<PAGE>
UNITED STATES
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, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________________ TO _________________
COMMISSION FILE NUMBER 1-10145
________________________
LYONDELL CHEMICAL 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, 77010
Suite 1600, Houston, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (713) 652-7200
________________________
(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,
1998: 77,432,949
<PAGE>
PART I. FINANCIAL INFORMATION
LYONDELL CHEMICAL COMPANY
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
--------------------------------- -------------------------------
Millions of dollars except per share amounts 1998 1997 1998 1997
- -------------------------------------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
INCOME FROM EQUITY INVESTMENTS:
Equistar Chemicals, LP (before unusual charges) $ 34 $ - - $ 113 $ - -
LYONDELL-CITGO Refining Company Ltd. 19 21 54 27
Lyondell Methanol Company, L.P. - - - - 6 - -
------------ ------------ ------------ -----------
53 21 173 27
------------ ------------ ------------ -----------
SALES AND OTHER OPERATING REVENUES:
Unrelated parties - - 631 - - 1,226
Related parties - - 158 - - 318
------------ ------------ ------------ -----------
- - 789 - - 1,544
------------ ------------- ------------ -----------
OPERATING COSTS AND EXPENSES:
Cost of sales
Unrelated parties - - 462 - - 972
Related parties - - 131 - - 250
Selling, general and administrative expenses 5 50 11 97
Unusual charges (including $3 million and $6
million from Equistar Chemicals, LP, respectively) 3 - - 10 - -
------------ ------------ ------------ -----------
8 643 21 1,319
------------ ------------ ------------ -----------
Operating income 45 167 152 252
Interest expense (6) (20) (13) (41)
Interest income 3 3 7 6
Other income, net 5 - - 5 - -
Minority interest - - (4) - - (8)
------------ ------------ ------------ -----------
Income before income taxes 47 146 151 209
Provision for income taxes 18 53 57 76
------------ ------------ ------------ -----------
NET INCOME $ 29 $ 93 $ 94 $ 133
============ ============ ============ ===========
COMPREHENSIVE INCOME $ 29 $ 93 $ 94 $ 133
============ ============ ============ ===========
BASIC AND DILUTED EARNINGS PER SHARE $ .38 $ $1.17 $ $1.20 $ $1.67
============ ============== ============ ===========
</TABLE>
See notes to consolidated financial statements.
1
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LYONDELL CHEMICAL COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
Millions of dollars except share amounts 1998 1997
- ---------------------------------------- ---------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 25 $ 86
Accounts receivable, net 3 5
Prepaid expenses and other current assets 17 12
---------- -----------
Total current assets 45 103
---------- -----------
Property, plant and equipment - - 138
Less accumulated depreciation and amortization - - (92)
---------- -----------
- - 46
Investment in affiliates:
Equistar Chemicals, LP 890 1,063
LYONDELL-CITGO Refining Company Ltd. 103 104
Lyondell Methanol Company, L.P. 50 - -
Receivable from LYONDELL-CITGO Refining Company Ltd. 213 196
Deferred charges and other assets 46 47
---------- -----------
Total assets $ 1,347 $ 1,559
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade $ 8 $ 87
Related parties - - 97
Notes payable 65 100
Other accrued liabilities 22 24
---------- -----------
Total current liabilities 95 308
---------- -----------
Long-term debt 345 345
Other liabilities and deferred credits 60 73
Deferred income taxes 219 209
Commitments and contingencies
Minority interest - - 5
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 80 80
Additional paid-in capital 158 158
Retained earnings 465 407
Treasury stock, at cost, 2,567,051 and 1,015,512 shares, respectively (75) (26)
---------- -----------
Total stockholders' equity 628 619
---------- -----------
Total liabilities and stockholders' equity $ 1,347 $ 1,559
========== ===========
</TABLE>
See notes to consolidated financial statements.
2
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LYONDELL CHEMICAL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30
------------------------------
Millions of dollars 1998 1997
- ------------------- ------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 94 $ 133
Adjustments to reconcile net income to net
cash (used in) provided by operating activities,
net of the effects of deconsolidation of affiliates:
Depreciation and amortization - - 44
Deferred income taxes 12 8
Minority interest - - 8
Decrease in accounts receivable 2 5
Increase in inventories - - (10)
Decrease in accounts payable (182) (76)
Net change in other working capital accounts (8) (10)
Other (18) (7)
---------- ----------
Net cash (used in) provided by operating activities (100) 95
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from affiliates in excess of earnings 185 24
Contributions and advances to affiliates (16) (50)
Additions to property, plant and equipment - - (28)
Deconsolidation of affiliates (11) (12)
---------- ----------
Net cash provided by (used in) investing activities 158 (66)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short-term debt (35) 100
Repayments of long-term debt - - (112)
Repurchase of common stock (49) - -
Minority owner distributions - - (7)
Dividends paid (35) (36)
---------- ----------
Net cash used in financing activities (119) (55)
---------- ----------
DECREASE IN CASH AND CASH EQUIVALENTS (61) (26)
Cash and cash equivalents at beginning of period 86 68
---------- ----------
Cash and cash equivalents at end of period $ 25 $ 42
========== ==========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
LYONDELL CHEMICAL 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, 1997 included in the Lyondell Chemical Company, formerly Lyondell
Petrochemical Company, ("Company" or "Lyondell") 1997 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 the current period presentation.
2. COMPANY OPERATIONS
The Company operates in the petrochemicals, polymers, refining and methanol
segments through its interests in Equistar Chemicals, LP ("Equistar"), LYONDELL-
CITGO Refining Company Ltd. ("LCR"), and Lyondell Methanol Company, L.P.
("Lyondell Methanol"). Effective January 1, 1998, Lyondell began accounting for
its investment in Lyondell Methanol using the equity method of accounting.
The Company's operations in the petrochemicals segment are conducted through its
interest in Equistar. Equistar was formed on December 1, 1997 as a joint
venture between the Company and Millennium Chemicals Inc. ("Millennium"). On
May 15, 1998, the ethylene, propylene and ethylene oxide and derivatives
businesses of Occidental Chemical Corporation ("OxyChem"), a subsidiary of
Occidental Petroleum Corporation ("Occidental"), were contributed to Equistar
(the "OxyChem Contributed Business"). Equistar is operated as a Delaware
limited partnership owned by subsidiaries of the Company, Millennium and
Occidental (the "Partners"). Equistar's petrochemicals division consists of:
olefins including ethylene, propylene and butadiene; aromatics including benzene
and toluene; oxygenated chemicals, including ethylene oxide and derivatives,
methyl tertiary butyl ether ("MTBE"), ethyl alcohol and diethyl ether; and
specialty chemicals including refinery blending stocks.
The Company's operations in the polymers segment are conducted through its
interest in Equistar. Equistar's polymers division consists of: polyolefins
including high-density polyethylene ("HDPE"), low-density polyethylene ("LDPE"),
linear low-density polyethylene ("LLDPE"), polypropylene, and performance
polymers products including color concentrates and compounds; wire and cable
resins and compounds; adhesive resins; and fine powders.
The Company's operations in the refining segment are conducted through its
interest in LCR, a Texas limited liability company owned by subsidiaries of the
Company and CITGO Petroleum Corporation ("CITGO"). The refining segment
consists of: refined petroleum products, including conventional and reformulated
gasoline, low sulfur diesel, and jet fuel; aromatics produced at LCR's full-
conversion Houston, Texas refinery ("Refinery"), including benzene, toluene,
paraxylene and orthoxylene; lubricants, including industrial lubricants, motor
oils, white oils and process oils; carbon black oil; sulfur; residual oil;
petroleum coke fuel; olefins feedstocks; and crude oil resales.
The Company's operations in the methanol segment are conducted through its
interest in Lyondell Methanol; a Texas limited partnership held by subsidiaries
of the Company and MCN Investment Corporation ("MCNIC"). The
4
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methanol segment consists of methanol and other petrochemical products produced
by the methanol facility. In 1997 and prior years, the results of the methanol
business were included in the petrochemicals segment.
3. EQUITY INTEREST IN EQUISTAR CHEMICALS, LP
Lyondell has a 41 percent ownership interest in Equistar, with Millennium and
Occidental each having a 29.5 percent ownership interest. Prior to the addition
of Occidental as a partner on May 15, 1998, Lyondell had a 57 percent ownership
interest in Equistar. Because the Partners jointly control certain management
decisions, Lyondell accounts for its investment in Equistar under the equity
method of accounting.
Summarized financial information for Equistar is as follows (in millions of
dollars).
<TABLE>
<CAPTION>
BALANCE SHEETS June 30 December 31
1998 1997
---------------- ----------------
<S> <C> <C>
Total current assets $ 1,448 $ 1,209
Property, plant and equipment, net 3,804 2,118
Goodwill, net 1,123 1,139
Deferred charges and other assets 574 151
---------------- ----------------
Total assets $ 6,949 $ 4,617
================ ================
Current maturities of long-term debt $ 32 $ 36
Other current liabilities 422 317
Long-term debt 2,238 1,512
Capital lease obligations 205 - -
Other liabilities and deferred credits 65 34
Partners' capital 4,332 3,063
Note receivable from Lyondell (345) (345)
---------------- ----------------
Total liabilities and partners' capital $ 6,949 $ 4,617
================ ================
INCOME STATEMENTS FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED
June 30, 1998 JUNE 30, 1998
---------------- ----------------
Sales and other operating revenues $ 1,093 $ 2,114
Cost of sales 941 1,739
Selling, general and administrative expenses 69 139
Unusual charges 7 13
---------------- ----------------
Operating income 76 223
Interest expense, net (32) (58)
---------------- ----------------
Net income $ 44 $ 165
================ ================
SELECTED CASH FLOW INFORMATION
Depreciation and amortization $ 71 $ 128
Net changes in working capital and other 51 81
Additions to property, plant and equipment (44) (65)
</TABLE>
Lyondell's $34 million and $113 million share of Equistar's income before
unusual charges for the three and six months ended June 30, 1998, respectively,
is presented as Lyondell's equity income from investment in Equistar on the
consolidated income statement. Lyondell's $3 million and $6 million share of
Equistar's unusual charges for the three and six months ended June 30, 1998,
respectively is included in the unusual charges line on the consolidated income
statement (see Note 6).
5
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4. EQUITY INTEREST IN LYONDELL-CITGO REFINING COMPANY LTD.
In July 1993, LCR was formed to own and operate the Company's refining business.
LCR completed a major upgrade project at the Refinery ("Upgrade Project") during
the first quarter of 1997 which enables the facility to process substantial
additional volumes of very heavy crude oil. As a result of the completion of
the Upgrade Project, effective April 1, 1997, the participation interests
changed from approximately 86 percent and 14 percent for Lyondell and CITGO,
respectively, to reflect CITGO's equity contribution in the Upgrade Project.
The participation interests are currently 58.75 percent and 41.25 percent for
Lyondell and CITGO, respectively. Net income before depreciation expense for
the period is allocated to LCR's owners based on participation interests.
Depreciation expense is allocated to the owners based on contributed assets.
Summarized financial information for LCR is as follows (in millions of dollars).
<TABLE>
<CAPTION>
BALANCE SHEETS June 30 DECEMBER 31
1998 1997
---------------- ----------------
<S> <C> <C>
Total current assets $ 200 $ 243
Property, plant and equipment, net 1,375 1,391
Deferred charges and other assets 68 47
---------------- ----------------
Total assets $1,643 $1,681
================ ================
Total current liabilities $ 202 $ 293
Long-term debt 686 663
Other liabilities and deferred credits 57 52
Members' equity 698 673
---------------- ----------------
Total liabilities and members' equity $1,643 $1,681
================ ================
</TABLE>
<TABLE>
<CAPTION>
INCOME STATEMENTS FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
------------------------------------- -----------------------------------
1998 1997 1998 1997
---------------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C>
Sales and other operating revenues $ 527 $ 641 $1,056 $ 1,340
Cost of sales 471 593 916 1,264
Selling, general and administrative expenses 17 16 36 33
---------------- ---------------- ---------------- --------------
Operating income 39 32 104 43
Interest expense, net (10) (11) (21) (15)
---------------- ---------------- ---------------- --------------
Net income $ 29 $ 21 $ 83 $ 28
================ ================ ================ ==============
SELECTED CASH FLOW INFORMATION
Depreciation and amortization $ 21 $ 25 $ 46 $ 42
Net changes in working capital and other 17 18 (91) (65)
Additions to property, plant and equipment (13) (12) (30) (51)
</TABLE>
5. EQUITY INTEREST IN LYONDELL METHANOL COMPANY, L.P.
Lyondell Methanol was formed in December 1996 by Lyondell and MCNIC to own and
operate the methanol facility at Equistar's Channelview, Texas facility. MCNIC
has a 25 percent interest in Lyondell Methanol. Lyondell has a 75 percent
interest in Lyondell Methanol and serves as managing partner. Equistar serves
as operator of the methanol facility. Lyondell began accounting for its
investment in Lyondell Methanol under the equity method of accounting effective
January 1, 1998.
Lyondell Methanol's revenues for the three months ended June 30, 1998 and 1997
were $25 million and $39 million, respectively. Lyondell Methanol's revenues
for the six months ended June 30, 1998 and 1997 were $57 million and $80
million, respectively.
6
<PAGE>
6. UNUSUAL CHARGES
During the second quarter of 1998, the Company's pro rata share of Equistar's
unusual charges was $3 million. The unusual charges related to the formation of
Equistar, comprised primarily of costs associated with the consolidation of
certain operations. These costs were paid by Equistar and allocated to the
Partners in accordance with their ownership percentages. The Company's pro rata
share of Equistar's unusual charges for the first six months of 1998 was $6
million.
7. STOCKHOLDERS' EQUITY
DIVIDENDS The Company paid regular quarterly dividends of $.225 per share of
common stock during the first and second quarters of 1998.
BASIC AND DILUTED EARNINGS PER SHARE Basic earnings per share for all periods
presented are computed based on the weighted average number of shares
outstanding for the periods. Diluted earnings per share includes the effect of
outstanding stock options issued under the Executive Long-Term Incentive Plan
and the Incentive Stock Option Plan.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
------------------------------------ ------------------------------------
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Basic 77,650,049 80,000,000 78,178,626 80,000,000
Diluted 77,815,129 80,000,000 78,343,706 80,000,000
</TABLE>
TREASURY STOCK In the second quarter of 1998, the Company completed the stock
buyback program authorized by a resolution adopted by the Board of Directors in
September 1997. A total of 2,567,051 shares were purchased for $75 million,
including 1,058,539 shares in the second quarter of 1998 for approximately $36
million.
8. COMMITMENTS AND CONTINGENCIES
CRUDE SUPPLY CONTRACT At its inception, LCR entered into a long-term crude oil
supply contract ("Crude Supply Contract") with Lagoven, S.A., now known as PDVSA
Petroleo y Gas, S.A. ("PDVSA Oil"), an affiliate of CITGO. LCR is required to
purchase, and PDVSA Oil is required to sell, sufficient crude oil to satisfy
LCR's coking capacity, or a minimum of 200,000 barrels per day and up to 230,000
barrels per day of very heavy Venezuelan crude oil. PDVSA Oil has the right,
but not the obligation, to supply incremental amounts above 230,000 barrels per
day. Depending on market conditions, breach or termination of LCR's Crude
Supply Contract could adversely affect LCR, and therefore, the Company.
Although the parties have negotiated alternative arrangements in the event of
certain force majeure conditions, including governmental or other actions
restricting or otherwise limiting PDVSA Oil's ability to perform its
obligations, any such alternative arrangements may not be as beneficial as the
Crude Supply Contract. There can be no assurance that alternative crude oils
with similar margins would be available for purchase by LCR. Furthermore, the
breach or termination of the Crude Supply Contract would require LCR to return
to the practice of purchasing all of its crude oil feedstocks in the merchant
market and would again subject LCR to significant volatility and price
fluctuations. In late April 1998, LCR received notification from PDVSA Oil of an
allocation of crude oil related to the announced OPEC production cuts. Beginning
in August, LCR began receiving different allocations of crude oil from PDVSA
Oil. In the opinion of LCR's management, the allocation is anticipated to be
temporary, with a possible estimated decrease of net income in the range of $10
million to $20 million over the second half of 1998. On the basis of those
estimates, Lyondell's after-tax pro rata share of the decrease in LCR's net
income would be $4 million to $7 million over the last half of 1998.
CROSS INDEMNITY AGREEMENT In connection with the transfer of assets and
liabilities from Atlantic Richfield Company ("ARCO") to the Company in 1983, the
Company agreed to assume certain liabilities arising out of the
7
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operation of the Company's integrated petrochemicals and refining business prior
to July 1, 1988. In connection with the transfer of such liabilities, the
Company and ARCO entered into an agreement, updated in 1997 ("Revised Cross-
Indemnity Agreement"), whereby the Company agreed to defend and indemnify ARCO
against certain uninsured claims and liabilities which ARCO may incur relating
to the operation of the business of the Company prior to July 1, 1988, including
certain liabilities which may arise out of pending and future lawsuits. For
current and future cases related to Company products and Company operations,
ARCO and the Company bear a proportionate share of judgment and settlement costs
according to a formula which allocates responsibility based on years of
ownership during the relevant time period. The party with the most significant
potential liability exposure is responsible for case management and associated
costs while allowing the non-case managing party to protect its interests.
Under the Revised Cross-Indemnity Agreement, the Company will assume
responsibility for its proportionate share of future costs for waste site
matters not covered by ARCO insurance. Subject to the uncertainty inherent in
all litigation, management believes the resolution of the matters pursuant to
the Revised Cross-Indemnity Agreement will not have a material adverse effect
upon the consolidated financial statements or liquidity of the Company.
INDEMNIFICATIONS WITH EQUISTAR Lyondell, Millennium, and Occidental have each
agreed to provide certain indemnifications to Equistar in respect of the
petrochemicals and polymers businesses contributed by the Partners. In
addition, Equistar agreed with each of Lyondell, Millennium and Occidental to
assume third party claims that are related to certain pre-closing contingent
liabilities that are asserted prior to December 1, 2004 to the extent the
aggregate thereof does not exceed $7 million and other liabilities, subject to
certain terms of the respective Asset Contribution Agreements. During the three
and six months ended June 30, 1998, less than $1 million and approximately $1
million, respectively, was expensed by Equistar under the $7 million
indemnification basket with respect to the business contributed by Lyondell.
ENVIRONMENTAL 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.
Subject to the terms of the Revised Cross-Indemnity Agreement, the Company is
currently contributing funds to the cleanup of one waste site (Brio, located
near Houston, Texas) under the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") as amended and 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") for
assessment and remediation of groundwater and soil contamination at the
Refinery.
As of June 30, 1998, the Company has accrued $10 million related to future
CERCLA, RCRA and TNRCC assessment and remediation costs, of which $1 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 recorded.
However, it is possible that new information about the sites for which the
reserve has been established, new technology or future developments such as
involvement in other CERCLA, RCRA, TNRCC or other comparable state law
investigations, could require the Company to reassess its potential exposure
related to environmental matters.
GENERAL 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
consolidated financial statements or liquidity of the Company.
In the opinion of management, any liability arising from the matters discussed
in this Note is not expected to have a material adverse effect on the
consolidated financial statements or liquidity of the Company. However, the
adverse
8
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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 without giving effect to contribution or indemnification
obligations of co-defendants or others, or to the effect of any insurance
coverage that may be available to offset the effects of any such award.
9. SUBSEQUENT EVENTS
As of July 28, 1998, Lyondell completed its acquisition of all outstanding
shares of ARCO Chemical Company ("ARCO Chemical"). ARCO Chemical is the world's
largest producer of propylene oxide and is a leading worldwide producer and
marketer of polyether polyols, propylene glycol, propylene glycol ethers,
toluene diisocyanate, styrene monomer and methyl tertiary butyl ether.
In connection with the acquisition of ARCO Chemical, Lyondell executed a bank
credit agreement providing for aggregate borrowings of up to $7 billion ("Credit
Facility"). The Credit Facility includes four separate term loans in the
amounts of (a) $2 billion to be amortized over five years, (b) $1.25 billion to
be amortized over seven years, (c) $1.25 billion with principal maturing in one
year and (d) $2 billion with principal maturing in two years, as well as a five-
year revolving credit facility of up to $500 million. As part of the
acquisition, Lyondell assumed approximately $870 million of ARCO Chemical debt.
Borrowings under the Credit Facility of $6.5 billion were used for the purchase
of approximately 97.4 million shares of ARCO Chemical, repayment of the $345
million note payable to Equistar, repayment of short-term borrowings of Lyondell
and ARCO Chemical and repayment of other long-term borrowings of ARCO Chemical.
Under the terms of the Amended and Restated Limited Liability Company
Regulations of LCR, CITGO was required to give notice to Lyondell of it's
intention to exercise a one-time option to increase its participation interest
in LCR up to 50 percent by making an additional equity contribution. Notice was
not received by Lyondell within the required 60 day period prior to the
expiration of the option on September 30, 1998.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Lyondell Chemical Company, formerly Lyondell Petrochemical Company ("Company" or
"Lyondell"), operates in the petrochemicals, polymers, refining and methanol
segments through its interests in Equistar Chemicals, LP ("Equistar"), LYONDELL-
CITGO Refining Company Ltd. ("LCR") and Lyondell Methanol Company, L.P.
("Lyondell Methanol"). In 1997 and prior years, the results of the methanol
business were included in the petrochemicals segment. Lyondell accounts for its
investment in Equistar, LCR and Lyondell Methanol using the equity method of
accounting.
The Company's operations in the petrochemicals segment are conducted through its
interest in Equistar. Equistar was formed on December 1, 1997 as a joint
venture between the Company and Millennium Chemicals Inc. ("Millennium"). On
May 15, 1998, the ethylene, propylene and ethylene oxide and derivatives
businesses of Occidental Chemical Corporation ("OxyChem"), a subsidiary of
Occidental Petroleum Corporation ("Occidental") were contributed to Equistar
(the "OxyChem Contributed Business"). Equistar is operated as a Delaware
limited partnership owned by subsidiaries of the Company, Millennium and
Occidental (the "Partners"). Equistar's petrochemicals division consists of:
olefins including ethylene, propylene and butadiene; aromatics including benzene
and toluene; oxygenated chemicals, including ethylene oxide and derivatives,
methyl tertiary butyl ether ("MTBE"); ethyl alcohol and diethyl ether; and
specialty chemicals including refinery blending stocks.
The Company's operations in the polymers segment are conducted through its
interest in Equistar. Equistar's polymers division consists of: polyolefins
including high-density polyethylene ("HDPE"), low-density polyethylene ("LDPE"),
linear low-density polyethylene ("LLDPE"), polypropylene, and performance
polymers products including color concentrates and compounds; wire and cable
resins and compounds; adhesive resins; and fine powders.
The Company's operations in the refining segment are conducted through its
interest in LCR, a Texas limited liability company owned by subsidiaries of the
Company and CITGO Petroleum Corporation ("CITGO"). The refining segment
consists of: refined petroleum products, including conventional and reformulated
gasoline, low sulfur diesel, and jet fuel; aromatics produced at the full-
conversion Houston, Texas refinery ("Refinery"), including benzene, toluene,
paraxylene and orthoxylene; lubricants, including industrial lubricants, motor
oils, white oils and process oils; carbon black oil; sulfur; residual oil;
petroleum coke fuel; olefins feedstocks; and crude oil resales. LCR completed a
major upgrade project at the Refinery ("Upgrade Project") during the first
quarter of 1997 to enable the facility to process substantial additional volumes
of very heavy crude oil.
At inception, LCR entered into a long-term crude oil supply contract ("Crude
Supply Contract") with Lagoven, S.A., now known as PDVSA Petroleo y Gas, S.A.
("PDVSA Oil"), an affiliate of CITGO. In addition, under terms of a long-term
product sales agreement ("Products Agreement"), CITGO purchases substantially
all of the refined products produced at the Refinery. Both PDVSA Oil and CITGO
are direct or indirect wholly owned subsidiaries of Petroleos de Venezuela, S.A.
("PDVSA"), the national oil company of Venezuela.
The Company's operations in the methanol segment are conducted through its
interest in Lyondell Methanol a Texas limited partnership held by subsidiaries
of the Company and MCN Investment Corporation ("MCNIC"). The methanol segment
consists of methanol and other petrochemical products produced by the methanol
facility.
10
<PAGE>
RESULTS OF OPERATIONS
OVERVIEW
Net income for second quarter of 1998 was $29 million or $.38 per share compared
with $93 million or $1.17 per share for the second quarter of 1997. Earnings
for the second quarter of 1998 included unusual charges of approximately $2
million after-tax for costs related to the formation of Equistar. The earnings
decrease in 1998 versus 1997 was primarily due to reduced earnings of the
petrochemicals segment which was impacted by declining prices for ethylene and
propylene as well as for other major by-products, which more than offset the
decline in feedstock costs during the quarter.
Net income for the first six months of 1998 was $94 million or $1.20 per share
compared to net income of $133 million or $1.67 per share for the first six
months of 1997. The $39 million decrease was primarily due to lower margins for
olefins and polymers as a result of declining prices. This decrease was
partially offset by higher earnings from LCR as higher volumes of very heavy
crude oil, which carry a favorable deemed margin under the Crude Supply
Contract, were processed in 1998.
Net income was $36 million lower for the second quarter of 1998 compared to the
first quarter of 1998. The decrease in net income was primarily due to lower
margins for olefins caused by declining prices, which more than offset the
decline in feedstock costs, and lower operating income for LCR for the quarter
as a result of planned downtime for maintenance and unplanned downtime due to a
fire in a coker unit.
EQUISTAR CHEMICALS, LP
INCOME FROM EQUITY INVESTMENT IN EQUISTAR Lyondell's share of Equistar's
earnings for the second quarter of 1998, before its pro rata share of the
unusual charge consisting of costs related to the formation of Equistar, was $34
million compared to $79 million for the first quarter of 1998. Lyondell's
income from equity investment in Equistar, which is before unusual charges, by
segments for the three and six months ended June 30, 1998 is as follows:
<TABLE>
<CAPTION>
FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED
June 30, 1998 JUNE 30, 1998
-------------------- --------------------
<S> <C> <C>
Petrochemicals segment $ 35 $109
Polymers segment 31 72
Unallocated (32) (68)
-------------------- --------------------
Total $ 34 $113
==================== ====================
</TABLE>
The unaudited pro forma financial information below presents the combined
historical results of operations of the businesses contributed to Equistar by
Lyondell and Millennium, adjusted for assumptions of a debt structure of $1.745
billion at 8 percent and other reclassifications for consistent presentation.
The unaudited pro forma financial information does not include the results of
operations of the OxyChem Contributed Business nor does it reflect the results
of operations had Equistar been formed on January 1, 1997. The unaudited pro
forma information may not be indicative of results that will be obtained in the
future.
11
<PAGE>
Summarized financial information for Equistar is as follows (in millions).
<TABLE>
<CAPTION>
INCOME STATEMENTS FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
----------------------------------- ---------------------------------
Pro forma PRO FORMA
1998 1997 1998 1997
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Sales and other operating revenues $ 1,093 $ 1,219 $ 2,114 $ 2,470
Cost of sales 941 920 1,739 1,986
Selling, general and administrative expenses 69 70 139 139
Unusual charges 7 - - 13 - -
------------ ------------ ------------ -------------
Operating income 76 229 223 345
Interest expense, net (32) (36) (58) (72)
------------ ------------ ------------ -------------
Net income $ 44 $ 193 $ 165 $ 273
============ ============ ============ =============
SELECTED FINANCIAL INFORMATION FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
----------------------------------- ---------------------------------
Pro forma PRO FORMA
1998 1997 1998 1997
------------ ------------ ------------ -------------
SALES AND OTHER OPERATING REVENUES
Petrochemicals segment $ 859 $ 873 $ 1,646 $ 1,771
Polymers segment 554 633 1,112 1,239
Intersegment eliminations (320) (287) (644) (540)
------------ ------------ ------------ -----------
Total $ 1,093 $ 1,219 $ 2,114 $ 2,470
============ ============ ============ ===========
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Petrochemicals segment $ 3 $ 3 $ 5 $ 5
Polymers segment 18 21 38 43
Unallocated 48 46 96 91
------------ ------------ ------------ -----------
Total $ 69 $ 70 $ 139 $ 139
============ ============ ============ ===========
OPERATING INCOME
Petrochemicals segment $ 68 $ 196 $ 197 $ 316
Polymers segment 63 79 135 120
Unallocated (55) (46) (109) (91)
------------ ------------ ------------ -----------
Total $ 76 $ 229 $ 223 $ 345
============ ============ ============ ===========
EBITDA
Petrochemicals segment $ 108 $ 220 $ 266 $ 364
Polymers segment 80 101 169 164
Unallocated (41) (35) (83) (69)
------------ ------------ ------------ -----------
Total $ 147 $ 286 $ 352 $ 459
============ ============ ============ ===========
</TABLE>
The following table sets forth sales volumes for Equistar's major products,
including production, purchases of products for resale, propylene production
from the product flexibility unit, products received on exchange and draws from
inventory.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
------------------------------------- -------------------------------------
Pro forma PRO FORMA
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
SELECTED PETROCHEMICAL PRODUCTS (MILLIONS)
Ethylene, propylene and other olefins (pounds) 3,977 3,378 7,369 6,582
Aromatics (gallons) 54 45 101 89
POLYMERS PRODUCTS (MILLIONS)
Polyethylene and polypropylene (pounds) 1,652 1,516 3,204 3,021
</TABLE>
12
<PAGE>
PETROCHEMICALS SEGMENT
OPERATING INCOME Operating income for the second quarter of 1998 decreased $128
million compared to the pro forma operating income for the second quarter of
1997 and decreased $119 million for the first six months of 1998 compared to the
pro forma operating income for the first six months of 1997. These decreases
were primarily due to declining prices for ethylene and propylene as well as for
other major by-products, which more than offset the decline in feedstock costs
during the quarter.
Equistar's olefins feedstocks are primarily condensates, other petroleum liquids
and natural gas liquids which tend to follow the cost trends of crude oil and
natural gas. Crude oil prices began dropping in 1997 and hit recent historic
lows in the first half of 1998, which resulted in lower feedstock costs for the
petrochemicals business. Natural gas prices also dropped in early 1998 before
rising slightly in April and May and then dropping off in June. The sales prices
for various olefins products are primarily driven by three factors. The first
factor is the demand for ethylene, propylene and other by-products as a result
of economic conditions in end-use markets. The second factor is the operating
rate of the installed capacity to produce olefin products. The third factor
driving sales prices is the underlying cost of the feedstock. Increased industry
capacity added in the fourth quarter of 1997 and lower feedstock costs were the
primary factors which drove 1998 prices for these products down below 1997
levels.
REVENUES Sales and other operating revenues, including intersegment sales, were
$859 million in the second quarter of 1998 compared to $873 million in the pro
forma second quarter of 1997, a decrease of $14 million. Sales and other
operating revenues for the first half of 1998 decreased $125 million over the
pro forma first half of 1997. This decrease was primarily due to declining
prices for ethylene and propylene, partially offset by increased sales volumes
due to the addition of the OxyChem Contributed Business.
COST OF SALES Cost of sales was $788 million in the second quarter of 1998
compared to $674 million in the second quarter of 1997 on a pro forma basis, an
increase of $114 million. The increase in cost of sales is primarily due to
increased production volumes due to the addition of the OxyChem Contributed
Business. Cost of sales decreased $6 million when comparing the first six
months of 1998 to the same pro forma period in 1997 due to declining feedstock
costs offset by increased production volumes due to the addition of the OxyChem
Contributed Business.
SELLING EXPENSES Selling expenses were $3 million in the second quarter of 1998
and the pro forma second quarter of 1997 and $5 million for the first six months
of 1998 and the pro forma first six months of 1997. Selling expenses for the
petrochemicals segment consist primarily of terminal expenses related to storage
and distribution of finished goods and rail freight costs of finished product.
POLYMERS SEGMENT
OPERATING INCOME Operating income for the second quarter of 1998 was $63
million compared to $79 million in the pro forma second quarter of 1997. The
$16 million decrease was primarily due to lower polymers sales prices which more
than offset the decrease in the polymers feedstock costs. Industry sales price
decreases reflecting the lower costs and excess industry supply became effective
during the fourth quarter of 1997 and extended through the second quarter of
1998. Olefins feedstock costs declined throughout the first half of 1998.
Operating income for the first six months of 1998 compared to the pro forma
first six months of 1997 increased $15 million. This increase was primarily
due to higher polymers sales margins as a result of lower feedstock and other
costs partially offset by decreases in polymers sales prices. In addition,
sales volumes were higher due to higher production levels.
Operating income decreased $9 million from the first quarter of 1998 to the
second quarter of 1998. This decrease was primarily due to lower polymers sales
prices which more than offset the decrease in the polymers feedstock costs.
13
<PAGE>
Equistar's polymers feedstocks are primarily ethylene and propylene. During the
first and second quarters of 1998 the industry sales price of ethylene has
decreased steadily which resulted in lower feedstock costs for the polymers
business. The sales prices for various polymers products are primarily driven
by three factors. The first factor is the demand for products as a result of
economic conditions in end-use markets such as the auto industry, housing
construction and consumer durable and non-durable goods. The second factor is
the operating rate of the installed capacity to produce polymers products.
