursuant to the following formula:
[CDBR ]*
ACDR = [-----------------] + AR
[1.00 - DRP]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate*
* The amount in brackets being rounded upwards, if necessary, to the next higher
1/100 of 1 percent.
25
<PAGE>
The "CD Base Rate" applicable to any Interest Period is the rate of interest
determined by the Administrative Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1 percent) of the prevailing rates per
annum (as determined by the CD Reference Banks as of approximately 9:00 a.m.) on
the first day of such Interest Period paid by the CD Reference Banks on their
respective certificates of deposit in an amount comparable to the unpaid
principal amount of the CD Loan to which such Interest Period applies and having
a maturity comparable to such Interest Period.
"Domestic Reserve Percentage" means for any day that percentage (expressed as
a decimal) which is in effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including without limitation any basic,
supplemental or emergency reserves) for a member bank of the Federal Reserve
System in Dallas with deposits exceeding five billion dollars in respect of new
non-personal time deposits in dollars in Dallas having a maturity comparable to
the related Interest Period and in an amount of $100,000 or more. The Adjusted
CD Rate shall be adjusted automatically on and as of the effective date of any
change in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in effect on
such day which is payable by a member of the Bank Insurance Fund classified as
well capitalized and within supervisory subgroup "B" (or a comparable successor
assessment risk classification) within the meaning of 12 C.F.R. Section 327.3(d)
(or any successor provision) to the Federal Deposit Insurance Corporation (or
any successor) for such Corporation's (or such successor's) insuring time
deposits at offices of such institution in the United States. The Adjusted CD
Rate shall be adjusted automatically on and as of the effective date of any
change in the Assessment Rate.
(c) Each Euro-Dollar Committed Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable thereto, at a rate
per annum equal to the lesser of (i) the sum of the Euro-Dollar Margin (as in
effect on the first day of such Interest Period) plus the Euro-Dollar Rate or
(ii) the Highest Lawful Rate. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than three
months, at intervals of three months after the first day thereof.
"Euro-Dollar Margin" means the applicable basis points set forth in Schedule
2.07(a) hereto.
"Euro-Dollar Rate" means, for the Interest Period for each Euro-Dollar
Committed Loan comprising part of the same Borrowing, an interest rate per annum
equal to the rate per annum at which deposits in U.S. dollars are offered by the
26
<PAGE>
principal office of the Reference Bank to first class banks in the interbank
eurodollar market selected by the Reference Bank, as shown on the Dow Jones
Telerate Screen (Pages 314, 872 and 4833) or, if the Dow Jones Telerate Screen
is not available, as shown on the Bloomberg Screen British Banker's LIBOR
fixing, at or around 9:00 a.m. Houston time two (2) Business Days before the
first day of such Interest Period in an amount substantially equal to the amount
of the Euro-Dollar Committed Loan of the Reference Bank comprising part of such
Borrowing to be outstanding during such Interest Period and for a period equal
to such Interest Period.
(d) Any overdue principal of and, to the extent permitted by law, overdue
interest on any Euro-Dollar Committed Loan shall bear interest, payable on
demand, for each day from and including the date payment thereof was due to but
excluding the date of actual payment, at a rate per annum equal to the lesser of
(i) the sum of 2 percent plus the rate applicable to Base Rate Loans for such
day or (ii) the Highest Lawful Rate.
(e) The Administrative Agent shall determine each interest rate applicable to
the Committed Loans hereunder. The Administrative Agent shall give prompt
notice to the Borrower and the participating Banks by telecopy, telex or cable
of each rate of interest so determined, and its determination thereof shall be
conclusive in the absence of manifest error.
(f) Each Reference Bank agrees to use its best efforts to furnish quotations
to the Administrative Agent as contemplated by this Section. If any Reference
Bank does not furnish a timely quotation, the Administrative Agent shall
determine the relevant interest rate on the basis of the quotation or quotations
furnished by the remaining Reference Bank or, if none of such quotations is
available on a timely basis, the provisions of Section 8.01 shall apply.
(g) Competitive Loans shall bear interest as set forth in Section 2.10(i).
SECTION 2.08. Conversions and Continuances. At the end of any Interest
Period, the Borrower shall have the option to convert or continue all or a
portion, equal to not less than $5,000,000 ($1,000,000 in the case of
conversions or continuations into Base Rate Loans), of the outstanding principal
amount of one Type of its Committed Loans made pursuant to one or more Committed
Borrowings into a Committed Borrowing or Committed Borrowings of the other Type
or Types of Committed Loans; provided, however, that except as otherwise
provided in Section 8.03, no partial conversion or continuation of Euro-Dollar
Committed Loans shall reduce the outstanding principal amount of Euro-Dollar
Committed Loans made pursuant to any single Borrowing to less than $5,000,000
and (ii) Base Rate Loans may be converted into CD Loans or Euro-Dollar Committed
Loans or continued as Base Rate Loans, and CD Loans and Euro-Dollar Committed
Loans may be continued as CD
27
<PAGE>
Loans or as Euro-Dollar Committed Loans (as applicable) or converted into Base
Rate Loans for additional Interest Periods if and only if, in either case no
Default or Event of Default is in existence on the date of the conversion or
continuation. Each such conversion or continuation shall be effected by the
Borrower giving the Administrative Agent notice substantially in the form of
Exhibit 2.08 (each a "Notice of Conversion") prior to 11:00 a.m. (Houston, Texas
time) at least (a) three Euro-Dollar Business Days prior to the date of such
conversion or continuation in the case of a conversion or continuation into
Euro-Dollar Committed Loans, (b) two Domestic Business Days in the case of a
continuation or conversion into CD Loans and (c) one Domestic Business Day in
the case of a conversion or continuation into Base Rate Loans, specifying each
Type of Borrowing (or portions thereof) to be so converted or continued and, if
to be converted or continued into CD Loans or Euro-Dollar Committed Loans, the
Interest Period to be initially applicable thereto. The Administrative Agent
shall promptly give the Banks written or telephonic notice (promptly confirmed
in writing) of any such proposed conversion or continuation affecting any of its
Loans.
SECTION 2.09. Pro Rata Committed Borrowings. All Committed Borrowings under
this Agreement shall be incurred from the Banks ratably in proportion to their
respective Commitments. It is understood that no Bank shall be responsible for
any default by any other Bank in its obligation to make Committed Loans
hereunder and that each Bank shall be obligated to make the Loans provided to be
made by it hereunder, regardless of the failure of any other Bank to fulfill its
Commitment hereunder.
SECTION 2.10. Competitive Borrowings. (a) The Borrower may, from time to
time, request the Auction Agent to deliver to the Banks a request for
Competitive Bids, to which any one or more of the Banks may, but are not
obligated to, respond. To request a Competitive Bid, the Borrower shall hand
deliver, telex or telecopy to the Auction Agent a duly completed request for
Competitive Bid in the form of Exhibit 2.10(a) hereto (a "Competitive Bid
Request"), to be received by the Auction Agent (i) in the case of: a Euro-Dollar
Competitive Loan, not later than 9:00 a.m., Houston, Texas time, four Euro-
Dollar Business Days before the Borrowing Date specified for a proposed
Competitive Borrowing and (ii) in the case of an Alternate Competitive Loan, not
later than 9:00 a.m., Houston, Texas time, one Domestic Business Day before the
Borrowing Date specified for a proposed Competitive Borrowing. A Competitive
Bid Request that does not conform substantially to the format of Exhibit 2.10(a)
may be rejected in the Auction Agent's sole discretion, and the Auction Agent
shall promptly notify the Borrower of such rejection by telex or telecopier.
Each Competitive Bid Request shall in each case refer to this Agreement and
specify (i) whether the Competitive Loans then being requested are to be Euro-
Dollar Competitive Loans or Alternate Competitive Loans, (ii) the Borrowing Date
of such Competitive Loans and the aggregate principal amount thereof which shall
not be less than $5,000,000 or greater than the unused aggregate amount of the
Commitments on
28
<PAGE>
such Borrowing Date and shall be in integral multiples of $1,000,000), (iii) the
Interest Period with respect thereto and (iv) the total Borrowings (Committed
and Competitive) outstanding under the Credit Agreement. Upon receipt of a
satisfactory Competitive Bid Requests, the Auction Agent shall forward a Notice
of Competitive Bid Request on to each of the Banks by telex or telecopier on the
terms and conditions of this Agreement, to make Competitive Bids pursuant to
such Notice of Competitive Bid Request. The Notice of Competitive Bid Request
with respect to any proposed Competitive Borrowing shall be given to the Banks
promptly, and in no event later than 12:00 noon, Houston, Texas time (i) in the
case of Euro-Dollar Competitive Loans, four Euro-Dollar Business Days before the
Borrowing Date specified for such proposed Competitive Borrowing, and (ii) in
the case of Alternate Competitive Loans, one Business Day before the Borrowing
Date specified for such Competitive Borrowing.
(b) (i) Each Bank may, in its sole discretion, make a Competitive Bid to the
Borrower responsive to each Notice of Competitive Bid Request. Each Competitive
Bid by a Bank must be submitted to the Auction Agent via telex or telecopier,
(A) in the case of Euro-Dollar Competitive Loans, not later than 8:30 a.m.,
Houston, Texas time, three Euro-Dollar Business Days before the Borrowing Date
specified for a proposed Competitive Borrowing and (B) in the case of Alternate
Competitive Loans, not later than 8:30 a.m., Houston, Texas time, on the
Borrowing Date specified for a proposed Competitive Borrowing. Each Competitive
Bid shall refer to this Agreement and (A) specify the principal amount which
shall not be less than $5,000,000 and integral multiples of $1,000,000, or (B)
specify the interest rate or rates at which the Bank is prepared to make the
Competitive Loan and (C) confirm the Borrowing Date and the Interest Period (if
any) with respect thereto specified by the Borrower. If any Bank shall elect
not to make a Competitive Bid, such Bank shall so notify the Auction Agent via
telex or telecopier (A) in the case of Euro-Dollar Competitive Loans, not later
than 8:30 a.m., Houston, Texas time, three Euro-Dollar Business Days before the
Borrowing Date specified for a proposed Competitive Borrowing and (B) in the
case of Alternate Competitive Loans, not later than 8:30 a.m., Houston, Texas
time, on the Borrowing Date specified for a proposed Competitive Borrowing;
provided, however, that failure by any Bank to give such notice shall not cause
such Bank to be obligated to make any Competitive Loan as part of such
Competitive Borrowing and shall constitute rejection. A Competitive Bid
submitted by a Bank pursuant to this paragraph shall be irrevocable;
(ii) with respect to any Competitive Bid for a Euro-Dollar Competitive
Borrowing, the interest rate shall be calculated on the basis of the LIBO Rate,
which means an interest rate per annum equal to the arithmetic average (rounded
upwards, if not already a whole multiple of 1/16 of 1%, to the next higher 1/16
of 1%) of the rate per annum at which deposits in U.S. dollars are offered in
immediately available funds to the principal office of the Reference Bank in
London, England (or if a
29
<PAGE>
Reference Bank does not at the time any such determination is made maintain an
office in London, England, the principal office of any Affiliate of such
Reference Bank in London, England), at 11:00 a.m., London time (or as soon
thereafter as practicable), two Business Days before the first day of such
Interest Period with a maturity equal to the applicable Interest Period.
(c) The Auction Agent will arrange the bids in ascending yield order. In the
case of (i) Euro-Dollar Competitive Loans, not later than 9:00 a.m., Houston
time, three Euro-Dollar Business Days before the proposed Borrowing Date
specified for a proposed Competitive Borrowing and (ii) Alternate Competitive
Loans, not later than 9:00 a.m., Houston time, on the Borrowing Date specified
for a proposed Competitive Borrowing, the Auction Agent shall notify the
Borrower of the terms (i) of any Competitive Bid submitted by a Bank that is in
accordance with subsection (b) of this Section and (ii) of any subsequent
Competitive Bids submitted by such Bank with respect to the same Notice of
Competitive Bid Request; provided that any such subsequent Competitive Bid shall
be disregarded by the Auction Agent unless such subsequent Competitive Bid is
submitted solely to correct a manifest error in such former Competitive Bid.
The Auction Agent's notice to the Borrower shall specify (i) the aggregate
principal amount of Competitive Bids for which offers have been received for
each Interest Period specified in the related Notice of Competitive Bid Request,
(ii) the respective principal amounts and interest rates, so offered and (iii)
if applicable, limitations on the aggregate principal amount of Competitive Bids
for which offers in any single Notice of Competitive Bid Request may be
accepted.
(d) If offers are made by two or more Banks with the same interest rates for a
greater aggregate principal amount of Competitive Loans than can be accepted for
the related Interest Period (after giving effect to the acceptance of all lower
Interest Rates, as the case may be, properly offered for such Interest Period),
the principal amount of Competitive Loans which can be accepted shall be
allocated by the Borrower among such Banks as nearly as possible (in such
multiples of $1,000,000 (or the approximate equivalent amount thereof), as the
Borrower may deem appropriate) in proportion to the aggregate principal amount
of such offers. Determinations by the Borrower of the amounts of Competitive
Loans to be made by each Bank shall be conclusive in the absence of manifest
error.
(e) The Borrower may in its sole and absolute discretion, subject only to the
provisions of this paragraph, accept or reject any Competitive Bid and shall
notify Auction Agent by telex or telecopier whether and to what extent it has
decided to accept or reject the bids (i) in the case of Euro-Dollar Competitive
Loans, not later than 10:00 a.m., Houston, Texas time, three Euro-Dollar
Business Days before the Borrowing Date specified for a proposed Competitive
Borrowing and (ii) in the case of Alternate Competitive Loans, not later than
10:00 a.m., Houston, Texas time, on the Borrowing Date specified for a proposed
Competitive Borrowing; provided, however,
30
<PAGE>
that (y) the failure of the Borrower to accept or reject any bid within the time
period specified shall be deemed to be a rejection of such bid and (z) the
aggregate amount of the Competitive Bids accepted by the Borrower shall not
exceed the principal amount specified in the Notice of Competitive Bid Request.
Failure to notify the Auction Agent of acceptance by said time shall be deemed a
rejection of a Competitive Bid.
(f) Upon receipt of a notice of the Borrower's acceptance of a Competitive
Bid, the Auction Agent shall promptly notify each Bank of the contents thereof
and of such Bank's ratable share (if any) of such Competitive Loan and such
notice of the Borrower's acceptance of a Competitive Bid shall not thereafter
be revocable by the Borrower giving such notice. The Borrower shall notify the
Auction Agent and the Auction Agent shall also notify each Bank of the aggregate
principal amount of all Competitive Bids accepted. Promptly, upon notice from
the Auction Agent of the Borrower's acceptance of a Competitive Bid, the
successful bidders will become bound, subject to the other applicable conditions
hereof, to make the Competitive Loan in respect of which its bid has been
accepted and shall forward the required funds to the Borrower on the Borrowing
Date indicated in its Competitive Bid.
(g) All Competitive Loans shall reduce the unused portion of the aggregate
amount of the Commitments by the total amount advanced; provided, however, that
each Bank's percentage of the aggregate unused Commitment shall remain
unchanged, regardless of the extent to which such Bank participates in any
Competitive Borrowing.
(h) (i) The Competitive Loan of each Bank shall be evidenced by a single
Competitive Note payable to the order of such Bank for the account of its
Applicable Lending Office in an amount equal to the aggregate amount of the
Commitments. (ii) Upon receipt of each Bank's Competitive Note pursuant to
Section 3.01(viii), the Administrative Agent shall send by overnight mail said
Competitive Note to such Bank. Each Bank shall record the date, amount and
maturity of each Competitive Loan made by it and the date and amount of each
payment of principal made by the Borrower with respect thereto, and prior to any
transfer of its Competitive Note shall endorse on the schedule forming a part
thereof appropriate notations to evidence the foregoing information with respect
to each such Competitive Loan then outstanding; provided, however, that the
failure of any Bank to make any such recordation or endorsement shall not affect
the obligations of the Borrower hereunder or under the Competitive Notes. Each
Bank is hereby irrevocably authorized by the Borrower so to endorse its
Competitive Note and to attach to and make a part of its Competitive Note a
continuation of any such schedule as and when required.
(i) Each Competitive Loan shall bear interest at the rate set forth in the
Competitive Bid by the bidding Bank which has been accepted by the Borrower.
Any
31
<PAGE>
overdue principal of and, to the extent permitted by law, overdue interest on
any Competitive Loan shall bear interest, payable on demand, for each day from
and including the date payment thereof was due to but excluding the date of
actual payment, at a rate per annum equal to the lesser of (i) the sum of 2
percent plus the rate applicable to Base Rate Loans for such day or (ii) the
Highest Lawful Rate.