Third, sales prices are driven by the underlying cost of the feedstocks. A high
level of industry inventory and declining feedstock costs were the primary
factors which pulled second quarter 1998 sales prices for polymers products down
from second quarter 1997 levels.
REVENUES Sales and other operating revenues were $554 million in the second
quarter of 1998 compared to $633 million in the pro forma second quarter of
1997, a decrease of $79 million. Sales and other operating revenues decreased
$127 million for the first six months of 1998 compared to the pro forma first
six months of 1997. The decreases in revenues were the result of decreases in
industry sales prices.
COST OF SALES Cost of sales was $473 million in the second quarter of 1998
compared to $533 million in the pro forma second quarter of 1997, a decrease of
$60 million. Cost of sales decreased $137 million for the first six months of
1998 compared to the first six months of 1997. The decrease in cost of sales is
primarily caused by the decrease in feedstock costs. Cost of sales increased $7
million for the first quarter of 1998 to the second quarter of 1998. The
decrease in cost of sales is primarily caused by the decrease in feedstock
costs.
SELLING EXPENSES Selling expenses for the second quarter of 1998 were $18
million, a decrease of $3 million compared to the pro forma second quarter of
1997. Selling expenses for the first six months of 1998 were $38 million, a
decrease of $5 million compared to the pro forma first six months of 1997. For
the polymers business, selling expense includes the costs of marketing products,
as well as research and development costs.
UNALLOCATED
GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses were
$48 million in the second quarter of 1998 compared to $46 million in the second
quarter of 1997 on a pro forma basis, an increase of $2 million. General and
administrative expenses were $96 million in the first six months of 1998
compared to $91 million in the first six months of 1997 on a pro forma basis, an
increase of $5 million. These increases are primarily due to increased software
amortization and pension expenses. General and administrative costs do not
include Equistar's unusual charges for the periods presented.
UNUSUAL CHARGES Equistar's unusual charges for the three and six months ended
June 30, 1998 were $7 million and $13 million, respectively. The unusual
charges related to the formation of Equistar, comprised primarily of costs
associated with the consolidation of certain operations. These costs were paid
by Equistar and allocated to the Partners in accordance with their ownership
percentages.
SYNERGIES The formation of Equistar in December 1997, together with the addition
of the OxyChem Contributed Business as of May 15, 1998, is expected to result in
substantial annual cost savings and profit improvement synergies by the end of
the year 2000. For 1998, the net positive impact of synergies before transition
costs, is expected to be $100 million. In the first six months of 1998, Equistar
achieved net synergies before transition costs of $65 million. Of the $65
million, approximately $48 million was in manufacturing and purchasing related
areas and $17 million was staffing and services related. Synergies included in
the $65 million that were not reflected in Equistar's income statement totaled
$7 million. Non-recurring transition costs related to Equistar's formation were
$13 million in the first half of 1998.
LYONDELL-CITGO REFINING COMPANY LTD.
REFINING SEGMENT
The refining segment consists of the results of operations of LCR. Effective
January 1, 1997, Lyondell began accounting for its investment in LCR under the
equity method of accounting.
14
<PAGE>
INCOME FROM EQUITY INVESTMENT IN LCR Lyondell's share of LCR's earnings for the
second quarter of 1998 was $19 million as compared to $21 million for the second
quarter of 1997. The decrease is primarily due to planned downtime for
maintenance and unplanned downtime due to a fire in a coker unit which resulted
in reduced processing rates. For the first six months of 1998, Lyondell's share
of LCR's earnings were $54 million, an increase of $27 million over the first
six months of 1997 due to the completion of the Upgrade Project in the first
quarter of 1997. Lyondell's share of LCR's earnings decreased by $16 million
during the second quarter of 1998 compared to the first quarter of 1998 as a
result of downtime for planned maintenance and unplanned downtime as the result
of a fire in a coker unit.
Summarized financial information for LCR is as follows (in millions).
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
----------------------------------- --------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ---------
<S> <C> <C> <C> <C>
Sales and other operating revenues $ 527 $ 641 $ 1,056 $ 1,340
Cost of sales 471 593 916 1,264
Selling, general and administrative expenses 17 16 36 33
------------ ------------ ------------ ---------
Operating income 39 32 104 43
Interest expense, net (10) (11) (21) (15)
------------ ------------ ------------ ---------
Net income $ 29 $ 21 $ 83 $ 28
============ ============ ============ =========
</TABLE>
The following table sets forth sales volumes for LCR's major products, including
production, purchases of products for resale, products received on exchange and
draws from inventory.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
-------------------------------------- ---------------------------------------
1998 1997 1998 1997
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
REFINED PRODUCTS
(THOUSAND BARRELS PER DAY)
Gasoline 118 105 121 107
Diesel and heating oil 85 79 74 65
Jet fuel 12 13 15 15
Aromatics 10 10 10 10
Other refined products 107 90 100 85
---------------- ---------------- ---------------- -----------------
Total refined products volumes 332 297 320 282
================ ================ ================ =================
</TABLE>
GENERAL LCR has a Crude Supply Contract with PDVSA Oil under which LCR is
required to purchase, and PDVSA Oil is required to sell, sufficient crude oil to
satisfy LCR's coking capacity, or a minimum of 200,000 barrels per day and up to
230,000 barrels per day of very heavy Venezuelan crude oil. PDVSA Oil has the
right, but not the obligation, to supply incremental amounts above 230,000
barrels per day. In addition, under terms of the Products Agreement, CITGO
purchases substantially all of the refined products produced at the Refinery.
15
<PAGE>
The Upgrade Project was completed in the first quarter of 1997, enabling LCR to
begin to take full benefit of the Crude Supply Contract. Beginning in March
1997, increasing volumes of very heavy crude oil were processed. The following
table sets forth processing rates at the Refinery for the periods indicated.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
-------------------------------------- ---------------------------------------
1998 1997 1998 1997
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Crude Processing Rates
(THOUSAND BARRELS PER DAY)
Crude Supply Contract - coked 223 212 228 192
Other crude oil 22 17 21 20
---------------- ---------------- ---------------- -----------------
Total 245 229 249 212
================ ================ ================ =================
</TABLE>
OPERATING INCOME LCR's operating income was $39 million in the second quarter
of 1998 as compared to $32 million in the second quarter of 1997 due to the
second quarter of 1997 being the first quarter of operations for the Refinery
after the completion of the Upgrade Project in the first quarter of 1997. This
resulted in normal operational start-up activities during which the Refinery was
not operating at peak rates. LCR's operating income was $104 million in the
first six months of 1998 compared to $43 million in the first six months of 1997
due to the completion of the Upgrade Project in the first quarter of 1997 which
resulted in higher volumes of very heavy crude oil processed in the coking mode
under the Crude Supply Contract resulting in higher margins. The decrease in
operating income of $26 million in the second quarter of 1998 compared to the
first quarter of 1998 is primarily due to planned downtime for maintenance and
unplanned downtime due to a fire in a coker unit which resulted in reduced
processing rates.
REVENUES Sales and other operating revenues for LCR, including intersegment
sales, were $527 million in the second quarter of 1998 compared to $641 million
in the second quarter of 1997. Sales and other operating revenues decreased
$284 million for the first six months of 1998 compared to the first six months
of 1997. The decreases primarily resulted from lower refined products prices,
which dropped as a result of lower industry crude prices, and lower crude oil
resale volumes. These decreases were partially offset by higher sales volumes
as production levels after completion of the Upgrade Project increased. 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 to reduce
transportation costs.
COST OF SALES Cost of sales was $471 million in the second quarter of 1998
compared to $593 million in the second quarter of 1997 for LCR. Cost of sales
was $916 million for the first six months of 1998 compared to $1.3 billion for
the first six months of 1997. The decreases in 1998 compared to 1997 were
primarily due to lower costs of crude oil and other petroleum feedstocks. Crude
oil feedstock costs are tied to sales prices under the Crude Supply Contract.
As industry sales prices declined as a result of lower industry crude prices,
feedstock costs for LCR decreased. In addition, crude oil resale costs were
lower due to significantly lower volumes of crude oil resales as purchases under
the Crude Supply Contract increased in 1997. These lower costs were offset
partially by higher production costs, primarily depreciation expense. In the
second quarter of 1998, LCR extended the depreciable life of certain Upgrade
Project fixed assets from 20 years to 24 years. This resulted in a reduction of
depreciation expense of approximately $4 million for the second quarter of 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and
administrative expenses for LCR were $17 million in the second quarter of 1998
compared to $16 million in the second quarter of 1997. Selling, general and
administrative expenses increased $3 million from the first six months of 1997
to the first six months of 1998. The increases in 1998 are primarily due to
increased selling expense as a result of increased petroleum coke production.
INTEREST EXPENSE LCR's interest expense was $10 million in the second quarter
of 1998 compared to $11 million in the second quarter of 1997. Interest expense
for the first six months of 1998 was $21 million compared to $15
16
<PAGE>
million for the first six months of 1997. Interest expense on debt related to
construction of the Upgrade Project was capitalized through its completion
including the first two months of 1997.
LYONDELL METHANOL COMPANY, L.P.
METHANOL SEGMENT
INCOME FROM EQUITY INVESTMENT IN LYONDELL METHANOL Lyondell's share of Lyondell
Methanol's earnings for the first six months of 1998 was $6 million. Lyondell
recorded no equity income from Lyondell Methanol in the second quarter of 1998.
Had the Company followed the equity method of accounting for its investment in
Lyondell Methanol during 1997, the Company would have earned $11 million and $20
million in income from equity investment in Lyondell Methanol for the three and
six months ended June 30, 1997, respectively.
Lyondell's equity income decreased $6 million in the second quarter of 1998
compared to the first quarter of 1998 and $14 million in the first half of 1998
compared to the same period in 1997. The decreases are due to significant
declines in the sales prices of methanol which occurred in the first quarter of
1998 due to oversupply from new global capacity, strong domestic production and
heavy imports into the Gulf Coast, as well as weaker demand from the MTBE sector
of the market and customer plant outages.
Methanol is a component of products used by the housing and plastic packaging
industry, as well as being a primary component of MTBE, a product used to blend
low-emission reformulated gasoline. Methanol prices were high in 1997 due to a
combination of strong demand by the end-use markets and supply constraints due
to industry operating problems. The price of natural gas, the principal
methanol feedstock, has remained fairly steady through June 1998.
LYONDELL CHEMICAL COMPANY
UNALLOCATED
GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses were $5
million in the second quarter of 1998 and $11 million for the first six months
of 1998. The decreases in 1998 compared to 1997 are due to the contribution of
the petrochemicals and polymers businesses to Equistar on December 1, 1997.
UNUSUAL CHARGES Lyondell's share of Equistar's unusual charges of $3 million
and $6 million for the three and six months ended June 30, 1998 consist of costs
related to the formation of Equistar comprised primarily of costs associated
with a reduction of the workforce and consolidation of certain operations. The
Equistar unusual charges were allocated to Lyondell in accordance with its
ownership percentage. Lyondell also incurred $4 million in the first quarter of
1998 related to executive severance.
INTEREST EXPENSE Interest expense of $6 million and $13 million in the second
quarter and first half of 1998, respectively, consisted of interest expense on
the $345 million note payable to Equistar and short-term borrowings. The
decreases in interest expense from $20 million and $41 million in the second
quarter and first half of 1997, respectively, are primarily due to the transfer
of debt to Equistar as of December 1, 1997.
OTHER INCOME, NET Other income, net of $5 million in the second quarter of 1998
consists primarily of the reversal of accruals for certain pre-closing
contingent liabilities expensed by Equistar under the terms of the Asset
Contribution Agreements and an insurance dividend.
MINORITY INTEREST Minority interest was $4 million in the second quarter of 1997
and $8 million for the first six months of 1997 representing the allocated share
of Lyondell Methanol net income to MCNIC, the minority owner of Lyondell
Methanol. Lyondell began accounting for its investment in Lyondell Methanol
under the equity method of accounting effective January 1, 1998.
17
<PAGE>
INCOME TAX The effective income tax rates during the second quarter of 1998 and
during the first six months of 1998 were 37.7 percent. The effective income tax
rates for the same periods in 1997 were 36.5 percent and 36.4 percent,
respectively. The effective income tax rate increased in 1998 primarily due to
the state tax impact of Equistar operating in more taxing jurisdictions than
previously operated by Lyondell. State income tax was the primary difference
between the effective tax rate and the 35 percent federal statutory rate during
each of the periods.
FINANCIAL CONDITION
OPERATING ACTIVITIES Lyondell's cash used in operating activities totaled $100
million during the first six months of 1998 compared to cash provided by
operating activities of $95 million in the first six months of 1997. The
increase in cash used in operating activities is primarily attributable to the
decrease in accounts payable as a result of the payment of accounts payable
retained by Lyondell in the formation of Equistar on December 1, 1997.
INVESTING ACTIVITIES - CAPITAL EXPENDITURES The Company made no capital
expenditures during the second quarter of 1998. Equistar's capital expenditures
totaled $65 million for the first six months of 1998, of which $33 million was
Lyondell's share. With the addition of the OxyChem Contributed Business, the
Equistar 1998 capital budget was increased from $204 million to $238 million.
LCR made capital expenditures of $30 million for the first six months of 1998 of
which Lyondell funded $16 million. LCR's expenditures related to environmental
projects were $6 million for the first six months of 1998 with the remainder for
other maintenance and capital projects.
INVESTING ACTIVITIES - CONTRIBUTIONS AND ADVANCES TO/DISTRIBUTIONS FROM
AFFILIATES Distributions in excess of earnings in the first six months of 1998
were $172 million by Equistar, $12 million by Lyondell Methanol and $1 million
by LCR. Contributions and advances to affiliates in the first quarter of 1998
include $16 million in loans to LCR for environmental and other maintenance and
capital projects.
FINANCING ACTIVITIES Cash used in financing activities in 1998 consisted
primarily of the $49 million repurchase of common stock and the repayment of $35
million of short-term notes payable.
The Company completed the stock buyback program authorized in September 1997 by
the Board of Directors in the second quarter of 1998. A total of 2,567,051
shares were purchased for $75 million including 1,058,539 shares in the second
quarter for approximately $36 million.
The Company paid regular quarterly dividends of $.225 per share of common stock
in the first and second quarters of 1998.
CREDIT FACILITY Lyondell has obtained through J.P. Morgan Securities Inc., as
Arranger, and Morgan Guaranty Trust Co. of NY as Administrative Agent, DLJ
Capital Funding, Inc., as Syndication Agent, and Bank of America National Trust
and Savings Assn., Citibank, N.A., The Chase Manhattan Bank, and NationsBank,
N.A., as Documentation Agents, financing in the amount of up to $7.0 billion
("Credit Facility") for the acquisition of ARCO Chemical Company ("ARCO
Chemical"). As part of the acquisition, Lyondell assumed approximately $870
million of ARCO Chemical debt. Borrowings under the Credit Facility of $6.5
billion were used for the purchase of approximately 97.4 million shares of ARCO
Chemical, repayment of the $345 million note payable to Equistar, repayment of
short-term borrowings of Lyondell and ARCO Chemical and repayment of other long-
term borrowings of ARCO Chemical and certain debt issuance costs.
TERM LOANS AND REVOLVING CREDIT FACILITY The Credit Facility consists of (i) a
five-year revolving credit facility of up to $500 million to be used for
general corporate purposes (the "Revolving Credit Facility") and (ii) four
separate term loans in the amounts of (a) $2.0 billion ("Term Loan A") to be
amortized over five years, (b) $1.25 billion ("Term Loan B") to be amortized
over seven years, (c) $1.25 billion with principal maturing in one year ("Term
Loan C") and (d) $2.0 billion with principal maturing in two years ("Term Loan
D"), each to be used to fund
18
<PAGE>
the acquisition of ARCO Chemical (collectively, the "Term Loans"). All of the
Term Loans were funded on July 28, 1998. No amounts have been funded to date
under the Revolving Credit Facility. The Credit Facility is collateralized by
cash flow streams of Lyondell's three joint ventures and Lyondell's stock in its
subsidiary companies.
The Term Loans initially bear interest at the following rates: (i) Term Loan A
- - LIBOR plus 2.0 percent; (ii) Term Loan B - LIBOR plus 2.5 percent; (iii) Term
Loan C - LIBOR plus 2.0 percent; and (iv) Term Loan D - LIBOR plus 2.0 percent.
PREPAYMENT Mandatory prepayments from certain sources of funds are required
with respect to the Term Loans until such time as (i) Term Loan C and Term Loan
D are repaid in full, including accrued interest and fees thereon, and (ii)
Lyondell has achieved investment grade ratings of at least BBB- and Baa3 from
Standard & Poor's Ratings Services and Moody's Investors Service, Inc.,
respectively. The sources of funds for mandatory prepayments include (i) cash
proceeds received from or as a result of (a) certain equity or debt issuances,
(b) the recapitalization and reorganization of LCR, and (c) asset sales as
defined in the Credit Facility, and (ii) 50% of annual Excess Cash Flow (as
defined in the Credit Facility) less the aggregate principal amount prepaid
under the Term Loans.
COVENANTS Under the covenant provisions of the Credit Facility, Lyondell has
agreed to, among other things, (i) maintain certain specified financial ratios
and consolidated net worth (as defined in the Credit Facility), (ii) refrain
from making certain distributions with respect to Lyondell's capital stock,
(iii) refrain from making certain investments (as defined in the Credit
Facility), (iv) refrain from allowing its subsidiaries to incur certain types
and amounts of debt, and (v) use its best efforts to maintain certain ownership
interests in the Borrower Joint Ventures and to ensure that the Borrower Joint
Ventures maintain certain capital expenditure and debt levels and cash
distribution policies.
EVENTS OF DEFAULT An event of default will occur under the Credit Facility in
various circumstances as described in the Credit Facility including a Change in
Control (as defined in the Credit Facility) of Lyondell.
SUBSIDIARY GUARANTEES ARCO Chemical (as successor by merger to the liabilities
of Lyondell Acquisition Corporation) and ARCO Chemie Nederland, Ltd., a
subsidiary of ARCO Chemical, have jointly and severally guaranteed the
obligations of Lyondell under the Credit Facility, as evidenced by a Security
Agreement.
19
<PAGE>
YEAR 2000
Lyondell, Equistar and LCR utilize many business information systems as well as
manufacturing support systems that could be impacted by the "Year 2000 problem".
Lyondell and Equistar have replaced many of their business and information
computer systems (including systems operated by Equistar for Lyondell Methanol).
Equistar is in the process of replacing the business information systems for the
operations contributed by Millennium and Occidental. LCR is also in the process
of replacing many of its business information systems. The new systems, based
on enterprise software from SAP America, Inc., will replace older business
systems and allow employees at different locations to share financial and
operating information more efficiently. The first major use of the software
commenced May 1, 1997 for the majority of the operations contributed to Equistar
by Lyondell. Remaining phases are targeted for completion late in 1998 and into
the first half of 1999. The new systems and software are Year 2000 compatible,
thus handling the majority of the Company's Year 2000 business system
requirements.
The Company has created a Year 2000 Executive Sponsor Team with representatives
of Lyondell, the former ARCO Chemical, Equistar and LCR. The Year 2000
Executive Sponsor Team is providing oversight to the individual Year 2000
Steering Committees within each organization. Each Steering Committee is in the
process of completing an assessment of the state of readiness of the company and
its joint ventures, including significant third party vendor and supplier
systems (including employee compensation and benefit and plant maintenance
related systems) as well as the manufacturing systems (including laboratory
information systems and field instrumentation). The Steering Committees also
are beginning to assess the readiness of significant customers. The assessment
and remediation phases should be completed in 1998 and the first quarter of 1999
with the majority of testing and final implementation to take place in 1999. An
estimate of the cost of Year 2000 readiness has not yet been completed. As part
of overall readiness, the Company is in the process of developing contingency
plans in the event of Year 2000 non-compliance of certain systems or third
parties. The former ARCO Chemical organization is conforming its Year 2000
readiness plan to the broader overall plan of the Lyondell enterprises.
Management believes that all significant systems will be Year 2000 ready in the
last half of 1999.
Management does not believe that Year 2000 issues will have a material adverse
effect on the operations, liquidity or financial condition of the Company,
including ARCO Chemical, and its joint ventures.
ARCO CHEMICAL ACQUISTION
As of July 28, 1998, Lyondell completed its acquisition of all outstanding
shares of ARCO Chemical, the world's largest producer of propylene oxide ("PO")
and a leading worldwide producer and marketer of polyether polyols, propylene
glycol, propylene glycol ethers, toluene diisocyanate ("TDI"), styrene monomer
("SM") and MTBE.
The acquisition of ARCO Chemical gives Lyondell a global market position in
propylene oxide and other intermediate and specialty chemicals, driven by
advantaged technology positions. It also provides vertical integration with
propylene, ethylene and benzene produced by Equistar and broadens the product
mix. In addition, the acquisition provides growth opportunities, particularly
because of ARCO Chemical's strong positions in Europe and the Asia Pacific
region.
Lyondell expects the acquisition of ARCO Chemical to result in annual cost
savings and profit improvement synergies of more than $100 million. This is in
addition to the $150 million cost reduction program previously announced by ARCO
Chemical. Under Internal Revenue Code Section 338 (g) and (h)(10), Lyondell and
Atlantic Richfield Company agreed to elect to step-up the domestic tax bases
of ARCO Chemical's net assets to the purchase price, which should result in
significant increased tax cash benefits from depreciation and amortization over
what would have resulted had the election not been made.
Subsequent to the acquisition, on August 7, 1998, Lyondell announced the delay
of construction of a previously announced propylene oxide plant (known as
PO-11). The previous plan was to build the plant in Rotterdam, The Netherlands,
for start-up in late 2000. Lyondell currently anticipates that the additional
capacity will start up in late 2002 or
20
<PAGE>
early 2003. The optimal location for the plant will be reevaluated. Lyondell is
also reevaluating the location of a proposed butanediol plant slated for start-
up in late 2001, also previously proposed for the Rotterdam location.
CURRENT BUSINESS OUTLOOK
BUSINESS OUTLOOK Lyondell's operating results will include the acquired
business of ARCO Chemical beginning August 1, 1998. Management expects margins
and demand for PO and derivatives in the U.S. and Europe to remain relatively
stable for the remainder of 1998, with the exception of certain nonrecurring
volumes in the first half of 1998 related to competitors' plant turnarounds.
However, continued economic difficulties in the Asian market could eventually
have a further negative impact on demand in the rest of the world because of
general weaknesses in the world economies and thereby place downward pressure on
margins, which if material, could have an adverse effect on the business and
operations of the acquired business as well as Equistar. Projected softness in
petrochemical prices should benefit the acquired operations, which use
propylene, ethylene and butanes as major feedstocks. However, competitive
pressures may limit the ability to maintain prices and improve margins.
Urethane products, including polyols and TDI, are subject to some seasonality
due to vacation shutdowns in the third quarter, particularly in Europe.
However, second half sales should benefit from settlement of the General Motors
strike, which occurred in the summer months of 1998. Sales of aircraft deicers
should benefit from a seasonal upturn, subject to the length and severity of the
winter season. Margins for co-products, including SM and MTBE, are expected to
remain weak. SM margins are affected by industry overcapacity and weak demand in
Asia, while MTBE margins reflect the weakness in gasoline prices.
During the remainder of 1998, management expects that olefins supply and demand
fundamentals will continue to be weak as compared with conditions that prevailed
in 1997. Olefins prices have declined as capacity additions in late 1997 and
slower demand growth have weakened the supply/demand balance for ethylene and
many of its coproducts. Lower feedstock costs resulting from lower energy prices
have reduced the impact of this price decline on margins and are continuing to
do so in the third quarter. While the rate of olefins price decline appears to
be slowing, pricing for the rest of 1998 and 1999 is not expected to improve
materially unless industry downtime is higher than now expected and/or ethylene
demand growth improves. Although near term capacity additions should be less
significant than those in late 1997, the timing and extent of recovery in
olefins margins will be determined by how rapidly worldwide demand growth
improves.
Polymers prices continue to decrease and are currently at lower levels than
experienced in 1997. Because the prices of olefins that serve as feedstocks have
also decreased, the impact of the polymers price decreases have not yet been
fully reflected in margins. To the extent that polymers prices continue to
decline after olefins pricing levels out, polymers margins would be expected to
decline over the remainder of 1998.
About 90 percent of LCR's crude oil purchases are made pursuant to the Crude
Supply Contract which significantly reduces the amount of the total crude oil
volume that is sensitive to market conditions. In late April 1998, LCR received
notification from PDVSA Oil of an allocation of crude oil related to the
announced OPEC crude oil production cuts. Beginning in August, LCR began
receiving different allocations of crude oil from PDVSA Oil. In the opinion of
LCR's management, the allocation is anticipated to be temporary, with a possible
estimated decrease of net income in the range of $10 million to $20 million over
the second half of 1998. On the basis of those estimates, Lyondell's after-tax
pro rata share of the decrease in LCR's net income would be $4 million to $7
million over the last half of 1998. LCR's results in the first half of 1998 were
reduced by planned and unplanned downtime of several processing units in the
refinery. There is little or no scheduled downtime for refinery units in the
second half of this year, and as a result, earnings from LCR are expected to be
significantly higher than in the first half, despite the impact of the
Venezuelan crude oil allocation.
Methanol margins in 1998 are expected to be significantly below the levels in
1997. Industry capacity additions should continue to impact pricing and
unscheduled outages in downstream markets have impacted demand.
Profitability and cash flows for the petrochemicals, polymers, refining and
methanol 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
maintenance turnarounds. Turnarounds on major units can have significant
financial impacts due to the associated loss of production, resulting in lower
profitability.
21
<PAGE>
FINANCING ACTIVITIES Lyondell plans to execute equity offerings for gross
proceeds of at least $1.25 billion within the next twelve months. Additional
equity and debt offerings of up to $2 billion are also anticipated.
LCR's indebtedness is also anticipated to be refinanced. In connection
therewith, the Company anticipates that LCR would repay the construction loan
from third parties and subordinated loans made to LCR by Lyondell and CITGO,
including those made in connection with the Upgrade Project. Additional cash
received in the refinancing will be distributed to Lyondell and CITGO. Lyondell
currently anticipates that its net proceeds will be in the $400 million to $550
million range.
Management believes business conditions will be such that cash balances, cash
distributions from the acquired business, Equistar, LCR and Lyondell Methanol
and existing lines of credit will be adequate to meet future cash requirements
for scheduled debt repayments and to sustain for the reasonably foreseeable
future the regular quarterly dividend. Management expects cash flow to be
sufficient to fund operations and debt repayments, and to maintain an
appropriate capital structure.
FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this report, including those regarding
the Current Business Outlook, are "forward-looking statements" within the
meaning of the federal securities laws. Although Lyondell believes the
expectations reflected in such forward-looking statements are reasonable, they
do involve certain assumptions, risks and uncertainties, and Lyondell can give
no assurance that such expectations will prove to have been correct. The
Company's actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including the
cyclical nature of the chemical and refining industries, uncertainties
associated with the United States and worldwide economies, current and potential
United States governmental regulatory actions, substantial chemical capacity
additions resulting in oversupply and declining prices and margins, raw material
costs or supply arrangements, the Company's ability to implement cost
reductions, and operating interruptions (including leaks, explosions, fires,
mechanical failure, unscheduled downtime, transportation interruptions, and
spills and releases and other environmental risks). Many of such factors are
beyond Lyondell's or its joint ventures' ability to control or predict.
Management cautions against putting undue reliance on forward-looking statements
or projecting any future results based on such statements or present or prior
earnings levels.
All subsequent written and oral forward-looking statements attributable to the
Company and persons acting on its behalf are qualified in their entirety by the
cautionary statements contained in this section and elsewhere in this report.
22
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
1. 1. On or about June 29, 1998, Mary E. McMullin, a purported shareholder of
ARCO Chemical, filed a complaint (the "Complaint") in the Court of Chancery
in the State of Delaware against each of the members of the Board of
Directors of ARCO Chemical (the "Individual Defendants"), ARCO Chemical and
Atlantic Richfield Company ("ARCO") and the Company. The Complaint
purportedly is brought on behalf of a class of all common stockholders of
ARCO Chemical other than the defendants and their affiliates. The Complaint
alleges that ARCO and the Individual Defendants breached fiduciary duties
owed to ARCO Chemical's public shareholders in connection with approval of
the Agreement and Plan of Merger to which the Company and its wholly owned
subsidiaries and ARCO Chemical are a party, and that Lyondell knowingly
aided and abetted such alleged breaches of fiduciary duty. The Complaint
seeks unspecified damages.
2. There have been no other material developments with respect to the Company's
legal proceedings previously reported in the 1997 Annual Report on Form 10-K
as updated by the Quarterly Report on Form 10-Q for the period ending
June 30, 1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4.9 Lyondell Petrochemical Company $7,000,000,000 Credit Agreement dated
as of July 23, 1998
27 Financial Data Schedule
(b) Reports on Form 8-K
The following Current Reports on Form 8-K were filed during the
quarter ended June 30, 1998 and through the date hereof.
Date of Report Item No. Financial Statements
-------------- ------- --------------------
May 15, 1998 5,7 None
June 18, 1998 2,7 None
July 23, 1998 2,7 Yes
23
<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 Chemical Company
Dated: August 13, 1998 /s/ VAN BILLET
----------------------------------------
Van Billet
Vice President and Controller
(Duly Authorized Officer and
Principal Accounting Officer)
24
<PAGE>
$7,000,000,000
CREDIT AGREEMENT
dated as of
JULY 23, 1998
among
LYONDELL PETROCHEMICAL COMPANY,
THE LENDERS PARTY HERETO,
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
AS ADMINISTRATIVE AGENT,
DLJ CAPITAL FUNDING, INC.,
AS SYNDICATION AGENT,
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
CITIBANK, N.A.,
THE CHASE MANHATTAN BANK
AND NATIONSBANK, N.A.,
AS DOCUMENTATION AGENTS.
J.P. MORGAN SECURITIES INC.,
AS ARRANGER
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION,
BANCAMERICA ROBERTSON STEPHENS
AND CHASE SECURITIES INC.,
AS CO-ARRANGERS
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
Definitions
Section 1.01. Definitions.................................................. 1
Section 1.02. Accounting Terms and Determinations.......................... 31
Section 1.03. Classes and Types of Loans and Borrowings.................... 32
Section 1.04. Other Definitional Provisions................................ 32
ARTICLE 2
The Credits
Section 2.01. Commitments to Lend.......................................... 32
Section 2.02. Notice of Borrowing.......................................... 33
Section 2.03. Notice to Lenders; Funding of Loans.......................... 34
Section 2.04. Maturity of Loans; Mandatory Prepayments..................... 35
Section 2.05. Interest Rates............................................... 39
Section 2.06. Method of Electing Interest Rates............................ 41
Section 2.07. Fees......................................................... 42
Section 2.08. Termination or Reduction of Commitments...................... 43
Section 2.09. Optional Prepayments......................................... 44
Section 2.10. General Provisions as to Payments............................ 44
Section 2.11. Funding Losses............................................... 45
Section 2.12. Computation of Interest and Fees............................. 45
Section 2.13. Notes........................................................ 46
Section 2.14. Registry..................................................... 46
Section 2.15. Regulation D Compensation.................................... 47
Section 2.16. Letters of Credit............................................ 47
Section 2.17. Swing Loans.................................................. 51
Section 2.18. Stop Issuance Notice......................................... 54
ARTICLE 3
Conditions
Section 3.01. Closing Date................................................. 55
Section 3.02. Borrowings and Issuances of Letters of Credit................ 57
ARTICLE 4
Representations and Warranties
Section 4.01. Corporate Existence and Power................................ 57
Section 4.02. Corporate and Governmental Authorization; No Contravention... 58
Section 4.03. Binding Effect; Liens Enforceable............................ 58
Section 4.04. Financial Information........................................ 58
<PAGE>
Section 4.05. Litigation................................................... 60
Section 4.06. Compliance with Laws......................................... 60
Section 4.07. Environmental Matters........................................ 60
Section 4.08. Taxes........................................................ 61
Section 4.09. Significant Subsidiaries..................................... 61
Section 4.10. No Regulatory Restrictions on Borrowing...................... 61
Section 4.11. Full Disclosure.............................................. 61
ARTICLE 5
Covenants
Section 5.01. Information.................................................. 62
Section 5.02. Payment of Obligations....................................... 65
Section 5.03. Maintenance of Property; Insurance........................... 65
Section 5.04. Conduct of Business and Maintenance of Existence............. 66
Section 5.05. Compliance with Laws......................................... 66
Section 5.06. Inspection of Property, Books and Records.................... 66
Section 5.07. Mergers and Sales of Assets.................................. 66
Section 5.08. Use of Proceeds.............................................. 67
Section 5.09. Negative Pledge.............................................. 67
Section 5.10. Limitation on Subsidiary Debt................................ 68
Section 5.11. Adjusted Debt to Adjusted EBITDA............................. 69
Section 5.12. Fixed Charge Coverage Ratio.................................. 69
Section 5.13. Minimum Consolidated Net Worth............................... 70
Section 5.14. Lease Payments............................................... 70
Section 5.15. Restricted Payments; Optional Prepayments.................... 70
Section 5.16. Investments; Business Acquisitions........................... 71
Section 5.17. Transactions with Affiliates................................. 71
Section 5.18. Limitation on Restrictions Affecting Subsidiaries............ 71
Section 5.19. Further Assurances........................................... 72
Section 5.20. Restrictions on Borrower Joint Ventures...................... 74
Section 5.21. Takeout Equity Issuance...................................... 75
ARTICLE 6
Defaults
Section 6.01. Events of Default............................................ 76
Section 6.02. Notice of Default............................................ 79
Section 6.03. Cash Cover................................................... 79
ARTICLE 7
The Agents
Section 7.01. Appointment and Authorization................................ 79
ii
<PAGE>
Section 7.02. Agents and Affiliates........................................ 80
Section 7.03. Action by the Administrative Agent........................... 80
Section 7.04. Consultation with Experts.................................... 80
Section 7.05. Liability of Agents.......................................... 80
Section 7.06. Indemnification.............................................. 81
Section 7.07. Credit Decision.............................................. 81
Section 7.08. Successor Administrative Agents.............................. 81
Section 7.09. Agents' Fees................................................. 82
Section 7.10. Syndication Agent, Co-Documentation Agents, Arranger
and Co-Arrangers............................................ 82
ARTICLE 8
Change in Circumstances
Section 8.01. Basis for Determining Interest Rate Inadequate or Unfair..... 82
Section 8.02. Illegality................................................... 83
Section 8.03. Increased Cost and Reduced Return............................ 83
Section 8.04. Taxes........................................................ 85
Section 8.05. Base Rate Loans Substituted for Affected Euro-Dollar Loans... 87
Section 8.06. Substitution of Bank......................................... 87
ARTICLE 9
Miscellaneous
Section 9.01. Notices...................................................... 88
Section 9.02. No Waivers................................................... 88
Section 9.03. Expenses; Indemnification.................................... 88
Section 9.04. Set-Offs..................................................... 89
Section 9.05. Amendments and Waivers....................................... 90
Section 9.06. Successors; Participations and Assignments................... 91
Section 9.07. Designated Lenders........................................... 93
Section 9.08. No Reliance on Margin Stock.................................. 95
Section 9.09. Governing Law; Submission to Jurisdiction.................... 95
Section 9.10. Counterparts; Effectiveness.................................. 95
Section 9.11. WAIVER OF JURY TRIAL......................................... 95
Section 9.12. ERISA Matters................................................ 95
Section 9.13. Confidentiality.............................................. 97
Section 9.14. Amendment and Restatement.................................... 98
COMMITMENT SCHEDULE
PRICING SCHEDULE
Schedule 5.20 - Existing Joint Venture Agreements
iii
<PAGE>
Exhibit A -- Note
Exhibit B-1 -- Form of Borrower Pledge Agreement (Acquisition Sub)
Exhibit B-2 -- Form of Borrower Pledge Agreement (LCR JV Subsidiary)
Exhibit B-3 -- Form of Borrower Pledge Agreement (Equistar JV Subsidiary)
Exhibit B-4 -- Form of Borrower Pledge Agreement (LMC JV Subsidiary)
Exhibit C-1 -- Form of JV Subsidiary Security Agreement (LCR)
Exhibit C-2 -- Form of JV Subsidiary Security Agreement (Equistar)
Exhibit C-3 -- Form of JV Subsidiary Security Agreement (LMC)
Exhibit D -- Form of Subsidiary Guarantee
Exhibit E -- Opinion of Special Counsel for Obligors
Exhibit F -- Opinion of Associate General Counsel of Borrower
Exhibit G -- Opinion of Special Counsel for Agents
Exhibit H -- Form of Assignment and Assumption Agreement
Exhibit I -- Form of Designation Agreement
iv
<PAGE>
AGREEMENT dated as of July 23, 1998 among LYONDELL PETROCHEMICAL COMPANY,
the LENDERS party hereto, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Administrative Agent, DLJ CAPITAL FUNDING, INC., as Syndication Agent, and BANK
OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, CITIBANK, N.A., THE CHASE
MANHATTAN BANK and NATIONSBANK, N.A., as Documentation Agents.
ARTICLE 1
Definitions
Section 1.01. Definitions. The following terms, as used herein, have the
following meanings:
"ACQUISITION" means the acquisition by the Borrower, directly or
indirectly, of ARCO Chemical pursuant to the Offer and the Merger.
"ACQUISITION DOCUMENTS" means the Offer to Purchase, the Merger Agreement
and the Voting Agreement.
"ACQUISITION SUB" means Lyondell Acquisition Corporation, a Delaware
corporation and a wholly-owned Subsidiary of the Borrower.
"ADDITIONAL JV DEBT" means Debt incurred by Equistar, LCR or LMC after the
Closing Date in connection with the admission into such Borrower Joint Venture
of a new partner or member, as the case may be; provided that, at the time such
Debt is incurred, such Borrower Joint Venture's ratio of Debt to EBITDA,
calculated on a pro forma basis (without giving effect to anticipated expense
reductions or other synergies) for its then most recent fiscal year for which
financial statements are available, does not exceed 2.25:1.00.
"ADJUSTED DEBT" means, at any date, the Debt of the Non-JV Group at such
date (exclusive of (i) the Lyondell-Equistar Debt and (ii) (A) the Equistar Note
and (B) Loans required to be prepaid pursuant to Section 2.04, in each case, if
and to the extent that cash available for payment thereof is held in an escrow
account established with the Administrative Agent).
"ADJUSTED EBITDA" means, for any period, the sum of (i) the EBITDA of the
Non-JV Group for such period, adjusted to exclude the effect of one time charges
incurred in connection with the Acquisition in an aggregate amount not
<PAGE>
exceeding $250,000,000 plus (ii) the Distributable Cash Flow of all Borrower
Joint Ventures for such period.
"ADMINISTRATIVE AGENT" means Morgan Guaranty Trust Company of New York in
its capacity as administrative agent for the Lenders under the Loan Documents,
and its successors in such capacity.
"ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Lender, an
administrative questionnaire in the form prepared by the Administrative Agent,
completed by such Lender and returned to the Administrative Agent (with a copy
to the Borrower).
"AFFILIATE" means (i) any Person that directly, or indirectly through one
or more intermediaries, controls the Borrower ("CONTROLLING PERSON"), (ii) any
Person (other than the Borrower or a Subsidiary) which is controlled by or is
under common control with a Controlling Person, (iii) any Borrower Joint Venture
or (iv) any Person (other than the Borrower or a Subsidiary) holding a direct or
indirect equity interest in any Borrower Joint Venture. As used herein, the
term "CONTROL" means possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise. No
director or officer of the Borrower shall be considered an Affiliate solely by
virtue of holding such position.
"AGENTS" means Administrative Agent, the Syndication Agent and the Co-
Documentation Agents, and "AGENT" means any of them as the context may require.
"APPLICABLE LENDING OFFICE" means, with respect to any Lender, (i) in the
case of its Base Rate Loans, its Domestic Lending Office and (ii) in the case of
its Euro-Dollar Loans, its Euro-Dollar Lending Office.
"APPLICABLE MARGIN" means, with respect to Loans of any Type and any Class
at any time, the percentage rate per annum set forth in the Pricing Schedule as
the Margin with respect to Loans of such Type and Class which is applicable at
such time in accordance with the Pricing Schedule; provided that the Applicable
Margin on any date shall be the sum of the percentage so determined in
accordance with the Pricing Schedule plus 2.00%, if on such date (i) an Event of
Default exists and (ii) except in the case of an Event of Default under Section
6.01(a) or 6.01(b), the Administrative Agent shall have notified the Borrower at
the request of the Required Lenders that this proviso shall be applicable.
"ARCO CHEMICAL" means ARCO Chemical Company, a Delaware corporation and the
surviving corporation in the Merger (expected to be renamed
2
<PAGE>
Lyondell Chemical Manufacturing Company effective on a date following the
Merger).
"ARRANGER" means J.P. Morgan Securities Inc.
"ASSET SALE" means any sale, lease or other disposition (including any such
transaction effected by way of merger or consolidation) by the Borrower or any
of its Subsidiaries of any asset, including without limitation any sale-
leaseback transaction, whether or not involving a capital lease, but excluding
(i) dispositions of inventory or equipment in the ordinary course of business,
(ii) dispositions of Temporary Cash Investments and cash payments otherwise
permitted under this Agreement (including Restricted Payments permitted by
Section 5.15), (iii) dispositions to the Borrower or a Subsidiary of the
Borrower, (iv) dispositions constituting mergers or consolidations permitted by
Section 5.07, (v) dispositions constituting Investments permitted by Section
5.16 (except as provided below) and (v) dispositions constituting Liens
permitted by Section 5.09. For avoidance of doubt, a Securitization Transaction
constitutes an Asset Sale and does not, in itself, give rise to an obligation
secured by a Lien on an asset of the Borrower or a Subsidiary. To the extent
that, in connection with (x) an Investment by the Borrower or a Subsidiary in a
Borrower Joint Venture or (y) a reduction in the proportionate interest of the
Borrower or a Subsidiary in a Borrower Joint Venture as contemplated by Section
5.19(d)(ii), the Borrower or a Subsidiary receives Net Cash Proceeds (determined
as if such transaction were an Asset Sale), then such transaction shall be
treated as an Asset Sale to the extent of such Net Cash Proceeds.
"ASSIGNEE" has the meaning set forth in Section 9.06(c).
"AVAILABLE CASH FLOW" means, for any Person for any fiscal period, the sum
of (i) the Net Income of such Person for such period plus (ii) to the extent
deducted in determining such Net Income for such period, depreciation,
amortization and other noncash charges plus (iii) any increase (or minus any
decrease) during such period in the deferred tax liabilities of such Person plus
(iv) any decrease (or minus any increase) in the Net Working Investment of such
Person between the beginning and end of such period minus (v) the Capital
Expenditures of such Person for such period (except to the extent financed with
the proceeds of Debt of such Person).
"BASE RATE" means, for any day, a rate per annum equal to the higher of (i)
the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds
Rate for such day.
3
<PAGE>
"BASE RATE LOAN" means a Loan which bears interest based on the Base Rate
pursuant to the applicable Notice of Borrowing or Notice of Interest Rate
Election or the provisions of Section 2.06(a) or Article 8.
"BORROWER" means Lyondell Petrochemical Company (expected to be renamed
Lyondell Chemical Company effective July 31, 1998), a Delaware corporation, and
its successors.
"BORROWER JOINT VENTURES" means Equistar, LCR, LMC and any Future Joint
Venture, and "BORROWER JOINT VENTURE" means any of them, as the context may
require.
"BORROWER PLEDGE AGREEMENT" means a Pledge Agreement dated as of the
Closing Date between the Borrower and the Administrative Agent, substantially in
the form of Exhibit B-1, B-2, B-3 or B-4 hereto.
"BORROWER'S 1997 FORM 10-K" means the Borrower's annual report on Form 10-K
for its fiscal year ended December 31, 1997, as filed with the SEC pursuant to
the Exchange Act.
"BORROWER'S LATEST FORM 10-Q" means the Borrower's quarterly report on Form
10-Q for the fiscal quarter ended March 31, 1998, as filed with the SEC pursuant
to the Exchange Act.
"BORROWING" has the meaning set forth in Section 1.03.
"BUSINESS ACQUISITION" means (i) an Investment by the Borrower or any of
its Subsidiaries in any other Person (including an Investment by way of
acquisition of securities of any other Person) pursuant to which such Person
shall become a Subsidiary or shall be merged into or consolidated with the
Borrower or any of its Subsidiaries or (ii) an acquisition by the Borrower or
any of its Subsidiaries of the property and assets of any Person (other than the
Borrower or any of its Subsidiaries) that constitute substantially all the
assets of such Person or any division or other business unit of such Person.
"CAPITAL EXPENDITURES" means, for any Person for any fiscal period, the
additions to property, plant and equipment and other capital expenditures of the
Borrower and its Consolidated Subsidiaries for such period, as the same are (or
would in accordance with GAAP be) set forth in a statement of cash flows of such
Person for such period.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, and any rules or regulations promulgated
thereunder.
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"CHANGE OF CONTROL" shall occur if (i) any Person or group of Persons
(within the meaning of Section 13 or 14 of the Exchange Act) shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 promulgated by the SEC
under said Act) of 20% or more of the outstanding shares of common stock of the
Borrower; or (ii) Continuing Directors shall cease to constitute a majority of
the Borrower's board of directors.
"CLASS" has the meaning set forth in Section 1.03.
"CLOSING DATE" means the date on which all conditions set forth in Section
3.01 shall have been satisfied (or waived in accordance with Section 9.05).
"CO-ARRANGERS" means Donaldson, Lufkin & Jenrette Securities Corporation,
BancAmerica Robertson Stephens and Chase Securities Inc.
"CO-DOCUMENTATION AGENTS" means Bank of America National Trust and Savings
Association, Citibank, N.A., The Chase Manhattan Bank and NationsBank, N.A.,
each in its capacity as documentation agent in respect of the Loan Documents,
and "CO-DOCUMENTATION AGENT" means any of them, as the context may require.
"COLLATERAL" means the collateral purported to be subject to the Liens of
the Collateral Documents.
"COLLATERAL DOCUMENTS" means the Borrower Pledge Agreements, the JV
Subsidiary Security Agreements, and any additional security agreements or pledge
agreements required to be delivered pursuant to the Loan Documents to secure the
obligations of the Obligors under the Loan Documents and, to the extent provided
therein, the obligations of the Borrower under the PBGC Settlement Agreement,
and any instruments of assignment or other instruments or agreements executed
pursuant to the foregoing.
"COMMITMENT" means any Term Commitment, Revolving Commitment, or Swing Loan
Commitment, and "COMMITMENTS" means any or all of the foregoing, as the context
may require.
"COMMITMENT FEE RATE" has the meaning set forth in the Pricing Schedule.
"COMMITMENT SCHEDULE" means the Schedule attached hereto and identified as
such.
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"CONSOLIDATED ASSETS" means, at any date, the consolidated assets of the
Borrower and its Consolidated Subsidiaries determined on a consolidated basis as
of such date.
"CONSOLIDATED NET INCOME" means, for any period, the net income of the
Borrower and its Consolidated Subsidiaries, determined on a consolidated basis
for such period, adjusted to exclude the effect of one time charges incurred in
connection with the Acquisition in an aggregate amount not exceeding
$250,000,000.
"CONSOLIDATED NET WORTH" means, at any date, the consolidated stockholders'
equity of the Borrower and its Consolidated Subsidiaries determined as of such
date, adjusted to exclude the effect of one time charges incurred in connection
with the Acquisition in an aggregate amount not exceeding $250,000,000.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary or other entity
the accounts of which would be consolidated with those of the Borrower in its
consolidated financial statements if such statements were prepared as of such
date.
"CONTINUING DIRECTORS" means (i) directors of the Borrower on the date
hereof and (ii) individuals who were recommended for election or elected to
become directors of the Borrower by a majority of the Continuing Directors then
in office.
"CREDIT EXPOSURE" means, with respect to any Lender at any time, the sum of
(i) such Lender's Revolving Commitment at such time or, if its Revolving
Commitment shall have been terminated, the amount of such Lender's Revolving
Outstandings at such time plus (ii) the aggregate outstanding principal amount
of such Lender's Term Loans at such time or, if it has no Term Loans then
outstanding, the aggregate amount such Lender's Term Commitments at such time.
"DEBT" of any Person means, at any date, without duplication, (i) the
principal amount of all obligations of such Person for borrowed money, (ii) the
principal amount of all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person to pay the deferred purchase price of property or services, except trade
accounts payable, accrued expenses and deferred compensation and other pension,
benefit and welfare expenses, in each case arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with GAAP, (v) all non-contingent obligations (and, solely for
purposes of Section 5.09, all contingent obligations, which contingent
obligations shall for such
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purposes be deemed to be in an outstanding principal amount equal to the maximum
contingent amount thereof) of such Person to reimburse any bank or other Person
in respect of amounts paid under a letter of credit or similar instrument, (vi)
all capital stock of such Person which is subject to redemption otherwise than
at the sole option of such Person at any time prior to the date 12 months after
the latest Maturity Date, (vii) all Debt secured by a Lien on any asset of such
Person, whether or not such Debt is otherwise an obligation of such Person and
(viii) all Guarantees by such Person of Debt of another Person (each such
Guarantee to constitute Debt in an amount equal to the amount of such other
Person's Debt Guaranteed thereby). For avoidance of doubt, Debt does not include
an Equity Equivalent or a Securitization Transaction.
"DEBT INCURRENCE" means the issuance for cash proceeds by the Borrower or
any of its Subsidiaries of any debt security having a maturity in excess of one
year, other than any such issuance (i) to the Borrower or a Subsidiary or (ii)
pursuant to a Working Capital Facility.
"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.
"DERIVATIVES OBLIGATIONS" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
"DESIGNATED LENDER" means, with respect to any Designating Lender, an
Eligible Designee designated by it pursuant to Section 9.07(a) as a Designated
Lender for purposes of this Agreement.
"DESIGNATING LENDER" means, with respect to each Designated Lender, the
Lender that designated such Designated Lender pursuant to Section 9.07(a).
"DISTRIBUTABLE CASH FLOW" means with respect to any Borrower Joint Venture
for any period, the cash from operations of such Borrower Joint Venture for such
period, but only to the extent the same is distributed to a JV Subsidiary during
or promptly after such period.
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"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to close.
"DOMESTIC LENDING OFFICE" means, as to each Lender, its office 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 as such Lender may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Administrative Agent.
"EBITDA" means, for any Person for any period, the Net Income of such
Person for such period plus, to the extent deducted in determining such Net
Income, interest expense, income tax expense and depreciation, amortization and
other similar non-cash charges.
"ELIGIBLE DESIGNEE" means a special purpose corporation that (i) is
organized under the laws of the United States or any state thereof, (ii) is
engaged in making, purchasing or otherwise investing in commercial loans in the
ordinary course of its business and (iii) issues (or the parent of which issues)
commercial paper rated at least A-1 or the equivalent thereof by S&P or P-1 or
the equivalent thereof by Moody's.
"ENVIRONMENTAL LAWS" means any federal, state, local or foreign law,
treaty, judicial decision, regulation, rule, judgment, order, decree,
injunction, permit or governmental restriction or requirement, whether now or
hereafter in effect, relating to human health and safety, the environment or the
protection of the environment.
"ENVIRONMENTAL LIABILITIES" means any and all liabilities of the Borrower
and its Subsidiaries, whether vested or unvested, contingent or fixed, actual or
potential, which arise under or relate to matters covered by Environmental Laws.
"EQUISTAR" means Equistar Chemicals, LP, a Delaware limited partnership and
a joint venture among the Borrower, Millennium Chemicals Inc. and Occidental
Chemical Corp. in which the Borrower holds at the date hereof a 41% indirect
equity interest.
"EQUISTAR NOTE" means the Debt identified in clause (vi) of the definition
of Existing Borrower Debt.
"EQUISTAR PARTNERSHIP AGREEMENT" means the Limited Partnership Agreement of
Equistar dated October 10, 1997, as amended and restated through May 15, 1998.
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"EQUITY EQUIVALENT" means any equity securities of a special purpose
Subsidiary of the Borrower, whose only assets consist of the proceeds of such
issuance and a debt obligation of the Borrower which matures more than one year
after the latest Maturity Date and is subordinated in right of payment to the
Loans on terms satisfactory to the Administrative Agent.
"EQUITY ISSUANCE" means any issuance of (a) equity securities (including
any preferred equity securities) by the Borrower, other than (i) equity
securities issued to a Subsidiary, (ii) equity securities issued pursuant to
employee benefit and/or dividend reinvestment plans in the ordinary course of
business and (iii) equity securities issued as consideration for a Business
Acquisition or (b) an Equity Equivalent.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA GROUP" means the Borrower, any Subsidiary and 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 or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"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 Lender, 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 Lender
as it may hereafter designate as its Euro-Dollar Lending Office by notice to the
Borrower and the Administrative Agent.
"EURO-DOLLAR LOAN" means a Loan which bears interest based on the London
Interbank Offered Rate pursuant to the applicable Notice of Borrowing or Notice
of Interest Rate Election.
"EURO-DOLLAR 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 for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
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<PAGE>
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Lender to
United States residents).
"EVENTS OF DEFAULT" has the meaning set forth in Section 6.01.
"EXCESS CASH FLOW" means, for any period, the excess (if any) of:
(a) the sum of (i) the Available Cash Flow for the Non-JV Group for such
fiscal period, (ii) the Distributable Cash Flow of all Borrower Joint Ventures
for such period plus (iii) the amount of cash extraordinary or other non-
recurring gains of the Non-JV Group during such period; over
(b) the sum of (i) Regular Preferred Stock Payments for such period, (ii)
the scheduled amortization of long-term Debt of the Non-JV Group during such
period and (iii) dividends paid on the Borrower's common stock during such
period.
The calculation of Excess Cash Flow shall be adjusted, to the extent necessary,
to avoid duplication of amounts of mandatory prepayments pursuant to Section
2.04(d).
"EXCESS CASH FLOW PREPAYMENT AMOUNT" means, for any period, (i) 50% of
Excess Cash Flow for such period minus (ii) the aggregate principal amount of
Term Loans prepaid during such period pursuant to Section 2.09 (exclusive of the
portion thereof credited against scheduled amortization in forward order of
maturity).
"EXCLUDED TAXES" has the meaning set forth in Section 8.04(a).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXISTING ARCO CHEMICAL DEBT" means (i) the 9.9% Debentures Due 2000, the
9.375% Debentures Due 2005, the 10.25% Debentures Due 2010 and the 9.8%
Debentures Due 2020, all issued by ARCO Chemical pursuant to the Indenture dated
June 15, 1988 among ARCO Chemical and The Bank of New York, as Trustee, (ii)
other Debt disclosed in the consolidated balance sheet of ARCO Chemical set
forth in ARCO Chemical's quarterly report on Form 10-Q for the fiscal quarter
ended March 31, 1998, and (iii) other Debt outstanding on the Closing Date
incurred subsequent to March 31, 1998 in the ordinary course of business
consistent with past practice.
"EXISTING BORROWER CREDIT AGREEMENT" means the $225,000,000 Credit
Agreement dated as of December 1, 1997 among the Borrower, Texas Commerce
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<PAGE>
Bank National Association, as administrative agent, Bank of America National
Trust and Savings Association, as documentation agent, The Chase Manhattan Bank,
as auction agent, and the other banks from time to time party thereto.
"EXISTING BORROWER DEBT" means (i) the 10.00% Notes Due 1999 issued by the
Borrower pursuant to the 1989 Indenture; (ii) the 9.125% Notes Due 2002 issued
by the Borrower pursuant to an Indenture dated as of March 10, 1992 between the
Borrower and First Trust National Association, as trustee, as supplemented by
the First Supplemental Indenture dated as of March 10, 1992 and the Second
Supplemental Indenture dated as of December 1, 1997; (iii) the 6.5% Notes Due
2006 and 7.55% Notes Due 2026, each issued by the Borrower pursuant to an
Indenture dated as of January 29,1996 between the Borrower and Texas Commerce
Bank National Association, as trustee, as supplemented by the First Supplemental
Indenture dated as of February 15, 1996 and the Second Supplemental Indenture
dated as of December 1, 1997; (iv) Debt under the Medium Term Notes (clauses (i)
through (iv) of this paragraph, describing certain Debt with respect to which,
as between the Borrower and Equistar, Equistar is the primary obligor and the
Borrower is an obligor, the "LYONDELL-EQUISTAR DEBT"); (v) Debt under the
Existing Borrower Credit Agreement; (vi) Debt under the $345,000,000 Term Note
Agreement between the Borrower and Equistar dated as of December 1, 1997; (vii)
Debt in an amount not in excess of $150,000,000 under certain uncommitted lines
of credit existing on the date of this Agreement; (viii) other Debt disclosed in
the consolidated balance sheet of the Borrower set forth in the Borrower's
quarterly report on Form 10-Q for the fiscal quarter ended March 31, 1998, and
(ix) other Debt outstanding on the Closing Date incurred subsequent to March 31,
1998 in the ordinary course of business consistent with past practice.
"EXISTING DEBT" means (i) the Existing Borrower Debt, (ii) the Existing
Equistar Debt, (iii) the Existing LCR Debt and (iv) the Existing ARCO Chemical
Debt.
"EXISTING EQUISTAR DEBT" means (i) Debt under the $1,250,000,000 Credit
Agreement dated as of November 25, 1997 among Equistar, Millennium America Inc.,
as Guarantor, the lenders party thereto, Bank of America National Trust and
Savings Association, as Servicing Agent, Documentation Agent and Administrative
Agent, and The Chase Manhattan Bank, as Syndication Agent and Administrative
Agent, (ii) the Lyondell-Equistar Debt, (iii) Debt under the $500,000,000 Credit
Agreement dated as of June 12, 1998 among Equistar, the lenders party thereto,
Bank of America National Trust and Savings Association, as administrative agent,
documentation agent and servicing agent and Chase Bank of Texas, National
Association, as administrative agent and syndication agent, (iv) Debt under the
Lease Intended for Security dated as of December 18, 1991 among Occidental
Chemical Corporation, as Lessee, the Institutions listed on
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Schedule I, as Lessors, Norwest Bank Minnesota, National Association, as Agent,
and Chemical Bank and The Bank of Nova Scotia, as Information Agent, (v) other
Debt disclosed in the balance sheet of Equistar set forth in the Borrower's
quarterly report on Form 10-Q for the fiscal quarter ended March 31, 1998, and
(vi) other Debt outstanding on the Closing Date incurred subsequent to March 31,
1998 in the ordinary course of business consistent with past practice.
"EXISTING LCR DEBT" means (i) Debt under the LCR Construction Facility;
(ii) Debt under the $70,000,000 Revolving Credit Agreement dated as of May 5,
1995 among LCR, the lenders party thereto, the co-agents party thereto and The
Bank of New York, as Agent and as Issuer, as amended by the First Amendment to
Revolving Credit Agreement dated as of April 16, 1996, the Second Amendment to
Revolving Credit Agreement dated as of November 12, 1996 and the Consent and
Third Amendment to Revolving Credit Agreement dated as of January 27, 1997, each
among LCR, the lenders party thereto and The Bank of New York, as Agent and as
Issuer; (iii) other Debt disclosed in the balance sheet of LCR set forth in the
Borrower's quarterly report on Form 10-Q for the fiscal quarter ended March 31,
1998, and (iv) other Debt outstanding on the Closing Date incurred subsequent to
March 31, 1998 in the ordinary course of business consistent with past practice.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100 of 1%) 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 New York on the Domestic Business Day next
succeeding such day, provided 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 immediately 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 Morgan Guaranty Trust Company of New York on
such day for such transactions by Federal funds brokers of recognized standing,
as determined by the Administrative Agent.
"FISCAL QUARTER" means a fiscal quarter of the Borrower.
"FISCAL YEAR" means a fiscal year of the Borrower.
"FIXED CHARGE COVERAGE RATIO" means, at any date, the ratio of (i) the sum
of (A) Adjusted EBITDA plus (B) the rental expense of the Non-JV Group, in each
case for the period of four consecutive Fiscal Quarters ended on or most
recently prior to such date to (ii) the sum of (A) the interest expense of the
Non-
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JV Group for such period plus (B) the rental expense of the Non-JV Group for
such period plus (C) Regular Preferred Stock Payments for such period.
"FIXED RATE LOAN" means a Euro-Dollar Loan or a Swing Loan.
"FOREIGN SUBSIDIARY" means any Subsidiary organized under the laws of a
jurisdiction, and conducting substantially all its operations, outside the
United States.
"FUTURE JOINT VENTURE" means any joint venture (i) in which the Borrower
acquires a direct or indirect equity interest after the Closing Date and (ii)
which is accounted for by the Borrower on the equity method.
"GAAP" means 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 Lenders.
"GROUP OF LOANS" means at any time a group of Loans of any Class consisting
of (i) all Loans of such Class which are Base Rate Loans at such time or (ii)
all Loans of such Class which are Euro-Dollar Loans having the same Interest
Period at such time, provided that, if a Loan of any particular Lender is
converted to or made as a Base Rate Loan pursuant to Article 8, such Loan shall
be included in the same Group or Groups of Loans from time to time as it would
have been in if it had not been so converted or made.
"GUARANTEE" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt or other obligation of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (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 virtue of an agreement to keep-well, to purchase assets, goods, securities or
services, to take-or-pay, or to maintain financial statement conditions or
otherwise), (ii) to reimburse a bank for amounts drawn under a letter of credit
for the purpose of paying such Debt or other obligation or (iii) entered into
for the purpose of assuring in any other manner the holder of such Debt or other
obligation of the payment thereof or to protect such holder against loss in
respect thereof (in whole or in part), provided that the term "Guarantee" shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
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"HAZARDOUS SUBSTANCES" means any pollutant, contaminant, waste or chemical
or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous
substance, waste or material, or any substance, waste or material having any
constituent elements displaying any of the foregoing characteristics, including
petroleum, its derivatives, by-products and other hydrocarbons, regulated under
Environmental Laws.
"INDEMNITEE" has the meaning set forth in Section 9.03(b).
"INFORMATION MEMORANDUM" means the confidential information memorandum
dated June 1998 furnished to the Lenders in connection with the syndication of
the credit facilities established under this Agreement.
"INTEREST PERIOD" means (1) with respect to each Euro-Dollar Loan, the
period commencing on the date of borrowing specified in the applicable Notice of
Borrowing or on the date specified in an applicable Notice of Interest Rate
Election and ending one, two, three or six months (or, if corresponding funding
is available to each Lender, nine or twelve months) thereafter, as the Borrower
may elect in such notice; provided 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 clauses (c) and (d) below, end on the
last Euro-Dollar Business Day of a calendar month;
(c) no Interest Period for any Revolving Loan shall extend beyond
the Revolving Credit Termination Date; and
(d) no Interest Period applicable to any Term Loan shall extend
beyond any date upon which is due any scheduled principal payment in
respect of the Term Loans unless the aggregate principal amount of Term
Loans represented by Base Rate Loans and Euro-Dollar Loans having Interest
Periods which end on or prior to such date equals or exceeds the amount of
such principal payment.
(2) with respect to each Swing Loan, the period commencing on the date of
borrowing specified in the applicable Notice of Swing Loan Borrowing or on
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the last day of the next preceding Interest Period applicable thereto and ending
one week thereafter; provided that;
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (b) below, be
extended to the next succeeding Euro-Dollar Business Day; and
(b) no Interest Period for any Swing Loan shall extend beyond the
Swing Loan Termination Date.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"INVESTMENT" means any investment in any Person, whether by means of
purchase of equity securities, capital contribution (in cash, property or
services), loan, Guarantee, time deposit or otherwise (but not including any
demand deposit).
"ISSUING BANK" means Morgan Guaranty Trust Company of New York and any
other Revolving Lender that may agree to issue letters of credit hereunder, in
each case as issuer of a letter of credit hereunder.
"JV SUBSIDIARIES" means Lyondell Petrochemical G.P. Inc., Lyondell
Petrochemical L.P. Inc., Lyondell Refining Company, Lyondell General Methanol
Company, Lyondell Limited Methanol Company and each other Subsidiary of the
Borrower that, at any time, directly holds an equity interest in any Borrower
Joint Venture, and "JV SUBSIDIARY" means any of the foregoing, as the context
may require.
"JV SUBSIDIARY SECURITY AGREEMENT" means a Security Agreement dated as of
the Closing Date entered into by each JV Subsidiary in favor of the
Administrative Agent, substantially in the form of Exhibit C-1, C-2 or C-3
hereto.
"LCR" means LYONDELL-CITGO Refining Company, Ltd., a Texas limited
liability company (and a joint venture between the Borrower and CITGO Petroleum
Corporation) in which the Borrower holds at the date hereof 58.75% indirect
equity interest.
"LCR CONSTRUCTION FACILITY" means the $450,000,000 Credit Agreement dated
as of May 5, 1995 among LCR, the lenders party thereto, The Bank of Nova Scotia,
Credit Lyonnais, The First National Bank of Chicago and The Industrial Bank of
Japan, Ltd., as Co-Agents, and The Bank of New York, as Agent, as amended by the
First Amendment to Credit Agreement dated as of April 16, 1996, the Second
Amendment to Credit Agreement dated as of November 12, 1996 and
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<PAGE>
the Consent and Third Amendment to Revolving Credit Agreement dated as of
January 27, 1997, each among LCR, the lenders party thereto and The Bank of New
York, as Agent.
"LCR RECAPITALIZATION" means the recapitalization and reorganization as a
limited partnership of LCR, anticipated to occur prior to March 31, 1999,
including the refinancing of certain Existing LCR Debt, repayment of Debt under
the LCR Construction Facility and the making of certain cash distributions to
the Borrower.