SECTION 2.11. Optional Termination or Reduction of Commitments. The
Borrower may, upon at least three Domestic Business Days' notice to the
Administrative Agent, (i) terminate the Commitments at any time, if no Loans or
Letters of Credit are outstanding at such time or (ii) ratably reduce from time
to time by an aggregate amount of $10,000,000 or any larger multiple of
$1,000,000, the aggregate amount of the Commitments in excess of the sum of the
aggregate outstanding principal amount of the Loans plus the Letter of Credit
Outstandings; provided, however, that if no Loans are then outstanding, the
Borrower may terminate the Commitments at any time when there are outstanding
Letters of Credit by depositing with the Administrative Agent such amount of
cash as is equal to the aggregate Stated Amount of the Letters of Credit then
outstanding to be held in an interest bearing account with the Administrative
Agent, all such cash and interest to be held by the Administrative Agent as
security for the obligations of the Borrower in respect of such Letters of
Credit; provided further, that the Borrower shall remain liable for any expenses
and other liabilities in respect of such Letters of Credit on terms consistent
with Section 9.04, but for all other purposes of this Agreement and the other
Loan Documents the Obligations will be deemed paid in full and not outstanding.
Any reduction of the Commitments shall apply proportionately to the Commitment
of each Bank in accordance with its Commitment Percentage and any such reduction
shall be permanent.
SECTION 2.12. Mandatory Termination of Commitments. The Commitment of each
Bank shall terminate on the Termination Date, and all Loans then outstanding
(together with accrued interest thereon) shall be due and payable on such date;
provided, however, if there are any Letter of Credit Outstandings or unpaid
Loans on the Termination Date, all obligations of the Borrower and all rights
and remedies of the Banks hereunder shall continue, subject to the provisos of
Section 2.10, until the full and final repayment thereof.
SECTION 2.13. Optional Prepayments. (a) The Borrower may, upon at least
one Domestic Business Day's notice to the Administrative Agent, prepay any Base
Rate Borrowing (or any other Borrowing bearing interest at the Base Rate
pursuant to Article VIII) or, subject to Section 2.15 and upon at least three
Euro-Dollar Business Days' notice to the Administrative Agent, prepay any Fixed
Rate Borrowing, in whole at any time, or from time to time in part in amounts
aggregating $10,000,000 or any larger multiple of $1,000,000, by paying the
principal amount to be prepaid together with accrued interest thereon to but
excluding the date of prepayment. Each such
32
<PAGE>
optional prepayment shall be applied to prepay ratably the Committed Loans of
the several Banks included in such Committed Borrowing. Competitive Loans may
not be prepaid.
(b) Upon receipt of a notice of prepayment pursuant to this Section, the
Administrative Agent shall promptly notify each Bank of the contents thereof and
of such Bank's ratable share (if any) of such prepayment and such notice shall
not thereafter be revocable by the Borrower.
SECTION 2.14. General Provisions as to Payments.
(a) The Borrower shall make each payment of principal of, and interest on, the
Loans and of fees hereunder, not later than 12:00 Noon (Houston time) on the
date when due, in Federal or other funds immediately available in Houston,
Texas, to the Administrative Agent at its address referred to in Section 9.01.
The Administrative Agent will promptly distribute to each Bank its ratable
share, if any, of each such payment received by the Administrative Agent for the
account of the Banks. Whenever any payment of principal of, or interest on, the
Domestic Loans or Alternate Competitive Loans or of fees shall be due on a day
which is not a Domestic Business Day, the date for payment thereof shall be
extended to the next succeeding Domestic Business Day. Whenever any payment of
principal of, or interest on, the Euro-Dollar Committed Loans and the Euro-
Dollar Competitive Loans shall be due on a day which is not a Euro-Dollar
Business Day, the date for payment thereof shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls
in another calendar month, in which case the date for payment thereof shall be
the next preceding Euro-Dollar Business Day. If the date for any payment of
principal is extended by operation of law or otherwise, interest thereon shall
be payable for such extended time.
(b) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Banks hereunder
that the Borrower will not make such payment in full, the Administrative Agent
may assume that the Borrower has made such payment in full to the Administrative
Agent on such date and the Administrative Agent may, in reliance upon such
assumption, cause to be distributed to each Bank on such due date an amount
equal to the amount then due such Bank. If and to the extent that the Borrower
shall not have so made such payment, each Bank shall repay to the Administrative
Agent forthwith on demand such amount distributed to such Bank together with
interest thereon, for each day from the date such amount is distributed to such
Bank until the date such Bank repays such amount to the Administrative Agent, at
the Federal Funds Rate.
33
<PAGE>
SECTION 2.15. Funding Losses. The Borrower shall pay to the Administrative
Agent for the account of each Bank, upon the request of such Bank through the
Administrative Agent, such amount or amounts as shall compensate such Bank for
any reasonable loss, cost or expense actually incurred by such Bank (or, subject
to Section 9.07(b), by any existing Participant in the related Committed Loan or
Competitive Loan) as a result of:
(a) any payment or prepayment of a Fixed Rate Loan or a Competitive
Loan (pursuant to Section 2.11 or Article VI or VIII or otherwise) held by
such Bank (or such Participant) on a date other than the last day of the
Interest Period applicable thereto, or
(b) any failure by the Borrower to borrow a Fixed Rate Loan or any
Competitive Loan held or to be held by such Bank (or such Participant) on
the date for such Borrowing specified in the relevant Notice of Committed
Borrowing or Request for Competitive Bid,
such compensation to include, without limitation, an amount equal to the excess,
if any, of (i) the amount of interest which would have accrued on the amount so
paid or prepaid, or not converted or borrowed, for the period from the date of
such payment or prepayment or failure to borrow or convert to the last day of
such Interest Period (or, in the case of a failure to borrow, the Interest
Period for such Fixed Rate Loan or Competitive Loan which would have commenced
on the date of such failure to convert or borrow) in each case at the applicable
rate of interest for such Fixed Rate Loan provided for herein (excluding,
however, the CD Margin or the Euro-Dollar Margin included therein) or
Competitive Loan over (ii) the amount of interest (as reasonably determined by
such Bank or Participant) which would have accrued to such Bank or Participant
on such amount by placing such amount on deposit for a comparable period with
leading banks in the relevant interbank market; provided, however, that such
Bank shall have delivered to the Borrower, within 60 days after the date of such
payment or prepayment or failure to borrow, a certificate as to the amount of
such actual loss or expense, which certificate shall set forth in reasonable
detail the basis for such loss or expense and shall be conclusive in the absence
of manifest error. Any payment required to be made pursuant to this Section 2.15
shall be made within 5 days after receipt of the certificate referred to above.
SECTION 2.16. Fees.
(a) Facility Fee. The Borrower shall pay to the Administrative Agent for
the account of the Banks ratably in proportion to their Commitments a facility
fee as set forth in Schedule 2.16. Such facility fee shall accrue for the
account of each Bank from and including the Effective Date to but excluding the
Termination Date.
34
<PAGE>
(b) Payments. Accrued fees under this Section and Section 2.03 for the
account of any Bank shall be payable quarterly in arrears on each March 31, June
30, September 30 and December 31 and upon the Termination Date.
SECTION 2.17. Computation of Interest and Fees. Interest based on the
Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in
a leap year) and paid for the actual number of days elapsed (including the first
day but excluding the last day). All other interest and all fees shall be
computed on the basis of a year of 360 days and paid for the actual number of
days elapsed (including the first day but excluding the last day) except that if
use of a 360-day year would cause any interest or fees constituting interest
(within the meaning of all applicable laws) to exceed the Highest Lawful Rate,
then such interest and fees will be computed on the basis of a year of 365 days
(or 366 in a leap year).
SECTION 2.18. Maximum Interest Rate. (a) It is the intention of the
parties hereto to comply strictly with all applicable usury laws regarding the
contracting for, and the taking, reserving, charging, collection, payment and
receipt of, interest (which shall, for purposes of this Section 2.18, be deemed
to include, without limitation, any compensation received by any Agent or any
Bank for the use, forbearance or detention (as such terms are used in Tex. Rev.
Civ. Stat. Ann. Art. 5069-1.01(a)) of the indebtedness incurred under this
Agreement and the Notes) whether such laws are now or hereafter in effect,
including the laws of the United States of America or any other jurisdiction
whose laws are applicable, and including any subsequent revisions to or judicial
interpretations of those laws, in each case to the extent they are applicable to
this Agreement and the Notes (the "Applicable Usury Laws").
(b) If any payment by the Borrower or any other Person to any Agent or any
Bank hereunder (including any payment upon acceleration of the maturity of any
Notes of such Bank) would produce a rate of interest in excess of the Highest
Lawful Rate, as defined in paragraph (e) below, with respect to any Bank, or
otherwise result in the Borrower or any other Person paying or being deemed to
have paid to any Agent or any Bank any interest in excess of the Maximum Amount,
as defined in subsection (e) below, with respect to any Bank, or if any Agent or
any Bank shall for any reason receive any unearned interest in violation of any
Applicable Usury Law, or if any transaction contemplated by or any provision of
this Agreement, any Bank's Note or Notes, any Letter of Credit Application or
any other agreement or instrument (collectively, such Bank's "Loan Documents")
would otherwise be usurious under any Applicable Usury Laws, then,
notwithstanding anything to the contrary in any Bank's Loan Documents, the
parties hereto agree as follows: (i) the provisions of this Section 2.18 shall
govern and control; (ii) the aggregate amount of all interest under Applicable
Usury Laws that is contracted for, taken, reserved, charged, collected or
received pursuant to each Bank's Loan Documents or otherwise shall under no
circumstances exceed the Maximum Amount; (iii) neither the Borrower nor any
other
35
<PAGE>
Person shall be obligated to pay the amount of such interest to the extent that
it exceeds the Maximum Amount; and (iv) the provisions of each Bank's Loan
Documents immediately shall be deemed reformed, without the necessity of the
execution of any new document or instrument, so as to comply with all Applicable
Usury Laws, it being the intention of the parties, to the fullest extent
permitted by law, to render inapplicable any and all penalties of any kind
provided by any Applicable Usury Law as a result of any such excess interest.
(c) If any payment by the Borrower or any other Person under any Bank's
Loan Documents (including any payment upon acceleration of the maturity of any
Note) results in the Borrower actually having paid to such Bank or any Agent any
interest in excess of the Maximum Amount, then such excess amount shall be
applied to the reduction of the principal balance of such Bank's Loans or to
other amounts (other than interest) payable hereunder, and if no such principal
is then outstanding, and no such other amount is then payable, such excess or
part thereof remaining, shall be repaid to the Borrower or such other Person.
(d) All interest paid, or agreed to be paid, pursuant to any Bank's Loan
Documents shall, to the fullest extent permitted by Applicable Usury Laws, be
amortized, prorated, allocated and spread throughout the full term of any
indebtedness incurred under or evidenced by such Bank's Loan Documents.
(e) As used herein, the term "Maximum Amount" means, with respect to any
Bank, in any of such Bank's capacities hereunder, the maximum nonusurious amount
of interest that may be lawfully contracted for, reserved, charged, collected or
received (in each case as determined by the Applicable Usury Laws) by such Bank
in connection with the indebtedness incurred under or evidenced by such Bank's
Loan Documents under all Applicable Usury Laws, and the term "Highest Lawful
Rate" means, with respect to any Bank, on any day, the maximum rate of interest,
if any, that may be contracted for, taken, reserved, charged, collected or
received under all Applicable Usury Laws on the principal balance of the
indebtedness incurred under or evidenced by such Bank's Loan Documents from time
to time outstanding. In this connection, for purposes of Tex. Rev. Civ. Stat.
Ann. Art. 5069-1.04, as it may from time to time be amended, the Highest Lawful
Rate, to the extent it is determined with reference thereto, shall be the
"indicated rate ceiling" from time to time in effect, referred to in, and
determined pursuant to Section (a)(1) of such Art. 5069-1.04, as amended, as
modified by Section (b) of such Art. 5069-1.04; provided, however, that to the
fullest extent permitted by all Applicable Usury Laws, each Agent and each Bank
reserves the right to change, from time to time, in accordance with such Art.
5069-1.04, by written notice to the Borrower, the ceiling upon which the Highest
Lawful Rate is based under such Art. 5069-1.04 to the extent it is based
thereon; provided further, that the Highest Lawful Rate shall not be limited to
the applicable rate ceiling under such Art. 5069-1.04 if applicable federal laws
or state laws now or
36
<PAGE>
hereafter in effect shall permit a higher rate of interest to be contracted for,
taken, reserved, charged, collected and received under any Bank's Loan
Documents.
(f) In the event that any rate of interest set forth in Sections 2.07 and
8.01 on any Loan of any Bank (a "Stated Rate"), together with any fees or other
amounts payable under such Bank's Loan Documents to any Agent or such Bank, in
any of such Bank's capacities hereunder, deemed to constitute interest under
Applicable Usury Laws ("Additional Interest"), exceeds the Highest Lawful Rate,
then the amount of interest payable to such Bank to accrue pursuant to such
Bank's Loan Documents shall be limited, notwithstanding anything to the contrary
in such Bank's Loan Documents, to the amount of interest that would accrue at
the Highest Lawful Rate; provided, however, that, to the fullest extent
permitted by Applicable Usury Laws, any subsequent reductions in any Stated Rate
shall not reduce the interest payable to such Bank to accrue pursuant to such
Bank's Loan Documents below the Highest Lawful Rate until the aggregate amount
of interest payable to such Bank actually accrued pursuant to such Bank's Loan
Documents, together with all Additional Interest payable to such Bank, equals
the amount of interest which would have accrued if the Stated Rates had at all
times been in effect and such Additional Interest, if any, had been paid in
full.
(g) In the event that, at maturity or upon payment in full of all amounts
payable under any Bank's Loan Documents, the total amount of interest paid or
payable to any Agent or any Bank, in any of such Bank's capacities hereunder,
and accrued under the terms of or evidenced by such Bank's Loan Documents is
less than the total amount of interest which would have been paid or accrued on
the indebtedness incurred under or evidenced by such Bank's Loan Documents if
the Stated Rates had, at all times, been in effect and all Additional Interest
had been paid in full, then the Borrower shall, to the extent permitted by
Applicable Usury Laws, pay to the Administrative Agent for the account of such
Bank an amount equal to the difference between (1) the lesser of (i) the amount
of interest payable to such Bank which would have accrued if the Highest Lawful
Rate for such Bank had at all times been in effect or (ii) the amount of
interest which would have accrued on the indebtedness incurred under or
evidenced by such Bank's Loan Documents if the Stated Rates had at all times
been in effect and all Additional Interest had been paid in full and (2) the
amount of interest actually paid to such Bank or payable to such Bank and
accrued under or evidenced by such Bank's Loan Documents.
(h) The Borrower, the Agents and the Banks agree that, except for Article
15.10(b) thereof, the provisions of Chapter 15, Subtitle 79, Revised Civil
Statutes of Texas, 1925, as amended (which regulates certain revolving credit
loan accounts and revolving tri-party accounts), do not apply to this Agreement
or any of the Notes or any of the Obligations.
37
<PAGE>
SECTION 2.19. Withholding Tax Exemption. At least five Domestic Business
Days prior to the first date on which interest or fees are payable hereunder for
the account of any Bank, each Bank that is not incorporated under the laws of
the United States of America or a state thereof agrees that it will deliver to
each of the Borrower and the Administrative Agent two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224, certifying in either
case that such Bank is entitled to receive payments under this Agreement and the
Notes without deduction or withholding of any United States federal income
taxes. Each Bank which so delivers a Form 1001 or 4224 further undertakes to
deliver to each of the Borrower and the Administrative Agent two additional
copies of such form (or a successor form) on or before the date that such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form so delivered by it, and such amendments thereto
or extensions or renewals thereof as may be reasonably requested by the Borrower
or the Administrative Agent, in each case certifying that such Bank is entitled
to receive payments under this Agreement and the Notes without deduction or
withholding of any United States federal income taxes, unless an event
(including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Bank from duly completing and delivering any such form with respect to it and
such Bank advises the Borrower and the Administrative Agent that it is not
capable of receiving payments without any deduction or withholding of United
States federal income tax. Any Bank that is not capable of receiving payments
without any deduction or withholding of United States federal income tax will
promptly notify the Borrower and the Administrative Agent to that effect and
will designate a different Applicable Lending Office if such designation will
render such Bank capable of receiving payments without any such deduction or
withholding and will not, in the reasonable judgment of such Bank, be otherwise
disadvantageous. If the Borrower shall receive a certificate of such Bank
claiming the need for deductions or withholdings under this Section 2.19, the
Borrower shall, subject to Section 8.06 hereof, commence making any deductions
and withholding any amounts with respect to payments for the account of such
Bank that are required by applicable law.