"LCR REGULATIONS" means the Limited Liability Company Regulations of LCR
dated July 1, 1993, as amended through January 27, 1997.
"LENDER" means (i) each lender listed on the Commitment Schedule, (ii) each
Assignee which becomes a Lender pursuant to Section 9.06(c) and (iii) their
respective successors.
"LENDER PARTIES" means the Lenders and the Agents.
"LETTER OF CREDIT" means a letter of credit to be issued hereunder by an
Issuing Bank.
"LETTER OF CREDIT LIABILITIES" means, for any Lender and at any time, such
Lender's ratable participation in the sum of (x) the aggregate amount then owing
by the Borrower in respect of amounts drawn under Letters of Credit and (y) the
aggregate amount then available for drawing under all Letters of Credit.
"LETTER OF CREDIT TERMINATION DATE" means the tenth Domestic Business Day
prior to the Revolving Credit Termination Date.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has substantially the same practical effect as a
security interest, in respect of such asset. For purposes hereof, 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.
"LMC" means Lyondell Methanol Company, L.P., a Texas limited partnership
(and a joint venture between the Borrower and MCN Investment Corporation) in
which the Borrower holds at the date hereof a 75% indirect equity interest.
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"LMC PARTNERSHIP AGREEMENT" means the Limited Partnership Agreement of LMC
dated December 12, 1996.
"LOAN" means a Base Rate Loan, a Euro-Dollar Loan or a Swing Loan and
"LOANS" means any combination of the foregoing, as the context may require;
provided that, if any such Loan or Loans (or portions thereof) are combined or
subdivided pursuant to a Notice of Interest Rate Election, the term "Loan" shall
refer to the combined principal amount resulting from such combination or to
each of the separate principal amounts resulting from such subdivision, as the
case may be.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Subsidiary Guarantee
and the Collateral Documents.
"LONDON INTERBANK OFFERED RATE" has the meaning set forth in Section
2.05(b).
"LYONDELL-EQUISTAR DEBT" has the meaning set forth in the definition of
"Existing Borrower Debt".
"MAJOR CASUALTY PROCEEDS" means (i) the aggregate insurance proceeds
received in connection with one or more related events by the Borrower or any of
its Subsidiaries under any Property Insurance Policy or (ii) any award or other
cash compensation with respect to any one or more related condemnations of
property (or any transfer or disposition of property in lieu of condemnation)
received by the Borrower or any of its Subsidiaries if the amount of such
aggregate insurance proceeds or award or other cash compensation exceeds
$10,000,000.
"MANDATORY PREPAYMENT RELEASE DATE" means the first date on which (i) all
Term Loans-C and Term Loans-D (including all interest and fees accrued thereon)
have been repaid in full and (ii) the Borrower has Senior Debt Ratings at or
above the level of Baa3 by Moody's and BBB- by S&P.
"MARGIN STOCK" has the meaning set forth in Regulation U.
"MATERIAL ADVERSE EFFECT" means (i) any material adverse effect upon the
financial condition, results of operations, assets or business of the Borrower
and its Subsidiaries, taken as a whole (other than general economic conditions
affecting the petrochemical industry as a whole); (ii) a material adverse effect
on the ability of the Obligors as a whole to perform their obligations under the
Loan Documents or (iii) any material adverse effect on the rights and remedies
of the Agents and the Lenders under this Agreement, the Notes and the other Loan
Documents.
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"MATERIAL DEBT" means Debt (other than the Loans and Reimbursement
Obligations) of the Borrower and/or one or more of its Subsidiaries (including
for this purpose the Borrower Joint Ventures), arising in one or more related or
unrelated transactions, in an aggregate principal amount exceeding $50,000,000.
"MATERIAL PLAN" means, at any time, a Plan or Plans having aggregate
Unfunded Liabilities in excess of $50,000,000.
"MATURITY DATE" means, (i) with respect to Term Loans-A, June 30, 2003,
(ii) with respect to Term Loans-B, June 30, 2005, (iii) with respect to Term
Loans-C, June 30, 1999, (iv) with respect to Term Loans-D, June 30, 2000, (v)
with respect to Revolving Loans, the Revolving Credit Termination Date and (vi)
with respect to Swing Loans, the Swing Loan Termination Date.
"MEDIUM TERM NOTES" means certain medium term notes issued by the Borrower
(in a form set forth as an exhibit to the Borrower's annual report on Form 10-K
for its fiscal year ended December 31, 1988, as filed with the SEC pursuant to
the Exchange Act), maturing at various dates from 1998 to 2005, and having a
weighted average interest rate at December 31, 1997 of 9.83%.
"MERGER" means the merger of Acquisition Sub with and into ARCO Chemical
pursuant to the Merger Agreement, with ARCO Chemical as the surviving company .
"MERGER AGREEMENT" means the Agreement and Plan of Merger dated as of June
18, 1998 among the Borrower, Acquisition Sub and ARCO Chemical, as amended from
time to time in accordance with its terms.
"MOODY'S" means Moody's Investors Service, Inc. or any successor to such
corporation's business of rating debt securities.
"MULTIEMPLOYER PLAN" means, at any time, an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"NET CASH PROCEEDS" means, with respect to any Reduction Event, an amount
equal to the cash proceeds received by the Borrower or any of its Subsidiaries
from or in respect of such Reduction Event (including any cash proceeds received
as interest or similar income on, or other cash proceeds of, any noncash
proceeds of any Asset Sale), less (a) any fees, costs and expenses reasonably
incurred by such Person in respect of such Reduction Event and (b) if
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such Reduction Event is an Asset Sale, (i) any taxes actually paid or to be
payable by such Person (as estimated by the chief financial officer or chief
accounting officer of the Borrower, giving effect to the overall tax position of
the Borrower) in respect of such Asset Sale, (ii) the amount of all Debt (other
than the Loans) secured by any assets subject to that Asset Sale and subject to
mandatory prepayment as a result of that Asset Sale, and (iii) the amount of any
reserves established by the Borrower and its Subsidiaries to fund contingent
liabilities payable by the Borrower and its Subsidiaries attributable to such
Asset Sale (as estimated by the chief financial officer or chief accounting
officer of the Borrower), including, without limitation, liabilities under any
indemnification obligations and severance and other employee termination costs
associated with such Asset Sale, until such time as such amounts are no longer
reserved or such reserve is no longer necessary (at which time any remaining
amounts will become Net Cash Proceeds).
"NET INCOME" means, for any Person for any period, the net income of such
Person for such period, adjusted to exclude the effect of any extraordinary
items of gain or loss.
"NET WORKING INVESTMENT" means at any date current assets (exclusive of
cash and cash equivalents) minus current liabilities (exclusive of Debt).
"1989 INDENTURE" means the Indenture dated as of May 31, 1989 between the
Borrower and Texas Commerce Bank, National Association, as trustee, as
supplemented by the First Supplemental Indenture dated as of May 31, 1989 and
the Second Supplemental Indenture dated as of December 1, 1997.
"NON-JV GROUP" means the Borrower and its Consolidated Subsidiaries,
including upon consummation of the Offer, ARCO Chemical, but excluding the
Borrower Joint Ventures and the JV Subsidiaries.
"NOTES" means promissory notes of the Borrower, substantially in the form
of Exhibit A hereto, evidencing the Borrower's obligation to repay the Loans,
and "NOTE" means any one of such promissory notes issued hereunder.
"NOTICE OF BORROWING" has the meaning set forth in Section 2.02.
"NOTICE OF INTEREST RATE ELECTION" has the meaning set forth in Section
2.06(a).
"NOTICE OF ISSUANCE" has the meaning set forth in Section 2.16(b).
"NOTICE OF SWING LOAN BORROWING" has the meaning set forth in Section
2.17(b).
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"OBLIGOR" means the Borrower, each Subsidiary Guarantor and each JV
Subsidiary.
"OFFER" means the offer by Acquisition Sub to purchase all the outstanding
shares of common stock, par value $1.00 per share, of ARCO Chemical pursuant to
the Offer to Purchase.
"OFFER TO PURCHASE" means the Offer to Purchase for Cash All Outstanding
Shares of Common Stock of ARCO Chemical Company at $57.75 Net Per Share by
Lyondell Acquisition Corporation, a wholly owned subsidiary of Lyondell
Petrochemical Company, dated June 24, 1998, as amended from time to time in
accordance with its terms; provided that no material amendment shall be
effective for purposes of references thereto in this Agreement unless approved
in writing by the Required Lenders.
"ORDINARY COURSE LIENS" means the following Liens:
(a) Liens incurred and pledges and deposits made in the ordinary course of
business in connection with workers' compensation, disability or unemployment
insurance, old-age pensions, retiree health benefits and other social security
benefits and deposits securing liabilities to insurance carriers under insurance
or self-insurance arrangements;
(b) Liens securing the performance of bids, tenders, leases, government and
other contracts (other than for Debt), statutory and regulatory obligations,
surety, customs bonds and other obligations of a like nature, incurred as an
incident to and in the ordinary course of business;
(c) Liens encumbering pipelines or pipeline facilities that arise by
operation of law, and other Liens imposed by law such as carriers',
warehousemen's, mechanics', materialmen's and vendors liens, incurred in good
faith in the ordinary course of business and securing obligations which are not
overdue for a period of more than 90 days or which are being contested in good
faith by appropriate proceedings;
(d) Liens securing the payment of taxes, assessments and governmental
charges or levies, either (i) not delinquent or (ii) being contested in good
faith by appropriate legal or administrative proceedings;
(e) (i) zoning restrictions, easements, licenses, reservations, provisions,
covenants, conditions, waivers, restrictions on the use of property, minor
irregularities of title and similar encumbrances incurred or suffered in the
ordinary course of business (and with respect to leasehold interests, the
interest of the landlord or owner in the leased property and mortgages,
obligations, liens and
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other encumbrances incurred, created, assumed or permitted to exist and arising
by, through or under a landlord or owner of the leased property, with or without
consent of the lessee) and (ii) licenses or leases for patents, copyrights,
trademarks, tradenames and other intellectual property;
(f) leases or subleases granted to others that do not materially interfere
with the ordinary course of business of the Borrower and its Subsidiaries;
(g) customary Liens for the fees, costs and expenses of trustees and escrow
agents pursuant to any indenture, escrow agreement or similar agreement
establishing a trust or escrow arrangement, and Liens pursuant to merger
agreements, stock purchase agreements, asset sale agreements, option agreements
and similar agreements in respect of the disposition of property or assets of
the Borrower and the Subsidiaries, to the extent such dispositions are permitted
hereunder;
(h) Liens in favor of customs and revenue authorities arising as a matter
of law to secure payment of customs duties in connection with the importation of
goods;
(i) customary Liens in favor of issuers of documentary letters of credit;
(j) netting provisions and setoff rights in favor of counterparties to
agreements creating Derivative Obligations;
(k) prejudgment Liens which are being contested in good faith by
appropriate proceedings;
(l) judgment Liens which are being contested in good faith by appropriate
proceedings and Liens securing appeal or similar surety bonds therefor; provided
that (i) no Event of Default exists under Section 6.01(k) relating thereto and
(ii) the aggregate amount secured by such Liens does not exceed $250,000,000
(exclusive of Liens securing judgments covered by (x) insurance in respect of
which the carrier has not contested coverage or (y) appeal or similar surety
bonds); and
(m) Liens not otherwise constituting Ordinary Course Liens on cash or cash
equivalents securing appeal or similar surety bonds, provided that no Event of
Default exists at the time any such Lien is created and no Event of Default
would exist at such time under Section 5.13 if (in the event the judgment for
which such bond is to be posted is not deducted as a liability in determining
Consolidated Net Worth) the amount of cash and cash equivalents subject to such
Liens were deducted from Consolidated Net Worth.
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"OTHER TAXES" has the meaning set forth in Section 8.04(a).
"PARENT" means, with respect to any Lender, any Person controlling such
Lender.
"PARTICIPANT" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PBGC SETTLEMENT AGREEMENT" means the settlement agreement proposed to be
entered into between the Borrower and the PBGC in substantially the form
heretofore furnished to the Lenders.
"PERMITTED LIENS" means (i) inchoate Liens existing at law and other non-
consensual Liens permitted by Section 5.09 and subordinated to the Liens created
by the Collateral Documents and (ii) other Liens expressly permitted by the
Collateral Documents.
"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 (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"PLEDGED SUBSIDIARIES" means each of Acquisition Sub, the JV Subsidiaries
and, upon consummation of the Merger, ARCO Chemical, and their respective
successors.
"POSM" means POSM II Limited Partnership, L.P., a Delaware limited
partnership.
"PRICING SCHEDULE" means the Schedule attached hereto and identified as
such.
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"PRIME RATE" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"PROPERTY INSURANCE POLICY" means any insurance policy maintained by the
Borrower or any of its Subsidiaries covering losses with respect to tangible
real or personal property or improvements, but excluding coverage for losses
from business interruption.
"QUARTERLY PAYMENT DATES" means each March 31, June 30, September 30 and
December 31.
"RATING AGENCY" means each of S&P and Moody's.
"REDUCTION EVENT" means (i) any Asset Sale (other than (x) a sale of Margin
Stock or (y) any other Asset Sale, the Net Cash Proceeds of which, when
aggregated with the Net Cash Proceeds of any related Asset Sale, do not exceed
$10,000,000), (ii) any Debt Incurrence, (iii) any Equity Issuance, (iv) the LCR
Recapitalization or (v) the receipt by the Borrower or any Subsidiary of Major
Casualty Proceeds, provided that with respect to any such Major Casualty
Proceeds, so long as no Event of Default has occurred and is continuing, the
receipt thereof shall not give rise to a Reduction Event to the extent that (x)
within 180 days after receipt of such Major Casualty Proceeds, the Borrower or a
Subsidiary shall have committed to expend, and (y) within 540 days after receipt
of such Major Casualty Proceeds (or within such greater number of days as may be
reasonably required to complete such restoration or replacement), the Borrower
or a Subsidiary shall have actually expended such Major Casualty Proceeds for
the restoration or replacement of the asset in respect of which such Major
Casualty Proceeds were received, so that the Reduction Event, if any, occurring
by reason of the receipt of such Material Casualty Proceeds shall be deemed to
occur on such 180th or 540th (or later) day following receipt thereof as to the
amount thereof not committed or expended as specified above. The description of
any transaction as falling within the above definition does not affect any
limitation on such transaction imposed by Article 5 of this Agreement.
"REFERENCE LENDERS" means the principal London offices of Bank of America
National Trust and Savings Association, The Chase Manhattan Bank and Morgan
Guaranty Trust Company of New York.
"REFUNDING DATE" has the meaning set forth in Section 2.17(h).
"REGISTER" has the meaning set forth in Section 2.14.
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"REGULAR PREFERRED STOCK PAYMENT" means, for any period, all fixed or
stated dividends paid or payable by the Borrower and its Consolidated
Subsidiaries during such period pursuant to the terms of any preferred equity
securities issued pursuant to an Equity Issuance after the date hereof.
"REGULATION U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"REIMBURSEMENT OBLIGATION" has the meaning set forth in Section 2.16(c).
"RELATED FUND" means, with respect to any Lender that is a fund that
invests in bank loans, any other fund that invests in bank loans and is advised
or managed by the same investment advisor as such Lender or by an affiliate of
such Lender.
"RELEASE" means any discharge, emission or release into the environment of
a Hazardous Substance, including a Release as defined in CERCLA at 42 U.S.C.
Section 9601(22).
"REQUIRED LENDERS" means, at any time, Lenders having in the aggregate,
more than 50% of the aggregate amount of the Credit Exposures at such time.
"RESPONSIBLE OFFICER" means the President and Chief Executive Officer, any
Executive Vice President, any Senior Vice President, the Treasurer or the
Controller of the Borrower.
"RESTRICTED PAYMENT" means (i) any dividend or other distribution on any
shares of the Borrower's capital stock (except dividends payable solely in
shares of its capital stock of the same class and rights or warrants to purchase
capital stock of the Borrower) or (ii) any payment on account of the purchase,
redemption, retirement or acquisition of (a) any shares of the Borrower's
capital stock or (b) any option, warrant or other right to acquire shares of the
Borrower's capital stock, but does not include (x) payments of principal,
premium (if any) or interest made pursuant to the terms of convertible debt
securities prior to conversion or (y) payments pursuant to employee compensation
or benefit plans in the ordinary course of business.
"REVOLVING COMMITMENT" means,
(i) with respect to each Revolving Lender listed on the signature
pages hereof, the amount set forth opposite the name of such Lender under
the heading "Revolving Commitment" in the Commitment Schedule, and
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(ii) with respect to each Assignee which becomes a Revolving
Lender pursuant to Section 9.06(c), the amount of the Revolving Commitment
thereby assumed by it,
in each case as such amount may be reduced from time to time pursuant to Section
2.08 or increased or reduced by reason of an assignment to or by such Lender in
accordance with Section 9.06(c).
"REVOLVING CREDIT PERCENTAGE" means, with respect to any Revolving Lender
at any time, the percentage which the amount of its Revolving Commitment at such
time represents of the aggregate amount of all the Revolving Commitments at such
time. At any time after the Revolving Commitments shall have terminated, the
term "REVOLVING CREDIT PERCENTAGE" shall refer to a Revolving Lender's Revolving
Credit Percentage immediately before such termination, adjusted to reflect any
subsequent assignments pursuant to Section 9.06(c).
"REVOLVING CREDIT PERIOD" means the period from and including the Closing
Date to but not including the Revolving Credit Termination Date.
"REVOLVING CREDIT TERMINATION DATE" means June 30, 2003 or, if such date 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 Revolving Credit Termination Date shall be the immediately preceding
Euro-Dollar Business Day.
"REVOLVING LENDER" means each Lender identified in the Commitment Schedule
as having a Revolving Commitment and each Assignee which acquires a Revolving
Commitment and/or Revolving Loans pursuant to Section 9.06(c), and their
respective successors.
"REVOLVING LOAN" means a loan made by a Revolving Lender pursuant to
Section 2.01(e).
"REVOLVING OUTSTANDINGS" means, at any time as to any Revolving Lender, the
sum of (i) the aggregate principal amount of such Lender's Revolving Loans plus
(ii) such Lender's Letter of Credit Liabilities plus (iii) such Lender's
Revolving Credit Percentage of the aggregate outstanding principal amount of
Swing Loans.
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-
Hill Companies, Inc., or any successor to its business of rating debt
securities.
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"SEC" means the Securities and Exchange Commission.
"SECURITIZATION TRANSACTION" means any transaction in which the Borrower or
any Subsidiary sells or otherwise transfers an interest in accounts receivable
(i) to one or more third party purchasers or (ii) to a special purpose entity
that borrows against such accounts receivable or sells such accounts receivable
to one or more third party purchasers, but only to the extent that amounts
received in connection with the sale or other transfer of such accounts
receivable would not under GAAP be accounted for as liabilities on a
consolidated balance sheet of the Borrower.
"SENIOR DEBT RATING" means a rating of the Borrower's senior long-term debt
which is not secured or supported by a guarantee (other than a guarantee issued
pursuant to Section 5.10(e)), letter of credit or other form of credit
enhancement; provided that if a Senior Debt Rating by a Rating Agency is
required to be at or above a specified level and such Rating Agency shall have
changed its system of classifications after the date hereof, the requirement
will be met if the Senior Debt Rating by such Rating Agency is at or above the
new rating which most closely corresponds to the specified level under the old
rating system; and provided further that the Senior Debt Rating in effect on any
date is that in effect at the close of business on such date.
"SIGNIFICANT SUBSIDIARY" means, at any date, any Subsidiary having
consolidated assets equal to or greater than 5% of the consolidated assets of
the Borrower and its Consolidated Subsidiaries at such time; provided that
neither POSM nor any Subsidiary whose only significant assets are partnership
interests in POSM shall be a Significant Subsidiary for purposes of the
definition of "Subsidiary Guarantors" or Section 4.09.
"STOP ISSUANCE NOTICE" has the meaning set forth in Section 2.18.
"SUBSIDIARY" means, as to any Person, 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 are at the time directly or indirectly owned by such Person. Unless
otherwise specified, "SUBSIDIARY" (i) means a Subsidiary of the Borrower and
(ii) does not, except where otherwise specifically indicated, include any
Borrower Joint Venture.
"SUBSIDIARY GUARANTEE" means the Subsidiary Guarantee dated as of the
Closing Date from each Subsidiary Guarantor in favor of the Administrative
Agent, substantially in the form of Exhibit D, as amended from time to time.
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<PAGE>
"SUBSIDIARY GUARANTORS" means Acquisition Sub, ARCO Chemical and each other
Significant Subsidiary of the Borrower (excluding any Borrower Joint Venture,
any JV Subsidiary and any Foreign Subsidiary) on the Closing Date, after giving
effect to the Offer, and any other Person that becomes a party to the Subsidiary
Guarantee pursuant to Section 5.19, and "SUBSIDIARY GUARANTOR" means any one of
them.
"SWING CREDIT PERIOD" means the period from and including the first
Domestic Business Day after the Closing Date to but not including the Swing Loan
Termination Date.
"SWING LOAN" means a Loan made by the Swing Loan Lender pursuant to Section
2.17.
"SWING LOAN COMMITMENT" means $20,000,000 or, if less, the aggregate amount
of the Revolving Commitments.
"SWING LOAN LENDER" means Morgan Guaranty Trust Company of New York, in its
capacity as the Swing Loan Lender under the swing loan facility described in
Section 2.17.
"SWING LOAN TERMINATION DATE" means the tenth Euro-Dollar Business Day
prior to the Revolving Credit Termination Date.
"SYNDICATION AGENT" means DLJ Capital Funding, Inc. in its capacity as
syndication agent in respect of the Loan Documents.
"TAXES" has the meaning set forth in Section 8.04(a).
"TEMPORARY CASH INVESTMENT" means any Investment in (i) direct obligations
of the United States or any agency thereof or obligations guaranteed by the
United States or any agency thereof, (ii) commercial paper rated at least A-1 by
S&P and P-1 by Moody's, (iii) time deposits with, including certificates of
deposit issued by, any office located in the United States of any bank or trust
company which is organized or licensed under the laws of the United States or
any State thereof and has capital, surplus and undivided profits aggregating at
least $1,000,000,000, (iv) repurchase agreements with respect to securities
described in clause (i) above entered into with an office of a bank or trust
company meeting the criteria specified in clause (iii) above, or (v) in the case
of Investments made by a Foreign Subsidiary, substantially similar investments
denominated in foreign currencies, provided in each case that such Investment
matures within one year after it is acquired by the Borrower or a Subsidiary.
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<PAGE>
"TERM COMMITMENTS" means the Term Loan-A Commitments, the Term Loan-B
Commitments, the Term Loan-C Commitments and the Term Loan-D Commitments, and
"TERM COMMITMENT" means any of them as the context may require.
"TERM LENDERS" means the Term Loan-A Lenders, the Term Loan-B Lenders, the
Term Loan-C Lenders and the Term Loan-D Lenders, and "TERM LENDER" means any of
them, as the context may require.
"TERM LOANS" means the Term Loans-A, the Term Loans-B, the Term Loans-C and
the Term Loans-D, and "TERM LOAN" means any of them, as the context may require.
"TERM LOAN-A" means a loan made by a Term Loan-A Lender pursuant to Section
2.01(a).
"TERM LOAN-A COMMITMENT" means,
(i) with respect to each Term Loan-A Lender listed on the signature pages
hereof, the amount set forth opposite the name of such Lender under the heading
"Term Loan-A Commitment" in the Commitment Schedule, and
(ii) with respect to each Assignee which becomes a Term Loan-A Lender
pursuant to Section 9.06(c), the amount of the Term Loan-A Commitment thereby
assumed by it,
in each case as such amount may be reduced from time to time pursuant
to Section 2.08 or increased or reduced by reason of an assignment to or by such
Lender in accordance with Section 9.06(c).
"TERM LOAN-A LENDER" means each Lender identified in the Commitment
Schedule as having a Term Loan-A Commitment and each Assignee which acquires a
Term Loan-A Commitment and/or any Term Loan-A pursuant to Section 9.06(c), and
their respective successors.
"TERM LOAN-B" means a loan made by a Term Loan-B Lender pursuant to Section
2.01(b).
"TERM LOAN-B COMMITMENT" means,
(i) with respect to each Term Loan-B Lender listed on the signature pages
hereof, the amount set forth opposite the name of such Lender under the heading
"Term Loan-B Commitment" in the Commitment Schedule, and
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(ii) with respect to each Assignee which becomes a Term Loan-B Lender
pursuant to Section 9.06(c), the amount of the Term Loan-B Commitment thereby
assumed by it,
in each case as such amount may be reduced from time to time pursuant to Section
2.08 or increased or reduced by reason of an assignment to or by such Lender in
accordance with Section 9.06(c).
"TERM LOAN-B LENDER" means each Lender identified in the Commitment
Schedule as having a Term Loan-B Commitment and each Assignee which acquires a
Term Loan-B Commitment and/or any Term Loan-B pursuant to Section 9.06(c), and
their respective successors.
"TERM LOAN-C" means a loan made by a Term Loan-C Lender pursuant to Section
2.01(c).
"TERM LOAN-C COMMITMENT" means,
(i) with respect to each Term Loan-C Lender listed on the signature pages
hereof, the amount set forth opposite the name of such Lender under the heading
"Term Loan-C Commitment" in the Commitment Schedule, and
(ii) with respect to each Assignee which becomes a Term Loan-C Lender
pursuant to Section 9.06(c), the amount of the Term Loan-C Commitment thereby
assumed by it,
in each case as such amount may be reduced from time to time pursuant to Section
2.08 or increased or reduced by reason of an assignment to or by such Lender in
accordance with Section 9.06(c).
"TERM LOAN-C LENDER" means each Lender identified in the Commitment
Schedule as having a Term Loan-C Commitment and each Assignee which acquires a
Term Loan-C Commitment and/or any Term Loan-C pursuant to Section 9.06(c), and
their respective successors.
"TERM LOAN-D" means a loan made by a Term Loan-D Lender pursuant to Section
2.01(d).
"TERM LOAN-D COMMITMENT" means,
(i) with respect to each Term Loan-D Lender listed on the signature pages
hereof, the amount set forth opposite the name of such Lender under the heading
"Term Loan-D Commitment" in the Commitment Schedule, and
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(ii) with respect to each Assignee which becomes a Term Loan-D Lender
pursuant to Section 9.06(c), the amount of the Term Loan-D Commitment thereby
assumed by it,
in each case as such amount may be reduced from time to time pursuant to Section
2.08 or increased or reduced by reason of an assignment to or by such Lender in
accordance with Section 9.06(c).
"TERM LOAN-D LENDER" means each Lender identified in the Commitment
Schedule as having a Term Loan-D Commitment and each Assignee which acquires a
Term Loan-D Commitment and/or any Term Loan-D pursuant to Section 9.06(c), and
their respective successors.
"TYPE" has the meaning set forth in Section 1.03.
"UNFUNDED LIABILITIES" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), 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 ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"UNITED STATES" means the United States of America.
"VOTING AGREEMENT" means the Tender and Voting Agreement dated as of June
18, 1998 between the Borrower and Atlantic Richfield Company, a Delaware
corporation.
"WORKING CAPITAL FACILITY" means a committed or uncommitted revolving
credit facility entered into by the Borrower or a Subsidiary to obtain working
capital financing in the ordinary course of business.
Section 1.2. Accounting Terms and Determinations. (a) 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 GAAP;
provided that, if the Borrower notifies the Administrative Agent that the
Borrower wishes to amend any provision hereof to eliminate the effect of any
change in GAAP (or if the Administrative Agent notifies the Borrower that the
Required Lenders wish to amend any provision hereof for such purpose), then such
provision shall be applied on the basis of GAAP in effect immediately before
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the relevant change in GAAP became effective, until either such notice is
withdrawn or such provision is amended in a manner satisfactory to the Borrower
and the Required Lenders.
(b) Calculations with respect to the Non-JV Group shall be made on a
basis consolidating the members of the Non-JV Group in accordance with GAAP,
except that there shall be excluded any amounts of income attributable to any
Borrower Joint Venture or JV Subsidiary, whether or not such amount was or was
available to be distributed to a member of the Non-JV Group during any relevant
period.
(c) Determinations of Adjusted EBITDA in respect of any period of four
consecutive Fiscal Quarters beginning before and ending after the Closing Date
shall be made on a pro forma basis as if the Acquisition had been consummated on
the first day of such period. Such pro forma calculation shall reflect the
benefit of anticipated expense reductions and similar synergies in an annualized
amount of $75,000,000 (or such greater amount as may actually be realized). In
the event of any future material acquisition or disposition of assets by the
Borrower and its Consolidated Subsidiaries (other than the Acquisition),
determinations of Adjusted EBITDA shall similarly be made on a pro forma basis,
reflecting the benefit of such anticipated expense reductions and similar
synergies as such reductions and synergies could properly be reflected in pro
forma financial statements included in a registration statement filed under the
Securities Act of 1933, as amended.
Section 1.3. Classes and Types of Loans and Borrowings. The term
"Borrowing" denotes the aggregation of Loans of one or more Lenders to be made
to the Borrower pursuant to Article 2 on the same date, all of which Loans are
of the same Class and Type (subject to Article 8) and, in the case of Euro-
Dollar Loans, have the same initial Interest Period. Loans hereunder are
distinguished by "Class" and by "Type". The "Class" of a Loan (or of a
Commitment to make such a Loan or of a Borrowing comprised of such Loans) refers
to the determination whether such Loan is a Term Loan-A, Term Loan-B, Term Loan-
C, Term Loan-D, Revolving Loan or Swing Loan, each of which constitutes a Class.
The "Type" of a Loan refers to the determination whether such Loan is a Euro-
Dollar Loan or a Base Rate Loan, each of which constitutes a "Type".
Identification of a Loan (or a Borrowing) by both Class and Type (e.g., a "Euro-
Dollar Term Loan-A") indicates that such Loan is both a Term Loan-A and a Euro-
Dollar Loan (or that such Borrowing is comprised of such Loans).
Section 1.4. Other Definitional Provisions. References in this Agreement
to "Articles", "Sections", "Schedules" or "Exhibits" shall be to Articles,
Sections, Schedules or Exhibits of or to this Agreement unless otherwise
specifically provided. Any of the terms defined in Section 1.01 may, unless the
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context otherwise requires, be used in the singular or plural depending on the
reference. "Include" or "includes" and "including" shall be deemed to be
followed by "without limitation" whether or not they are in fact followed by
such words or words of like import. "Writing", "written" and comparable terms
refer to printing, typing and other means of reproducing words in a visible
form. References to any agreement or contract are to such agreement or contract
as amended, modified or supplemented from time to time in accordance with the
terms hereof and thereof. References to any Person include the successors and
assigns of such Person. References "from" or "through" any date mean, unless
otherwise specified, "from and including" or "through and including",
respectively.
ARTICLE 2
The Credits
Section 2.1. Commitments to Lend. (a) Term Loan-A Facility. On the Closing
Date each Term Loan-A Lender severally agrees, on the terms and conditions set
forth in this Agreement, to make a Term Loan-A to the Borrower in a principal
amount not to exceed the amount of its Term Loan-A Commitment. The Term Loan-A
Commitments are not revolving in nature, and amounts repaid or prepaid pursuant
to Section 2.04 or Section 2.09 shall not be reborrowed.
(b) Term Loan-B Facility. On the Closing Date each Term Loan-B Lender
severally agrees, on the terms and conditions set forth in this Agreement, to
make a Term Loan-B to the Borrower in a principal amount not to exceed the
amount of its Term Loan-B Commitment. The Term Loan-B Commitments are not
revolving in nature, and amounts repaid or prepaid pursuant to Section 2.04 or
Section 2.09 shall not be reborrowed.
(c) Term Loan-C Facility. On the Closing Date each Term Loan-C Lender
severally agrees, on the terms and conditions set forth in this Agreement, to
make a Term Loan-C to the Borrower in a principal amount not to exceed the
amount of its Term Loan-C Commitment. The Term Loan-C Commitments are not
revolving in nature, and amounts repaid or prepaid pursuant to Section 2.04 or
Section 2.09 shall not be reborrowed.
(d) Term Loan-D Facility. On the Closing Date each Term Loan-D Lender
severally agrees, on the terms and conditions set forth in this Agreement, to
make a Term Loan-D to the Borrower in a principal amount not to exceed the
amount of its Term Loan-D Commitment. The Term Loan-D Commitments are not
revolving in nature, and amounts repaid or prepaid pursuant to Section 2.04 or
Section 2.09 shall not be reborrowed.
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(e) Revolving Credit Facility. During the Revolving Credit Period, each
Revolving Lender severally agrees, on the terms and conditions set forth in this
Agreement, to make Revolving Loans to the Borrower from time to time in an
aggregate amount such that, after giving effect to such Loans, the Revolving
Outstandings of such Lender do not exceed the amount of its Revolving
Commitment. Each Revolving Borrowing shall be in the aggregate principal amount
of $20,000,000 or any larger multiple of $1,000,000 (except that any such
Borrowing may be in the aggregate amount of the unused Revolving Commitments).
Within the limits specified in this Agreement, the Borrower may borrow under
this Section 2.01(e), prepay Revolving Loans to the extent permitted by Section
2.09 and reborrow at any time during the Revolving Credit Period pursuant to
this Section 2.01(e).
(f) Borrowings Ratable. Each Borrowing shall be made from the several
Lenders ratably in proportion to their respective Commitments of the relevant
Class.
Section 2.02. Notice of Borrowing. The Borrower shall give the
Administrative Agent notice (a "NOTICE OF BORROWING") not later than 11:30 A.M.
(New York City time) (i) on the date of each Base Rate Borrowing and (ii) on the
third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in
the case of a Euro-Dollar Borrowing;
(b) the aggregate amount of such Borrowing;
(c) the Class and initial Type of Loans comprising such Borrowing;
and
(d) in the case of a Euro-Dollar Borrowing, the duration of the
initial Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period.
Section 2.03. Notice to Lenders; Funding of Loans. (a) Promptly after
receiving a Notice of Borrowing, the Administrative Agent shall notify each
Lender of the contents thereof and of such Lender's share of such Borrowing and
such Notice of Borrowing shall not thereafter be revocable by the Borrower.
(b) Not later than 1:00 P.M. (New York City time) on the date of each
Borrowing, each Lender participating therein shall make available its share of
such Borrowing, in Federal or other funds immediately available in New York
City, to the Administrative Agent at its address specified in or pursuant to
Section
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9.01. Unless the Administrative Agent determines that any applicable condition
specified in Article 3 has not been satisfied, the Administrative Agent will
make the funds so received from the Lenders available to the Borrower at the
Administrative Agent's aforesaid address.
(c) Unless the Administrative Agent shall have received notice from a
Lender before the date of any Borrowing that such Lender will not make available
to the Administrative Agent such Lender's share of such Borrowing, the
Administrative Agent may assume that such Lender has made such share available
to the Administrative Agent on the date of such Borrowing in accordance with
Section 2.03(b) 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 Lender shall not have so made such share
available to the Administrative Agent, such Lender 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) if such amount is repaid by the
Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the
interest rate applicable to such Borrowing pursuant to Section 2.05 and (ii) if
such amount is repaid by such Lender, the Federal Funds Rate. If such Lender
shall repay to the Administrative Agent such corresponding amount, the Borrower
shall not be required to repay such amount and the amount so repaid by such
Lender shall constitute such Lender's Loan included in such Borrowing for
purposes of this Agreement.
Section 2.04. Maturity of Loans; Mandatory Prepayments.
(a) Each Loan of each Class shall mature, and the outstanding principal
amount thereof shall be due and payable (together with interest accrued
thereon), on the Maturity Date for such Class of Loans.
(b) Term Loan-A Scheduled Amortization. In addition, on each date set
forth below, the Borrower shall repay, and there shall become due and payable,
an aggregate principal amount of the Term Loans-A equal to the amount set forth
below opposite such date (as such amount may be reduced pursuant to Section
2.04(d) and Section 2.09):
DATE AMOUNT
---- ------
September 30, 1998 --
December 31, 1998 --
March 31, 1999 $ 50,000,000
June 30, 1999 $114,500,000
September 30, 1999 $114,500,000
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December 31, 1999 $114,500,000
March 31, 2000 $114,500,000
June 30, 2000 $114,500,000
September 30, 2000 $114,500,000
December 31, 2000 $114,500,000
March 31, 2001 $114,500,000
June 30, 2001 $114,500,000
September 30, 2001 $114,500,000
December 31, 2001 $114,500,000
March 31, 2002 $114,500,000
June 30, 2002 $114,500,000
September 30, 2002 $114,500,000
December 31, 2002 $114,500,000
March 31, 2003 $114,500,000
June 30, 2003 $118,000,000
(c) Term Loan-B Scheduled Amortization. In addition, on each date set
forth below, the Borrower shall repay, and there shall become due and payable,
an aggregate principal amount of the Term Loans-B equal to the amount set forth
below opposite such date (as such amount may be reduced pursuant to Section
2.04(d) and Section 2.09):
DATE AMOUNT
---- ------
September 30, 1998 --
December 31, 1998 --
March 31, 1999 $ 2,500,000
June 30, 1999 $ 2,500,000
September 30, 1999 $ 2,500,000
December 31, 1999 $ 2,500,000
March 31, 2000 $ 2,500,000
June 30, 2000 $ 2,500,000
September 30, 2000 $ 2,500,000
December 31, 2000 $ 2,500,000
March 31, 2001 $ 2,500,000
June 30, 2001 $ 2,500,000
September 30, 2001 $ 2,500,000
December 31, 2001 $ 2,500,000
March 31, 2002 $ 2,500,000
June 30, 2002 $ 2,500,000
September 30, 2002 $ 2,500,000
December 31, 2002 $ 2,500,000
March 31, 2003 $ 2,500,000
June 30, 2003 $ 2,500,000
September 30, 2003 $100,000,000
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December 31, 2003 $120,000,000
March 31, 2004 $120,000,000
June 30, 2004 $120,000,000
September 30, 2004 $120,000,000
December 31, 2004 $125,000,000
March 31, 2005 $250,000,000
June 30, 2005 $250,000,000
(d) Prepayment and Reduction. In addition, at any time prior to the
Mandatory Prepayment Release Date, the Borrower shall, subject to subsection (g)
of this Section, prepay Term Loans as follows:
(i) Subject to subsection (f) of this Section, upon the receipt by
the Borrower or any of its Subsidiaries of Net Cash Proceeds in respect of
any Reduction Event, the Borrower shall prepay the Term Loans in an amount
equal to such Net Cash Proceeds; provided that if the Net Cash Proceeds in
respect of any Reduction Event are less than $10,000,000, no such
prepayment shall be required until the amount of such Net Cash Proceeds,
together with the amount of all other Net Cash Proceeds in respect of which
no prepayment under this subsection (d)(i) shall have theretofore been
made, are equal to at least $10,000,000. The Borrower shall give the
Administrative Agent at least five Euro-Dollar Business Days' notice of
each prepayment required to be made pursuant to this subsection (d)(i).
(ii) On the 100th day following the last day of each Fiscal Year,
beginning with the Fiscal Year ending December 31, 1998, the Borrower shall
prepay the Term Loans in an amount equal to the Excess Cash Flow Prepayment
Amount for such Fiscal Year (or, in the case of the Fiscal Year ending
December 31, 1998, for the period from October 1, 1998 through December 31,
1998).
(e) Application of Prepayments and Repayments. (i) The prepayments
required pursuant to subsection (d) of this Section shall be applied as follows:
(A) in the case of prepayments required pursuant to
subsection (d)(i) of this Section in respect of any Debt Incurrence or
Equity Issuance or in respect of the LCR Recapitalization, first, the
Borrower shall prepay the Term Loans-C, until all Term Loans-C have
been paid in full, second, the Borrower shall prepay the Term Loans-D,
until all Term Loans-D have been paid in full and, third, the Borrower
shall prepay the Term Loans-A and (subject to subsection (f) of this
Section) the Term Loans-B, ratably, until all Term Loans-A and Term
Loans-B have been paid in full; and
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(B) in the case of prepayments required pursuant to
subsection (d)(i) of this Section in respect of any Asset Sale or
receipt of Major Casualty Proceeds, or pursuant to subsection (d)(ii)
of this Section, first, the Borrower shall prepay the Term Loans-A and
(subject to subsection (f) of this Section) the Terms Loans-B,
ratably, until all Term Loans-A and Term Loans-B have been paid in
full, second, the Borrower shall prepay the Term Loans-C, until all
Term Loans-C have been paid in full and, third, the Borrower shall
prepay the Term Loans-D, until all Term Loans-D have been paid in
full.
(ii) Each prepayment of any Class of Term Loans shall be applied
ratably to the respective Term Loans of such Class of all Term Loan
Lenders, subject to subsection (f) of this Section.
(iii) The amount of any prepayments of Term Loans-A pursuant to
subsection (d) of this Section shall be applied to reduce pro rata the
amount of the subsequent scheduled prepayments of the Term Loans-A required
pursuant to subsection (a) of this Section.
(iv) The amount of any prepayments of Term Loans-B pursuant to
subsection (d) of this Section shall be applied to reduce pro rata the
amount of the subsequent scheduled prepayments of the Term Loans-B required
pursuant to subsection (b) of this Section.
(v) Each payment of principal of the Term Loans of any Class shall
be made together with interest accrued and unpaid on the amount repaid to
the date of payment.
(vi) Each payment of the Term Loans of any Class shall be applied
to such Group or Groups of Term Loans of any Class as the Borrower may
designate (or, failing such designation, as determined by the
Administrative Agent).
(f) Option of Term Loan-B Lenders Not to Accept Mandatory Prepayments.
(i) At least five Euro-Dollar Business Days prior to any date (an "UNSCHEDULED
PREPAYMENT DATE") on which any prepayment of the Term Loans-B (a "TERM LOAN-B
UNSCHEDULED PREPAYMENT") would, but for the provisions of this subsection (f),
otherwise be required pursuant to subsection (d) of this Section, the Borrower
shall deliver a notice conforming to the requirements of subsection (f)(ii) (a
"TERM LOAN-B PREPAYMENT NOTICE") to the Administrative Agent. Upon receipt of
any Term Loan-B Prepayment Notice, the Administrative Agent shall promptly
notify each Term Loan-B Lender of the contents thereof,
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and such Term Loan-B Unscheduled Prepayment shall not occur on such Unscheduled
Payment Date but shall instead be deferred as hereinafter provided in this
subsection (f).
(ii) Each Term Loan-B Prepayment Notice shall be in writing, shall
refer to this Section and shall (w) set forth the amount of the Term Loan-B
Unscheduled Prepayment and the prepayment that the applicable Term Loan-B
Lender will be entitled to receive if it accepts prepayment of its Term
Loans-B in accordance with this subsection, (x) contain an offer to prepay
on a specified date (each such date, a "DEFERRED TERM LOAN-B UNSCHEDULED
PREPAYMENT DATE"), which shall be the tenth Euro-Dollar Business Day after
the date of such Term Loan-B Prepayment Notice, the Term Loans-B of such
Term Loan-B Lender by an aggregate principal amount equal to such Term
Loan-B Lender's ratable share of such Term Loan-B Unscheduled Prepayment
(determined by reference to the outstanding principal amount of such
Lender's Term Loan-B as a proportion of the aggregate outstanding principal
amount of the Term Loans-B of all of the Term Loan-B Lenders), (y) request
such Term Loan-B Lender to notify the Borrower and the Administrative Agent
in writing, no later than the third Euro-Dollar Business Day prior to the
Deferred Term Loan-B Unscheduled Prepayment Date, of such Term Loan-B
Lender's acceptance or rejection (in each case, in whole and not in part)
of such offer of prepayment and (z) inform such Term Loan-B Lender that the
failure by such Term Loan-B Lender to reject such offer in writing on or
before the fifth day prior to such Deferred Term Loan-B Unscheduled
Prepayment Date shall be deemed an acceptance of such prepayment offer.
Each Term Loan-B Prepayment Notice shall be given by telecopy, confirmed
hand delivery or overnight courier service, in each case addressed to the
Administrative Agent and each Term Loan-B Lender as provided in Section
9.01.
(iii) Subject to subsection (g) of this Section, on each Deferred
Term Loan-B Unscheduled Prepayment Date, the Borrower shall pay to the
Administrative Agent an amount equal to the amount that would have been
payable by the Borrower pursuant to subsection (d) of this Section on the
related Unscheduled Prepayment Date but for the provisions of this
subsection (f). Of such amount, the Administrative Agent shall apply to
the prepayment of the outstanding Term Loans-B of each of the Term Loan-B
Lenders that shall have accepted (or been deemed to have accepted)
prepayment (each, an "ACCEPTING TERM LOAN-B LENDER") its ratable share
(allocated pro rata among all Term Loan-B Lenders) of the amount so paid by
the Borrower, and shall apply the balance of the amount so paid by the
Borrower to the ratable prepayment of the then
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outstanding Term Loans-A and the then outstanding Term Loans-B of the
Accepting Term Loan-B Lenders.
(g) Deferred Payment. If subsection (d) or (f) of this Section (or the
proviso to Section 2.09(a)) would otherwise require prepayment of Euro-Dollar
Loans or portions thereof prior to the last day of the then current Interest
Period therefor, each such prepayment may, if the Borrower so elects and unless
the Administrative Agent otherwise notifies the Borrower upon the instructions
of the Required Lenders, be deferred to such last day of the related Interest
Period. The Borrower shall use reasonable efforts to minimize any deferrals of
payments pursuant to this subsection.
Section 2.05. Interest Rates. (a) Each Base Rate Loan shall bear interest
on the outstanding principal amount thereof, for each day from the date such
Loan is made until it becomes due, at a rate per annum equal to the sum of the
Applicable Margin and the Base Rate for such day. Such interest shall be
payable quarterly in arrears on each Quarterly Payment Date. Any overdue
principal of or 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 sum of the
Applicable Margin plus the Base Rate for such day.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of the Applicable Margin for such
day plus the London Interbank Offered Rate applicable to such Interest Period.
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.
The "LONDON INTERBANK OFFERED RATE" applicable to any Interest Period means
the rate appearing on the Bloomberg Screen British Banker's LIBOR fixing, at
approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the
first day of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the "LONDON INTERBANK OFFERED RATE"
applicable to such Interest Period shall be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the respective rates per annum at
which deposits in dollars are offered to each of the Reference Lenders in the
London interbank market at approximately 11:00 A.M. (London time) two Euro-
Dollar Business Days before the first day of such Interest Period in an amount
approximately equal to the principal amount of the Euro-Dollar Loan of such
Reference Lender to which such Interest Period is to apply and for a period of
time comparable to such Interest Period. If any Reference Lender does not
furnish a timely quotation, the Administrative Agent shall determine the
relevant
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interest rate on the basis of the quotation or quotations furnished by the
remaining Reference Lender or Lenders or, if none of such quotations is
available on a timely basis, the provisions of Section 8.01 shall apply.
(c) Any overdue principal of or interest on any Euro-Dollar Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the higher of (i) the sum of the Applicable Margin for such day plus
the London Interbank Offered Rate applicable to such Loan on the day before such
payment was due and (ii) the sum of the Applicable Margin for such day plus a
rate per annum equal to the quotient obtained (rounded upward, if necessary, to
the next higher 1/100 of 1%) by dividing (x) the average (rounded upward, if
necessary, to the next higher 1/16 of 1%) of the respective rates per annum at
which one day (or, if such amount due remains unpaid more than three Euro-Dollar
Business Days, then for such other period of time not longer than three months
as the Administrative Agent may select) deposits in dollars in an amount
approximately equal to such overdue payment due to each of the Reference Lenders
are offered to such Reference Lender in the London interbank market for the
applicable period determined as provided above by (y) 1.00 minus the Euro-Dollar
Reserve Percentage (or, if the circumstances described in clause 8.01(a) or
8.01(b) shall exist, at a rate per annum equal to the rate applicable to overdue
Base Rate Loans of such Class for such day).
(d) The Administrative Agent shall determine each interest rate
applicable to the Loans hereunder. The Administrative Agent shall promptly
notify the Borrower and the Lenders of each rate of interest so determined, and
its determination thereof shall be conclusive in the absence of manifest error.
(e) Each Reference Lender agrees to use its best efforts to furnish
quotations to the Administrative Agent if and when contemplated by this Section.
Section 2.06. Method of Electing Interest Rates. (a) The Loans included in
each Borrowing shall bear interest initially at the type of rate specified by
the Borrower in the applicable Notice of Borrowing. Thereafter, the Borrower may
from time to time elect to change or continue the type of interest rate borne by
each Group of Term Loans or Revolving Loans (subject to subsection (d) and the
provisions of Article 8), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect to
convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day;
and
(ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to
convert such Loans to Base Rate Loans as of any Domestic Business Day or
elect to continue such Loans as Euro-Dollar Loans for an
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additional Interest Period, subject to Section 2.11 if any such conversion
is effective on any day other than the last day of an Interest Period
applicable to such Loans.
Each such election shall be made by delivering a notice (a "NOTICE OF INTEREST
RATE ELECTION") to the Administrative Agent not later than 11:30 A.M. (New York
City time) on the third Euro-Dollar Business Day before the conversion or
continuation selected in such notice is to be effective. A Notice of Interest
Rate Election may, if it so specifies, apply to only a portion of the aggregate
principal amount of the relevant Group of Loans; provided that (i) such portion
is allocated ratably among the Loans comprising such Group and (ii) the portion
to which such Notice applies, and the remaining portion to which it does not
apply, are each at least $20,000,000 (unless such portion is comprised of Base
Rate Loans). If no such notice is timely received before the end of an Interest
Period for any Group of Euro-Dollar Loans, the Borrower shall be deemed to have
elected that such Group of Loans be converted to Base Rate Loans at the end of
such Interest Period.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such notice
applies;
(ii) the date on which the conversion or continuation selected in
such notice is to be effective, which shall comply with the applicable
clause of subsection (a) above;
(iii) if the Loans comprising such Group are to be converted, the
new Type of Loans and, if the Loans resulting from such conversion are to
be Euro-Dollar Loans, the duration of the next succeeding Interest Period
applicable thereto; and
(iv) if such Loans are to be continued as Euro-Dollar Loans for an
additional Interest Period, the duration of such additional Interest
Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Promptly after receiving a Notice of Interest Rate Election from the
Borrower pursuant to subsection (a) above, the Administrative Agent shall notify
each Lender of the contents thereof and such notice shall not thereafter be
revocable by the Borrower.
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(d) The Borrower shall not be entitled to elect to convert any Loans to,
or continue any Loans for an additional Interest Period as, Euro-Dollar Loans if
(i) the aggregate principal amount of any Group of Euro-Dollar Loans created or
continued as a result of such election would be less than $20,000,000 or (ii) a
Default shall exist when the Borrower delivers notice of such election to the
Administrative Agent.
(e) If any Loan is converted to a different Type of Loan, the Borrower
shall pay, on the date of such conversion, the interest accrued to such date on
the principal amount being converted.
Section 2.07. Fees. (a) During the Revolving Credit Period, the Borrower
shall pay to the Administrative Agent for the account of the Revolving Lenders
ratably in proportion to their Revolving Commitments commitment fees at the
Commitment Fee Rate (determined daily in accordance with the Pricing Schedule)
on the daily amount by which the aggregate amount of the Revolving Commitments
exceeds the sum of (i) the aggregate outstanding principal amount of Revolving
Loans and (ii) the aggregate Letter of Credit Liabilities. Such commitment fee
shall accrue from and including the Closing Date to but excluding the date of
termination of the Revolving Commitments in their entirety.
(b) The Borrower shall pay to the Administrative Agent (i) for the
account of the Revolving Lenders ratably a letter of credit fee accruing daily
on the aggregate undrawn amount of all outstanding Letters of Credit at a rate
per annum equal to the Applicable Margin for Revolving Euro-Dollar Loans for
such day and (ii) for the account of each Issuing Bank a letter of credit
fronting fee accruing daily on the aggregate amount then available for drawing
under all Letters of Credit issued by such Issuing Bank at a rate per annum
mutually agreed between the Borrower and such Issuing Bank from time to time.
(c) Accrued commitment and letter of credit fees under this Section
shall be payable quarterly in arrears on each Quarterly Payment Date and on the
date of termination of the Revolving Commitments in their entirety.
Section 2.08. Termination or Reduction of Commitments. (a) The Borrower
may, upon at least three Domestic Business Days' notice to the Administrative
Agent, (i) terminate the Commitments of any Class at any time, if no Loans of
such Class (and, in the case of the Revolving Commitments, no Letter of Credit
Liabilities and no Swing Loans) are outstanding at such time (after giving
effect to any mandatory or optional prepayments to be made at such time) or (ii)
ratably reduce from time to time by an aggregate amount of $20,000,000 or any
larger multiple of $1,000,000 the aggregate amount of the Commitments of any
Class in excess of the aggregate outstanding principal amount of the Loans of
such Class (and, in the case of the Revolving
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Commitments, the aggregate principal amount of the Letter of Credit Liabilities
and Swing Loans). Promptly after receiving a notice of a termination or
reduction of Commitments, the Administrative Agent shall notify each Lender of
each relevant Class of the contents thereof, and such notice shall not
thereafter be revocable by the Borrower.
(b) The Term Commitments shall terminate in their entirety on the close
of business (New York City time) on the Closing Date.
(c) Unless previously terminated, the Revolving Commitments shall
terminate in their entirety on the Revolving Credit Termination Date.
(d) The Swing Loan Commitment shall terminate in its entirety on the
earlier of the Swing Loan Termination Date or the date on which the Revolving
Commitments terminate in their entirety.
Section 2.09. Optional Prepayments. (a) Subject in the case of Euro-Dollar
Loans to Section 2.11, the Borrower may (i) upon at least one Domestic Business
Day's notice to the Administrative Agent, prepay any Group of Base Rate Loans of
any Class or (ii) upon at least three Euro-Dollar Business Days' notice to the
Administrative Agent, prepay any Group of Euro-Dollar Loans of any Class, in
each case in whole at any time, or from time to time in part in amounts
aggregating $20,000,000 or any larger multiple of $1,000,000 by paying the
principal amount to be prepaid together with interest accrued thereon to the
date of prepayment. Each such optional prepayment shall be applied to prepay
ratably the Loans of the several Lenders included in such Group of Loans;
provided that any prepayment of Term Loans-A or Term Loans-B pursuant to this
Section 2.09 shall be applied ratably to the outstanding Term Loans of both such
Classes.
(b) Promptly after receiving a notice of prepayment pursuant to this
Section, the Administrative Agent shall notify each Lender of the contents
thereof and of such Lender's ratable share (if any) of such prepayment, and such
notice shall not thereafter be revocable by the Borrower.
(c) The amount of any prepayment of Term Loans-A or Term Loans-B
pursuant to this Section shall be applied, first, to the next scheduled payment
in respect of the relevant Class pursuant to Section 2.04(b) or (c), to the
extent necessary to reduce such next scheduled payment to zero, and, second, pro
rata to all subsequent scheduled payments in respect of the relevant Class
pursuant to Section 2.04(b) or (c).
Section 2.10. General Provisions as to Payments. (a) The Borrower shall
make each payment of principal of, and interest on, the Loans, of Letter of
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Credit Liabilities or interest thereon or of fees hereunder not later than 1:00
P.M. (New York City time) on the date when due, in Federal or other funds
immediately available in New York City, to the Administrative Agent at its
address specified in or pursuant to Section 9.01. The Administrative Agent will
promptly distribute to each Lender its ratable share of each such payment
received by the Administrative Agent for the account of the Lenders. Whenever
any payment of principal of, or interest on, the Base Rate Loans, of Letter of
Credit Liabilities or interest thereon or of fees hereunder 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 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 immediately 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 Borrower notifies the Administrative Agent before the
date on which any payment is due to the Lenders 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 on such assumption, cause to be
distributed to each Lender on such due date an amount equal to the amount then
due such Lender. If and to the extent that the Borrower shall not have so made
such payment, each Lender shall repay to the Administrative Agent forthwith on
demand such amount distributed to such Lender together with interest thereon,
for each day from the date such amount is distributed to such Lender until the
date such Lender repays such amount to the Administrative Agent, at the Federal
Funds Rate.
Section 2.11. Funding Losses. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan or any Euro-Dollar Loan is
converted to a Base Rate Loan (whether such payment or conversion is pursuant to
Article 2, 6 or 8 or otherwise) on any day other than the last day of an
Interest Period applicable thereto, or the last day of an applicable period
fixed pursuant to Section 2.05(c), or if the Borrower fails to borrow, prepay,
convert or continue any Fixed Rate Loan after notice has been given to any
Lender in accordance with Section 2.02(a), 2.06(c), 2.09(b), or 2.17, the
Borrower shall reimburse each Lender requesting such reimbursement within 15
days after demand for any resulting loss or expense incurred by it (or by a
Participant in the related Loan), including (without limitation) any loss
incurred in obtaining, liquidating or employing deposits from third parties, but
excluding loss of margin for the period after such payment or conversion or
failure to borrow, prepay, convert or
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continue; provided that such Lender shall have delivered to the Borrower a
certificate setting forth in reasonable detail the calculation of the amount of
such loss or expense, which certificate shall be conclusive in the absence of
manifest error.
Section 2.12. Computation of Interest and Fees. Interest based on the
Prime Rate hereunder 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
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).
Section 2.13. Notes. (a) If a Lender so requests in writing, the
Borrower's obligation to repay the Loans of such Lender shall be evidenced by a
single Note payable to the order of such Lender for the account of its
Applicable Lending Office.
(b) Each Lender may, by notice to the Borrower and the Administrative
Agent, request that the Borrower's obligation to repay such Lender's Loans of a
particular Type or Class be evidenced by a separate Note. Each such Note shall
be in substantially the form of Exhibit A hereto with appropriate modifications
to reflect the fact that it relates solely to Loans of the relevant Type or
Class. Each reference in this Agreement to the "Note" of such Lender shall be
deemed to refer to and include any or all of such Notes, as the context may
require.
(c) Promptly after it receives any Lender's Note pursuant to Section
3.01(b), the Administrative Agent shall forward such Note to such Lender. Each
Lender shall record the date, amount, Class and Type of each Loan made by it and
the date and amount of each payment of principal made by the Borrower with
respect thereto, and may, if such Lender so elects in connection with any
transfer or enforcement of its Note, endorse on the schedule forming a part
thereof appropriate notations to evidence the foregoing information with respect
to each such Loan then outstanding; provided that a Lender's failure to make (or
any error in making) any such recordation or endorsement shall not affect the
Borrower's obligations hereunder or under the Notes. Each Lender is hereby
irrevocably authorized by the Borrower so to endorse its Note and to attach to
and make a part of its Note a continuation of any such schedule as and when
required.
Section 2.14. Registry. The Administrative Agent shall maintain a
register (the "REGISTER") on which it will record the name and Commitments of
each Lender, each Loan made by such Lender and each repayment of any Loan made
by such Lender. With respect to any Lender, the assignment or other transfer of
the Commitments of such Lender and the rights to the principal of, and interest
on, any Loan made and Note issued pursuant to this Agreement shall not
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be effective until such assignment or other transfer is recorded on the Register
and otherwise complies with Section 9.06(c). The registration of assignment or
other transfer of all or part of any Commitments, Loans and Notes for a Lender
shall be recorded by the Administrative Agent on the Register only upon the
acceptance by the Administrative Agent of a properly executed and delivered
Assignment and Assumption Agreement referred to in Section 9.06(c). The Register
shall be available at the offices where kept by the Administrative Agent for
inspection by the Borrower and any Lender at any reasonable time upon reasonable
prior notice to the Administrative Agent. Each Lender shall record on its
internal records (including computerized systems) the foregoing information as
to its own Commitments and Loans. Failure to make any such recordation, or any
error in such recordation, shall not affect the obligations of any Obligor under
the Loan Documents.
Section 2.15. Regulation D Compensation. If and so long as a reserve
requirement of the type described in the definition of "Euro-Dollar Reserve
Percentage" is prescribed by the Board of Governors of the Federal Reserve
System (or any successor), each Lender subject to such requirement may require
the Borrower to pay, contemporaneously with each payment of interest on each of
such Lender's Euro-Dollar Loans, additional interest on such Euro-Dollar Loan at
a rate per annum determined by such Lender up to but not exceeding the excess of
(i) (A) the applicable London Interbank Offered Rate divided by (B) one minus
the Euro-Dollar Reserve Percentage over (ii) the applicable London Interbank
Offered Rate. Any Lender wishing 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 Loans of such Lender shall be
payable to such Lender at the place indicated in such notice with respect to
each Interest Period commencing at least three Euro-Dollar Business Days after
such Lender gives such notice and (y) shall notify the Borrower at least five
Euro-Dollar Business Days before each date on which interest is payable on the
Euro-Dollar Loans of the amount then due it under this Section. It is
understood that (x) no additional interest is payable under this Section in
respect of Euro-Dollar Loans not paid when due and (y) amounts claimed by any
Lender under this Section shall be based on an assumed level of reserves
maintained by it which is consistent with such Lender's good faith estimate of
the actual level at which the related reserves are required to be maintained by
it over time.
Section 2.16. Letters of Credit.
(a) Commitment to Issue Letters of Credit. Subject to the terms and
conditions hereof, and so long as no Stop Issuance Notice is in effect, each
Issuing Bank agrees to issue Letters of Credit from time to time before the
Letter of Credit Termination Date upon the request of the Borrower; provided
that, immediately after each Letter of Credit is issued (i) the aggregate amount
of the
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Revolving Outstandings shall not exceed the aggregate amount of the Revolving
Commitments and (iii) the aggregate amount of the Letter of Credit Liabilities
shall not exceed $100,000,000. Upon the date of issuance by an Issuing Bank of a
Letter of Credit, the Issuing Bank shall be deemed, without further action by
any party hereto, to have sold to each Revolving Lender, and each Revolving
Lender shall be deemed, without further action by any party hereto, to have
purchased from the Issuing Bank, a participation in such Letter of Credit and
the related Letter of Credit Liabilities in the proportion its respective
Revolving Commitment bears to the aggregate Revolving Commitments.
(b) Method for Issuance; Terms; Extensions.
(i) The Borrower shall give the Issuing Bank notice at least five
Domestic Business Days (or such shorter notice as may be acceptable to the
Issuing Bank in its discretion) prior to the requested issuance of a Letter
of Credit specifying the date such Letter of Credit is to be issued, and
describing the terms of such Letter of Credit and the nature of the
transactions to be supported thereby (such notice, including any such
notice given in connection with the extension of a Letter of Credit, a
"NOTICE OF ISSUANCE"). Upon receipt of a Notice of Issuance, the Issuing
Bank shall promptly notify the Administrative Agent, and the Administrative
Agent shall promptly notify each Revolving Lender of the contents thereof
and of the amount of such Lender's participation in such Letter of Credit.
(ii) The issuance by the Issuing Bank of each Letter of Credit
shall, in addition to the conditions precedent set forth in Section 3.02,
be subject to the conditions precedent that such Letter of Credit shall be
in such form and contain such terms as shall be reasonably satisfactory to
the Issuing Bank and that the Borrower shall have executed and delivered
such other instruments and agreements relating to such Letter of Credit as
the Issuing Bank shall have reasonably requested. The Borrower shall also
pay to the Issuing Bank for its own account issuance, drawing, amendment
and extension charges in the amounts and at the times as agreed between the
Borrower and the Issuing Bank.
(iii) The extension or renewal of any Letter of Credit shall be
deemed to be an issuance of such Letter of Credit, and if any Letter of
Credit contains a provision pursuant to which it is deemed to be extended
unless notice of termination is given by the Issuing Bank, the Issuing Bank
shall timely give such notice of termination unless it has theretofore
timely received a Notice of Issuance and the other conditions to issuance
of a Letter of Credit have also theretofore been met with respect to such
extension. No Letter of Credit shall have a term of more than one year;
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provided that a Letter of Credit may contain a provision pursuant to which
it is deemed to be extended on an annual basis unless notice of termination
is given by the Issuing Bank; provided further that no Letter of Credit
shall have a term extending or be so extendible beyond the Letter of Credit
Termination Date.
(c) Payments; Reimbursement Obligations.
(i) Upon receipt from the beneficiary of any Letter of Credit of
any notice of a drawing under such Letter of Credit, the Issuing Bank shall
notify the Administrative Agent and the Administrative Agent shall promptly
notify the Borrower and each other Revolving Lender as to the amount to be
paid as a result of such demand or drawing and the payment date. The
Borrower shall be irrevocably and unconditionally obligated forthwith to
reimburse the Issuing Bank for any amounts paid by the Issuing Bank upon
any drawing under any Letter of Credit, without presentment, demand,
protest or other formalities of any kind.
(ii) All such amounts paid by the Issuing Bank and remaining
unpaid by the Borrower (a "REIMBURSEMENT OBLIGATION") shall, if and to the
extent that the amount of such Reimbursement Obligation would be permitted
as a Borrowing pursuant to Section 3.02, and unless the Borrower otherwise
instructs the Administrative Agent by not less than one Domestic Business
Day's prior notice, convert automatically to Revolving Base Rate Loans on
the date such Reimbursement Obligation arises. The Administrative Agent
shall, on behalf of the Borrower (which hereby irrevocably directs the
Administrative Agent so to act on its behalf), give notice no later than
11:30 A.M. (New York City time) on such date requesting each Revolving
Lender to make, and each Revolving Lender hereby agrees to make, a
Revolving Base Rate Loan, in an amount equal to such Revolving Lender's
Revolving Credit Percentage of the Reimbursement Obligation with respect to
which such notice relates. Each Revolving Lender shall make such Loan
available to the Administrative Agent at its address specified in or
pursuant to Section 9.01 in immediately available funds, not later than
1:00 P.M. (New York City time), on the date specified in such notice. The
Administrative Agent shall pay the proceeds of such Revolving Loans to the
Issuing Bank, which shall immediately apply such proceeds to repay the
Reimbursement Obligation. All amounts not so repaid shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the
rate applicable to Revolving Base Rate Loans for such day.