38
<PAGE>
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness. This Agreement shall become effective on
the date that each of the following conditions shall have been satisfied (or
waived in accordance with Section 9.05):
(i) receipt by the Administrative Agent of certified copies of the
Certificate of Incorporation and By-Laws of the Borrower and the
resolutions of the Board of Directors of the Borrower authorizing the
transactions contemplated hereby and such other documents as the
Administrative Agent or the Required Banks may reasonably request relating
to the existence of the Borrower, the corporate authority for and the
validity of this Agreement and the Notes, and any other matters relevant
hereto, all in form and substance satisfactory to the Administrative Agent;
(ii) receipt by the Administrative Agent of a Certificate of
Incumbency dated the Effective Date executed by the Secretary or an
Assistant Secretary of the Borrower in substantially the form of Exhibit
3.01(ii) hereto setting forth the name, title and specimen signature of
each Authorized Officer or Authorized Representative of the Borrower (1)
who has signed this Agreement on behalf of the Borrower, (2) who will sign
the Notes on behalf of the Borrower or (3) who will, until replaced by
another officer or representative duly authorized for that purpose, act as
the representative of the Borrower for the purposes of signing documents
and giving notices and other communications by the Borrower in connection
with this Agreement and the transactions contemplated hereby;
(iii) receipt by the Administrative Agent of counterparts of this
Agreement signed by each of the parties hereto (or, in the case of any
party as to which an executed counterpart shall not have been received,
receipt by the Administrative Agent in form reasonably satisfactory to it
of telecopied, telegraphic, telex or other written confirmation from such
party of execution of a counterpart hereof by such party);
(iv) receipt by the Administrative Agent of an opinion of the General
Counsel of the Borrower in substantially the form of Exhibit 3.01(iv)
hereto and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
39
<PAGE>
(v) receipt by the Agents of an opinion of Andrews & Kurth L.L.P.,
counsel for the Agents in substantially the form of Exhibit 3.01(v) hereto
and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
(vi) receipt by the Administrative Agent of a certificate signed by
the Chief Executive Officer, Chief Financial Officer or Treasurer of the
Borrower dated the Effective Date to the effect set forth in clauses (iii)
and (iv) of Section 3.02;
(vii) receipt by the Administrative Agent of a certificate signed by
the Chief Executive Officer, Chief Operating Officer or Chief Financial
Officer of LRC, dated the Effective Date, to the effect that LRC is not in
default in its material obligations pursuant to the Company Regulations;
and
(viii) receipt by the Administrative Agent for the account of each
Bank of a duly executed Committed Note dated on or before the Effective
Date, complying with the provisions of Section 2.05 and a duly executed
Competitive Note dated on or before the Effective Date, complying with the
provisions of Section 2.10.
provided, however, that this Agreement shall not become effective or be binding
on any party hereto unless all of the foregoing conditions are satisfied not
later than June 27, 1995. The Administrative Agent shall promptly notify the
Borrower and the Banks of the Effective Date, and such notice shall be
conclusive and binding on all parties hereto. The Administrative Agent shall
promptly forward to the Banks copies of the documents delivered pursuant to this
Section 3.01.
SECTION 3.02. Credit Events. (a) The obligation of any Bank to make a
Committed Loan on the occasion of any Committed Borrowing hereunder and the
obligation of the Issuing Bank to issue, renew or extend any Letter of Credit
hereunder are subject to the satisfaction of the following conditions:
(i) receipt by the Administrative Agent of a Notice of Committed
Borrowing as required by Section 2.02 or receipt by the Issuing Bank of a
Letter of Credit Request as required by Section 2.03, as the case may be;
(ii) the fact that, immediately after such Credit Event, the aggregate
outstanding principal amount of the Committed Loans plus the Letter of
Credit Outstandings plus the aggregate outstanding principal amount of the
Competitive Loans will not exceed the aggregate amount of the Commitments;
40
<PAGE>
(iii) the fact that, immediately before and after such Credit Event,
no Default or Event of Default shall have occurred and be continuing; and
(iv) the fact that the representations and warranties of the Borrower
contained in this Agreement shall be true on and as of the date of such
Credit Event as if made on and as of such date (except in the case of a
Refunding Borrowing, the representations and warranties set forth in
paragraphs (d), (e), (k) and (l) of Section 4.01).
(b) The obligation of each Bank bound to make a Competitive Loan pursuant to
Section 2.10 hereof on the occasion of a Competitive Borrowing (including the
initial Competitive Borrowing) is subject to the further condition precedent
that:
(i) The Auction Agent and the Administrative Agent shall have received
a Competitive Bid Request with respect thereto; and
(ii) On the Borrowing Date of such Competitive Borrowing, the
following statements shall be true (and each of the giving of the
applicable Competitive Bid Request and the acceptance by the Borrower of
the proceeds of such Competitive Borrowing shall constitute a
representation and warranty by the Borrower that on the date of such
Competitive Borrowing such statements are true):
(A) the fact that, immediately after such Credit Event, the
aggregate outstanding principal amount of the Committed Loans plus the
Letter of Credit Outstandings plus the aggregate outstanding principal
amount of the Competitive Loans will not exceed the aggregate amount
of the Commitments;
(B) the fact that, immediately before and after such Credit
Event, no Default or Event of Default shall have occurred and be
continuing; and
(C) the fact that the representations and warranties of the
Borrower contained in this Agreement shall be true on and as of the
date of such Credit Event as if made on and as of such date.
Each Credit Event hereunder shall be deemed to be a representation and warranty
by the Borrower on the date of such Borrowing as to the facts specified in
clauses (ii), (iii) and (iv) of paragraph (a) or (b), as the case may be.
41
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The
Borrower represents and warrants to the Banks as follows:
(a)(1) The Borrower is (i) a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and
(ii) qualified to do business and in good standing in each jurisdiction
where the ownership of its properties or the conduct of its business
requires such qualification except where the failure to be so qualified
would not have a Material Adverse Effect.
(2) The Borrower has all corporate power and authority, governmental
permits, licenses, consents, authorizations, orders and approvals and other
authorizations and powers as are necessary to carry on its business
substantially as presently conducted except where the failure to have such
power, authority, permits, licenses, consents, authorizations, orders and
approvals would not have a Material Adverse Effect.
(3) The execution, delivery and performance by the Borrower of this
Agreement and of the Notes, and Borrowings and other extensions of credit
hereunder, are within the Borrower's corporate power and authority and have
been duly authorized by all necessary corporate proceedings.
(4) Neither such authorization nor the execution, delivery and
performance by the Borrower of this Agreement or of the Notes, nor any
Borrowing or Letter of Credit when made or issued, as the case may be,
hereunder will conflict with, result in a breach of or constitute a default
under any of the terms, conditions or provisions of any law or any
regulation, order, writ, injunction or decree of any court or governmental
authority or of the Certificate of Incorporation or By-Laws of the Borrower
or result in the violation or contravention of, or the acceleration of any
obligation under, or cause the creation of any Lien on any of the assets of
the Borrower pursuant to the provisions of, any indenture, loan or credit
agreement or other material instrument to which it is a party or by which
it is bound.
(5) Assuming its due execution by the Banks and the Agents, this
Agreement constitutes a legal, valid and binding agreement of the Borrower
and the Notes, when duly executed on behalf of the Borrower, and delivered
in
42
<PAGE>
accordance with this Agreement, will constitute legal, valid and binding
obligations of the Borrower.
(b)(1) The consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of December 31, 1994 and the related
consolidated statements of income and cash flows for the fiscal year ended
that date, reported on by Coopers & Lybrand, copies of which have been
delivered to the Administrative Agent, present fairly, in all material
respects, the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such fiscal year, in conformity with
generally accepted accounting principles consistently applied.
(b)(2) The unaudited consolidated balance sheet of the Borrower and
its Consolidated Subsidiaries as of March 31, 1995 and the related
unaudited consolidated statements of income and cash flows for the three-
month period then ended, copies of which have been delivered to the
Administrative Agent, present fairly, in all material respects, in
conformity with generally accepted accounting principles applied on a basis
consistent with the financial statements referred to in paragraph (b)(1) of
this Section, the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such three-month period (subject to normal
year-end adjustments and not including footnotes or schedules required by
generally accepted accounting principles).
(c)(1) The balance sheet of LCR as of December 31, 1994 and the
related statements of income and cash flows for the fiscal year ended that
date, reported on by Coopers & Lybrand, copies of which have been delivered
to the Administrative Agent, present fairly, in all material respects, the
financial position of LCR as of such date and its results of operations and
cash flows for such fiscal year, in conformity with generally accepted
accounting principles consistently applied.
(c)(2) The unaudited balance sheet of LCR as of March 31, 1995 and the
related statements of income and cash flows for the three-month period then
ended, copies of which have been delivered to the Administrative Agent,
present fairly, in all material respects, in conformity with generally
accepted accounting principles applied on a basis consistent with the
financial statements referred to in paragraph (c)(1) of this Section, the
financial position of LCR as of such date and its results of operations and
cash flows for such three-month period (subject to normal year-end
adjustments and not including footnotes or schedules required by generally
accepted accounting principles).
43
<PAGE>
(d) Except as described in the Company's Annual Report on Form 10-K
for the year ended December 31, 1994 ("1994 Form 10-K") or any document
filed subsequently by the Borrower pursuant to the Securities Exchange Act
of 1934 ("'34 Act Report") or as otherwise disclosed in writing to the
Administrative Agent and delivered to the Banks, there is no action, suit
or proceeding pending or, to the knowledge of the Borrower, threatened
against or affecting the Borrower or any of its Consolidated Subsidiaries
in any court or before or by any arbitrator, governmental department,
agency or instrumentality, an adverse decision in which could reasonably be
expected to have a Material Adverse Effect.
(e) Except as described in the 1994 Form 10-K or any subsequent '34
Act Report or as otherwise disclosed in writing to the Administrative Agent
and delivered to the Banks, there has been no material adverse change since
December 31, 1994 in the business, operations, affairs, assets, condition
(financial or otherwise) or results of operations of the Borrower and its
Consolidated Subsidiaries, considered as a whole.
(f) No Default or Event of Default has occurred and is continuing.
(g) No consent, authorization, order or approval of (or filing or
registration with) any governmental commission or board or other
governmental regulatory authority (other than routine reporting
requirements) is required for the execution, delivery and performance by
the Borrower of this Agreement or of the Notes.
(h) Each member of the Controlled Group has fulfilled its obligations
under the minimum funding standards of ERISA and the Code with respect to
each Plan and is in compliance in all material respects with the presently
applicable provisions of ERISA and the Code, and has not incurred any
liability to the PBGC (other than for routine premiums due to the PBGC) or
a Plan under Title IV of ERISA.
(i)(1) Each corporate Subsidiary is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as
now conducted except for powers, licenses, authorizations, consents or
approvals the absence of which would not have a Material Adverse Effect.
(2) LCR is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Texas and is
registered, qualified or licensed (or has applied for such registration,
qualification or
44
<PAGE>
licensing) to do business and is in good standing in each of the
jurisdictions within the United States where ownership of its properties or
the conduct of its business requires such registration, qualification or
licensing, except in all cases where the failure to be so registered,
qualified or licensed would not reasonably be expected to have a Material
Adverse Effect. LCR also has all power and authority, governmental permits,
licenses, consents, authorizations, orders and approvals and other
authorizations as are necessary to carry on its business substantially as
presently conducted except in all cases where the failure to have any of
the foregoing would not reasonably be expected to have a Material Adverse
Effect.
(j) The Borrower is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, or a "public-utility
company" or a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935 or a "public utility" under the laws of the
State of Texas.
(k) Except as described in the Borrower's 1994 Form 10-K or any
subsequent '34 Act Report or as otherwise disclosed in writing to the
Administrative Agent and delivered to the Banks, to the best of its
knowledge (i) the Borrower and each of its Consolidated Subsidiaries
possess all environmental, health and safety licenses, permits,
authorizations, registrations, approvals and similar rights necessary for
the Borrower or such Consolidated Subsidiary to conduct its operations as
now being conducted (other than where the failure to possess or maintain
any of the foregoing would not reasonably be expected to have a Material
Adverse Effect) and (ii) the Borrower and each of its Consolidated
Subsidiaries are in compliance with all terms, conditions or other
provisions of such licenses, permits, authorizations, registrations,
approvals and similar rights except for such failure or noncompliance that
would not reasonably be expected to have a Material Adverse Effect.
(l) Except as described in the Borrower's 1994 Form 10-K or any
subsequent '34 Act Report or as otherwise disclosed in writing to the
Administrative Agent and delivered to the Banks, to the best of its
knowledge, there does not exist any Release of a Hazardous Material or any
violation of the Requirements of Environmental Laws that reasonably would
be expected to impose a liability on the Borrower or a Consolidated
Subsidiary, or require an expenditure by the Borrower or a Consolidated
Subsidiary to cure such violation, in any case where such liability or
expenditure would reasonably be expected to have a Material Adverse Effect.
45
<PAGE>
(m) Each of the Borrower and its Consolidated Subsidiaries has filed
all federal income tax returns and other material tax returns, statements
and reports (or obtained extensions with respect thereto) which are
required to be filed and have paid or deposited or made adequate provision
in accordance with generally accepted accounting standards for the payment
of all taxes (including estimated taxes shown on such returns, statements
and reports) which are shown to be due pursuant to such returns.
(n) The Company Regulations, as the same may be amended or otherwise
modified from time to time, are in full force and effect in accordance with
their terms.
46
<PAGE>
ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment hereunder
or any amount payable under any Note or in respect of any Letter of Credit
remains unpaid:
SECTION 5.01. Certain Information to be Furnished by the Borrower. The
Borrower will deliver to the Administrative Agent and the Administrative Agent
shall promptly deliver to the Banks:
(a)(1) as soon as available and in any event within 120 days after the
end of each of its fiscal years, the consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of the end of such fiscal
year and the related consolidated statements of income and cash flows for
such year, setting forth in each case in comparative form the figures for
the previous fiscal year, together with the audit report thereon of a
nationally recognized firm of independent certified public accountants;
(a)(2) as soon as available and in any event within 120 days after the
end of each of its fiscal years, the balance sheet of LCR as of the end of
such fiscal year and the related statements of income and cash flows for
such year, setting forth in each case in comparative form the figures for
the previous fiscal year, together with an audit report thereon of a
nationally recognized firm of independent certified public accountants;
(b)(1) as soon as available and in any event within 60 days after the
end of each of the first three quarters of each of its fiscal years, (i)
the consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of the end of such fiscal quarter, (ii) the related
consolidated statement of income for such fiscal quarter and for the
portion of the fiscal year ended with such quarter and (iii) the related
consolidated statement of cash flows for the portion of the fiscal year
ended with such quarter, setting forth, with respect to (iii), in
comparative form the figures for the corresponding portion of the
Borrower's previous fiscal year, all certified (subject to normal year-end
adjustments and not including footnotes or schedules required by generally
accepted accounting principles) by the chief financial officer or the chief
accounting officer of the Borrower to present fairly, in all material
respects, the financial position, results of operations and cash flows of
the Borrower and its Consolidated Subsidiaries in accordance with generally
accepted accounting principles (except as otherwise
47
<PAGE>
stated therein) applied on a basis consistent with the financial statements
referred to in paragraph (a)(1) of this Section;
(b)(2) as soon as available and in any event within 60 days after the
end of each of the first three quarters of each of its fiscal years, (i)
the balance sheet of LCR as of the end of such fiscal quarter, (ii) the
related statement of income for such fiscal quarter and for the portion of
the fiscal year ended with such quarter and (iii) the related statement of
cash flows for the portion of the fiscal year ended with such quarter,
setting forth, with respect to (iii), in comparative form the figures for
the corresponding portion of LCR's previous fiscal year, all certified
(subject to normal year-end adjustments and not including footnotes or
schedules required by generally accepted accounting principles) by the
chief financial officer or the chief accounting officer of LCR to present
fairly, in all material respects, the financial position, results of
operations and cash flows of LCR in accordance with generally accepted
accounting principles (except as otherwise stated therein) applied on a
basis consistent with the financial statements referred to in paragraph
(a)(2) of this Section;
(c) promptly after the same are sent to shareholders or filed, copies
of all (i) financial statements, notices, reports and proxy materials sent
by the Borrower to shareholders of the Borrower and (ii) registration
statements (other than exhibits thereto and any registration statements on
Form S-8 or its equivalent) and reports on Form 10-K, 10-Q and 8-K (or
their equivalents) filed by the Borrower with the Securities and Exchange
Commission (or any governmental agency succeeding to the functions of such
Commission);
(d) simultaneously with the delivery of the financial statements
referred to in paragraphs (a) and (b) above, (i) a certificate of the
Borrower signed by the Treasurer or any Assistant Treasurer of the Borrower
stating whether there exists to the knowledge of such officer of the
Borrower on the date of such certificate any Default, and, if any such
Default then exists, specifying the nature and period of existence thereof
and the action the Borrower is taking and proposes to take with respect
thereto and (ii) a certificate of the Borrower signed by the Treasurer or
any Assistant Treasurer of the Borrower stating that the Borrower is in
compliance with the provisions of Section 5.08 and setting forth all
computations relating thereto;
(e) forthwith, if at any time any officer of the Borrower shall obtain
knowledge of any Default or Event of Default, a certificate of the
Treasurer or any Assistant Treasurer specifying the nature and period of
existence thereof and the action the Borrower is taking and proposes to
take with respect thereto;
48
<PAGE>
(f) promptly upon obtaining knowledge thereof, a copy of each of the
following notices: if and when any member of the Controlled Group (i)
gives or is required to give notice to the PBGC of any "reportable event"
(as defined in Section 4043 of ERISA) with respect to any Plan which might
constitute grounds for a termination of such Plan under Title IV of ERISA,
or knows that the plan administrator of any Plan has given or is required
to give notice of any such reportable event, a copy of the notice of such
reportable event given or required to be given to the PBGC; (ii) receives
notice of complete or partial withdrawal liability under Title IV of ERISA,
a copy of such notice; or (iii) receives notice from the PBGC under Title
IV of ERISA of an intent to terminate or appoint a trustee to administer
any Plan, a copy of such notice;
(g) in the event of any damage, loss or casualty to or destruction of
any portion of any facility of the Borrower, any Subsidiary or LCR, prompt
notice thereof, specifying the nature and extent of such damage, loss,
casualty or destruction and stating whether such damage, loss, casualty or
destruction, in the reasonable judgment of the Borrower, materially
adversely affects the production capacity of such facility or the economic
value of such facility; provided, however, that the Borrower shall have no
obligation to deliver such notice if the damage to the facility in the good
faith judgment of the Borrower will not cost in excess of $15,000,000 to
rebuild, replace or restore or if such damage does not materially adversely
affect such production capacity or the economic value of the facility;
(h) in the event of any total or partial shutdown of any production or
storage facility of the Borrower or any Consolidated Subsidiary in
connection with any Release, prompt notice thereof to the Administrative
Agent, specifying the reason for such shutdown; provided, however, that the
Borrower shall have no obligation to deliver such notice if in the good
faith judgment of the Borrower such shutdown will not result in a reduction
of Consolidated Net Income of $10,000,000 or more over a period of five
years beginning with the date of such shutdown;
(i) in addition to its obligations pursuant to Section 2.02, prompt
written notice of any Debt, other than Borrowings, incurred subsequent to
the Effective Date; and
(j) from time to time such further information regarding compliance
with this Agreement or the business, operations, affairs, assets, condition
(financial or otherwise) or results of operations of the Borrower and its
Consolidated Subsidiaries as the Administrative Agent, at the request of
any Bank, may reasonably request.