(iii) To the extent the Reimbursement Obligation is not refunded
by a Revolving Lender pursuant to clause (ii) above, such Revolving
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Lender will pay to the Administrative Agent, for the account of the Issuing
Bank, immediately upon the Issuing Bank's demand at any time during the
period commencing after such Reimbursement Obligation arises until
reimbursement therefor in full by the Borrower, an amount equal to such
Revolving Lender's ratable share of such Reimbursement Obligation (in
proportion to its participation therein), together with interest on such
amount for each day from the date of the Issuing Bank's demand for such
payment (or, if such demand is made after 1:00 P.M. (New York City time) on
such date, from the next succeeding Domestic Business Day) to the date of
payment by such Lender of such amount at a rate of interest per annum equal
to the Federal Funds Rate for the first three Domestic Business Days after
the date of such demand and thereafter at a rate per annum equal to the
Base Rate for each additional day. The Issuing Bank will pay to each
Revolving Lender ratably all amounts received from the Borrower for
application in payment of its Reimbursement Obligations in respect of any
Letter of Credit, but only to the extent such Revolving Lender has made
payment to the Issuing Bank in respect of such Letter of Credit pursuant
hereto; provided that in the event such payment received by the Issuing
Bank is required to be returned, such Revolving Lender will return to the
Issuing Bank any portion thereof previously distributed to it by the
Issuing Bank.
(d) Obligations Absolute. The obligations of the Borrower and each
Revolving Lender under subsection (c) above shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement, under all circumstances whatsoever, including without limitation
the following circumstances:
(i) any lack of validity or enforceability of this Agreement or any
Letter of Credit or any document related hereto or thereto;
(ii) any amendment or waiver of or any consent to departure from
all or any of the provisions of this Agreement or any Letter of Credit or
any document related hereto or thereto;
(iii) the use which may be made of the Letter of Credit by, or any
acts or omission of, a beneficiary of a Letter of Credit (or any Person for
whom the beneficiary may be acting);
(iv) the existence of any claim, set-off, defense or other rights
that the Borrower may have at any time against a beneficiary of a Letter of
Credit (or any Person for whom the beneficiary may be acting), any Lender
(including the Issuing Bank) or any other Person, whether
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in connection with this Agreement or the Letter of Credit or any document
related hereto or thereto or any unrelated transaction;
(v) any statement or any other document presented under a Letter of
Credit proving to be forged, fraudulent or invalid in any respect or any
statement therein being untrue or inaccurate in any respect whatsoever; or
(vi) any other act or omission to act or delay of any kind by any
Lender (including the Issuing Bank), the Administrative Agent or any other
Person or any other event or circumstance whatsoever that might, but for
the provisions of this subsection (vi), constitute a legal or equitable
discharge of or defense to the Borrower's or the Lender's obligations
hereunder.
(e) Indemnification; Expenses.
(i) Borrower hereby indemnifies and holds harmless each Revolving
Lender (including each Issuing Bank) and the Administrative Agent from and
against any and all claims, damages, losses, liabilities, costs or expenses
which it may reasonably incur in connection with a Letter of Credit issued
pursuant to this Section 2.16.
(ii) None of the Revolving Lenders (including an Issuing Bank) nor
the Administrative Agent nor any of their officers or directors or
employees or agents shall be liable or responsible, by reason of or in
connection with the execution and delivery or transfer of or payment or
failure to pay under any Letter of Credit, including without limitation any
of the circumstances enumerated in subsection (d) above; provided that the
Borrower shall not be required to indemnify any Lender, or the
Administrative Agent, for any claims, damages, losses, liabilities, costs
or expenses, to the extent found by a court of competent jurisdiction to
have been caused by the gross negligence or willful misconduct of such
Person; and provided further that, notwithstanding Section 2.16(d), the
Borrower and each Lender shall have a claim for direct (but not
consequential) damage suffered by it, to the extent found by a court of
competent jurisdiction to have been caused by (x) the willful misconduct or
gross negligence of the Issuing Bank in determining whether a request
presented under any Letter of Credit complied with the terms of such Letter
of Credit or (y) the Issuing Bank's failure to pay under any Letter of
Credit after the presentation to it of a request strictly complying with
the terms and conditions of the Letter of Credit.
(iii) Nothing in this subsection (e) is intended to limit the
obligations of the Borrower under any other provision of this Agreement.
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To the extent the Borrower does not indemnify an Issuing Bank as required
by this subsection, the Revolving Lenders agree to do so ratably in
accordance with their Revolving Commitments.
Section 2.17. Swing Loans. (a) Swing Loan Commitment. During the Swing
Credit Period, so long as no Stop Issuance Notice is in effect, the Swing Loan
Lender agrees, on the terms and conditions set forth in this Agreement, to make
Swing Loans to the Borrower pursuant to this subsection from time to time in
amounts such that at any time (i) the aggregate principal amount of Swing Loans
outstanding at such time does not exceed the Swing Loan Commitment and (ii) the
aggregate amount of Revolving Outstandings at such time does not exceed the
aggregate amount of the Revolving Commitments at such time. Each Borrowing under
this Section shall be in a principal amount of $1,000,000 or any larger multiple
of $500,000 (except that any such Borrowing may be in the amount of the Swing
Loan Commitment available in accordance with the immediately preceding
sentence). Within the foregoing limits, the Borrower may borrow under this
subsection, prepay Swing Loans and reborrow at any time during the Swing Credit
Period under this subsection.
(b) Swing Loan Borrowing Procedure. The Borrower shall give the Swing
Loan Lender notice (a "NOTICE OF SWING LOAN BORROWING"), not later than 12:00
Noon (New York City time) on the date of each Swing Loan Borrowing, specifying
the amount and the date of such Borrowing, which shall be a Euro-Dollar Business
Day. Not later than 2:00 P.M. (New York City time) on the date of each Swing
Loan Borrowing, the Swing Loan Lender shall, unless it determines that any
applicable condition specified in Article 3 has not been satisfied, make
available the amount of such Swing Loan Borrowing, in Federal or other funds
immediately available in New York City, to the Borrower at the Swing Loan
Lender's address specified in or pursuant to Section 9.01.
(c) Interest. Each Swing Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of the Applicable Margin for
Revolving Euro-Dollar Loans for such day plus the New York Interbank Offered
Rate applicable to such Interest Period. Interest for each Interest Period
shall be payable on the last day thereof. Any overdue principal of or interest
on any Swing Loan shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the sum of the Applicable Margin for Revolving
Base Rate Loans for such day plus the Base Rate for such day.
The "NEW YORK INTERBANK OFFERED RATE" applicable to any Interest Period
means the rate per annum at which deposits in dollars are offered to the Swing
Loan Lender in the New York interbank market at approximately 12:00 Noon (New
York City time) on the first day of such Interest Period in an amount
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approximately equal to the principal amount of the Swing Loan to which such
Interest Period is to apply and for a period of time comparable to such Interest
Period.
(d) Optional Prepayment. The Borrower may prepay the Swing Loans in
whole at any time, or from time to time in part in a principal amount of at
least $1,000,000, by giving notice of such prepayment to the Swing Loan Lender
not later than 1:00 P.M. (New York City time) on the date of prepayment and
paying the principal amount to be prepaid, together with accrued interest
thereon to the date of prepayment, to the Swing Loan Lender.
(e) Mandatory Prepayment. On the date of each Revolving Borrowing
pursuant to Section 2.01, the Administrative Agent shall apply the proceeds
thereof to prepay all Swing Loans then outstanding, together with interest
accrued thereon to the date of prepayment.
(f) Payments. All payments to the Swing Loan Lender under this Section
2.17 shall be made to it at its address specified in or pursuant to Section
9.01, in Federal or other funds immediately available in New York City, not
later than 2:00 P.M. (New York City time) on the date of payment.
(g) Refunding Unpaid Swing Loans. If (x) the Swing Loans are not paid
in full on their Maturity Date or (y) the Swing Loans become immediately due and
payable pursuant to Article 6, the Administrative Agent shall (if requested to
do so by the Swing Loan Lender), by notice to the Revolving Lenders (including
the Swing Loan Lender, in its capacity as a Revolving Lender), require each
Revolving Lender to pay to the Administrative Agent for the account of the Swing
Loan Lender an amount equal to such Revolving Lender's Revolving Credit
Percentage of the aggregate unpaid principal amount of the Swing Loans then
outstanding. Such notice shall specify the date on which such payments are to
be made, which shall be the first Domestic Business Day after such notice is
given. Not later than 12:00 Noon (New York City time) on the date so specified,
each Revolving Lender shall pay the amount so notified to it to the
Administrative Agent at its address specified in or pursuant to Section 9.01, in
Federal or other funds immediately available in New York City. Promptly upon
receipt thereof, the Administrative Agent shall remit such amounts to the Swing
Loan Lender. The amount so paid by each Revolving Lender shall constitute a
Revolving Base Rate Loan to the Borrower and shall be applied by the Swing Loan
Lender to repay the outstanding Swing Loans.
(h) Purchase of Participations in Swing Loans. If at the time Revolving
Loans would have otherwise been made pursuant to Section 2.17(g), one of the
events described in Section 6.01(h) or 6.01(i) with respect to the Borrower
shall have occurred and be continuing or the Revolving Commitments shall have
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terminated, each Revolving Lender shall, on the date such Revolving Loans would
have been made pursuant to the notice referred to in Section 2.17(g) (the
"REFUNDING DATE"), purchase an undivided participating interest in the relevant
Swing Loan in an amount equal to such Revolving Lender's Revolving Credit
Percentage of the principal amount of such Swing Loan. On the Refunding Date,
each Revolving Lender shall transfer to the Swing Loan Lender, in immediately
available funds, such amount.
(i) Payments on Participated Swing Loans. Whenever, at any time after
the Swing Loan Lender has received from any Revolving Lender such Revolving
Lender's payment pursuant to Section 2.17(h), the Swing Loan Lender receives any
payment on account of the Swing Loan in which the Revolving Lenders have
purchased participations pursuant to Section 2.17(h), the Swing Loan Lender will
promptly distribute to each such Revolving Lender its ratable share of such
payment (appropriately adjusted, in the case of interest payments, to reflect
the period of time during which such Revolving Lender's participating interest
was outstanding and funded); provided that in the event that such payment
received by the Swing Loan Lender is required to be returned, such Revolving
Lender will return to the Swing Loan Lender any portion thereof previously
distributed to it by the Swing Loan Lender.
(j) Obligations to Refund or Purchase Participations in Swing Loans
Absolute. Each Revolving Lender's obligation to transfer the amount of a
Revolving Loan to the Swing Loan Lender as provided in Section 2.17(g) or to
purchase a participating interest pursuant to Section 2.17(h) shall be absolute
and unconditional and shall not be affected by any circumstance, including,
without limitation, (i) any set-off, counterclaim, recoupment, defense or other
right which such Revolving Lender, the Borrower or any other Person may have
against the Swing Loan Lender or any other Person, (ii) the occurrence or
continuance of a Default or an Event of Default or the termination or reduction
of any Commitments, (iii) any adverse change in the condition (financial or
otherwise) of the Borrower or any other Person, (iv) any breach of this
Agreement by the Borrower, any other Lender or any other Person or (v) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing.
Section 2.18. Stop Issuance Notice. If the Required Banks determine at
any time that the conditions set forth in Section 3.02 would not be satisfied in
respect of a Revolving Borrowing at such time, then the Required Banks may
request that the Administrative Agent issue a "STOP ISSUANCE NOTICE", and the
Administrative Agent shall issue such notice to the Swing Loan Lender and to
each Issuing Bank. Such Stop Issuance Notice shall be withdrawn upon a
determination by the Required Banks that the circumstances giving rise thereto
no longer exist. No Swing Loan shall be made and no Letter of Credit shall be
issued while a Stop Issuance Notice is in effect. The Required Banks may
request
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issuance of a Stop Issuance Notice only if there is a reasonable basis therefor,
and shall consider reasonably and in good faith a request from the Borrower for
withdrawal of the same on the basis that the conditions in Section 3.02 are
satisfied; provided that the Administrative Agent, the Swing Loan Lender and the
Issuing Banks may and shall conclusively rely on any Stop Issuance Notice while
it remains in effect.
ARTICLE 3
Conditions
Section 3.01. Closing Date. The Closing Date shall occur on the first date
on which all the following conditions have been satisfied (or waived in
accordance with Section 9.05):
(a) receipt by the Administrative Agent of counterparts hereof 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 satisfactory to it of telegraphic, telex or other written confirmation from
such party of execution of a counterpart hereof by such party);
(b) receipt by the Administrative Agent of a duly executed Note for the
account of each Lender which shall have made written request therefor not less
than two Domestic Business Days prior to the Closing Date, dated on or before
the Closing Date and complying with the provisions of Section 2.13;
(c) receipt by the Administrative Agent of duly executed counterparts of
each Collateral Document, together with evidence satisfactory to it in its sole
good faith discretion of the effectiveness of the security contemplated thereby
and the perfection of the security interests created thereby (including the
filing of UCC-1s and the delivery of any stock certificates or promissory notes
comprising the Collateral);
(d) receipt by the Administrative Agent of duly executed counterparts of
the Subsidiary Guarantee signed on behalf of each Subsidiary Guarantor;
(e) the fact that Acquisition Sub shall have accepted tenders of not
less than the minimum number of shares of common stock, par value $1.00 per
share, of ARCO Chemical required pursuant to the Offer to Purchase, without
waiver of any of the material conditions thereof, and the Administrative Agent
shall have received a certificate from the chief executive officer, chief
financial officer or treasurer of the Borrower to such effect;
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(f) receipt by the Administrative Agent of (x) an opinion (addressed to
the Agents and the Lenders) of Baker & Botts L.L.P., special counsel for the
Obligors, substantially in the form of Exhibit E hereto, and (y) an opinion
(addressed to the Agents and the Lenders) of Kerry A. Galvin, Associate General
Counsel of the Borrower, substantially in the Form of Exhibit F hereto, each
dated the Closing Date and each covering such additional matters relating to the
transactions contemplated hereby as the Required Lenders may reasonably request;
(g) receipt by the Administrative Agent of an opinion (addressed to the
Agents and the Lenders) of Davis Polk & Wardwell, special counsel for the
Agents, substantially in the form of Exhibit G hereto, dated the Closing Date
and covering such additional matters relating to the transactions contemplated
hereby as the Required Lenders may reasonably request;
(h) receipt by the Administrative Agent of payment of participation fees
for the account of each Lender in the amount heretofore mutually agreed;
(i) receipt by each of the Agents, the Arranger and the Co-Arrangers of
payment of all other costs, fees and expenses (including, without limitation,
reasonable legal fees and expenses for which invoices shall have been submitted
to the Borrower) and other compensation payable to any of the foregoing on or
prior to the Closing Date in connection with the Loan Documents;
(j) the fact that there shall have been no material adverse change in
the financial condition, business, assets, results of operations, liabilities or
prospects of the Borrower and ARCO Chemical and their respective Subsidiaries,
taken as a whole, since the most recently ended fiscal year of such entity for
which audited financial statements have been delivered to the Lenders;
(k) receipt by the Administrative Agent of all documents it may
reasonably request relating to the existence of each Obligor, the corporate
authority for the Loan Documents and the Acquisition Documents, and any other
matters relevant hereto, all in form and substance satisfactory to such Agent in
its sole good faith discretion; and
(m) receipt by the Administrative Agent of evidence satisfactory to it of
termination of the Existing Borrower Credit Agreement and payment of all
principal of and interest on any loans outstanding thereunder, all fees accrued
thereunder and any other amounts payable thereunder.
Promptly after the Closing Date occurs, the Administrative Agent shall notify
the Borrower, the other Agents and the Lenders thereof, and such notice shall be
conclusive and binding on all parties hereto.
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Section 3.02. Borrowings and Issuances of Letters of Credit. The
obligation of any Lender to make a Loan on the occasion of any Borrowing, and
the obligation of an Issuing Bank to issue (or renew or extend the term of) any
Letter of Credit, is subject to the satisfaction of the following conditions:
(a) the fact that the Closing Date shall have occurred on or before
September 21, 1998;
(b) receipt by the Agent of a Notice of Borrowing as required by
Section 2.02, receipt by the Issuing Bank of a Notice of Issuance as
required by Section 2.16(b) or receipt by the Swing Loan Lender of a Notice
of Swing Loan Borrowing as required by Section 2.17(b), as the case may be;
(c) the fact that, immediately before and after such Borrowing or
issuance, no Default shall exist; and
(d) the fact that the representations and warranties of the
Obligors contained in the Loan Documents (except, in the case of any
Borrowing or issuance subsequent to the Closing Date, the representations
and warranties contained in Section 4.11) shall be true in all material
respects on and as of the date of such Borrowing or issuance.
Each Borrowing and each issuance or extension of a Letter of Credit hereunder
shall be deemed to be a representation and warranty by the Borrower on the date
of such Borrowing or issuance as to the facts specified in the foregoing clauses
3.02(c) and 3.02(d).
ARTICLE 4
Representations and Warranties
The Borrower represents and warrants (including, in the case of any such
representation and warranty made or deemed made on the Closing Date, immediately
after giving effect to the consummation of the Offer) that:
Section 4.01. Corporate Existence and Power. The Borrower 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, consents, authorizations and approvals required to carry
on its business as now conducted, except where the failure to have such
licenses, consents, authorizations and approvals could not reasonably be
expected to have a Material Adverse Effect.
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Section 4.02. Corporate and Governmental Authorization; No Contravention.
The execution, delivery and performance by each Obligor of the Loan Documents to
which it is a party are within its corporate or other company powers, as the
case may be, have been duly authorized by all necessary corporate or other
company action, as the case may be, require no action by or in respect of, or
filing with, any governmental body, agency or official (other than the filing of
appropriate UCC financing statements pursuant to the Collateral Documents) and
do not contravene, or constitute a default under, any provision of applicable
law or regulation or of the certificate of incorporation, by-laws or other
constitutive documents of such Obligor or of any agreement or instrument
governing Material Debt or any other material agreement, judgment, injunction,
order, decree or other instrument binding upon the Borrower or any of its
Subsidiaries or result in the creation or imposition of any Lien on any asset of
the Borrower or any of its Subsidiaries (other than Liens created under the
Collateral Documents).
Section 4.03. Binding Effect; Liens Enforceable. (a) Each Loan Document
(other than the Notes) constitutes a valid and binding agreement of each Obligor
party thereto, and each Note, when executed and delivered in accordance with
this Agreement, will constitute a valid and binding obligation of the Borrower,
in each case enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
general principles of equity (which principles may include implied duties of
good faith and fair dealing).
(b) The Collateral Documents create valid security interests in the
Collateral purported to be covered thereby, which security interests are and
will remain perfected security interests prior to all other Liens other than
Permitted Liens. Each of the representations and warranties made by each
Obligor in the Collateral Documents to which it is a party is true and correct
in all material respects.
Section 4.04. Financial Information. (a) The consolidated balance sheet of
the Borrower and its Consolidated Subsidiaries as of December 31, 1997 and the
related consolidated statements of income and retained earnings and of cash
flows for the Fiscal Year then ended, reported on by Coopers & Lybrand L.L.P.,
and set forth in the Borrower's 1997 Form 10-K, fairly present in all material
respects, in conformity with GAAP, 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.
(b) The unaudited consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of March 31, 1998 and the related unaudited
consolidated statements of income and of cash flows for the three months then
ended, set forth in the Borrower's Latest Form 10-Q, fairly present in all
material
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respects, on a basis consistent with the financial statements referred to in
subsection (a), 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).
(c) The audited balance sheet of Equistar as of December 31, 1997, and
the related statements of income, partners' capital and cash flows for the
fiscal year of Equistar then ended, reported on by Coopers & Lybrand L.L.P. and
Price Waterhouse LLP, and set forth in the Borrower's 1997 Form 10-K, fairly
present in all material respects, in conformity with GAAP, the financial
position of Equistar as of such date and its results of operations and cash
flows for such fiscal year.
(d) The unaudited summarized balance sheet of Equistar as of March 31,
1998 and the related unaudited summarized statements of income and selected cash
flows information for the three months then ended, set forth in the Borrower's
Latest Form 10-Q, fairly present in all material respects, on a basis consistent
with the financial statements referred to in subsection (c), the financial
position of Equistar as of such date and its results of operations and cash
flows for such three month period (subject to normal year-end adjustments).
(e) The audited balance sheet of LCR as of December 31, 1997, and the
related statements of income, members' equity and cash flows for the fiscal year
of LCR then ended, reported on by Coopers & Lybrand L.L.P., and set forth in the
Borrower's 1997 Form 10-K, fairly present in all material respects, in
conformity with GAAP, the financial position of LCR as of such date and its
results of operations and cash flows for such fiscal year.
(f) The unaudited summarized balance sheet of LCR as of March 31, 1998
and the related unaudited summary financial information for the three months
then ended, set forth in the Borrower's Latest Form 10-Q, fairly present in all
material respects, on a basis consistent with the financial statements referred
to in subsection (e), 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).
(g) Since December 31, 1997, there has been no material adverse change
in the business, financial condition, assets, results of operations or
liabilities of the Borrower and its Consolidated Subsidiaries, considered as a
whole.
Section 4.05. Litigation. There is no action, suit or proceeding
(including any action, suit or proceeding arising out of any Environmental Law)
pending against, or to the Borrower's knowledge threatened against or affecting,
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the Borrower or any Subsidiary (including, for purposes of this Section, the
Borrower Joint Ventures) before any court or arbitrator or any governmental
body, agency or official which could reasonably be expected to have a Material
Adverse Effect, or which in any manner draws into question the validity or
enforceability of any Loan Document.
Section 4.06. Compliance with Laws. (a) Each of the Borrower and its
Subsidiaries (including, for purposes of this Section, the Borrower Joint
Ventures) is in compliance in all material respects with all laws, regulations
and orders of any governmental authority applicable to it or its property
(including Environmental Laws), except for those failures to comply that could
not reasonably be expected to have a Material Adverse Effect.
(b) Each member of the ERISA Group has fulfilled its obligations under the
minimum funding standards of ERISA and the Internal Revenue Code with respect to
each Plan and is in compliance (except where the failure to so comply could not
reasonably be expected to have a Material Adverse Effect) with the presently
applicable provisions of ERISA and the Internal Revenue Code with respect to
each Plan. Except as reflected in the PBGC Settlement Agreement, no member of
the ERISA Group has (i) sought a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to
make any contribution or payment to any Plan or Multiemployer Plan, or made any
amendment to any Plan, which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security under ERISA or the Internal
Revenue Code or (iii) incurred any liability under Title IV of ERISA other than
a liability to the PBGC for premiums under Section 4007 of ERISA.
Section 4.07. Environmental Matters. In the ordinary course of its
business, the Borrower conducts an ongoing review of the effect of Environmental
Laws on the business, operations and properties of the Borrower and its
Subsidiaries, in the course of which it identifies and evaluates associated
liabilities and costs (including, without limitation, any capital or operating
expenditures required for clean-up or closure of properties presently or
previously owned, any capital or operating expenditures required to achieve or
maintain compliance with environmental protection standards imposed by law or as
a condition of any license, permit or contract, any related constraints on
operating activities, including any periodic or permanent shutdown of any
facility or reduction in the level of or change in the nature of operations
conducted thereat, any costs or liabilities in connection with off-site disposal
of wastes or Hazardous Substances and any actual or potential liabilities to
third parties, including employees, and any related costs and expenses). On the
basis of this review, the Borrower has reasonably concluded that such
associated liabilities and costs, including the costs of complying with
Environmental Laws, could not reasonably be expected to have a Material Adverse
Effect.
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Section 4.08. Taxes. The Borrower and its Subsidiaries (including, for
purposes of this Section, the Borrower Joint Ventures) have filed all United
States Federal income tax returns and all other material tax returns which are
required to be filed by them and have paid or accrued all taxes shown to be due
such returns or on any assessment received by the Borrower or any Subsidiary and
required to be paid or accrued by it, except to the extent that any such taxes
are being contested in good faith by appropriate proceedings.
Section 4.09. Significant Subsidiaries. Each of the Borrower's Significant
Subsidiaries (including, for purposes of this Section, the Borrower Joint
Ventures) is duly organized, validly existing and, where applicable, in good
standing under the laws of its jurisdiction of organization, and has the
constitutive powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except where the
failure to have such licenses, consents, authorizations and approvals could not
reasonably be expected to have a Material Adverse Effect. The Borrower has no
Significant Subsidiaries which are not either Foreign Subsidiaries, JV
Subsidiaries or, subject to Section 5.19(d)(v), Subsidiary Guarantors. The
Borrower does not at the date hereof, and will not as of the Closing Date,
directly own any Significant Subsidiaries other than the Pledged Subsidiaries.
Section 4.10. No Regulatory Restrictions on Borrowing. No Obligor is (i)
an "investment company" within the meaning of the Investment Company Act of
1940, as amended, (ii) a "holding company" or a "subsidiary company" of a
holding company within the meaning of the Public Utility Holding Company Act of
1935, as amended, or (iii) otherwise subject to any regulatory scheme (other
than Regulation U) which restricts its ability to incur or guarantee debt.
Section 4.11. Full Disclosure. The Information Memorandum does not
contain on the date hereof any material misstatement of fact or omit to state
any material fact necessary to make the statements contained therein, in light
of the circumstances under which they were made, not misleading; provided,
however, to the extent any such information was based on or constituted a
forecast or projection, the Borrower represents that it acted in good faith and
utilized information available to it at the time the Information Memorandum was
prepared and assumptions believed by it to be reasonable in light of the then
current and foreseeable business conditions of the Borrower and its
Subsidiaries.
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ARTICLE 5
Covenants
The Borrower agrees that, so long as any Lender has any Commitment
hereunder or any amount payable under any Note or any Letter of Credit Liability
remains unpaid:
Section 5.01. Information. The Borrower will deliver to the Administrative
Agent, for delivery by it to each of the Lenders:
(a) as soon as available and in any event within 100 days after the
end of each Fiscal Year, a 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 retained earnings and of cash
flows for such Fiscal Year, setting forth in each case in comparative form
the figures for the previous Fiscal Year, all reported on without material
qualification by Price Waterhouse Coopers L.L.P. or other independent
public accountants of nationally recognized standing;
(b) as soon as available and in any event within 50 days after the
end of each of the first three Fiscal Quarters of each Fiscal Year, a
consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of the end of such Fiscal Quarter, the related consolidated
statement of income for such Fiscal Quarter and the related consolidated
statements of income and cash flows for the portion of the Fiscal Year
ended at the end of such Fiscal Quarter, setting forth in the case of each
such statement of income and of cash flows in comparative form the figures
for the corresponding period in the previous Fiscal Year, all certified
(subject to normal year-end adjustments) as to fairness of presentation and
consistency with GAAP by the Borrower's chief financial officer or chief
accounting officer;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses 5.01(a) and 5.01(b) above, a certificate
of the Borrower's chief financial officer or chief accounting officer (i)
setting forth in reasonable detail the calculations required to establish
whether the Borrower was in compliance with the requirements of Sections
5.09 to 5.13, inclusive, on the date of such financial statements and (ii)
stating whether any Default exists on the date of such certificate and, if
any Default then exists, setting forth the details thereof and the action
which the Borrower is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause 5.01(a) above, a statement of the firm of
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independent public accountants which reported on such statements (i)
stating whether anything has come to their attention to cause them to
believe that any Default existed on the date of such statements and (ii)
confirming the calculations set forth in the officer's certificate
delivered simultaneously therewith pursuant to clause 5.01(c) above;
(e) prior to the Mandatory Prepayment Release Date, on or prior to
100 days after the end of each Fiscal Year, a certificate of the Borrower's
chief financial officer or chief accounting officer setting forth in
reasonable detail the calculation of Excess Cash Flow and the Excess Cash
Flow Prepayment Amount for such Fiscal Year (or, in the case of the Fiscal
Year ending December 31, 1998, for the period from October 1, 1998 through
December 31, 1998);
(f) within five Domestic Business Days after any Responsible
Officer obtains knowledge of any Default, if such Default is then
continuing, a certificate of the Borrower's chief financial officer or
chief accounting officer setting forth the details thereof and the action
which the Borrower is taking or proposes to take with respect thereto;
(g) promptly after the mailing thereof to the Borrower's
stockholders generally, copies of all financial statements, reports and
proxy statements so mailed;
(h) promptly after the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements
on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or
their equivalents) filed by the Borrower with the SEC;
(i) promptly after any member of the ERISA 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
or notice that any Multiemployer Plan is in reorganization, is insolvent or
has been terminated, a copy of such notice; (iii) receives notice from the
PBGC under Title IV of ERISA of an intent to terminate, impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or
appoint a trustee to administer any Plan, a copy of such notice; (iv)
applies for a waiver of the minimum funding standard under Section 412 of
the Internal Revenue Code, a copy of such application; (v) gives notice of
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intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such
notice and other information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such
notice; or (vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or makes any amendment to any Plan which has resulted or
could result in the imposition of a Lien or the posting of a bond or other
security, a certificate of the Borrower's chief financial officer or chief
accounting officer setting forth details as to such occurrence and the
action, if any, which the Borrower or applicable member of the ERISA Group
is required or proposes to take;
(j) as soon as reasonably practicable after any Responsible Officer
obtains knowledge of the commencement of an action, suit or proceeding
against the Borrower or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official in which there is a
reasonable likelihood of an adverse decision which could have a Material
Adverse Effect or which in any manner questions the validity of the Loan
Documents, a certificate of a senior financial officer of the Borrower
setting forth the nature of such pending or threatened action, suit or
proceeding and such additional information with respect thereto as may be
reasonably requested by any Lender;
(k) promptly, upon receipt of any complaint, order, citation,
notice or other written communication from any Person with respect to, or
upon a Responsible Officer's obtaining knowledge of, (i) the existence of a
violation of any applicable Environmental Law or any Environmental
Liability in connection with any property now or previously owned, leased
or operated by the Borrower or any of its Subsidiaries, (ii) any Release on
such property or any part thereof in a quantity that is reportable under
any applicable Environmental Law, and (iii) any pending or threatened
proceeding for the termination, suspension or non-renewal of any permit
required under any applicable Environmental Law, in each case which could
reasonably be expected to have a Material Adverse Effect; and
(l) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as the
Administrative Agent, at the request of any Lender, may reasonably request.
Information required to be delivered pursuant to Sections 5.01(a), 5.01(b),
5.01(g) or 5.01(h) above shall be deemed to have been delivered on the date on
which the Borrower provides notice to the Administrative Agent that such
information has been posted on the Borrower's website on the Internet at the
website address listed on the signature pages hereof, at
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sec.gov/edaux/searches.htm or at another website identified in such notice and
accessible by the Lenders without charge; provided that (i) such notice may be
included in a certificate delivered pursuant to Section 5.01(c) and (ii) the
Borrower shall deliver paper copies of the information referred to in Sections
5.01(a), 5.01(b), 5.01(g) or 5.01(h) to any Lender which requests such delivery.
Section 5.02. Payment of Obligations. The Borrower will pay and discharge,
and will cause each Subsidiary to pay and discharge, at or before delinquency,
all material taxes, assessments and governmental charges or levies imposed upon
it or its income or profits or in respect of its property, except where the same
are contested in good faith by appropriate proceedings.
Section 5.03. 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, provided that no item of property need be so kept if the failure to
keep it so individually or in the aggregate with all other items not so kept by
the Borrower and its Subsidiaries could not reasonably be expected to have a
Material Adverse Effect.
(b) The Borrower will maintain, and will cause each of its Subsidiaries
to maintain (either in the Borrower's name or in such Subsidiary's own name)
insurance on all their respective properties consistent with the insurance
maintained on the date hereof or otherwise in at least such amounts (with no
materially greater risk retention) and against at least such risks as are
usually maintained, retained or insured against in the same general area by
companies of established repute owning similar properties in such area and
engaged in the same or a similar business, in either case, to the extent
available to the Borrower and its Subsidiaries on commercially reasonable terms.
The Borrower will furnish to the Lenders, upon request from the Administrative
Agent, information presented in reasonable detail as to the insurance so
carried.
Section 5.04. Conduct of Business and Maintenance of Existence. The
Borrower and its Subsidiaries will continue to engage in business of the same
general type as now conducted by the Borrower and its Subsidiaries. Subject to
Section 5.07, the Borrower and its Subsidiaries will maintain their respective
corporate or other company existences and their respective rights, privileges
and franchises, except to the extent that the failure to maintain those rights,
privileges and franchises, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
Section 5.05. Compliance with Laws. The Borrower will comply, and will
cause each Subsidiary to comply, in all material respects with all applicable
laws, ordinances, rules, regulations and requirements of governmental
authorities
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(including, without limitation, Environmental Laws and ERISA and the rules and
regulations thereunder), except where the necessity of compliance therewith is
contested in good faith by appropriate proceedings or where the failure to do
so, individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
Section 5.06. Inspection of Property, Books and Records. The Borrower will
keep, and will cause each Subsidiary to keep, proper books of record and
account; and will permit, and will cause each Subsidiary to permit,
representatives of any Lender at such Lender's expense to visit and inspect any
of their respective properties, to examine and make abstracts from any of their
respective books and records and to discuss their respective affairs, finances
and accounts with their respective officers and independent public accountants,
all at such reasonable times and as often as may reasonably be requested.