49
<PAGE>
SECTION 5.02. Maintenance of Property; Insurance.
(a) The Borrower will keep, and will cause each Subsidiary to keep, all
property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted.
(b) The Borrower will, and will cause each of its Subsidiaries to, maintain
insurance consistent either with the insurance practices of the Borrower and its
Subsidiaries in effect on the date hereof, or with then existing industry
practice, in either case to the extent available to the Borrower and its
Subsidiaries on commercially reasonable terms, and will furnish to the
Administrative Agent, upon request from the Administrative Agent, information
presented in reasonable detail as to the insurance so carried.
SECTION 5.03. Limitation on Liens. Except as otherwise specifically
provided in this Agreement, nothing contained in this Agreement shall in any way
restrict or prevent the Borrower or any Subsidiary from incurring any Debt;
provided, however, that neither the Borrower nor any Restricted Subsidiary will
issue, assume or guarantee any Debt secured by any Lien upon any Restricted
Property or grant any Lien on any such Restricted Property to secure any such
Debt without effectively providing that all of the Notes and the Letter of
Credit Outstandings (together with, if the Borrower so determines, any other
Debt then existing and any other Debt thereafter created ranking equally with
the Notes) shall be secured equally and ratably with (or prior to) such Debt so
long as such Debt shall be so secured. To the extent, if any, that the
following Liens would otherwise be prohibited by the foregoing provisions, the
foregoing provisions shall not apply to:
(a) Liens on any property of a corporation or other Person existing at the
time it becomes a Subsidiary or at the time it is merged into or consolidated
with the Borrower or a Subsidiary and not created in contemplation of such
event;
(b) Liens on any assets (i) existing at the time of acquisition thereof and
not created in contemplation of such event or (ii) incurred to secure payment of
all or part of the purchase price thereof or (iii) incurred to secure Debt
incurred prior to, at the time of or within 120 days after acquisition thereof
for the purpose of financing all or part of the purchase price thereof;
(c) Liens on property of the Borrower or a Subsidiary existing or
contemplated on the date hereof and listed on Schedule 5.03(c) hereto;
(d) Liens on any new plant (including any processing unit or production or
storage facility) or the real estate on which such plant is situated or is to be
constructed securing Debt incurred or assumed either (i) at the time of or
within 24
50
<PAGE>
months after commencement of improvement or construction or (ii) within 120 days
after completion of improvement or construction of such plant in a principal
amount not exceeding the cost of such improvement or construction and the cost
of acquisition of such plant and such real estate;
(e) Liens which secure only Debt owing by a Subsidiary to the Borrower or
another Subsidiary;
(f) Liens in favor of the United States of America or any state thereof or
any department, agency, instrumentality or political subdivision of any such
jurisdiction to secure partial, progress, advance or other payments pursuant to
any contract or statute or to secure any Debt incurred for the purpose of
financing all or any part of the purchase price or cost of constructing or
improving the property subject to such Lien, including, without limitation,
Liens to secure Debt of the pollution control or industrial revenue bond type;
(g) Liens required by any contract or statute in order to permit the
Borrower or a Subsidiary to perform any contract or subcontract made by it with
or at the request of the United States of America, any state or any department,
agency or instrumentality or political subdivision of either; or
(h) Liens securing taxes, assessments, governmental charges or levies,
statutory Liens of landlords and Liens of carriers, warehousemen, materialmen,
mechanics and other like Persons not yet due or the payment of which is not then
required; provided, however, that this paragraph (h) shall not be deemed to
permit any Liens which may be imposed pursuant to Section 4068 of ERISA;
(i) Liens of or resulting from any judgment or award not in excess of
$25,000,000, the time for the appeal or petition for rehearing of which shall
not have expired, or in respect of which the obligor shall at any time in good
faith be prosecuting an appeal or proceeding for a review and in respect of
which a stay of execution pending such appeal or proceeding for review shall
have been secured;
(j) Liens incurred or deposits made in the ordinary course of business (i)
in connection with workers' compensation, unemployment insurance and other types
of social security, or (ii) to secure reimbursement obligations in respect of
documentary letters of credit secured by collateral customarily and normally
provided to banks issuing documentary letters of credit; provided, however, that
any obligation secured by any such Lien shall not be overdue or, if overdue, is
being contested in good faith by appropriate actions or proceedings during which
there is no right to exercise remedies and adequate book reserves have been
established; provided further, that paragraph (j) shall not be deemed to permit
any Liens which may be imposed pursuant to Section 4068 of ERISA;
51
<PAGE>
(k) Minor survey exceptions and minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and other similar
purposes, or zoning or other restrictions as to the use of real properties,
which are necessary for the conduct of the activities of Borrower or any
Subsidiary or which customarily exist on properties of corporations or other
Persons engaged in similar activities and similarly situated;
(l) any extension, renewal or replacement (or successive extensions,
renewals or replacements), in whole or in part, of any Lien referred to in the
foregoing paragraphs (a) to (k) inclusive or of any Debt secured thereby,
provided that the principal amount of Debt secured thereby shall not exceed the
principal amount of Debt so secured at the time of such extension, renewal or
replacement, and that such extension, renewal or replacement Lien shall be
limited to all or part of substantially the same property which secured the Lien
extended, renewed or replaced (plus improvements on such property);
provided, however, that the Borrower and any one or more Restricted Subsidiaries
may issue, assume or guarantee Debt secured by Liens which would otherwise be
subject to the foregoing restrictions or grant any such Lien to secure any such
Debt in an aggregate principal amount which, together with the aggregate
outstanding principal amount of all Debt of the Borrower and the Restricted
Subsidiaries which would otherwise be subject to the foregoing restrictions (not
including Debt permitted to be secured under paragraphs (a) to (l) inclusive
above), does not at any one time exceed the greater of $50,000,000 or 10 percent
of Consolidated Net Tangible Assets of the Borrower and its Consolidated
Subsidiaries.
SECTION 5.04. Consolidation, Merger, Disposition of Assets. (a) Subject
to the provisions of Section 5.04(b) hereof, nothing contained in this Agreement
shall prevent any consolidation or merger of the Borrower with or into any other
corporation or corporations (whether or not affiliated with the Borrower), or
successive consolidations or mergers in which the Borrower or its successor or
successors shall be a party or parties, or shall prevent any sale or conveyance
of all or substantially all the property of the Borrower, to any other Person
(whether or not affiliated with the Borrower) authorized to acquire and operate
the same; provided, however, that upon any such consolidation, merger, sale or
conveyance, other than a consolidation or merger in which the Borrower is the
continuing corporation, the surviving entity must be chartered under the laws of
the United States or one of its states and the due and punctual payment of the
principal of and interest on all of the Notes, according to their tenor, and the
due and punctual performance and observance of all of the covenants and
conditions of this Agreement, shall be expressly assumed by instrument
reasonably satisfactory in form to the Required Banks and executed and delivered
to the Administrative Agent by the corporation (if other than the Borrower)
formed by such consolidation or into which the Borrower shall have been merged
or
52
<PAGE>
by the Person which shall have acquired such property; and provided further that
no Default or Event of Default shall exist hereunder after giving effect to such
consolidation, merger or sale of assets.
(b) If, upon any consolidation or merger of the Borrower with or into any
other corporation, or upon the sale or conveyance of all or substantially all
the property of the Borrower to any other Person or if any of the remaining
property of the Borrower or of any Restricted Subsidiary would thereupon become
subject to any Lien, the Borrower, prior to or simultaneously with such
consolidation, merger, sale or conveyance, will secure the Notes, the Letter of
Credit Outstandings and all other obligations of the Borrower under this
Agreement equally and ratably with any other obligations of the Borrower (or any
Restricted Subsidiary if applicable) then entitled thereto, by a direct Lien on
all such property prior to all Liens other than any theretofore existing
thereon.
SECTION 5.05. Use of Proceeds. The proceeds of the Loans made and
Letters of Credit issued under this Agreement will be used by the Borrower and
its Subsidiaries for general business purposes. None of such proceeds will be
used in violation of Regulation U, Regulation X, Regulation G or of any similar
laws or regulations.
SECTION 5.06. Payment of Taxes. The Borrower will, and will cause each
Consolidated Subsidiary to, pay and discharge, or make adequate provision for,
all material taxes, assessments and governmental charges or levies imposed upon
it or upon its income or profits, or upon any properties belonging to it;
provided, however, that neither the Borrower nor any Consolidated Subsidiary
shall be required to pay or discharge or cause to be paid or discharged any such
taxes, assessments, charges or levies whose amount, applicability or validity is
being contested in good faith by appropriate actions or proceedings and as to
which reserves have been established if required by generally accepted
accounting principles.
SECTION 5.07. LCR Matters.
(a) The Borrower will cause LRC to not permit any amendment or modification
to the Company Regulations, or take any other action, that would in each case
result in LRC's Participation Percentage (as defined in the Company Regulations)
to be less that 50 percent, without the consent of Banks having at least 70
percent of the aggregate amount of the Commitments.
(b) Unless the Banks having at least 70 percent of the aggregate
Commitments agree otherwise, the Borrower shall cause LRC (within the bounds of
good business judgment and its legal obligations under or in connection with the
Company Regulations), as an Owner of LCR, to withhold its consent, which is
53
<PAGE>
required under Section 3.8 of the Company Regulations, with respect to any
action that would cause or permit LCR (or any Person acting in the name or on
behalf of LCR), directly or indirectly, to undertake any of the following:
(1) to incur Debt; provided, however, that this covenant shall not be
applicable to (i) any Debt for which the Borrower or LRC is the obligee,
(ii) any Debt resulting from the Revolving Loan Credit Agreement or the
Term Loan Credit Agreement, each dated as of May 5, 1995 (as the same may
be amended or otherwise modified from time to time) between LCR and The
Bank of New York as Agent, or any renewal or replacement of such Credit
Agreements; provided, however, that such renewal or replacement does not
result in an increase in the aggregate principal amount of such credit
facilities, (iii) any Debt which CITGO Refining is contractually or
otherwise liable to pay or to provide reimbursement for pursuant to the
Company Regulations, as the same may be amended or otherwise modified from
time to time, or (iv) any Debt that is non-recourse to the Borrower and LRC
either existing on the In-Service Date (as defined in the Company
Regulations) or incurred by LCR subsequent to the In-Service Date;
(2) to fail to maintain insurance consistent either with the insurance
practices of the Borrower and its Subsidiaries in effect on the date hereof
or with then existing industry practice, in either case to the extent
available to LCR on commercially reasonable terms; and
(3) to amend, or alter the Company Regulations in any way that would
materially adversely affect (i) the Borrower's access to its share of
distributable cash from LCR or (ii) other material rights and obligations
of the Borrower or LRC under the Company Regulations (including without
limitation materially increasing an obligation of the Borrower or LRC to
make contributions to LCR or materially decreasing an obligation of CITGO
or CITGO Refining to make contributions to LCR), provided, however, that in
any event the Borrower will provide promptly thereafter to the
Administrative Agent notice and copies of all amendments to the Company
Regulations.
SECTION 5.08. Financial and Other Covenants. The Borrower will comply
with the covenants described in this Section.
a. Debt Incurrence Test. If the aggregate outstanding principal amount
of all Debt of the Borrower and its Consolidated Subsidiaries incurred
subsequent to December 6, 1993 exceeds $75,000,000, then the Borrower and its
Subsidiaries will not be permitted to incur any additional Debt unless, after
giving effect thereto, the ratio of EBITDA to Consolidated Interest Expense, for
the four-fiscal-quarter period most recently ended, is greater than or equal to
the ratio set forth below with respect
54
<PAGE>
to the period that includes the last quarter of such four-fiscal-quarter period;
provided, however, that each such determination shall be made by giving effect
to all Debt of the Borrower and its Consolidated Subsidiaries actually
outstanding during any portion of such four-fiscal-quarter period and by
assuming that such proposed Debt had been incurred on the first day of such
four-fiscal-quarter period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From the Effective Date through December 31, 1995 2.00 to 1
Thereafter 2.25 to 1
</TABLE>
b. Fixed Charge Coverage Ratio. The Borrower will not permit, as of the
end of any fiscal quarter, the ratio of (i) EBITDA less Consolidated Capital
Expenditures (provided, however, that in determining Consolidated Capital
Expenditures for purposes of this covenant all items attributable to the
activities or business of LCR shall be excluded), to (ii) Consolidated Interest
Expense, computed in each case for the four-fiscal-quarter period ending during
each of the following periods, to be less than the designated ratio set forth
below with respect to each such period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From the Effective Date through December 31, 1995 1.30 to 1
Thereafter 2.00 to 1
</TABLE>
c. Leverage Ratio. The Borrower will not permit, as of the end of any
fiscal quarter, the ratio of Consolidated Debt to EBITDA, computed in each case
for the four-fiscal-quarter period ending during each of the following periods,
to be greater than the designated ratio set forth below with respect to each
such period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From the Effective Date through December 31, 1995 5.50 to 1
From January 1, 1996 through December 31, 1996 4.50 to 1
</TABLE>
55
<PAGE>
<TABLE>
<S> <C>
Thereafter 4.00 to 1
</TABLE>
d. Dividend Payments. The Borrower will not at any time declare, make or
pay, or incur any liability to make or pay, or cause or permit to be declared,
made or paid any Dividend unless at the time of declaring such Dividend, and
after giving effect thereto, the aggregate amount of all such Dividends declared
or paid on or after January 1, 1994 shall not exceed an amount equal to the sum
of $72,000,000 plus 100 percent of Consolidated Net Income or Loss, excluding
non-cash Non-Operating Special Items used in determining Consolidated Net Income
or Loss, for the period commencing October 1, 1993 and ending with the most
recently completed fiscal quarter of the Borrower.
e. Restricted LCR Investments. From and after December 6, 1993, the
aggregate of all Investments shall not exceed $200,000,000; provided, however,
that the Borrower or LRC may invest in LCR, in excess of such $200,000,000, all
or a portion of the proceeds from any capital markets offering consisting solely
of equity securities.
f. Methodology for Determining Covenant Compliance. Notwithstanding any
contrary provision of this Agreement, the Borrower's compliance with each of the
covenants described in this Section shall be determined in accordance with the
following methodology:
(1) All calculations shall be made without taking into account any
Debt or Interest Expense of LCR or CITGO Refining, or any Debt or Interest
Expense which CITGO Refining, pursuant to the Company Regulations as the
same may be amended or otherwise modified from time to time, is
contractually or otherwise liable to pay or provide reimbursement for;
(2) In the event the Borrower issues Debt ("Replacement Debt") for the
purpose of refinancing Debt outstanding under any of the Borrower's public
indentures or medium-term note programs ("Replaced Debt"), the aggregate
principal amount of such Replacement Debt shall be substituted in place of
the Replaced Debt for purposes of all determinations and the calculations,
in paragraphs (a) and (c) of this Section; provided, however, that the Net
Interest associated with such Replacement Debt shall be included in
Interest Expense for purposes of the calculation in paragraph (b) of this
Section; and further provided, that the treasurer of the Borrower shall
certify to the Administrative Agent that such Replacement Debt will be used
to refinance Replaced Debt.
56
<PAGE>
(3) The results of operations for, and all information pertaining
to, the Borrower's most recently completed quarter or four fiscal quarter
period, as applicable, shall be determined based upon the last quarter, or
the four fiscal quarter period (the last quarter of which is the most
recent quarter), for which the Borrower made a public announcement of its
Consolidated Net Income or Loss.
57
<PAGE>
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.01. Defaults. If one or more of the following events (herein
called "Events of Default") shall occur and be continuing:
(a) the Borrower shall default in the payment when due of any
principal of any Loan or any reimbursement obligation in respect of any
Letter of Credit, or shall default in the payment within five days of the
due date thereof of any interest on any Loan or any other amount payable
hereunder;
(b) the Borrower shall fail to perform or observe any covenant or
agreement to be performed by it contained in Section 5.01(e), Section
5.02(b) or Sections 5.03 through 5.08;
(c) the Borrower shall fail to perform or observe any covenant or
agreement to be performed by it contained in this Agreement (other than
those covered by paragraphs (a) or (b) above) for 30 days after written
notice of such failure is given to the Borrower by the Administrative Agent
at the request of any Bank;
(d) the Borrower shall have made, or be deemed to have made pursuant
to Section 3.02, any representation or warranty in this Agreement, or in
any certificate, financial statement or other document delivered pursuant
hereto, which shall prove to have been incorrect in any material respect
when so made or deemed to have been made;
(e) the Borrower or any Subsidiary shall fail to pay any indebtedness
for borrowed money (other than the Loans or any reimbursement obligation in
respect of any Letters of Credit) payable or guaranteed by it, or any
interest or premium thereon, when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) and such failure
shall continue after the applicable grace period, if any, specified in the
agreement or instrument relating to such indebtedness or guarantee;
provided, however, that the aggregate amount of such indebtedness or
guarantee, including any interest or premium thereon, shall exceed
$15,000,000;
(f) LCR shall be determined (upon exhaustion of all appeals and
expiration of all cure periods as provided in the Company Regulations) to
be in default of any of its material obligations pursuant to the Company
Regulations;
58
<PAGE>
(g) the Borrower or any Restricted Subsidiary or LCR shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or shall consent to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of creditors, or shall
take any corporate action to authorize any of the foregoing, or shall fail
generally to pay its debts as they become due, or shall admit in writing
its inability to pay its debts as they become due;
(h) an involuntary case or other proceeding shall be commenced against
the Borrower or any Restricted Subsidiary or LCR seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for relief shall be entered
against the Borrower or any Restricted Subsidiary or LCR under the federal
bankruptcy laws as now or hereafter in effect;
(i) any member of the Controlled Group shall fail to pay when due an
amount or amounts aggregating in excess of $25,000,000 which it shall have
become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or
notice of intent to terminate a Plan or Plans having aggregate Unfunded
Vested Liabilities in excess of $25,000,000 (collectively, a "Material
Plan") shall be filed under Title IV of ERISA by any member of the
Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA
to terminate or to cause a trustee to be appointed to administer any
Material Plan or a proceeding shall be instituted by a fiduciary of any
Material Plan against any member of the Controlled Group to enforce Section
515 of ERISA and such proceeding shall not have been dismissed within 30
days thereafter; or a condition shall exist by reason of which the PBGC
would be entitled to obtain a decree adjudicating that any Material Plan
must be terminated; or
(j) a final, non-appealable judgment or order for the payment of money
in excess of $15,000,000 shall be rendered against the Borrower or any
Restricted Subsidiary or LCR and such judgment or order shall continue
unsatisfied for a period of 30 days;
59
<PAGE>
then, and without notice upon the occurrence of an Event of Default
specified in Section 6.01(g) or Section 6.01(h), or, by notice to the
Borrower upon the occurrence and during the continuation of any other Event
of Default, the Administrative Agent may and, upon the written request of
the Required Banks shall, take any or all of the following actions: (i)
declare the Banks' Commitments terminated, whereupon the Commitments of the
Banks shall forthwith terminate immediately and any facility fee shall
forthwith become due and payable without any other notice of any kind; (ii)
declare the principal of and any accrued interest in respect of all Loans
and all Obligations owing hereunder, to be, whereupon the same shall
become, forthwith due and payable without further presentment, demand,
notice of demand or of dishonor and non-payment, protest, notice of
protest, notice of intent to accelerate, declaration or notice of
acceleration or any other notice of any kind, all of which are hereby
waived by the Borrower; and (iii) direct the Borrower to pay, and the
Borrower agrees that upon receipt of such notice (or upon the occurrence of
an Event of Default specified in Section 6.01(g) or Section 6.01(h)), it
will pay to the Administrative Agent such additional amount of cash as is
equal to the aggregate Stated Amount of all Letters of Credit then
outstanding to be held in an interest bearing account with the
Administrative Agent, all such cash and interest to be held by the
Administrative Agent as security for the Obligations of the Borrower
hereunder and under the Notes and the other Loan Documents.
SECTION 6.02. Other Remedies. Upon the occurrence and during the
continuance of any Event of Default, the Administrative Agent, acting at the
request of the Required Banks, may proceed to protect and enforce its rights,
either by suit in equity or by action at law or both, or may proceed to enforce
the payment of all amounts owing to the Agents and the Banks under the Loan
Documents and interest thereon in the manner set forth herein or therein; it
being intended that no remedy conferred herein or in any of the other Loan
Documents is to be exclusive of any other remedy, and each and every remedy
contained herein or in any other Loan Document shall be cumulative and shall be
in addition to every other remedy given hereunder and under the other Loan
Documents now or hereafter existing at law or in equity or by a statute or
otherwise.
SECTION 6.03. Rights of Setoff. If any Event of Default shall have
occurred and be continuing, each Bank is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Bank, or any
branch, subsidiary or Affiliate of such Bank, to or for the credit or the
account of the Borrower against any and all the Obligations of the Borrower now
or hereafter existing under this Agreement and the other Loan Documents
irrespective of whether or not such Bank or the
60
<PAGE>
Administrative Agent shall have made any demand under this Agreement, such Note,
or the Obligations and although the Obligations may be unmatured. Each Bank
agrees promptly to notify the Borrower after any such setoff and application
made by such Bank, but the failure to give such notice shall not affect the
validity of such setoff and application. The rights of each Bank under this
Section are in addition to other rights and remedies (including other rights of
setoff) which such Bank may have.
61
<PAGE>
ARTICLE VII
THE AGENTS
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes each of the Administrative Agent, the Co-Agent and the
Auction Agent to take such action as Administrative Agent, the Co-Agent or the
Auction Agent, as the case may be, on its behalf and to exercise such powers
under this Agreement and the Notes as are delegated to the Administrative
Agent, the Co-Agent or the Auction Agent, as the case may be, by the terms
hereof or thereof, together with all such powers as are reasonably incidental
thereto.
SECTION 7.02. Agents and Affiliates. Each of the Administrative Agent
and the Co-Agent shall have the same rights and powers under this Agreement as
any other Bank and may exercise or refrain from exercising the same as though
they were not the Agents, and its Affiliates may accept deposits from, lend
money to, and generally engage in any kind of business with the Borrower or any
Subsidiary or LCR or any Affiliate thereof as if they were not the Agents
hereunder.
SECTION 7.03. Action by Agents. The obligations of the Agents hereunder
are only those expressly set forth herein. Without limiting the generality of
the foregoing, the Agents shall not be required to take any action with respect
to any Default, except as expressly provided in Article VI. The Co-Agent shall
have no duties or obligations hereunder.
SECTION 7.04. Consultation with Experts. The Agents may consult with
legal counsel, independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken by it in
good faith in accordance with the advice of such counsel, accountants or
experts.
SECTION 7.05. Liability of Agents. NEITHER THE AGENTS NOR ANY OF THEIR
RESPECTIVE DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES SHALL BE LIABLE TO ANY BANK
FOR ANY ACTION TAKEN OR NOT TAKEN BY THEM IN CONNECTION HEREWITH (I) WITH THE
CONSENT OR AT THE REQUEST OF THE REQUIRED BANKS OR (II) IN THE ABSENCE OF ITS
OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. IT IS THE EXPRESS INTENTION OF THE
PARTIES HERETO THAT THE AGENTS, THEIR RESPECTIVE DIRECTORS, OFFICERS, AGENTS OR
EMPLOYEES SHALL BE INDEMNIFIED AND HELD HARMLESS BY THE BANKS FROM ALL COSTS,
EXPENSES (INCLUDING COUNSEL FEES AND DISBURSEMENTS) CLAIMS, DEMANDS, ACTIONS,
LOSSES OR LIABILITIES ARISING OUT OF THE NEGLIGENCE (WHETHER SOLE OR
CONTRIBUTORY) OF SUCH PERSONS. Neither the Agents nor any of their directors,
officers, agents or employees shall be responsible for or have any duty to
ascertain, inquire into or verify (i) any statement, warranty or representation
made in connection with this Agreement or any Credit Event hereunder;
62
<PAGE>
(ii) the performance or observance of any of the covenants or agreements of the
Borrower; (iii) the satisfaction of any condition specified in Article III,
except receipt of items required to be delivered to the Administrative Agent; or
(iv) the validity, effectiveness or genuineness of this Agreement, the Notes or
any other instrument or writing furnished in connection herewith. The Agents
shall not incur any liability to any Bank by acting in reliance upon any notice,
consent, certificate, statement, or other writing (which may be a bank wire,
telex or similar writing) reasonably believed by it to be genuine or to be
signed by the proper party or parties.
SECTION 7.06. INDEMNIFICATION. EACH BANK SHALL RATABLY IN ACCORDANCE
WITH ITS COMMITMENT, INDEMNIFY EACH OF THE AGENTS (TO THE EXTENT NOT REIMBURSED
BY THE BORROWER) AGAINST ANY COST, EXPENSE (INCLUDING COUNSEL FEES AND
DISBURSEMENTS), CLAIM, DEMAND, ACTION, LOSS OR LIABILITY INCLUDING ANY LIABILITY
FOR ANY OF THE AGENTS' OWN NEGLIGENCE (EXCEPT SUCH AS RESULT FROM SUCH AGENT'S
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) THAT SUCH AGENT MAY SUFFER OR INCUR IN
CONNECTION WITH THIS AGREEMENT OR ANY ACTION TAKEN OR OMITTED BY SUCH AGENT
HEREUNDER. IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT THE AGENTS,
THEIR RESPECTIVE DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES SHALL BE INDEMNIFIED
AND HELD HARMLESS BY THE BANKS FROM ALL COSTS, EXPENSES (INCLUDING COUNSEL FEES
AND DISBURSEMENTS) CLAIMS, DEMANDS, ACTIONS, LOSSES OR LIABILITIES ARISING OUT
OF OR RESULTING FROM THE ORDINARY NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY) OF
SUCH PERSONS.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agents or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agents or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
SECTION 7.08. Successor Agents. Either of the Agents may resign at any
time by giving written notice thereof to the Banks and the Borrower, with such
resignation to be effective upon the acceptance by a successor Agent of its
appointment as agent hereunder, as set forth below. Further, upon vote of the
Required Banks, either of the Agents may be replaced by any other Bank consented
to by the Borrower (which consent shall not be unreasonably withheld) and which
Bank consents to assume the duties of the Agent being replaced; provided,
however, that upon any such resignation or removal, the remaining Agent (at its
sole discretion) may assume the role and responsibilities of the resigning
Agent, with the consent of the Borrower, which consent shall not be unreasonably
withheld. If the remaining Agent chooses not to accept such appointment
following a resignation, the Required Banks shall have the right to appoint a
successor Agent, with the consent of the
63
<PAGE>
Borrower, which consent shall not be unreasonably withheld. If no successor
Agent shall have been so appointed by the Required Banks, and shall have
accepted such appointment, within 30 days after the retiring Agent's giving of
notice of resignation, then the retiring Agent may, on behalf of the Banks,
appoint a successor Agent, which shall be a Bank or a commercial bank organized
under the laws of the United States of America or of any state thereof and
having a combined capital and surplus of at least $50,000,000. Upon the
acceptance of its appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the rights
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations hereunder. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Article shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent.
64
<PAGE>
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair.
If on or prior to the first day of any Interest Period for any Fixed Rate
Borrowing:
(1) the Administrative Agent is advised by the Reference Banks that
deposits in dollars (in the applicable amounts) are not being offered to
the Reference Banks in the relevant market for such Interest Period, or
(2) the Required Banks advise the Administrative Agent that the
Adjusted CD Rate or the Euro-Dollar Rate, as the case may, as determined by
the Administrative Agent will not adequately and fairly reflect the cost to
such Banks of funding their Fixed Rate Loans for such Interest Period,
the Administrative Agent shall forthwith give notice thereof to the Borrower and
the Banks, whereupon until the Administrative Agent notifies the Borrower that
the circumstances giving rise to such notice no longer exist: (A)(i) if such
circumstances relate to CD Loans, the obligations of the Banks to make CD Loans
shall be suspended or (ii) if such circumstances relate to the Euro-Dollar
Committed Loans, the obligations of the Banks to make Euro-Dollar Committed
Loans shall be suspended and (B) unless the Borrower notifies the Administrative
Agent at least one Domestic Business Day before the date of any Fixed Rate
Borrowing for which a Notice of Committed Borrowing has previously been given
that it elects not to borrow on such date,
(i) if such Fixed Rate Borrowing is a CD Borrowing, such CD Borrowing
shall instead be made (x) as a Euro-Dollar Committed Borrowing if the
Borrower so elects by notice to the Administrative Agent and all of the
procedures set forth herein for a Euro-Dollar Committed Borrowing can be
complied with at such time or (y) if a Euro-Dollar Committed Borrowing is
not possible, then such CD Borrowing shall instead be made as a Base Rate
Borrowing, and
(ii) if such Fixed Rate Borrowing is a Euro-Dollar Committed
Borrowing, such Euro-Dollar Committed Borrowing shall be made (x) as a CD
Borrowing if the Borrower so elects by notice to the Administrative Agent
and all of the procedures set forth herein for a CD Borrowing can be
complied with at such time or (y) if a CD Borrowing is not elected or is
not possible, then such Euro-Dollar Committed Borrowing shall instead be
made as a Base Rate Borrowing.
65
<PAGE>
SECTION 8.02. Illegality. If, after the Effective Date, the adoption of
any applicable law, rule or regulation, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Euro-Dollar Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency shall make it unlawful
or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain
or fund its Euro-Dollar Committed Loans or its Euro-Dollar Competitive Loans and
such Bank shall so notify the Administrative Agent, the Administrative Agent
shall forthwith give notice thereof to the other Banks and the Borrower
whereupon until such Bank notifies the Borrower and the Administrative Agent
that the circumstances giving rise to such suspension no longer exist (which
such Bank shall do forthwith) the obligation of such Bank to make Euro-Dollar
Committed Loans or its Euro-Dollar Competitive Loans shall be suspended. Before
giving any notice to the Administrative Agent pursuant to this Section, such
Bank shall designate a different Euro-Dollar Lending Office if such designation
will avoid the need for giving such notice and will not, in the reasonable
judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank
shall determine that it may not lawfully continue to maintain and fund any of
its outstanding Euro-Dollar Committed Loans or its Euro-Dollar Competitive Loans
to maturity and shall so specify in such notice, the Borrower shall immediately
prepay in full the then outstanding principal amount of each such affected Euro-
Dollar Committed Loan or Euro-Dollar Competitive Loan, together with accrued
interest thereon. Concurrently with prepaying each such affected Euro-Dollar
Committed Loan or Euro-Dollar Competitive Loan, the Borrower shall borrow a Base
Rate Loan (or, if the Borrower so elects by at least one Domestic Business Day's
notice to the Administrative Agent and such Bank, the Borrower shall borrow a CD
Loan from such Bank in a principal amount equal to the principal amount of such
affected Euro-Dollar Committed Loan or Euro-Dollar Competitive Loan for an
Interest Period coincident with the remaining term of the Interest Period
applicable to such affected Euro-Dollar Committed Loan or Euro-Dollar
Competitive Loan of the Borrower, and such Bank shall make such a Base Rate (or
other) Loan.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after the
Effective Date, in the case of any Loan or any obligation to make Loans or any
obligations to issue or participate in any Letters of Credit, the adoption of
any applicable law, rule or regulation, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Parent or Applicable
Lending Office) with any request or directive (whether or not having the force
of law) of any such authority, central bank or comparable agency:
66
<PAGE>
(i) shall subject any Bank (or its Applicable Lending Office) to any
tax, duty or other charge with respect to its Fixed Rate Loans, its
Competitive Loans or participation in Letters of Credit, its Committed
Notes, its Competitive Notes or its obligation to make Fixed Rate Loans or
issue Letters of Credit, or shall change the basis of taxation of payments
to any Bank (or its Applicable Lending Office) of the principal of or
interest on its Fixed Rate Loans, its Competitive Loans or Letters of
Credit or any other amounts due under this Agreement in respect of its
Fixed Rate Loans, its Competitive Loans or Letters of Credit or its
obligation to make Fixed Rate Loans or issue or participate in Letters of
Credit (except for changes in the rate of tax on the income of such Bank or
its Applicable Lending Office or changes in franchise taxes imposed on it
under applicable law); or
(ii) shall impose, modify or deem applicable any reserve, special
deposit, deposit insurance assessment or similar requirement (including,
without limitation, any such requirement imposed by the Board of Governors
of the Federal Reserve System, but excluding (A) with respect to any CD
Loan any such requirement included in an applicable Domestic Reserve
Percentage and (B) with respect to any Euro-Dollar Committed Loan or Euro-
Dollar Competitive Loan any such requirement with respect to which such
Bank is entitled to compensation during the relevant Interest Period under
Section 8.05) against assets of, deposits with or for the account of, or
credit extended by, any Bank (or its Applicable Lending Office) or shall
impose on any Bank (or its Applicable Lending Office) or on the United
States market for certificates of deposit or the London interbank market
any other condition affecting its Fixed Rate Loans, its Competitive Loans,
its Committed Notes, its Competitive Notes or its obligation to make Fixed
Rate Loans;
and the result of any of the foregoing is to increase the actual cost to such
Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate
Loan or Competitive Loan or issuing or participating in any Letter of Credit, or
to reduce the amount of any sum received or receivable by such Bank (or its
Applicable Lending Office) under this Agreement or under its Committed Notes or
Competitive Notes with respect thereto, by an amount reasonably deemed by such
Bank to be material, then, within 15 days after demand by such Bank (with a copy
to the Administrative Agent), the Borrower shall pay to such Bank (without
duplication of amounts otherwise payable hereunder) such additional amount or
amounts as will compensate such Bank for such increased cost or reduction with
respect to such affected Fixed Rate Loan, Competitive Loan or Letter of Credit
or such affected sum.