Section 5.07. Mergers and Sales of Assets. The Borrower will not, and will
not permit any of its Subsidiaries to, consolidate or merge with or into any
other Person; provided that nothing in this Section shall prohibit (i) the
Borrower from merging with any Subsidiary (other than a JV Subsidiary or
Acquisition Sub or, prior to the consummation of the Equity Issuances
contemplated by Section 5.21, ARCO Chemical) if the Borrower is the corporation
surviving such merger and, immediately after giving effect to such merger, no
Default shall exist or (ii) any Subsidiary from merging with any Person if the
entity surviving the merger is such Subsidiary or becomes a Subsidiary as a
result of that merger (and if either party to such merger is a Subsidiary
Guarantor, the entity surviving the merger is a Subsidiary Guarantor) and
immediately after giving effect to such merger, no Default shall exist. The
Borrower will not sell or otherwise dispose of all or substantially all of its
assets to any other Person or Persons; provided that this provision shall not
prohibit the sale of Margin Stock for fair value (as determined in good faith by
the chief financial officer of the Borrower) in cash or cash equivalents. Prior
to the Mandatory Prepayment Release Date, the Borrower will not, and will not
permit any of its Subsidiaries to, make any Asset Sale unless (i) the
consideration therefor is not less than the fair market value of the related
asset (as determined in good faith by the chief financial officer of the
Borrower) and (ii) the consideration therefor consists solely of cash or cash
equivalents.
Section 5.08. Use of Proceeds. The proceeds of the Term Loans will be used
by the Borrower (i) to finance the Acquisition and the consummation of the
transactions contemplated thereby (including without limitation to pay related
fees and expenses) and (ii) to refinance certain Existing Borrower Debt, certain
Existing ARCO Chemical Debt and certain other Debt of direct and indirect
Subsidiaries of the Borrower. The proceeds of the Revolving Loans will be used
by the Borrower for general corporate purposes, including, without limitation,
working capital purposes. None of the proceeds of the Loans will be used, in
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violation of any applicable law or regulation, including without limitation of
Regulation U.
Section 5.09. Negative Pledge. Neither the Borrower nor any Subsidiary
will create, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired by it, except:
(a) Liens existing on the Closing Date securing Existing Debt in an
aggregate principal amount not exceeding $75,000,000;
(b) any Lien existing on any asset of any Person at the time such Person
becomes a Subsidiary and not created in contemplation of such event;
(c) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the cost of acquiring, constructing, or
improving such asset, provided that such Lien attaches to such asset
concurrently with or within 180 days after the acquisition or completion of
construction or improvement thereof;
(d) any Lien existing on any asset prior to the acquisition thereof by
merger or otherwise by the Borrower or a Subsidiary and not created in
contemplation of such acquisition;
(e) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, provided that such Debt is not increased (except by the
amount of any costs associated with such refinancing, extension, renewal or
refunding) and is not secured by any additional assets;
(f) Liens to secure a Debt owing to the Borrower or a Subsidiary
Guarantor;
(g) Liens created under the Collateral Documents;
(h) Ordinary Course Liens;
(i) Liens on Margin Stock, if and to the extent that the value of such
Margin Stock exceeds 25% of the total assets of the Borrower and its
Subsidiaries subject to this Section; and
(j) Liens not otherwise permitted by this Section securing Debt in an
aggregate principal amount at no time exceeding (x) $50,000,000 less (y) the
aggregate outstanding principal amount of Debt of Subsidiaries permitted solely
by clause (g) of Section 5.10 at such time.
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Section 5.10. Limitation on Subsidiary Debt. The Borrower will not
permit any of its Subsidiaries to incur or at any time be liable with respect to
any Debt except:
(a) Debt under the Loan Documents;
(b) the Existing Debt of such Subsidiary outstanding on the Closing
Date; and (except in the case of the Existing ARCO Chemical Debt described in
clause (i) of the definition of such term, which if refinanced with other Debt
may be refinanced only with Debt of the Borrower) refinancings thereof provided
that the principal amount thereof is not increased beyond the amount outstanding
thereunder on the date hereof and the amount of any refinancing costs;
(c) Debt secured by Liens permitted by Section 5.09;
(d) intercompany Debt of an Obligor owing to an Obligor, or of any
Subsidiary which is not an Obligor owing to the Borrower or any other
Subsidiary;
(e) Debt of a Subsidiary Guarantor consisting of a Guarantee of a Debt
Incurrence by the Borrower;
(f) Debt of Foreign Subsidiaries in an aggregate outstanding principal
amount at no time exceeding $300,000,000; and
(g) Debt of Subsidiaries not otherwise permitted by this Section
incurred after the Closing Date in an aggregate principal amount at any time
outstanding not to exceed (x) $50,000,000 less (y) the aggregate outstanding
principal amount of Debt secured by Liens permitted solely by clause (j) of
Section 5.09 at such time;
provided that, notwithstanding the foregoing, the Borrower will not permit any
JV Subsidiary to incur or at any time be liable with respect to any Debt, other
than obligations of such JV Subsidiary in respect of the Borrower Joint Venture
in which it holds an equity interest and arising by reason of such JV
Subsidiary's ownership of such equity interest.
Section 5.11. Adjusted Debt to Adjusted EBITDA. At any date during each
period set forth below, the ratio of (i) Adjusted Debt at such date to (ii)
Adjusted EBITDA for the period of four consecutive Fiscal Quarters most recently
ended on or prior to such date will not exceed the ratio set forth below
opposite such period:
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PERIOD RATIO
------ -----
September 30, 1998 - June 30, 1999 6.85:1.00
July 1, 1999 - September 30, 1999 5.00:1.00
October 1, 1999 - December 31, 1999 4.75:1.00
January 1, 2000 - March 31, 2000 4.50:1.00
April 1, 2000 - June 30, 2000 4.25:1.00
July 1, 2000 - September 30, 2000 4.00:1.00
October 1, 2000 - December 31, 2000 3.75:1.00
January 1, 2001 - March 31, 2001 3.50:1.00
April 1, 2001 - June 30, 2001 3.25:1.00
July 1, 2001 - December 31, 2001 3.00:1.00
January 1, 2002 - December 31, 2002 2.75:1.00
January 1, 2003 and thereafter 2.50:1.00
; provided that on the later of (x) January 1, 1999 and (y) the date on which
the Borrower shall have consummated one or more Equity Issuances for gross cash
proceeds not less than $1,250,000,000, such ratio shall be the lesser of (i)
5.75:1.00 and (ii) the ratio set forth above for the applicable period.
Section 5.12. Fixed Charge Coverage Ratio. At the end of each Fiscal
Quarter ending during each period set forth below, the Fixed Charge Coverage
Ratio will not be less than the ratio set forth below opposite such period:
PERIOD RATIO
------ -----
September 30, 1998 - June 30, 1999 1.50:1.00
July 1, 1999 - June 30, 2000 1.75:1.00
July 1, 2000 - December 31, 2000 2.00:1.00
January 1, 2001 - March 31, 2001 2.25:1.00
April 1, 2001 and thereafter 2.50:1.00
Section 5.13. Minimum Consolidated Net Worth. Consolidated Net Worth will
not at the end of any Fiscal Quarter be less than an amount equal to the sum of
(i) $475,000,000 and (ii) an amount equal to 50% of Consolidated Net Income for
each Fiscal Quarter ending after March 31, 1998 but on or before the date of
determination, in each case, for which Consolidated Net Income is positive (but
with no deduction on account of negative Consolidated Net Income for any Fiscal
Quarter) plus (iii) 75% of the amount by which Consolidated Net Worth is
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increased after March 31, 1998 as a result of the issuance and sale of capital
stock of the Borrower or the conversion or exchange of Debt of the Borrower into
capital stock of the Borrower.
Section 5.14. Lease Payments. Neither the Borrower nor any Subsidiary
will incur or assume (whether pursuant to a Guarantee or otherwise) any
liability for rental payments under a lease with a lease term (as defined in
Financial Accounting Standards Board Statement No. 13, as in effect on the date
hereof) of ten years or more if, immediately after giving effect thereto, the
aggregate amount of minimum lease payments for which the Borrower and its
Subsidiaries are liable will exceed $150,000,000 for any Fiscal Year under all
such leases (excluding capital leases).
Section 5.15. Restricted Payments; Optional Prepayments. (a) Neither the
Borrower nor any Subsidiary will declare or make any Restricted Payment;
provided that so long as at the time no Default shall exist, the Borrower may
(i) pay dividends on any preferred stock issued pursuant to Section 5.21 and
(ii) pay regular quarterly dividends on its common stock at a rate not exceeding
$0.225 per share per quarter (adjusted to reflect any stock split, stock
dividend, stock combination or similar transaction subsequent to the date
hereof).
(b) Prior to the Mandatory Prepayment Release Date, neither the Borrower
nor any Subsidiary will optionally prepay, redeem, purchase, acquire or make any
other principal payment in respect of any Debt, including any refinancing
thereof, other than (i) the Loans, (ii) the Equistar Note, (iii) Working Capital
Facilities and (iv) other refinancing of Existing Debt contemplated by the
Information Memorandum.
Section 5.16. Investments; Business Acquisitions. Neither the Borrower
nor any Subsidiary will make or acquire any Investment in any Person or make any
Business Acquisition other than:
(a) Investments in Subsidiaries;
(b) Investments in Borrower Joint Ventures;
(c) Temporary Cash Investments;
(d) the Acquisition;
(e) employee Loans and advances for travel, entertainment,
relocation and other ordinary business expenses;
(f) Business Acquisitions; and
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(g) other Investments made after the Closing Date if, immediately
after such Investment is made or acquired, the aggregate net book value of
all Investments permitted by this clause does not exceed $10,000,000.
Section 5.17. Transactions with Affiliates. The Borrower will not, and
will not permit any Subsidiary to, directly or indirectly, (i) pay any funds to
or for the account of any Affiliate, (ii) make any investment in any Affiliate
(whether by acquisition of stock or indebtedness, by loan, advance, transfer of
property, guarantee or other agreement to pay, purchase or service, directly or
indirectly, any Debt, or otherwise), (iii) lease, sell, transfer or otherwise
dispose of any assets, tangible or intangible, to any Affiliate, or (iv)
participate in, or effect, any transaction with any Affiliate, except on an
arms-length basis; provided that the foregoing provisions of this Section shall
not prohibit (i) any Restricted Payment permitted by Section 5.15 or (ii) any
Subsidiary from declaring or paying any lawful dividend or other payment ratably
in respect of all its capital stock of the relevant class. It is understood
that the agreements set forth in Schedule 5.20 do not contravene this Section.
Section 5.18. Limitation on Restrictions Affecting Subsidiaries. Neither
the Borrower nor any of its Subsidiaries will enter into, or suffer to exist,
any agreement with any Person which prohibits or limits the ability of any
Subsidiary to (a) pay dividends or make other distributions or pay any Debt owed
to the Borrower or any Subsidiary, (b) make loans or advances to the Borrower or
any Subsidiary, (c) transfer any of its properties or assets to the Borrower or
any Subsidiary, (d) create, incur, assume or suffer to exist any Lien upon any
of its property, assets or revenues, whether now owned or hereafter acquired,
(e) Guarantee any Debt of the Borrower or another Subsidiary or (f) suffer to
exist any Lien on capital stock or other equity interests issued by it; provided
that the following shall be permitted: (i) the Loan Documents, (ii) the
agreements governing the Existing Debt as in effect on the Closing Date, (iii)
agreements between a JV Subsidiary and another partner or member of the Borrower
Joint Venture of which such JV Subsidiary is a partner or member so long as the
limitations imposed thereby are not materially more restrictive than those
contained in agreements set forth in Schedule 5.20; (iv) agreements with respect
to Debt secured by Liens permitted under Section 5.09(b) - (e) containing
restrictions on the ability to transfer or grant Liens on the assets securing
such Debt; (v) customary restrictions contained in stock purchase agreements,
asset sale agreements limiting the transfer of assets pending the closing of the
sale and customary non-assignment provisions in leases and other contracts
entered into in the ordinary course of business; (vi) the PBGC Settlement
Agreement in the form proposed as of the Closing Date; (vii) agreements entered
into in connection with Debt Incurrences by the Borrower containing limitations
no more restrictive than
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those contained in the instruments governing the Debt described in clauses (i) -
(iv) of the definition of Existing Borrower Debt as in effect on the Closing
Date; (viii) restrictions existing on the Closing Date on POSM and any
Subsidiary whose only significant assets are partnership interests in POSM and
(ix) from and after the Mandatory Prepayment Release Date, agreements entered
into in connection with the refinancing of Existing Debt containing limitations
no more restrictive than the Existing Debt refinanced thereby as in effect on
the Closing Date or, in the case of any Debt incurred by the Borrower to
refinance Existing Debt, containing limitations no more restrictive than those
contained in the instruments governing the Debt described in clauses (i) - (iv)
of the definition of Existing Borrower Debt as in effect on the Closing Date;
and provided further that (x) clauses (c) and (d) above shall be inapplicable to
any Foreign Subsidiary and (y) from and after the Mandatory Prepayment Release
Date, clause (d) shall be inapplicable to the Borrower or any other Subsidiary.
Section 5.19. Further Assurances. (a) The Borrower will, and will cause
each other Obligor to, at the Borrower's sole cost and expense, do, execute,
acknowledge and deliver all such further acts, deeds, conveyances, mortgages,
assignments, notices of assignment and transfers as the Administrative Agent
shall from time to time request, which may be necessary in the reasonable
judgment of the Administrative Agent from time to time to assure, perfect,
convey, assign and transfer to the Administrative Agent the property and rights
conveyed or assigned pursuant to the Collateral Documents.
(b) All costs and expenses in connection with the grant of any security
interests under the Collateral Documents, including without limitation
reasonable legal fees and other reasonable costs and expenses in connection with
the granting, perfecting and maintenance of any security interests under the
Collateral Documents or the preparation, execution, delivery, recordation or
filing of documents and any other acts as the Administrative Agent may
reasonably request in connection with the grant of such security interests shall
be paid by the Borrower promptly upon demand.
(c) The Borrower will not, and will not permit any of its Subsidiaries
(other than a Foreign Subsidiary) to, enter into or become subject to any
agreement which would impair their ability to comply, or which would purport to
prohibit them from complying, with the provisions of this Section.
(d) The Borrower will:
(i) cause each Person which becomes a Significant Subsidiary
(excluding any Borrower Joint Venture, JV Subsidiary or Foreign Subsidiary)
after the Closing Date to become a party to the Subsidiary
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Guarantee as guarantor by executing a supplement thereof in form and
substance satisfactory to the Administrative Agent;
(ii) maintain direct and indirect ownership interests in each of
Equistar, LCR and LMC not less than those held by it at the date hereof
(subject (x) in the case of LCR, to the right of CITGO Petroleum
Corporation to acquire additional interests so as to reduce the Borrower's
indirect equity interest to 50% and (y) in the case of each such Borrower
Joint Venture, to the admission of additional partners or members, as the
case may be, so long as the product of (I) the EBITDA of such Borrower
Joint Venture, calculated on a pro forma basis (without credit for
anticipated expense reductions or similar synergies) for its then most
recent fiscal year for which financial statements are available multiplied
by (II) the percentage representing the Borrower's direct and indirect
ownership in such Borrower Joint Venture (the "EBITDA PRODUCT"), calculated
after giving effect to such admission of any additional partner or member,
is not less than the EBITDA Product calculated before giving effect to such
admission);
(iii) cause each Person which becomes a JV Subsidiary (other than a
Foreign Subsidiary) after the Closing Date, to enter into a JV Subsidiary
Security Agreement and any other agreements, each in form and substance
satisfactory to the Administrative Agent, as may be necessary or desirable
in order to grant perfected first priority security interests (subject to
Permitted Liens) upon its rights to receive distributions from any Borrower
Joint Venture in which it holds an equity interest, to secure the
obligations under the Loan Documents;
(iv) pledge, or cause to be pledged, pursuant to the Borrower
Pledge Agreement, (x) in the case of any Significant Subsidiary described
in clause (i) above and any JV Subsidiary described in clause (iii) above,
all the capital stock or other equity interests of such Subsidiary owned
directly by the Borrower and (y) in the case of any Foreign Subsidiary
which becomes a Significant Subsidiary of the Borrower after the Closing
Date, to the extent permitted by applicable law, 65% of the voting stock or
other voting equity interests of such Foreign Subsidiary, and 100% of any
other capital stock or other equity interest, owned directly by the
Borrower; and
(v) take, and cause the appropriate Subsidiaries to take, such
actions as may be necessary or desirable to effect the steps required by
the foregoing paragraphs (i), (ii), (iii) and (iv) as soon as practicable
and in any event within 10 Domestic Business Days after the day on which
the Borrower is required to deliver financial statements pursuant to
Section
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5.01(a) and 5.01(b) with respect to the Fiscal Quarter during which the
event requiring such steps occurs, including without limitation (x)
executing and delivering, or causing the appropriate Subsidiaries to
execute and deliver, to the Administrative Agent such number of copies as
the Administrative Agent may specify of such supplements and other
documents and (y) delivering, or causing such Subsidiaries to deliver, such
certificates, evidences of corporate action, legal opinions or other
documents as the Administrative Agent may reasonably request, all in form
and substance satisfactory to the Administrative Agent, relating to the
satisfaction of the Borrower's obligations under this Section.
Section 5.20. Restrictions on Borrower Joint Ventures. The Borrower shall
use its best efforts, including, without limitation, by voting (through the JV
Subsidiaries) its indirect interest in any Borrower Joint Venture at any
meetings of the respective governing bodies of such Borrower Joint Venture, to:
(a) limit annual expenditures for fixed assets by Equistar, LCR and
LMC to an aggregate amount of $400,000,000; provided that if the aggregate
amount of such expenditures for fixed assets actually made in any calendar
year indicated above shall be less than $400,000,000 then the amount of
such shortfall may be added to the amount of such expenditures for fixed
assets permitted for the immediately succeeding calendar year; and
provided further that expenditures in any year may exceed the foregoing
annual limitation so long as the aggregate amount of all such excesses for
all years during the term of this Agreement does not exceed $500,000,000;
and provided further that the limitations set forth in this Section
5.20(a) shall not apply to (and calculations hereunder shall exclude) (x)
expenditures for fixed assets in respect of projects for the sole account
of, and funded exclusively by, partners or members of such Borrower Joint
Ventures other than the Borrower or (y) expenditures of casualty insurance
or condemnation proceeds.
(b) maintain without material change (i) the cash distribution
policy of Equistar as stated in the Equistar Partnership Agreement as in
effect on the date hereof, (ii) the cash distribution policy (as may be
adjusted in connection with the LCR Recapitalization) of LCR as stated in
the LCR Regulations as in effect on the date hereof, and (iii) the cash
distribution policy of LMC as stated in the LMC Partnership Agreement as in
effect on the date hereof;
(c) limit the Debt that any of Equistar, LCR or LMC creates,
incurs, assumes or permits to exist (exclusive of Debt owing to the
Borrower or a Subsidiary) to an aggregate outstanding principal amount
which, together with all other outstanding Debt of such Borrower Joint
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Venture, does not exceed (i) in the case of Equistar, $3,100,000,000, (ii)
in the case of LCR, $1,750,000,000 and (iii) in the case of LMC,
$250,000,000 plus, in each case, the amount of any Additional JV Debt;
(d) prevent each of Equistar, LCR and LMC from, directly or
indirectly, entering into, incurring or permitting to exist any agreement
or other arrangement with any Person that prohibits, restricts or imposes
any condition upon the ability of such Borrower Joint Venture to pay
dividends or other distributions to, or to make or repay loans or advances
to, the Borrower or any JV Subsidiary, which restrictions or conditions are
materially more restrictive than those contained in agreements to which
such Borrower Joint Venture is a party set forth in Schedule 5.20, as in
effect on the date hereof; and
(e) maintain the rights of Lyondell Petrochemical G.P. Inc. (i) to
appoint the chief executive officer of Equistar, as provided in the
Equistar Partnership Agreement, (ii) together with CITGO Refining
Investment Company, to appoint the chief executive officer of LCR, as
provided in the LCR Regulations and (iii) to act as managing partner of LMC
pursuant to the LMC Partnership Agreement.
Section 5.21. Takeout Equity Issuance. On or prior to the first
anniversary of the Closing Date, the Borrower shall consummate one or more
Equity Issuances for gross cash proceeds not less than $1,250,000,000.
ARTICLE 6
Defaults
Section 6.01. Events of Default. If one or more of the following events
("EVENTS OF DEFAULT") shall have occurred and be continuing:
(a) the Borrower shall fail (i) to reimburse any drawing under any
Letter of Credit when required hereunder or (ii) to pay when due any
principal of any Loan;
(b) the Borrower shall fail to pay any interest on any Loan or any
fee or any other amount (other than an amount referred to in clause (a) of
this Article) payable under this Agreement or any other Loan Document, when
and as the same shall become due and payable, and such failure shall
continue unremedied for a period of five Domestic Business Days;
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(c) the Borrower shall fail to observe or perform any covenant
contained in Section 5.01(f) or Section 5.07 through 5.18 or 5.20 or 5.21,
inclusive;
(d) the Borrower shall fail to observe or perform any covenant or
agreement (other than those covered by clause 6.01(a), 6.01(b) or 6.01(c)
or above) contained in this Agreement or any other Loan Document or any
amendment hereof or thereof for 30 days after the Administrative Agent
gives notice thereof to the Borrower at the request of any Lender;
(e) any representation, warranty, certification or statement made
by any Obligor in any Loan Document or any amendment thereof or in any
certificate delivered pursuant to any Loan Document shall prove to have
been incorrect in any material respect when made (or deemed made);
(f) the Borrower and its Subsidiaries shall fail to make one or
more payments aggregating more than $50,000,000 in respect of Debt or
Derivatives Obligations when due or within any applicable grace period;
(g) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables (or, with the
giving of notice or lapse of time or both, would enable) the holder of such
Debt or any Person acting on such holder's behalf to accelerate the
maturity thereof; provided that (i) an event or condition which does not
presently enable such holder or other Person to accelerate the maturity of
such Debt and which is subsequently waived or cured will then no longer
constitute an Event of Default hereunder; (ii) the existence or exercise of
rights of holders of Debt under the 1989 Indenture and the Medium Term
Notes to require repurchase thereof arising from the admission of
subsidiaries of Occidental Chemical Corp. to Equistar shall not give rise
to a Default under this subsection; and (iii) no Event of Default shall
arise under this clause 6.01(g) in respect of Debt which is Guaranteed by,
but is not otherwise Debt of, the Borrower or any Significant Subsidiary
(including for this purpose the Borrower Joint Ventures);
(h) (i) the Borrower or any Significant Subsidiary (including for
this purpose the Borrower Joint Ventures) 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
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assignment for the benefit of creditors, or shall fail generally to pay its
debts as they become due, or (ii) shall take any corporate action to
authorize any of the foregoing;
(i) an involuntary case or other proceeding shall be commenced
against the Borrower or any Significant Subsidiary (including for this
purpose the Borrower Joint Ventures) 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 Significant Subsidiary (including for this purpose the
Borrower Joint Ventures) under the federal bankruptcy laws as now or
hereafter in effect;
(j) any member of the ERISA Group shall fail to pay when due an
amount or amounts which it shall have become liable to pay under Title IV
of ERISA; or notice of intent to terminate a Plan shall be filed under
Title IV of ERISA by any member of the ERISA Group, any plan administrator
or any combination of the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate, to impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or to
cause a trustee to be appointed to administer, any Plan; or a condition
shall exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any Plan must be terminated; or there shall occur
a complete or partial withdrawal from, or a default, within the meaning of
Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer
Plans which could cause one or more members of the ERISA Group to incur a
current payment obligation, if any of the foregoing could reasonably be
expected to have a Material Adverse Effect (it being understood that the
fact of the Borrower becoming a party to the PBGC Settlement Agreement is
not, in itself, expected to have a Material Adverse Effect);
(k) judgments or orders for the payment of money exceeding
$50,000,000 in aggregate amount (exclusive of amounts covered by insurance
as to which the carrier has not contested coverage) shall be rendered
against the Borrower or any Subsidiary (including for this purpose the
Borrower Joint Ventures) and such judgments or orders shall continue
undischarged, unsatisfied and unstayed for a period of 30 days; or
enforcement remedies in respect of any such judgments or orders shall be
commenced;
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(l) a Change of Control of the Borrower shall have occurred;
(m) (i) any Lien created by any of the Collateral Documents shall
at any time fail to constitute a valid and (to the extent required by the
Collateral Documents) perfected Lien on all the Collateral purported to be
subject thereto, securing the obligations purported to be secured thereby,
with the priority required by the Loan Documents, or (ii) any Obligor shall
so assert in writing; provided that if a failure of the sort described in
clause 6.01(m) is susceptible of cure, no Event of Default shall arise
under this clause 6.01(m) with respect thereto until 30 days after notice
of such failure shall have been given to the Borrower by the Administrative
Agent;
(n) any Guarantee by any Subsidiary Guarantor pursuant to the
Subsidiary Guarantee shall cease for any reason (other than pursuant to a
transaction permitted hereunder) to be in full force and effect, or any
Obligor shall so assert in writing;
then, and in every such event, the Administrative Agent shall:
(i) if requested by Lenders having more than 50% in aggregate
amount of the Commitments, by notice to the Borrower terminate the
Commitments and they shall thereupon terminate; and
(ii) if requested by Lenders holding more than 50% in aggregate
outstanding principal amount of the Loans, by notice to the Borrower
declare all, or a pro rata portion of all, principal of the Loans (together
in each case with accrued interest thereon) to be, and such principal of
the Loans (together with accrued interest thereon) shall thereupon become,
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower;
provided that, if any Event of Default specified in clause 6.01(h)(i) or 6.01(i)
occurs with respect to the Borrower, then without any notice to the Borrower or
any other act by the Administrative Agent or the Lenders, the Commitments shall
thereupon terminate and the entire principal amount of the Loans (together with
accrued interest thereon) shall become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower.
Section 6.02. Notice of Default. The Administrative Agent shall give
notice to the Borrower under Section 6.01(d) or 6.01(m) promptly upon being
requested to do so by any Lender and shall thereupon notify all the Lenders
thereof.
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Section 6.03. Cash Cover. The Borrower agrees, in addition to the
provisions of Section 6.01 hereof, that upon the occurrence and during the
continuance of any Event of Default, it shall, if requested by the
Administrative Agent upon the instruction of Lenders having more than 50% of the
Letter of Credit Liabilities, pay to the Administrative Agent an amount in
immediately available funds (which funds shall be held as collateral pursuant to
arrangements satisfactory to the Administrative Agent) equal to the aggregate
amount available for drawing under all Letters of Credit then outstanding at
such time; provided that, upon the occurrence of any Event of Default specified
in Section 6.01(h)(i) or 6.01(i) with respect to the Borrower, the Borrower
shall pay such amount forthwith without any notice or demand or any other act by
the Administrative Agent or the Lenders.
ARTICLE 7
The Agents
Section 7.01. Appointment and Authorization. Each Lender irrevocably
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under the Loan Documents as are delegated
to the Administrative Agent by the terms hereof or thereof, together with all
such powers as are reasonably incidental thereto.
Section 7.02. Agents and Affiliates. Each financial institution serving as
an Agent shall have the same rights and powers under the Loan Documents as any
other Lender and may exercise or refrain from exercising the same as though it
were not an Agent, and such financial institution 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 affiliate of the Borrower as if it were not an
Agent.
Section 7.03. Action by the Administrative Agent. The obligations of the
Administrative Agent hereunder are only those expressly set forth herein.
Without limiting the generality of the foregoing, the Administrative Agent shall
not be required to take any action with respect to any Default, except, as
expressly provided in Article 6.
Section 7.04. Consultation with Experts. The Administrative Agent may
consult with legal counsel (who may be counsel for any Obligor), 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.
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Section 7.05. Liability of Agents. None of the Agents, their respective
affiliates, and the directors, officers, agents and employees of the Agents and
their respective affiliates shall be liable for any action taken or not taken by
it in connection herewith (i) with the consent or at the request of the Required
Lenders (or such different number of Lenders as any provision hereof expressly
requires for such consent or request) or (ii) in the absence of its own gross
negligence or willful misconduct. None of the Agents, their respective
affiliates, and the directors, officers, agents and employees of the Agents and
their respective affiliates 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 borrowing or issuance of a Letter
of Credit hereunder; (ii) the performance or observance of any of the covenants
or agreements of the Borrower; (iii) the satisfaction of any condition specified
in Article 3, except receipt of items required to be delivered to such Agent;
(iv) the validity, effectiveness or genuineness of any Loan Document or any
other instrument or writing furnished in connection herewith or (v) the
existence, validity or sufficiency of any Collateral. No Agent shall incur any
liability by acting in reliance upon any notice, consent, certificate, statement
or other writing (which may be a bank wire, telex, facsimile or similar writing)
believed by it to be genuine or to be signed by the proper party or parties.
Without limiting the generality of the foregoing, the use of the term "agent" in
this Agreement with reference to any Agent is not intended to connote any
fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law. Instead, such term is used merely as a matter
of market custom and is intended to create or reflect only an administrative
relationship between independent contracting parties.
Section 7.06. Indemnification. The Lenders shall, ratably in proportion to
their Commitments, indemnify each Agent, its affiliates and the directors,
officers, agents and employees of each such Agent and its affiliates (to the
extent not reimbursed by the Borrower) against any cost, expense (including
counsel fees and disbursements), claim, demand, action, loss or liability
(except such as result from such indemnitees' gross negligence or willful
misconduct) that such indemnitees may suffer or incur in connection with this
Agreement or any action taken or omitted by such indemnitees hereunder.
Section 7.07. Credit Decision. Each Lender acknowledges that it has,
independently and without reliance on the Arranger, any Co-Arranger, any Agent
or any other Lender, 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 Lender also acknowledges that it will, independently and
without reliance on any Agent or any other Lender, 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.
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Section 7.08. Successor Administrative Agents. The Administrative Agent
may resign at any time by giving notice thereof to the Lenders and the Borrower.
Upon any such resignation, the Required Lenders shall have the right to appoint
a successor for such resigning Administrative Agent. If no successor Agent
shall have been so appointed by the Required Lenders, and shall have accepted
such appointment, within 30 days after the retiring Administrative Agent gives
notice of resignation, then the retiring Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent, which shall be a
commercial bank organized or licensed under the laws of the United States or of
any State thereof and having a combined capital and surplus of at least
$100,000,000. Upon the acceptance of its appointment as Administrative Agent
hereunder by a successor, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations hereunder. After any Administrative Agent's
resignation hereunder, the provisions of this Article shall inure to its benefit
as to actions taken or omitted to be taken by it while it was an Administrative
Agent.
Section 7.09. Agents' Fees. The Borrower shall pay to each Agent for its
own account fees in the amounts and at the times previously agreed upon in
writing by the Borrower and such Agent.
Section 7.10. Syndication Agent, Co-Documentation Agents, Arranger and Co-
Arrangers. None of DLJ Capital Funding, Inc., Bank of America Trust and Savings
Association, Citibank, N.A., The Chase Manhattan Bank, NationsBank, N.A.,
J.P.Morgan Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation,
BancAmerica Robertson Stephens and Chase Securities Inc. shall have any
responsibility, obligation or liability under the Loan Documents in its
respective capacity as Syndication Agent, Co-Documentation Agent, Arranger or
Co-Arranger, as the case may be.
ARTICLE 8
Change in Circumstances
Section 8.01. Basis for Determining Interest Rate Inadequate or Unfair.
If on or before the first day of any Interest Period for any Euro-Dollar Loans
of any Class:
(a) the Administrative Agent is advised by the Reference Lenders
that deposits in dollars in the applicable amounts are not being offered to
the Reference Lenders in the London interbank market for such Interest
Period, or
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(b) Lenders having at least 50% in aggregate amount of the
Commitments of such Class (or, in the case of Term Lenders after the
Closing Date, holding at least 50% of the aggregate outstanding principal
amount of the affected Class of Term Loans) advise the Administrative Agent
that the London Interbank Offered Rate as determined by the Administrative
Agent will not adequately and fairly reflect the cost to such Lenders of
funding their Euro-Dollar Loans for such Interest Period,
the Administrative Agent shall forthwith give notice thereof to the Borrower and
the Lenders, whereupon until the Administrative Agent notifies the Borrower that
the circumstances giving rise to such suspension no longer exist, (i) the
obligations of the Lenders to make Euro-Dollar Loans or to continue or convert
outstanding Loans as or into Euro-Dollar Loans, as the case may be, shall be
suspended and (ii) each outstanding Euro-Dollar Loan of the affected Class shall
be converted into a Base Rate Loan on the last day of the then current Interest
Period applicable thereto. Unless the Borrower notifies the Administrative Agent
at least one Domestic Business Day before the date of any affected Borrowing for
which a Notice of Borrowing has previously been given that it elects not to
borrow on such date, such Borrowing shall instead be made as a Base Rate
Borrowing.