(b) If any Bank shall have reasonably determined that the adoption of any
applicable law, rule or regulation regarding capital adequacy or any change
therein, or any change in the interpretation or administration thereof by any
governmental
67
<PAGE>
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Parent or Applicable
Lending Office) with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or has had the effect of reducing the rate of return on
capital of such Bank (or its Parent) as a consequence of such Bank's obligations
hereunder to a level below that which such Bank or its Parent could have
achieved but for such adoption, change or compliance (taking into consideration
such Bank's policies with respect to capital adequacy) by an amount deemed by
such Bank to be material, then from time to time, within 15 days after demand by
such Bank (with a copy to the Administrative Agent), the Borrower shall pay to
such Bank (without duplication of amounts otherwise payable hereunder) such
additional amount or amounts as will compensate such Bank or its Parent for such
reduction.
(c) Each Bank will promptly notify the Borrower and the Administrative
Agent of any event of which it has knowledge, occurring after the Effective
Date, which will entitle such Bank to compensation pursuant to this Section and
will designate a different Applicable Lending Office if such designation will
avoid the need for, or reduce the amount of, such compensation and will not, in
the reasonable judgment of such Bank, be otherwise disadvantageous to such Bank.
A certificate of any Bank claiming compensation under this Section, setting
forth the additional amount or amounts to be paid to it hereunder and setting
forth in reasonable detail the basis for such compensation shall be conclusive
in the absence of manifest error, and the amount set forth therein shall be
payable by the Borrower within five days after receipt of such certificate. In
determining such amount, such Bank may use any reasonable averaging and
attribution methods.
SECTION 8.04. Substitute Loans. If (i) the obligation of any Bank to
make Euro-Dollar Committed or Euro-Dollar Competitive Loans has been suspended
pursuant to Section 8.01 or 8.02 or (ii) any Bank has demanded compensation
under Section 8.03(a) and the Borrower shall, by at least five Euro-Dollar
Business Days' prior notice to such Bank through the Administrative Agent, have
elected that the provisions of this Section shall apply to such Bank, then,
unless and until such Bank notifies the Borrower that the circumstances giving
rise to such suspension or demand for compensation no longer apply (which such
Bank shall do forthwith):
(a) all Loans which would otherwise be made by such Bank as CD Loans
or Euro-Dollar Committed Loans or Euro-Dollar Competitive Loans, as the
case may be, shall be made instead as Base Rate Loans or, if the Borrower
shall so elect in its Notice of Committed Borrowing, CD Loans or Euro-
Dollar Committed Loans (whichever type is not affected by such
circumstances) for an Interest Period coincident with the related Fixed
Rate Borrowing, and
68
<PAGE>
(b) after each of its CD Loans or Euro-Dollar Committed Loans or Euro-
Dollar Competitive Loans, as the case may be, has been repaid, all payments
of principal which would otherwise be applied to repay such Fixed Rate
Loans or Euro-Dollar Competitive Loans, as the case may be, shall instead
be applied to repay its Loans made pursuant to Section 8.02 or clause (a)
above.
SECTION 8.05. Regulation D Compensation. Each Bank may require the
Borrower to pay, contemporaneously with each payment of interest on Euro-Dollar
Committed Borrowings or Euro-Dollar Competitive Borrowings, additional interest
on the related Euro-Dollar Committed Loan or Euro-Dollar Competitive Loan of
such Bank at a rate per annum equal to the excess of (i) (A) the applicable
Euro-Dollar Rate divided by (B) one minus the Euro-Dollar Reserve Percentage
over (ii) the rate specified in clause (i)(A). Any Bank electing to require
payment of such additional interest (x) shall so notify the Borrower and the
Administrative Agent, in which case such additional interest on the Euro-Dollar
Committed Loans or Euro-Dollar Competitive Loans of such Bank shall be payable
to such Bank at the place indicated in such notice with respect to each Interest
Period commencing at least five Euro-Dollar Business Days after the giving of
such notice and (y) shall notify the Borrower at least five Euro-Dollar Business
Days prior to each date on which interest is payable on the Euro-Dollar
Committed Loans of the amount then due it under this Section.
SECTION 8.06. Substitution of Bank. If (i) the obligation of any Bank to
make Euro-Dollar Committed Loans or Euro-Dollar Competitive Loans has been
suspended pursuant to Section 8.01 or 8.02 or (ii) any Bank has demanded
compensation under Section 8.03 or 8.05, or if any Bank has notified the
Borrower that it is not capable of receiving payments without deduction or
withholding pursuant to Section 2.19 the Borrower shall have the right, with the
assistance of the Administrative Agent, to seek a mutually satisfactory
substitute bank or banks (which may be one or more of the Banks) to purchase the
Committed Notes or Competitive Notes for cash without recourse to such Bank and
assume the Commitment and participation in any Letters of Credit of such Bank.
Any such purchase shall be at par, shall be subject to the provisions of Section
2.15, shall be without prejudice to the Borrower's obligations under Section
9.04 and shall release such Bank from all further obligations under this
Agreement.
69
<PAGE>
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices and other communications provided for
herein shall be in writing (including bank wire, telex, telegraph, telecopy,
cable or similar writing) and shall be given to the intended recipient at the
"Address for Notices" specified, if the intended recipient is the Borrower or
any of the Agents, below its name on the signature pages hereof or, if the
intended recipient is a Bank, in such Bank's Administrative Questionnaire, or,
as to any party, at such other address as shall be designated by such party in a
notice to the Borrower and the Administrative Agent. All notices and other
communications shall be effective (i) if given by telex, when such telex is
transmitted to the telex number specified in this Section and the appropriate
answerback is received, (ii) if given by mail, 72 hours after such communication
is deposited in the mails with first class postage prepaid, addressed as
aforesaid, (iii) if given by telecopier, upon telephone confirmation that the
telecopied document has been received by the individual to whom it was
addressed, or (iv) if given by any other means, when delivered at the address
specified in this Section; provided, however, that notices to the Administrative
Agent under Article II or VIII hereof shall not be effective until received and
notices to the Borrower under Section 6.01 shall not be effective until such
notice is received.
SECTION 9.02. No Waiver. No failure on the part of any of the Agents or
any Bank to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under this Agreement or any Note shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under this Agreement or any Note preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
SECTION 9.03. GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS,
WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW PRINCIPLES.
SECTION 9.04. Expenses; Documentary Taxes; Indemnification. (a) The
Borrower shall pay, within 30 days after receipt of a reasonably detailed
statement setting forth the amount and nature thereof, (i) all out-of-pocket
expenses of the Agents, including the reasonable fees and disbursements of one
firm serving as special counsel for both Agents, in connection with the
preparation of this Agreement, any waiver or consent hereunder or any amendment
hereof or any Default or alleged Default hereunder and (ii) if an Event of
Default occurs, all out-of-pocket expenses
70
<PAGE>
incurred by the Agents or any Bank, including reasonable fees and disbursements
of counsel (either outside counsel or in-house counsel, as the case may be), in
connection with such Event of Default and collection and other enforcement
proceedings resulting therefrom. The Borrower shall indemnify each Bank against
any transfer taxes, documentary taxes, assessments or charges made by any
governmental authority by reason of the execution and delivery of this Agreement
or the Notes.
(B) THE BORROWER AGREES TO INDEMNIFY EACH BANK (AND THEIR RESPECTIVE
DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES) AND EACH AGENT (AND THEIR RESPECTIVE
DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES) AND HOLD EACH BANK AND EACH AGENT
HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, COSTS AND
EXPENSES OF ANY KIND (INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL (EITHER OUTSIDE COUNSEL OR IN-HOUSE COUNSEL, AS THE
CASE MAY BE) FOR ANY BANK AND THE AGENTS IN CONNECTION WITH ANY INVESTIGATIVE,
ADMINISTRATIVE OR JUDICIAL PROCEEDING, WHETHER OR NOT SUCH BANK OR THE AGENT
SHALL BE DESIGNATED A PARTY THERETO) WHICH MAY BE INCURRED BY ANY BANK, OR BY
ANY AGENT IN CONNECTION WITH ITS ACTIONS AS AGENT HEREUNDER, RELATING TO OR
ARISING OUT OF ARTICLE VI OR VII OF THIS AGREEMENT OR ANY ACTUAL OR PROPOSED USE
OF PROCEEDS OF LOANS HEREUNDER.
(C) EACH AGENT AND EACH BANK ENTITLED TO INDEMNITY FROM THE BORROWER UNDER
ANY PROVISION OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE INDEMNIFIED
AND HELD HARMLESS TO THE EXTENT PROVIDED THEREUNDER AGAINST ANY AND ALL LOSSES,
LIABILITIES, DAMAGES, CLAIMS, DEFICIENCIES, JUDGMENTS, COSTS OR REASONABLE
EXPENSES RELATING TO ENVIRONMENTAL LAWS OR RELEASES IF ANY OF SUCH LOSSES,
LIABILITIES, DAMAGES, CLAIMS, DEFICIENCIES, JUDGMENTS, COSTS OR EXPENSES RELATE
TO VIOLATIONS OF REQUIREMENTS OF ENVIRONMENTAL LAWS RESULTING FROM ANY OF THE
BORROWER'S AND ITS CONSOLIDATED SUBSIDIARIES' OPERATIONS (OTHER THAN AS A RESULT
OF AN INDEMNIFIED PERSON'S ACTS OR OMISSIONS IF SUCH INDEMNIFIED PERSON IS
DEEMED TO BE A "PERSON IN CONTROL" UNDER ANY STATE OR FEDERAL STATUTE OR
REGULATION).
(D) WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS BUT IN ALL EVENTS SUBJECT TO PARAGRAPH (E) OF THIS SECTION 9.04,
IT IS THE EXPRESS INTENTION OF THE BORROWER AND THE OTHER PARTIES HERETO THAT
EACH INDEMNIFIED PERSON ENTITLED TO INDEMNITY UNDER ANY PROVISION OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE INDEMNIFIED AND HELD HARMLESS TO
THE EXTENT PROVIDED THEREUNDER AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS,
DEFICIENCIES, JUDGMENTS OR REASONABLE EXPENSES ARISING OUT OF OR RESULTING FROM
THE ORDINARY NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY) OF SUCH INDEMNIFIED
PERSON.
71
<PAGE>
(E) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR ANY OTHER DOCUMENT OR INSTRUMENT, IN NO EVENT SHALL THE BORROWER BE
LIABLE IN ANY MANNER WITH RESPECT TO ANY LIABILITIES DAMAGES, LOSSES, CLAIMS,
DEFICIENCIES, JUDGMENTS, COSTS OR EXPENSES OF ANY KIND FOR ANY ACTS OR OMISSIONS
CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OR VIOLATION OF LAW ON THE
PART OF ANY INDEMNIFIED PERSON.
SECTION 9.05. Amendments, Etc. Any provision of this Agreement or the
Notes may be amended or waived if, but only if, such amendment or waiver is in
writing and is signed by the Borrower and the Required Banks (and, if the rights
or duties of any Agent are affected thereby, by such Agent); provided, however,
that no such amendment, waiver or modification shall, unless signed by all the
Banks, (i) increase or decrease the Commitment of any Bank (except for increases
to the Commitment of any Bank pursuant to Section 8.06 to which such Bank has
agreed in writing), (ii) reduce the principal of or rate of interest on any Loan
or any fees hereunder, (iii) postpone the date fixed for any payment of
principal of or interest on any Loan or any fees hereunder or for any
termination of any Commitment, (iv) change the percentage of the Commitments or
of the aggregate unpaid principal amount of the Notes, or the number of Banks,
which shall be required for the Banks or any of them to take any action under
this Section or any other provision of this Agreement or (v) amend or waive any
provision of Section 3.01 or this Section 9.05.
SECTION 9.06. Counterparts; Integration. This Agreement may be executed
in any number of counterparts, all of which taken together shall constitute one
and the same instrument, and any of the parties hereto may execute this
Agreement by signing any such counterpart. This Agreement constitutes the
entire agreement and understanding among the parties hereto and supersedes any
and all prior agreements and understandings, oral or written, relating to the
subject matter hereof.
SECTION 9.07. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign or otherwise transfer any of its rights under this Agreement without the
prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its Loans or any or all of its Commitment Percentage of Letter of
Credit Outstandings. In the event of any such grant by a Bank of a participating
interest to a Participant, whether or not upon notice to the Borrower and the
Agents, such Bank shall remain responsible for the performance of its
obligations hereunder, and the Borrower and the Agents shall continue to deal
solely and directly with such Bank in connection with such Bank's rights and
obligations under this Agreement. Any
72
<PAGE>
agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of the Borrower hereunder including, without limitation,
the right to approve any amendment, modification or waiver of any provision of
this Agreement; provided, however, that such participation agreement may provide
that such Bank will not agree to any modification, amendment or waiver of this
Agreement described in clause (i), (ii), (iii) or (iv) of Section 9.05 without
the consent of the Participant. The Borrower agrees that each Participant shall
be entitled to the benefits of Sections 2.14 and 9.04 and Article VIII with
respect to its participating interest; provided, however, that all amounts
payable to a Bank for the account of a Participant under Sections 2.14 and 9.04
and Article VIII shall be determined as if such Bank had not granted such
participation to the Participant. An assignment or other transfer which is not
permitted by subsection (c) below shall be given effect for purposes of this
Agreement only to the extent of a participating interest granted in accordance
with this subsection (b).
(c) Any Bank may, upon 5 days notice to the Administrative Agent and the
Borrower, assign to one or more banks or other institutions (each an "Assignee")
all, or a proportionate part of all (in minimum amounts of $10,000,000 and in
multiples of $1,000,000), of its rights and obligations under this Agreement and
the Notes, and such Assignee shall assume such rights and obligations, pursuant
to an instrument executed by such Assignee and such transferor Bank, with (and
subject to) the written consent of the Borrower and the Administrative Agent;
which shall not be unreasonably withheld; provided, however, that if an Assignee
is the local Federal Reserve Bank branch for the region in which such Bank is
located and is receiving a collateral assignment or is an affiliate of such
transferor Bank, no such consent shall be required. Upon execution by the
transferor Bank, the Borrower, the Assignee and the Agents, and delivery of,
such an instrument and payment by such Assignee to such transferor Bank of an
amount equal to the purchase price agreed between such transferor Bank and such
Assignee, such Assignee shall be a Bank party to this Agreement and shall have
all the rights and obligations of a Bank with a Commitment as set forth in such
instrument of assumption, and the transferor Bank shall be released from its
obligations hereunder to the extent of such assignment, and no further consent
or action by any party shall be required. Upon the consummation of any
assignment pursuant to this subsection (c), the transferor Bank, the Agents and
the Borrower shall make appropriate arrangements so that, if required, new Notes
are issued to the Assignee. Prior to the issuance of any such new Note, the
Assignee to which such Note is issued shall pay to the Administrative Agent a
fee of $2,000.00.
(d) No Assignee or other transferee of any Bank's rights shall be entitled
to receive any greater payment under Section 8.03 than such Bank would have been
entitled to receive with respect to the rights transferred, unless such transfer
is made with the Borrower's prior written consent or by reason of the provisions
of Section
73
<PAGE>
8.02 or 8.03 requiring such Bank to designate a different Lending Office under
certain circumstances or at a time when the circumstances giving rise to such
greater payment did not exist.
(e) If any Reference Bank assigns its Notes to an unaffiliated institution,
the Administrative Agent shall, in consultation with the Borrower and with the
consent of the Required Banks, appoint another bank to act as a Reference Bank
hereunder.
SECTION 9.08. Survival. The obligations of the Borrower under Article
VIII and Section 9.04 shall survive the repayment of the Loans and the
satisfaction of the Letter of Credit Outstandings and the termination of the
Commitments.
SECTION 9.09. Acknowledgement. The Borrower acknowledges that the Banks
have entered into this Agreement in reliance on the Borrower's assurance that
the Borrower does not intend to use the proceeds of any Borrowings hereunder in
a manner which would violate any applicable law or governmental rule or
regulation.
SECTION 9.10. Headings. The Table of Contents and Article and Section
headings used herein shall not affect the interpretation of any provision of
this Agreement.
SECTION 9.11. Sharing of Setoffs. Each Bank agrees that, if it shall, by
exercising any right of setoff or counterclaim or otherwise, receive payment of
a proportion of the aggregate amount of principal and interest due with respect
to any Committed Note or Competitive Note held by it or any Letter of Credit
Outstandings which is greater than the proportion received by any other Bank in
respect of the aggregate amount of principal and interest due with respect to
any Committed Note or Competitive Note held by such other Bank or any Letter of
Credit Outstandings (other than disproportionate payments to any Bank provided
for by this Agreement), the Bank receiving such proportionately greater payment
shall purchase such participation in the Committed Notes or the Competitive
Notes held by, or the rights in respect of Letter of Credit Outstandings of, the
other Banks, and such other adjustments shall be made, as may be required so
that all such payments of principal and interest with respect to the Committed
Notes or the Competitive Notes and Letter of Credit Outstandings held by the
Banks shall be shared by the Banks pro rata; provided, however, that nothing in
this Section shall impair the right of any Bank to exercise any right of setoff
or counterclaim it may have and to apply the amount recovered thereby to the
payment of indebtedness of the Borrower other than its indebtedness under the
Notes, or in respect of Letter of Credit Outstandings. If under any applicable
bankruptcy, insolvency or other similar law, any Bank receives a secured claim
in lieu of a setoff to which this Section applies, such Bank shall, to the
extent practicable, exercise its rights in respect of such secured claim in a
manner
74
<PAGE>
consistent with the rights of the Banks entitled under this Section to share in
the benefits of any recovery on such secured claim.
SECTION 9.12. Collateral. Each of the Banks represents to the Agents and
each of the other Banks that it in good faith is not relying upon any "margin
stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 9.13. CONSENT TO JURISDICTION. (a) THE BORROWER IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY FEDERAL OR STATE COURT SITTING IN HARRIS
COUNTY, TEXAS OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY NOTE OR ANY LETTER OF CREDIT. THE BORROWER IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. THE BORROWER AGREES THAT A FINAL, NONAPPEALABLE JUDGMENT IN ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH A COURT SHALL BE CONCLUSIVE AND
BINDING UPON THE BORROWER AND MAY BE ENFORCED IN ANY FEDERAL OF STATE COURT
SITTING IN THE STATE OF TEXAS (OR ANY OTHER COURTS TO THE JURISDICTION OF WHICH
THE BORROWER IS OR MAY BE SUBJECT) BY A SUIT UPON SUCH JUDGMENT; PROVIDED,
HOWEVER, THAT SERVICE OF PROCESS IS EFFECTED UPON THE BORROWER IN ONE OF THE
MANNERS SPECIFIED IN SUBSECTION (b) OF THIS SECTION OR AS OTHERWISE PERMITTED BY
LAW.
(b) SERVICE OF PROCESS. THE BORROWER HEREBY CONSENTS TO PROCESS BEING
SERVED IN ANY SUIT, ACTION OR PROCEEDING REFERRED TO IN THE FIRST SENTENCE OF
SUBSECTION (a) OF THIS SECTION IN ANY FEDERAL OR STATE COURT SITTING IN HARRIS
COUNTY, TEXAS BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED AIR MAIL,
POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO THE BORROWER AT ITS ADDRESS
SPECIFIED IN SECTION 9.01 OR TO ANY OTHER ADDRESS OF WHICH THE BORROWER SHALL
HAVE GIVEN WRITTEN NOTICE TO THE ADMINISTRATIVE AGENT. THE BORROWER IRREVOCABLY
WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW, ALL CLAIM OF ERROR BY REASON OF
ANY SUCH SERVICE IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY ANY AGENT OR ANY
BANK. THE BORROWER AGREES THAT SUCH SERVICE, TO THE FULLEST EXTENT PERMITTED BY
LAW, SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE
BORROWER IN ANY SUCH SUIT, ACTION OR PROCEEDING AND SHALL BE TAKEN AND HELD TO
BE VALID AND PERSONAL SERVICE UPON AND PERSONAL DELIVERY TO THE BORROWER.
75
<PAGE>
(c) NO LIMITATION ON SERVICE OR SUIT. NOTHING IN THIS ARTICLE SHALL AFFECT
THE RIGHT OF ANY AGENT OR ANY BANK TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR LIMIT THE RIGHT OF ANY AGENT OR ANY BANK TO BRING
PROCEEDINGS OTHERWISE PERMITTED BY LAW AGAINST THE BORROWER IN THE COURTS OF THE
JURISDICTION OF ANY BANK'S LENDING OFFICE OR THE COURTS OF ANY JURISDICTION OR
JURISDICTIONS IN WHICH THE BORROWER HAS ANY ASSETS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
LYONDELL PETROCHEMICAL COMPANY
By: /s/ Russell S. Young
----------------------------------------------------
Name: Russell S. Young
Title: Senior Vice President, Chief Financial Officer
and Treasurer
Address for Notices:
One Houston Center
Suite 1600
1221 McKinney Street
P.O. Box 3646
Houston, Texas 77253-3646
Attn: Treasurer
Telephone No.: (713) 652-7200
Telecopier No.: (713) 652-7430
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, as Administrative Agent
By: /s/ D. G. Mills
-------------------------------------------------
Name: D. G. Mills
Title: Vice President
Address for Notices:
712 Main Street
Houston, Texas 77002
Attn: Syndications Department
Telephone No.: (713) 216-4037
Telecopier No.: (713) 216-2339
76
<PAGE>
BANK OF AMERICA ILLINOIS, as Co-Agent
By: /s/ Robert R. Ingersoll
----------------------------------------
Name: Robert R. Ingersoll
Title: Managing Director
Address for Notices:
231 South LaSalle Street, 10th Floor
Chicago, IL 60697
Attn: Gloria Turner
Telephone No.: (312) 628-4575
Telecopier No.: (312) 974-9626
CHEMICAL BANK, as Auction Agent
By:
----------------------------------------
Name: Sandra J. Miklave
Title: Vice President
Address for Notices:
140 East 45th Street 29th floor
New York NY 10017
Telephone No.: 212-622-0005
Telecopier No.: 212-622-0854
77
<PAGE>
EXHIBIT 10.2
AMENDMENT NO. 1
TO
LYONDELL PETROCHEMICAL COMPANY
SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN
Pursuant to the authority contained in resolutions adopted by the Board of
Directors of Lyondell Petrochemical Company (the "Company") and Article X,
Section 1 of the Lyondell Petrochemical Company Supplementary Executive
Retirement Plan adopted effective as of October 1, 1990 (the "Plan"), the Plan
is hereby amended as follows:
1. Effective as of July 1, 1993, Article II, Section 2.2 and Section 2.3
are hereby deleted in their entireties and new amended and restated Sections 2.2
and 2.3 are hereby inserted in place thereof and shall read as follows:
"2.2 Participant Benefit.
(a) General Calculation. The amount of a Participant's monthly
benefit under this Article will be a percentage of the excess, if any, of:
(1) the amount of monthly allowance the Participant would have
received under the Retirement Plans at retirement, under the Basic
Allowance, if the Base Pay used in calculating the monthly allowance
under the Retirement Plans had included the Participant's Awards and
Deferred Compensation, over
(2) the amount of monthly allowance the Participant is actually
entitled to receive at retirement from the Retirement Plans, under
the Basic Allowance under the Retirement Plans.
(b) Special Rule for Certain Participants. For purposes of
calculating the amount described in Section 2.2(a)(1), if the Participant
transferred directly on July 1, 1993 from the employment of the Company to
the employment of LYONDELL-CITGO Refining Company Ltd. ("LYONDELL-CITGO"),
such calculation will take into account any awards made to and deferred
compensation elected by such Participant during or with respect to his
employment by LYONDELL-CITGO, on the same basis that salary earned by the
Participant while employed by LYONDELL-CITGO is taken into account in
determining the Participant's benefits under the Retirement Plan.
(c) Specific Benefit. The percentage of the excess described in
Article II, Section 2.2(a), which will be the actual retirement benefit
payable under this Article, shall be the percentage equivalent to a
fraction of which the numerator is the number of years of service credited
to the Participant for benefit accrual purposes under the Retirement Plan
and any other tax-qualified, defined benefit retirement plan maintained by
the Company and the denominator of which is the total number of years of
service credited to the Participant for benefit accrual purposes under the
Retirement Plans.
2.3 Survivor Benefit In the Event of Death of Participant Prior to
Commencement of Participant's Benefit.
<PAGE>
(a) General Calculation. If a Participant or former Participant who is
entitled to receive a benefit under this Article dies prior to commencing
receipt of the benefit, then the Participant's Beneficiary will be paid a
monthly Survivor Benefit under this Article equal to a percentage of the
excess, if any, of:
(1) the monthly Pre-Retirement Annuity that would have been
payable under the Retirement Plans if the Base Pay used in computing
benefits under the Retirement Plans included the Participant's Awards
and Deferred Compensation, over
(2) the monthly Pre-Retirement Annuity actually payable under the
Retirement Plans.
(b) Special Rule for Certain Participants. For purposes of calculating
the amount described in Section 2.3(a)(1), if the Participant transferred
on July 1, 1993 from the employment of the Company to the employment of
LYONDELL-CITGO, such calculation will take into account any awards made to
and deferred compensation elected by such Participant during or with
respect to his employment by LYONDELL-CITGO, on the same basis that salary
earned by the Participant while employed by LYONDELL-CITGO is taken into
account in determining the Participant's benefits under the Retirement
Plan.
(c) Special Survivor Benefit. The percentage of the excess described
in Article II, Section 2.3(a), which shall be the actual Survivor Benefit
payable under this Article, shall be the percentage equivalent to a
fraction of which the numerator is the number of years of service credited
to the Participant for benefit accrual purposes under the Retirement Plan
and any other tax-qualified, defined benefit retirement plan maintained by
the Company and the denominator of which is the total number of years of
service credited to the Participant for benefit accrual purposes under the
Retirement Plans."
2. Effective as of July 1, 1993, Article II, Section 2.4 is hereby amended
by deleting the words "Section 2.2(a)" and "Section 2.3(a)(1)" and substituting
in place thereof the words "Section 2.2" and "Section 2.3".
3. Effective as of July 1, 1993, Article III, Section 2.2 and 2.3 are
deleted in their entireties and new amended and restated Sections 2.2 and 2.3
are hereby inserted in place thereof and shall read as follows:
"2.2 Participant Benefit.
(a) General Calculation. The amount of a Participant's monthly benefit
under this Article will be a percentage of the excess, if any, of:
(1) the amount of monthly allowance the Participant would have
received under the Retirement Plans at retirement, under the Basic
Allowance, if the calculation of the benefit were not subject to
limitations or reductions required under the Code or ERISA, over
(2) the amount of monthly allowance the Participant is actually
entitled to receive at retirement from the Retirement Plans, under the
Basic Allowance under the Retirement Plans.
(b) Specific Benefit. The percentage of excess calculated under
Article III, Section 2.2(a), which shall be the actual retirement benefit
payable under this Article, shall be the percentage equivalent to a
fraction of which the numerator is the number of years of service
2
<PAGE>
credited to the Participant for benefit accrual purposes under the
Retirement Plan and any other qualified, defined benefit retirement plan
maintained by the Company and the denominator of which is the total number
of years of Membership Service credited to the Participant for benefit
accrual purposes under the Retirement Plans.
2.3 Survivor Benefit In the Event of Death of Participant Prior to
Commencement of Participant's Benefits.
(a) General Calculation. If a Participant or former Participant who is
entitled to receive a benefit under this Article dies prior to commencing
receipt of the benefit, then the Participant's Beneficiary will be paid a
monthly Survivor Benefit under this Article equal to a percentage of the
excess, if any, of:
(1) the monthly Pre-Retirement Annuity that would have been
payable under the Retirement Plans if the calculation of the Pre-
Retirement Annuity were not subject to limitations or reductions
required under the Code of ERISA, over
(2) the monthly Pre-Retirement Annuity actually payable under the
Retirement Plans.
(b) Specific Survivor Benefit. The percentage of the excess calculated
under Article III, Section 2.3(a), which shall be the actual Survivor
Benefit payable under this Article, shall be the percentage equivalent to a
fraction of which the numerator is the number of years of service credited
to the Participant for benefit accrual purposes under the Retirement Plan
and any other tax-qualified, defined benefit retirement plan maintained by
the Company and the denominator of which is the total number of years of
service credited to the Participant for benefit accrual purposes under the
Retirement Plans."
4. Effective as of July 1, 1993, Article VII, Section 4, relating to
interpretation of the Plan, is amended by revising the first sentence thereof to
provide as follows:
"The Administrative Committee shall have the exclusive right and
discretionary authority to interpret the provisions of this Plan and to
decide questions arising in its administration."
The undersigned, being duly authorized, on behalf of the Company has
executed this Amendment No. 1 to the Plan in Houston, Texas on the 25th day of
June, 1993.
LYONDELL PETROCHEMICAL COMPANY
Attest: /s/ Gerald A. O'Brien By: /s/ Richard W. Park
------------------------ -----------------------------
Richard W. Park
Vice President, Human Resources
3
<PAGE>
EXHIBIT 10.3
AMENDMENT NO. 1
TO
LYONDELL PETROCHEMICAL COMPANY
EXECUTIVE DEFERRAL PLAN
Pursuant to the authority contained in resolutions adopted by the Board of
Directors of Lyondell Petrochemical Company (the "Company") and Article VII,
Section 1 of the Lyondell Petrochemical Company Executive Deferral Plan adopted
effective as of October 1, 1990 (the "Plan"), the Plan is hereby amended as
follows:
1. Effective as of July 1, 1993, Article I, Section 3.3 of the Plan is
hereby deleted in its entirety and a new amended and restated Section 3.3 is
hereby substituted in place thereof and shall read as follows:
"3.3 Awards means cash awards made under the Lyondell Petrochemical
Company Annual Incentive Plan or awards under any other plan that the
Board of Directors of Lyondell Petrochemical Company has authorized the
Company to adopt and has further authorized awards thereunder to be
treated as Awards under this Plan."
2. Effective as of July 1, 1993, Article I, Section 3.31 of the Plan is
hereby deleted in its entirety and a new amended and restated Section 3.31 is
hereby substituted in place thereof and shall read as follows:
"3.31 Termination of Employment means the termination of an Employee's
employment within the Company. For purposes of this definition Company
shall include Atlantic Richfield Company and ARCO Chemical Company, as
well as LYONDELL-CITGO Refining Company Ltd. or any subsidiary or
affiliate of such company, in determining whether a Termination of
Employment has occurred. A transfer to any such company shall not be a
Termination of Employment for purposes of this Plan."
3. Effective as of July 1, 1993, Article I is amended to add, as Section
3.33, the following new definition:
"3.33 Survivor Benefit means the benefit provided by Section 4.1 of
Article IV in the event of the Participant's death."
4. Effective as of July 1, 1993, Article II, Section 6.1 is hereby deleted
in its entirety and a new amended and restated Section 6.1 is hereby substituted
in place thereof and shall read as follows:
"6.1 A Participant's Deferral Commitments shall be irrevocable
regardless of a transfer of employment among Lyondell Petrochemical
Company, Atlantic Richfield Company or ARCO Chemical Company, as well as
LYONDELL-CITGO Refining Company Ltd. or any subsidiary or affiliate of
any such company. In the case of such a transfer, the Participant's
Deferral Commitment shall apply to Awards, Salary or ESSP Benefits, as
applicable, granted by the transferee company and the applicable Plan of
the transferee company shall assume responsibility for the remaining
period, if any, of any Deferral Commitment that the Participant made
under the transferor company.
5. Effective as of July 1, 1993, Article IV, Section 4.1, relating to the
amount of survivor benefit, is hereby deleted in its entirety and a new amended
and restated Section 4.1 is hereby substituted in place thereof and shall read
as follows:
<PAGE>
"4.1 Amount and Form of Benefits:
(a) Death After Age 65. If the Participant dies on or after
attaining age 65, the amount of the Survivor Benefit shall be equal to
the Participant's Account balance, increased by the applicable Interest
Rate on the unpaid Account balance during the period in which Survivor
Benefit payments are being made to the Participant's Beneficiary, and
payable in the form elected by the Participant.
(b) Death Prior to Termination of Employment and Prior to Age 65.
(1) Benefit Determination. If a Participant dies prior to
attaining age 65 and prior to Termination of Employment, the Survivor
Benefit payable with respect to such Participant shall be determined by
comparing the following values:
(A) With respect to each Deferral Unit, the net present value
of a stream of annual payments each of which equals (i) 40 percent
of the Participant's Deferral Unit, and which are payable on the
date of the Participant's death and on each anniversary of such
date until the date on which the Participant would have attained
age 65. For purposes of this calculation (i) the applicable
discount rate shall be determined by the Administrative Committee,
in its sole discretion, and (ii) Deferral Units relating to
Deferral Commitments that have not been completed prior to the
Participant's death shall be determined in accordance with the
provisions of Section 4.1(b)(1)(C) below; and
(B) The value of the Participant's Account balance at his date
of death.
If the value determined in paragraph (A) above is greater than the
value determined in paragraph (B), then the death benefit shall be
as described in Section 4.1(b)(2)(A), and if the value determined
in paragraph (B) above is greater than the value determined in
paragraph (A), then the death benefit shall be as described in
Section 4.1(b)(2)(B).
(C) For purposes of calculating the amount of a Deferral Unit
where a Participant has died before he completes the Deferral
Commitments with respect to that Deferral Unit, the Participant's
Salary (for purposes of determining Deferral Units with respect to
either Salary or ESSP Benefits) and Awards for relevant years or
other time periods ending after his death shall be deemed to be as
follows:
(i) Salary for each such year or time period shall be the
Participant's annual base Salary in effect on the date of his
death, increased for each relevant year after his death by
the escalation factor for such year, determined in the sole
discretion of the Administrative Committee; and
(ii) Awards for each such year shall be the amount that
is the highest average amount of the Participant's actual
Awards for any three consecutive years during the last ten
years during which the Participant received Awards from the
Company or, for years prior to
2
<PAGE>
the Effective Date, from a Subsidiary or Affiliate (or in
fewer than ten, the total number of years for which the
Participant received Awards).
(2) Amount and Form of Payment.
(A) The annual Survivor Benefit payable with respect to
Section 4.1(b)(1)(A) shall be equal to the aggregate, for all of
the Participant's Deferral Units, of 40 percent of such Deferral
Units. For this purpose, Deferral Units relating to Deferral
Commitments that have not been completed prior to the
Participant's death shall be determined in accordance with the
provisions of Section 4.1(b)(1)(C). Notwithstanding the foregoing,
one-twelfth of the annual Survivor Benefit shall be paid monthly
from the Participant's date of death until the end of the month in
which the Participant would have attained age 65.
(B) The Survivor Benefit payable with respect to Section
4.1(b)(1)(B) shall be the value of the Participant's Account
balance at his date of death, increased by the applicable Interest
Rate on the unpaid Account balance during the period in which
Survivor Benefit payments are being made to the Participant's
Beneficiary, and shall be paid in monthly installments over the
greater of:
(i) the period described in Section 4.1(b)(2)(A); or
(ii) the period over which the Participant had elected to
have installment payments made after his retirement.
(C) Notwithstanding any other provision of this Plan, if the
Survivor Benefit payable is the amount determined under Section
4.1(b)(2)(A, and if the Participant completed (or, pursuant to
Section 4.1(b)(1)(C), is deemed to have completed) a portion of
the Deferral Commitment attributable to one or more of the
applicable Deferral Units while an employee at LYONDELL-CITGO
Refining Company Ltd. and a portion of such Deferral Commitment
while a Participant in this Plan, then the annual amount of the
Survivor Benefit determined pursuant to Section 4.1(b)(2)(A) shall
be equal to the product of (i) the amount of the Survivor Benefit
determined pursuant to Section 4.1(b)(2)(A), multiplied by (ii) a
fraction, the numerator of which is equal to the portion of the
Deferral Commitment attributable to the applicable Deferral Unit
or Units that the Participant completed (or, pursuant to Section
4.1(b)(1)(C), is deemed to have completed) under this Plan, and
the denominator of which is equal to the sum of the Deferral
Commitments attributable to the applicable Deferral Unit or Units
that the Participant completed (or, pursuant to Section
4.1(b)(1)(C), is deemed to have completed) under this Plan and
under the LYONDELL-CITGO Refining Company Ltd. Executive Deferral
Plan. An example of the determination of the Survivor Benefit and
the proration of that benefit between the Company and LYONDELL-
CITGO Refining Company Ltd. is attached hereto as Appendix A.
(c) Death After Termination of Employment and Prior to Age 65. If
the Participant dies after Termination of Employment and prior to age
65, the Participant's Account balance shall be paid by continuation of
the form of benefit that was payable to the Participant for the
remaining payments that would have been made to
3
<PAGE>
the Participant if the Participant had lived, increased by the applicable
Interest Rate credited on unpaid Account balances of deceased Participants
during each year of the payment period to the Beneficiary. "
6. Effective as of July 1, 1993, Article VI, Section 4, relating to
interpretation of the Plan, is amended by revising the first sentence thereof to
provide as follows:
"The Administrative Committee shall have the exclusive right and
discretionary authority to interpret the provisions of this Plan and to
decide quotations arising in its administration."
7. A new Appendix A, in the form attached to this Amendment No. 1 as
Exhibit 1, shall be added to the Plan at the end thereof.
The undersigned, being duly authorized, on behalf of the Company has
executed this Amendment No. 1 to the Plan in Houston, Texas on the 25th day of
June, 1993.
LYONDELL PETROCHEMICAL COMPANY
Attest: /s/ Gerald A. O'Brien By: /s/ Richard W. Park
-------------------------- --------------------------
Richard W. Park
Vice President, Human Resources
4
<PAGE>
EXHIBIT 1
APPENDIX A
TO
LYONDELL PETROCHEMICAL COMPANY
EXECUTIVE DEFERRAL PLAN
EXAMPLE OF SURVIVOR BENEFIT DETERMINATION AND PRORATION
John Doe: Current Age - 49
Presumed to die on July 1, 1994
<TABLE>
<CAPTION>
AIP % Deferred Amount
--- ---------- ------
<S> <C> <C> <C>
1992 $39,000 100% $39,000
1993 -0- 10% -0-
1994 $60,000 10% $6,000
1995 $60,000 10% $6,000
1996 $70,000 10% $7,000
Total $58,000
</TABLE>
<TABLE>
<CAPTION>
BASE SALARY % DEFERRED AMOUNT
----------- ---------- ------
<S> <C> <C> <C>
1991 $140,000 20% $28,000
1992 $164,000 0% -0-
1993 $170,000 10% $17,000
1994 $180,000 10% $18,000
1995 $190,000 10% $19,000
Total $82,000
</TABLE>
Calculation of Survivor Benefit - Greater of:
(a) 40% of Deferral Commitment
$58,000 + $82,000 = $140,000 * 40% = $56,000 per year. for 15 yrs.
The present value of this benefit would be determined by multiplying the
annual benefit ($56,000) by the number of years the payment is to be made
(15) and then applying a discount rate.
If the discount rate is 7.8%, the present value of this benefit would be
approximately $500,000.
(b) Actual Account Balance
Amounts deferred:
$39,000 + $6,000 + $28,000 + $17,000 + $9,000 = $ 99,000
Interest (est.) $ 21,000
--------
Total $120,000
$120,000 paid out over 15 years.
The annual Survivor Benefit would be $56,000 for 15 years as (a) is greater
than (b).
Proration of the Annual Survivor Benefit between Company and LYONDELL-CITGO:
Company's Share: $56,000 * 75.5/140 = 30,200.
LYONDELL-CITGO's Share: $56,000 * 64.5/140 = $25,800
5
<PAGE>
EXHIBIT 10.4
AMENDMENT NO. 1
LONG-TERM DISABILITY PLAN OF
LYONDELL PETROCHEMICAL COMPANY AND ITS PARTICIPATING SUBSIDIARIES
Pursuant to the authority contained in resolutions adopted by the Board of
Directors of Lyondell Petrochemical Company (the "Company") and Section 10.1 of
the Long-Term Disability Plan of Lyondell Petrochemical Company and its
Participating Subsidiaries (the "Plan"), the Plan is hereby amended, effective
as of May 31, 1993, as follows:
1. Section 1.12 of the Plan, the definition of Subsidiary, is amended in its
entirety to read as follows:
"1.12 SUBSIDIARY. "Subsidiary" means any wholly-owned
subsidiary of the Company or of any wholly-owned
subsidiary thereof, or any other corporation or
business venture in which the Company owns, directly
or indirectly, a significant financial interest if
the Company designates such corporation or business
venture to be a Subsidiary for the purposes of this
Plan for any Plan Year, and if the Board of Directors
(or equivalent governing authority), or the delegate
thereof, of such
<PAGE>
corporation or business venture consents to being
designated as a Subsidiary."
The undersigned, being duly authorized, on behalf of the Company has
executed this Amendment No. 1 on this 10th day of June, 1993.
LYONDELL PETROCHEMICAL COMPANY
ATTEST: /s/ Gerald O'Brien By: /s/ Richard W. Park
--------------------------- ---------------------------
Richard W. Park
Vice President,
Human Resources
2
<PAGE>
EXHIBIT 10.5
AMENDMENT NO. 1
LYONDELL PETROCHEMICAL COMPANY
VALUE SHARE PLAN
Pursuant to the authority contained in the resolution of the Compensation
Committee of the Board of Directors of Lyondell Petrochemical Company, the Value
Share Plan is amended, effective July 21, 1995, as follows:
SECTION III.3, TERMINATIONS, DEMOTIONS AND TRANSFERS, is restated to read as
follows:
If Termination of the Participant's employment occurs by reason of death,
disability or retirement, or if termination occurs within one year
following a change in Control, or if the Participant becomes ineligible to
participate in the Plan due to a demotion or transfer by the Company to an
Affiliate, such as LYONDELL-CITGO Refining Company, Ltd., the Participant
(or the Participant's beneficiary or estate in the event of death) will be
eligible to receive a pro-rata award, calculated as according to the
following formula: the award the Participant would have earned for the
Performance Cycle ending in the year in which an event listed above occurs
shall be multiplied by a fraction, the numerator of which shall be the
number of full months that the Participant was employed by the Company
during that final year of the Performance Cycle and the denominator of
which shall be twelve. Pro-rated awards pursuant to this Section III.3 will
be paid in their entirety by cash within 120 days following the end of the
Performance Cycle.
A Participant who terminates employment with the Company prior to the end
of any ongoing Performance Cycle, for any other reason (whether voluntary
of involuntary) in the absence of a Change in Control, will forfeit the
opportunity to earn an award under the plan.
<PAGE>
Notwithstanding any other provision of this Plan, the Committee, in its
sole discretion, may permit continued participation, pro-ration or early
distribution (or a combination of awards which would otherwise be
forfeited.)
SECTION III.5 NEW HIRES AND PROMOTIONS
Individuals who have been selected during a Performance Cycle to
participate in the Plan and who have a minimum of one month of service as a
Participant may be eligible, at the discretion of the committee, to receive
a pro-rate award for the Performance Cycle in which participation begins,
calculated according to the following formula: the award the Participant
would have earned for the Performance Cycle ending in the year in which
participation begins, had the Participant been eligible for the entire
Performance Cycle shall be multiplied by a fraction, the numerator of which
shall be the number of full months that the Participant was eligible to
participate in the Plan during that final year of the Performance Cycle,
and the denominator of which shall be twelve. Pro rated awards earned
pursuant to this Section III.5 will be paid out in a combination of cash,
Restricted Stock and Deferred Cash in accordance with Section II.8 of this
document.
The undersigned, being duly authorized on behalf of the Company, has executed
this Amendment No. 1 on this 27th day of July 1995.
LYONDELL PETROCHEMICAL COMPANY
ATTEST: /s/ Jane P. ?????? BY: /s/ Richard W. Park
--------------------------- -------------------------------
Richard W. Park
Vice President, Human Resources
<PAGE>
EXHIBIT 10.6
Dear
The Compensation Committee of the Board of Directors has authorized the
extension and amendment of your Executive Severance Agreement, dated May 27,
1994 (the "Agreement"). The Agreement will be amended to extend the Expiration
Date and to substitute the Value Share Plan award in lieu of the Targeted Bonus
currently contained in the Agreement, as a result of the discontinuance of the
Annual Incentive Plan. Specifically, the Agreement will be amended as follows:
1. The Expiration Date of the Agreement shall be midnight on August 31, 1996.
2. The definition of Targeted Bonus in Section 2(c)(viii) is deleted.
3. A reduction in an Executive's Value Share Plan award as a result of an
adverse change in plan terms (and not as a result of a reduction solely to
satisfy the federal tax law requirements) shall be substituted for a reduction
in an Executive's Targeted Bonus as an event which may constitute a
Constructive Termination for Good Reason under Section 2(a)(ii) of the
Agreement.
4. Applicable Annual Earnings in Section 3(a) of the Agreement is revised to
substitute one-third of an Executive's last Value Share Plan awarded for an
Executive's Targeted Bonus, and shall be revised to read as shown in
Attachment A.
5. The Prorated Targeted Bonus provision of Section 3(b) is revised to
substitute an Executive's Value Share Plan award for the Performance Cycle
ending in the year in which termination occurs for an Executive's Targeted
Bonus, for purposes of calculating a prorated amount and shall be revised to
read as shown in Attachment B.
If you agree to these revisions, please sign the acceptance and return one
original letter to me. The duplicate original letter should be retained for your
records.
Richard W. Park
Accepted and agreed to this the day of , 1995
---------------------------------
<PAGE>
ATTACHMENT A
For purposes of this Agreement, "Applicable Annual Earnings" shall mean the
sum of Executive's current annual base salary (determined using the highest rate
in effect up to and including the effective date of Termination, whether or not
paid) and one-third of Executive's last Value Share Plan awarded, (whether or
not paid) and one-third of Executive's last Value Share Plan awarded, (whether
or not paid) for personal services on behalf of the Company, LCR or their
subsidiaries for a calendar year in which the Termination occurs (except that if
Executive is subject to a Constructive Termination for Good Reason because his
salary is reduced or the Value Share Plan award is reduced as a result of an
adverse change in plan terms, then the current annual base salary and Value
Share Plan award used to determine Applicable Annual Earnings shall be the
annual base salary in effect or the last Value Share Plan awarded, as
applicable, immediately prior to such Constructive Termination for Good Reason).
Applicable Annual Earnings shall include Executive's current annual base salary
and one-third of Executive's last Value Share Plan award whether or not paid
on a deferred basis, including without limitation, amounts contributed by or on
behalf of Executive under a Company-sponsored plan, such as (i) a plan described
in Section 125 or 401(k) of the Internal Revenue Code of 1986, as amended, or
(ii) the Company's Executive Deferral Plan or an "excess benefit plan" as
defined in the Employee Retirement Income Security Act of 1974, as amended.
Notwithstanding the preceding provisions of this paragraph, Applicable Annual
Earnings does not include any income attributable to stock options, stock
appreciation rights, performance awards, dividend credits, and restricted stock
granted under, and dividends on shares acquired pursuant to, any stock option
plan, restricted stock plan or performance unit plan.
<PAGE>
ATTACHMENT B
(b) Prorated Value Share Plan Award. Company shall pay to Executive, not later
than one hundred and twenty (120) days following the end of the year in which
Termination occurs, a cash lump-sum payment equal to his Value Share Plan award
for the Performance Cycle ending in the year of Termination (except that if
Executive is subject to Constructive Termination for Good Reason because his
Value Share Plan award was reduced, then the Value Share Plan award for this
purpose shall be the Value Share Plan award immediately prior to such
Constructive Termination for Good Reason) multiplied by a fraction, the
numerator of which is the number of elapsed days in the year of Termination up
to and including the date of Termination and the denominator of which is 365. No
payment shall be made under this paragraph if Executive is entitled to a
prorated award payable under the Value Share Plan.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 35
<SECURITIES> 0
<RECEIVABLES> 450
<ALLOWANCES> 3
<INVENTORY> 307
<CURRENT-ASSETS> 802
<PP&E> 3,393
<DEPRECIATION> 1,958
<TOTAL-ASSETS> 2,320
<CURRENT-LIABILITIES> 814
<BONDS> 588
<COMMON> 80
0
0
<OTHER-SE> 209
<TOTAL-LIABILITY-AND-EQUITY> 2,320
<SALES> 2,544
<TOTAL-REVENUES> 2,544
<CGS> 1,992
<TOTAL-COSTS> 1,992
<OTHER-EXPENSES> 93
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39
<INCOME-PRETAX> 417
<INCOME-TAX> 155
<INCOME-CONTINUING> 262
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 262
<EPS-PRIMARY> 3.27
<EPS-DILUTED> 3.27
</TABLE>