Section 8.02. Illegality. If, after the date hereof, the adoption of any
applicable law, rule or regulation, or any change in any applicable law, rule or
regulation, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency (including without
limitation the National Association of Insurance Commissioners (the "NAIC"))
charged with the interpretation or administration thereof, or compliance by any
Lender (or its Euro-Dollar Lending Office) with any request or directive made or
issued after the date hereof (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 Lender (or its Euro-Dollar Lending Office) to make, maintain
or fund its Euro-Dollar Loans and such Lender shall so notify the Administrative
Agent, the Administrative Agent shall forthwith give notice thereof to the other
Lenders and the Borrower, whereupon until such Lender notifies the Borrower and
the Administrative Agent that the circumstances giving rise to such suspension
no longer exist, the obligation of such Lender to make Euro-Dollar Loans, or to
convert outstanding Loans into Euro-Dollar Loans or continue outstanding Loans
as Euro-Dollar Loans, shall be suspended. Before giving any notice to the
Administrative Agent pursuant to this Section, such Lender shall designate a
different Euro-Dollar Lending Office if such designation will avoid the need for
giving such notice and will not, in the judgment of such Lender, be otherwise
disadvantageous to such Lender. If such notice is given, each Euro-Dollar Loan
of such Lender then outstanding shall be converted to a Base Rate
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Loan either (i) on the last day of the then current Interest Period applicable
to such Euro-Dollar Loan if such Lender may lawfully continue to maintain and
fund such Loan as a Euro-Dollar Loan to such day or (ii) immediately if such
Lender shall determine that it may not lawfully continue to maintain and fund
such Loan as a Euro-Dollar Loan to such day. Interest and principal on any such
Base Rate Loan shall be payable on the same dates as, and on a pro rata basis
with, the interest and principal payable on the related Euro-Dollar Loans of the
other Lenders.
Section 8.03. Increased Cost and Reduced Return. (a) If after the date
hereof, the adoption of any applicable law, rule or regulation, or any change in
any applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency (including without limitation the NAIC) charged with the interpretation
or administration thereof, or compliance by any Lender (or its Applicable
Lending Office) with any request or directive made or issued after the date
hereof (whether or not having the force of law) of any such authority, central
bank or comparable agency, shall impose, modify or deem applicable any reserve
(including, without limitation, any such requirement imposed by the Board of
Governors of the Federal Reserve System, but excluding any such requirement with
respect to which such Lender is entitled to compensation during the relevant
Interest Period under Section 2.15), special deposit, insurance assessment or
similar requirement against assets of, deposits with or for the account of, or
credit extended by, any Lender (or its Applicable Lending Office) or shall
impose on any Lender (or its Applicable Lending Office) or on the London
interbank market any other condition affecting its Fixed Rate Loans, its Notes
or its obligation to make Fixed Rate Loans or its obligations hereunder in
respect of Letters of Credit and the result of any of the foregoing is to
increase the cost to such Lender (or its Applicable Lending Office) of making or
maintaining any Fixed Rate Loan, or of issuing or participating in any Letter of
Credit, or to reduce the amount of any sum received or receivable by such Lender
(or its Applicable Lending Office) under this Agreement or under its Note with
respect thereto, by an amount deemed by such Lender to be material, then, within
15 days after demand by such Lender (with a copy to the Administrative Agent),
the Borrower shall pay to such Lender such additional amount or amounts as will
compensate such Lender for such increased cost or reduction.
(b) If any Lender shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change in any such law, rule or regulation, 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 any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency (including without limitation the NAIC), which adoption, change, request
or directive was
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effected after the date hereof, has or would have the effect of reducing the
rate of return on capital of such Lender (or its Parent) as a consequence of
such Lender's obligations hereunder to a level below that which such Lender (or
its Parent) could have achieved but for such adoption, change, request or
directive (taking into consideration its policies with respect to capital
adequacy) by an amount deemed by such Lender to be material, then from time to
time, within 15 days after demand by such Lender (with a copy to the
Administrative Agent), the Borrower shall pay to such Lender such additional
amount or amounts as will compensate such Lender (or its Parent) for such
reduction.
(c) Each Lender will promptly notify the Borrower and the Administrative
Agent of any event of which it has knowledge, occurring after the date hereof,
which will entitle such Lender 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
judgment of such Lender, be otherwise disadvantageous to it. A certificate of
any Lender claiming compensation under this Section and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error. In determining such amount, such Lender may use
any reasonable averaging and attribution methods.
Section 8.4. Taxes. (a) For the purposes of this Section, the following
terms have the following meanings:
"TAXES" means any and all present or future taxes, duties, levies, imposts,
deductions, charges or withholdings with respect to any payment by the Borrower
pursuant to this Agreement or under any Note, and all liabilities with respect
thereto, excluding (the "EXCLUDED TAXES") (i) in the case of each Lender Party,
taxes imposed on its net income, and franchise, capital or similar taxes
(including branch profits taxes) imposed on it, by a jurisdiction under the laws
of which (or of a political subdivision of which) it is organized or in which
its principal executive office is located or in which its Applicable Lending
Office is located and (ii) in the case of each Lender, any United States
withholding tax imposed on such payment, but not excluding any portion of such
tax that exceeds the United States withholding tax which would have been imposed
on such a payment to such Lender under the laws and treaties in effect when such
Lender first becomes a party to this Agreement if that Lender is in compliance
with its obligations under Section 8.04(b).
"OTHER TAXES" means any present or future stamp or documentary taxes and
any other excise or property taxes, or similar charges or levies, which arise
from any payment made pursuant to this Agreement or under any Note or from the
execution, delivery, registration or enforcement of, or otherwise with respect
to, any Loan Document other than Taxes and Excluded Taxes.
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(b) All payments by the Borrower to or for the account of any Lender
Party hereunder or under any Note shall be made without deduction for any Taxes
or Other Taxes; provided that, if the Borrower shall be required by law to
deduct any Taxes or Other Taxes from any such payment, (i) the sum payable shall
be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section)
such Lender Party receives an amount equal to the sum it would have received had
no such deductions been made, (ii) the Borrower shall make such deductions,
(iii) the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law and (iv) the
Borrower shall promptly furnish to the Administrative Agent, at its address
specified in or pursuant to Section 9.01, the original or a certified copy of a
receipt evidencing payment thereof.
(c) The Borrower agrees to indemnify each Lender Party for the full
amount of Taxes and Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed or asserted (whether or not correctly) by any jurisdiction
on amounts payable under this Section) paid by such Lender Party and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto. This indemnification shall be paid within 15 days after such
Lender Party makes demand therefor.
(d) Each Lender Party organized under the laws of a jurisdiction outside
the United States, (i) before it signs and delivers this Agreement in the case
of each Lender Party listed on the signature pages hereof and before it becomes
a Lender Party in the case of each other Lender Party, (ii) before it changes
the country where its Applicable Lending Office is located, (iii) from time to
time thereafter if requested in writing by the Borrower (but only so long as
such Lender Party remains lawfully able to do so), and (iv) at the time or times
prescribed by applicable law, shall provide each of the Borrower and the
Administrative Agent with (x) Internal Revenue Service form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
certifying that such Lender Party is entitled to benefits under an income tax
treaty to which the United States is a party which exempts such Lender Party
from United States withholding tax or reduces the rate of withholding tax on
payments of interest for the account of such Lender Party or certifying that the
income receivable by it pursuant to this Agreement is effectively connected with
the conduct of a trade or business in the United States or (y) solely if such
Lender is claiming exemption from United States withholding tax under Section
871(h) or 881(c) of the Internal Revenue Code with respect to payments of
"portfolio interest", a Form W-8, or any successor form prescribed by the
Internal Revenue Service, and a certificate representing that such Lender is not
a bank for purposes of Section 881(c) of the Internal Revenue Code, is not a 10-
percent shareholder (within the meaning of Section 871(h)(3)(B) of the Internal
Revenue Code) of the Borrower and is not a
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controlled foreign corporation related to the Borrower (within the meaning of
Section 864(d)(4) of the Internal Revenue Code).
(e) For any period with respect to which a Lender Party has failed to
provide the Borrower or the Administrative Agent with the appropriate form
referred to in Section 8.04(d) (unless such failure is due to a change in
treaty, law or regulation occurring after the date on which such form originally
was required to be provided), such Lender Party shall not be entitled to
indemnification under Section 8.04(b) or 8.04(c) with respect to Taxes imposed
by the United States; provided that if a Lender Party, that is otherwise exempt
from or subject to a reduced rate of withholding tax, becomes subject to Taxes
because of its failure to deliver a form required hereunder, the Borrower shall
take such steps as such Lender Party shall reasonably request to assist such
Lender Party to recover such Taxes.
(f) If the Borrower is required to pay additional amounts to or for the
account of any Lender pursuant to this Section as a result of a change in law or
treaty occurring after such Lender first became a party to this Agreement, then
such Lender will, at the Borrower's request, change the jurisdiction of its
Applicable Lending Office if, in the judgment of such Lender, such change (i)
will eliminate or reduce any such additional payment which may thereafter accrue
and (ii) is not otherwise disadvantageous to such Lender.
Section 8.05. Base Rate Loans Substituted for Affected Euro-Dollar Loans.
If (i) the obligation of any Lender to make, or to continue or convert
outstanding Loans as or to, Euro-Dollar Loans has been suspended pursuant to
Section 8.02 or (ii) any Lender has demanded compensation under Section 8.03 or
8.04 with respect to its Euro-Dollar Loans, and in any such case the Borrower
shall, by at least five Euro-Dollar Business Days' prior notice to such Lender
through the Administrative Agent, have elected that the provisions of this
Section shall apply to such Lender, then, unless and until such Lender notifies
the Borrower that the circumstances giving rise to such suspension or demand for
compensation no longer exist, all Loans which would otherwise be made by such
Lender as (or continued as or converted to) Euro-Dollar Loans shall instead be
Base Rate Loans on which interest and principal shall be payable
contemporaneously with the related Euro-Dollar Loans of the other Lenders. If
such Lender notifies the Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer exist, the principal amount of
each such Base Rate Loan shall be converted into a Euro-Dollar Loan on the first
day of the next succeeding Interest Period applicable to the related Euro-Dollar
Loans of the other Lenders.
Section 8.06. Substitution of Bank. If (i) the obligation of any Lender to
make or to convert or continue outstanding Loans as or into Euro-Dollar Loans
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has been suspended pursuant to Section 8.02 or (ii) any Lender has demanded
compensation under Section 8.03 or 8.04, the Borrower shall have the right, with
the assistance of the Administrative Agent, to designate a substitute bank or
banks (which may be one or more of the Lenders) mutually satisfactory to the
Borrower and the Administrative Agent (and, in the case of a Revolving Lender,
the Issuing Banks and the Swing Loan Lender) to purchase for cash, pursuant to
an Assignment and Assumption Agreement in substantially the form of Exhibit H
hereto, the outstanding Loans and Letter of Credit Liabilities of such Lender
and assume the Commitment(s) of such Lender, without recourse to or warranty by,
or expense to, such Lender, for a purchase price equal to the principal amount
of all of such Lender's outstanding Loans and Reimbursement Obligations plus any
accrued but unpaid interest thereon and the accrued but unpaid fees for the
account of such Lender hereunder plus such amount, if any, as would be payable
pursuant to Section 2.11 if the outstanding Loans of such Lender were prepaid in
their entirety on the date of consummation of such assignment.
ARTICLE 9
Miscellaneous
Section 9.01. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including bank wire, telex, facsimile
or similar writing) and shall be given to such party: (a) in the case of the
Borrower or any Agent, at its address or facsimile number set forth on the
signature pages hereof, (b) in the case of any Lender, at its address, facsimile
number or telex number set forth in its Administrative Questionnaire or (c) in
the case of any party, at such other address, facsimile number or telex number
as such party may hereafter specify for the purpose by notice to the
Administrative Agent and the Borrower. Each such notice, request or other
communication shall be effective (i) if given by telex, when transmitted to the
telex number referred to in this Section and the appropriate answerback is
received, (ii) if given by facsimile, when transmitted to the facsimile number
referred to in this Section and confirmation of receipt is received, or (iii) if
given by any other means, when delivered at the address referred to in this
Section; provided that notices to the Administrative Agent under Article 2 or
Article 8 shall not be effective until received.
Section 9.2. No Waivers. No failure or delay by any Lender Party
exercising any right, power or privilege hereunder or under any Note shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
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Section 9.03. Expenses; Indemnification. (a) The Borrower shall pay (i)
all out-of-pocket expenses of the Agents, including fees and disbursements of
special counsel for the Agents, in connection with the preparation of the Loan
Documents, any waiver or consent thereunder or any amendment thereof or any
Default thereunder and (ii) if an Event of Default occurs, all out-of-pocket
expenses incurred by each Lender Party, including the fees and disbursements of
counsel, in connection with such Event of Default and collection, bankruptcy,
insolvency and other enforcement proceedings resulting therefrom.
(b) The Borrower agrees to indemnify each Lender Party, their respective
affiliates and the respective directors, officers, agents and employees of the
foregoing (each an "INDEMNITEE") and hold each Indemnitee harmless from and
against any and all liabilities, losses, damages, costs and expenses of any kind
(including without limitation reasonable expenses of investigation by engineers,
environmental consultants and similar technical personnel), including, without
limitation, the reasonable fees and disbursements of counsel, which may be
incurred by such Indemnitee in connection with any investigative, administrative
or judicial proceeding (whether or not such Indemnitee shall be designated a
party thereto) brought or threatened relating to or arising out of any Loan
Document or any actual or proposed use of any Commitments or any proceeds of
Loans hereunder; provided that no Indemnitee shall have the right to be
indemnified hereunder for (i) such Indemnitee's own gross negligence or willful
misconduct or (ii) liabilities, losses, damages, costs and expenses arising out
of a proceeding in which such Indemnitee and the Borrower are adverse parties
and in which the Borrower prevails on the merits, in each case as determined by
a court of competent jurisdiction.
Section 9.04. Set-Offs. (a) If (i) an Event of Default has occurred and is
continuing and Lenders holding more than 50% in aggregate unpaid principal
amount of the Loans have requested the Administrative Agent to declare the Loans
to be immediately due and payable pursuant to Section 6.01, or (ii) the Loans
have become immediately due and payable without notice as provided in Section
6.01, then each Lender is hereby authorized by the Borrower at any time and from
time to time, to the extent permitted by applicable law, without notice to the
Borrower (any such notice being expressly waived by the Borrower), to set off
and apply all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by such Lender
to or for the account of the Borrower against any obligations of the Borrower to
such Lender now or hereafter existing under this Agreement, regardless of
whether any such deposit or other obligation is then due and payable or is in
the same currency or is booked or otherwise payable at the same office as the
obligation against which it is set off and regardless of whether such Lender
shall have made any demand for payment under this Agreement. Each Lender agrees
promptly to notify the Borrower after any such set-off and application made by
such Lender;
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provided that any failure to give such notice shall not affect the validity of
such setoff and application. The rights of the Lenders under this subsection are
in addition to any other rights and remedies which the Lenders may have.
(b) Each Lender agrees that if it shall, by exercising any right of set-
off or counterclaim or otherwise, receive payment of a proportion of the
aggregate amount of principal and interest then due with respect to the Loans
and Letter of Credit Liabilities held by it which is greater than the proportion
received by any other Lender in respect of the aggregate amount of principal and
interest then due with respect to the Loans and Letter of Credit Liabilities
held by such other Lender, the Lender receiving such proportionately greater
payment shall purchase such participations in the Loans held by the other
Lenders, and such other adjustments shall be made, as may be required so that
all such payments of principal and interest with respect to the Loans and Letter
of Credit Liabilities held by the Lenders shall be shared by the Lenders pro
rata; provided that nothing in this Section shall impair the right of any Lender
to exercise any right of set-off or counterclaim it may have and to apply the
amount subject to such exercise to the payment of indebtedness of the Borrower
other than its indebtedness in respect of the Loans; and provided further that
this Section shall not require sharing by the Swing Loan Lender of amounts
received in respect of Swing Loans pursuant to Section 2.17.
Section 9.05. Amendments and Waivers. (a) 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 Lenders (and, if
the rights or duties of any Agent, any Issuing Bank or the Swing Loan Lender (in
such capacities) are affected thereby, by it); provided that no such amendment
or waiver shall:
(i) unless signed by all the Term Lenders of the relevant Class,
(A) increase or decrease the Term Commitment of such Class of any Lender
(except for a ratable decrease in the Term Commitments of such Class of all
Term Lenders), (B) reduce the principal of or rate of interest on any Term
Loan of such Class, (C) postpone the date fixed for any payment of
principal of or interest on any Term Loan of such Class or for the
termination of any Term Commitment of such Class, or (D) alter in a manner
unfavorable to the Term Lenders of such Class the provisions of clause (i)
of Section 2.04(e),
(ii) unless signed by all the Revolving Lenders, (A) increase or
decrease the Revolving Commitment of any Revolving Lender (except for a
ratable decrease in the Revolving Commitments of all the Revolving
Lenders), (B) reduce the principal of or rate of interest on any Revolving
Loan or the amount to be reimbursed in respect of any Letter of Credit or
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any interest thereon or any fees with respect thereto, or (C) postpone the
date fixed for any payment of any principal of or interest on any Revolving
Loan or for reimbursement in respect of any Letter of Credit or any
interest thereon or fees with respect thereto or any fees payable with
respect to the Revolving Commitments or for the termination of any
Revolving Commitment, or (except as expressly provided in Section 2.16) the
expiry date of any Letter of Credit,
(iii) unless signed by all the Lenders, (A) change the percentage
of the Commitments of any Class or of the aggregate unpaid principal amount
of the Loans of any Class, or the number of Lenders, which shall be
required for the Lenders or any of them to take any action under this
Section or any other provision of this Agreement, (B) release any
Subsidiary Guarantor from the Subsidiary Guarantee or permit termination of
the Subsidiary Guarantee or (C) effect or permit the release of all or
substantially all of the Collateral,
(iv) unless signed by Revolving Lenders holding, in the aggregate,
Revolving Credit Percentages of greater than 50%, waive any condition to
any Borrowing of Revolving Loan or issuance of Letter of Credit; or
(v) unless signed by a Designated Lender or its Designating Lender,
subject such Designated Lender to any additional obligation or affect its
rights hereunder (unless the rights of all the Lenders of the applicable
Class hereunder are similarly affected).
(b) Any provision of the Collateral Documents or the Subsidiary
Guarantee may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed by each Obligor party thereto and the Administrative
Agent with the consent of the Required Lenders; provided that no such amendment
or waiver shall, unless signed by all the Lenders, effect or permit a release of
all or substantially all of the Collateral, release any Subsidiary Guarantor
from the Subsidiary Guarantee or permit termination of the Subsidiary Guarantee.
Notwithstanding the foregoing, including Section 9.05(a)(iii), Subsidiary
Guarantees shall be terminated and Collateral (but not the proceeds thereof)
shall be released from the Lien of the Collateral Documents from time to time as
necessary to effect any sale of assets, including the sale of a Subsidiary
Guarantor, permitted by the Loan Documents. and the Administrative Agent shall
execute and deliver all release documents reasonably requested to evidence such
release.
Section 9.06. Successors; Participations and Assignments. (a) The
provisions of this Agreement shall be binding upon and inure to the benefit of
the
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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 the Lender Parties.
(b) Any Lender may at any time grant to one or more banks, institutions
or other entities that regularly make, purchase or invest in bank loans (each a
"PARTICIPANT") participating interests in its Commitments or any or all of its
Loans and Letter of Credit Liabilities. If a Lender grants any such
participating interest to a Participant, whether or not upon notice to the
Borrower and the Administrative Agent, such Lender shall remain responsible for
the performance of its obligations hereunder, and the Borrower and the
Administrative Agent shall continue to deal solely and directly with such Lender
in connection with such Lender's rights and obligations under this Agreement.
Any agreement pursuant to which any Lender may grant such a participating
interest shall provide that such Lender 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 that such participation agreement
may provide that such Lender will not agree to any modification, amendment or
waiver of this Agreement described in clause (i) or (ii) of Section 9.05 without
the consent of the Participant. The Borrower agrees that, subject to Section
9.06(e), each Participant shall, to the extent provided in its participation
agreement, be entitled to the benefits of Section 2.15 and Article 8 with
respect to its participating interest. An assignment or other transfer which is
not permitted by Section 9.06(c) or 9.06(d) below shall be given effect for
purposes of this Agreement only to the extent of a participating interest
granted in accordance with this subsection.
(c) Any Lender may at any time assign to one or more banks, other
institutions or other entities that regularly make, purchase or invest in bank
loans (each an "ASSIGNEE") all, or a proportionate part of all, of its
Commitment of any Class or its Loans and Letter of Credit Liabilities of any
Class and such Assignee shall assume such rights and obligations, pursuant to an
Assignment and Assumption Agreement substantially in the form of Exhibit H
hereto signed by such Assignee and such transferor Lender, with (and subject to)
the subscribed consent of the Borrower (which shall not be unreasonably
withheld) and the Administrative Agent (and, in the case of a Revolving
Commitment, the Issuing Banks and the Swing Loan Lender); provided that (i) (A)
after giving effect to any proposed assignment, the Credit Exposure of the
transferor Lender (or in the case of a transferor Lender that is a fund, the
aggregate Credit Exposure of such Lender and its Related Funds) shall be equal
to $0 or at least $5,000,000 and (B) the Credit Exposure of the proposed
Assignee shall be at least equal to $5,000,000, unless the proposed Assignee is
an affiliate of the transferor Lender, a Related Fund of any Lender or was a
Lender immediately before such assignment, (ii) if a proposed Assignee is an
affiliate of a transferor Lender, a Related Fund of any
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Lender or was a Lender immediately before such assignment, no such consent of
the Borrower or the Administrative Agent shall be required and (iii) if an Event
of Default shall have occurred and be continuing, no such consent of the
Borrower shall be required. When such instrument has been signed and delivered
by the parties thereto and recorded as provided in Section 2.14, and such
Assignee has paid to such transferor Lender the purchase price agreed between
them, such Assignee shall be a Lender party to this Agreement and shall have all
the rights and obligations of a Lender with a Commitment and/or Loans as set
forth in such instrument of assumption, and the transferor Lender shall be
released from its obligations hereunder to a corresponding extent, and no
further consent or action by any party shall be required. Upon the consummation
of any assignment pursuant to this subsection, the transferor Lender, the
Administrative Agent and the Borrower shall make appropriate arrangements so
that, if required, a new Note is issued to the Assignee. In connection with any
such assignment (other than an assignment to which any Agent or any affiliate of
any Agent is a party), the transferor Lender shall pay to the Administrative
Agent an administrative fee for processing such assignment in the amount of
$3,000; provided that only one such fee shall be due in respect of a
simultaneous assignment to more than one Related Fund. If the Assignee is not
incorporated under the laws of the United States or a State thereof, it shall
deliver to the Borrower and the Administrative Agent certification as to
exemption from deduction or withholding of taxes in accordance with Section
8.04(d).
(d) Any Lender may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank, and any Lender that
is a fund that invests in bank loans may, with the consent of the
Administrative Agent, pledge all or any portion of its rights under this
Agreement and its Note to its trustee in support of its obligations to its
trustee or its noteholders. No such assignment or pledge shall release the
transferor Lender from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Lender's rights
shall be entitled to receive any greater payment under Section 8.03 or 8.04 than
such Lender 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 8.02, 8.03 or 8.04 requiring
such Lender to designate a different Applicable Lending Office under certain
circumstances.
Section 9.07. Designated Lenders. (a) Subject to the provisions of this
Section 9.07(a), any Lender may from time to time elect to designate an Eligible
Designee to provide all or a portion of the Loans to be made by such Lender
pursuant to this Agreement; provided that such designation shall not be
effective unless the Borrower and the Administrative Agent consent thereto.
When a Lender and its Eligible Designee shall have signed an agreement
substantially in
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the form of Exhibit I hereto (a "DESIGNATION AGREEMENT") and the Borrower and
the Administrative Agent shall have signed their respective consents thereto,
such Eligible Designee shall become a Designated Lender for purposes of this
Agreement. The Designating Lender shall thereafter have the right to permit such
Designated Lender to provide all or a portion of the loans to be made by such
Designating Lender pursuant to Section 2.01 and the making of such Loans or
portions thereof shall satisfy the obligation of the Designating Lender to the
same extent, and as if, such Loans or portion thereof were made by the
Designating Lender. As to any Loans or portion thereof made by it, each
Designated Lender shall have all the rights that a Lender making such Loans or
portion thereof would have had under this Agreement and otherwise; provided that
(x) its voting rights under this Agreement shall be exercised solely by its
Designating Lender and (y) its Designating Lender shall remain solely
responsible to the other parties hereto for the performance of its obligations
under this Agreement, including its obligations in respect of the Loans or
portion thereof made by it. No additional Note shall be required to evidence
Loans or portions thereof made by a Designated Lender; and the Designating
Lender shall be deemed to hold its Note as agent for its Designated Lender to
the extent of the Loans or portion thereof funded by such Designated Lender.
Each Designating Lender shall act as administrative agent for its Designated
Lender and give and receive notices and other communications on its behalf. Any
payments for the account of any Designated Lender shall be paid to its
Designating Lender as administrative agent for such Designated Lender and
neither the Borrower nor the Administrative Agent shall be responsible for any
Designating Lender's application of such payments. In addition, any Designated
Lender may (i) with notice to, but without the prior written consent of, the
Borrower or the Administrative Agent, assign all or portions of its interest in
any Loans to its Designating Lender or to any financial institutions consented
to by the Borrower and the Administrative Agent providing liquidity and/or
credit facilities to or for the account of such Designated Lender to support the
funding of Loans or portions thereof made by such Designated Lender and (ii)
disclose on a confidential basis any non-public information relating to its
Loans or portions thereof to any rating agency, commercial paper dealer or
provider of any guarantee, surety, credit or liquidity enhancement to such
Designated Lender.
(b) Each party to this Agreement agrees that it will not institute
against, or join any other Person in instituting against, any Designated Lender
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding or other proceeding under any federal or state bankruptcy or similar
law, for one year and a day after all outstanding senior indebtedness of such
Designated Lender is paid in full. The Designating Lender for each Designated
Lender agrees to indemnify, save, and hold harmless each other party hereto for
any loss, cost, damage and expense arising out of its inability to institute any
such proceeding
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against such Designated Lender. This Section 9.07(b) shall survive the
termination of this Agreement.
Section 9.08. No Reliance on Margin Stock. Each of the Lenders represents
to each Agent and each of the other Lenders that it in good faith is not relying
upon any Margin Stock as collateral in the extension or maintenance of the
credit provided for in this Agreement.
Section 9.09. Governing Law; Submission to Jurisdiction. This Agreement
and each Note shall be governed by, and construed and interpreted in accordance
with, the laws of the State of New York. To the extent permitted by applicable
law, the Borrower hereby submits to the nonexclusive jurisdiction of the United
States District Court for the Southern District of New York and of any New York
State court sitting in New York City for purposes of all legal proceedings
arising out of or relating to this Agreement or the transactions contemplated
hereby. 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 proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
Section 9.10. Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective on the date that the Administrative Agent
shall have received counterparts hereof 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 the form satisfactory to
it of facsimile or other written confirmation from such party of execution of a
counterpart hereof by such party).
Section 9.11. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
Section 9.12. ERISA Matters. (a) Representations and Warranties. Each
Lender, solely with respect to itself, severally represents and warrants that
one or more of the following is true with respect to all of the funds used to
make or purchase any interest in any Loan or Letter of Credit Liability (or one
or more of the following is true with respect to each portion of the funds used
to make or
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purchase such interest in such Loan or Letter of Credit Liability if such funds
are from more than one source):
(i) no part of the funds to be used by it constitutes under the
Internal Revenue Code or ERISA the assets of any ERISA Plan; or
(ii) (A) the funds to be used by it constitute, under the Internal
Revenue Code or ERISA, the assets of an insurance company pooled separate
account, as such term is used in Prohibited Transaction Class Exemption
90-1 issued by the U.S. Department of Labor, or a "collective investment
fund," as defined in Section IV of Prohibited Transaction Class Exemption
91-38 issued by the U.S. Department of Labor, in which an ERISA Plan has an
interest, and (B) such Loan or Letter of Credit Liability or interest
therein is, and the subsequent holding of the Note or any agreement related
thereto shall at all times thereafter be, entitled to full relief under
Prohibited Transaction Class Exemption 90-1 or 91-38, as applicable; or
(iii) (A) the funds to be used by it for any Loan or Letter of
Credit Liability or interest therein which constitutes, under the Internal
Revenue Code or ERISA, the assets of any ERISA Plan are invested in an
investment fund which is managed by a "Qualified Professional Asset
Manager" as such term is defined in Prohibited Transaction Class Exemption
84-14 issued by the U.S. Department of Labor, and (B) such Loan or Letter
of Credit Liability or interest therein is and the subsequent holding of
the Note or any agreement related thereto shall at all times thereafter be,
exempt under Prohibited Transaction Class Exemption 84-14 to the fullest
extent provided therein;
(iv) the assets to be used by it constitute the assets of an
investment company registered under the Investment Company Act of 1940; or
(v) the Lender is an "insurance company" and the funds to be used
by it constitute assets of an "insurance company general account" as
defined in Section V of Prohibited Transaction Class Exemption 95-60 issued
by the U.S. Department of Labor, and such Loan or Letter of Credit
Liability or interest therein is, and shall at all times thereafter satisfy
the requirements to be and shall be, exempt under Prohibited Transaction
Class Exemption 95-60 to the fullest extent provided therein.
(b) Representations of Transferees. Each Person that becomes an
Assignee or Participant hereunder shall be deemed to make, effective upon the
acceptance of any assignment of an interest hereunder or the entering into of
any
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participation agreement contemplated in Section 9.06(b), the representations and
warranties set forth in Section 9.12(a). Such deemed representation shall be
effective against, and binding on, such Assignee or Participant to the same
extent as if such Assignee or Participant had executed an original counterpart
of this Agreement.
(c) Additional ERISA Representations. Each Lender that now or hereafter
makes or maintains any Loan or Letter of Credit Liability with any assets of any
ERISA Plan (i) represents and warrants that it has evaluated for itself the
merits of making or maintaining such Loan or Letter of Credit Liability; has not
solicited and has not received from the Borrower or any of its Affiliates, any
evaluation or other investment advice on any basis in respect of the
advisability of making or maintaining such Loan or Letter of Credit Liability;
and is not relying and has not relied on the Borrower or any of its Affiliates
for any investment advice with respect to making or maintaining such Loan or
Letter of Credit Liability in any manner that would cause the Borrower or any of
its Affiliates to become a "party in interest" (within the meaning of ERISA) or
a "disqualified person" (within the meaning of the Internal Revenue Code) in
connection with making or maintaining such Loan or Letter of Credit Liability
and (ii) acknowledges and confirms that none of the Borrower or any of its
Affiliates is acting as a "fiduciary" (within the meaning of ERISA, the Internal
Revenue Code or any other applicable law or any rulings or regulations
thereunder) for such Lender in connection with making or maintaining such Loan
or Letter of Credit Liability.
Section 9.13. Confidentiality. Each Lender and Agent agrees to hold all
non-public information obtained pursuant to the requirements of this Agreement
in accordance with its customary procedure for handling confidential information
of this nature and in accordance with safe and sound commercial lending
practices; provided that nothing herein shall prevent any Lender or Agent from
disclosing such information (i) to any affiliate of such Lender or to any other
Lender or Agent, (ii) to any other Person if reasonably incidental to the
administration of the Loans and Letter of Credit Liabilities, (iii) to the
extent required by applicable laws or regulations or upon the order of any court
or administrative agency, (iv) upon the request or demand of any regulatory
agency or authority, (v) which had been publicly disclosed other than as a
result of a disclosure by any Agent or Lender prohibited by this Agreement, (vi)
in connection with any litigation to which any Agent, any Lender or its
subsidiaries or Parent may be a party, (vii) to the extent necessary in
connection with the exercise of any remedy hereunder, (viii) to such Lender's or
Agent's legal counsel and independent auditors and (ix) subject to provisions
substantially similar to those contained in this Section, to any actual or
proposed Participant or Assignee.
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<PAGE>
Section 9.14. Amendment and Restatement. This Agreement amends and
restates in its entirety the Credit Agreement of even date herewith among the
Borrower, Morgan Guaranty Trust Company of New York, DLJ Capital Funding, Inc.,
Bank of America National Trust and Savings Association, Citibank, N.A., The
Chase Manhattan Bank and NationsBank, N.A.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
LYONDELL PETROCHEMICAL
COMPANY
By: /s/ Edward W. Rich
-----------------------------------
Title: Vice President, Finance and
Treasurer
Address: 1221 McKinney
Suite 1600
Houston, TX 77002
Facsimile: (713) 652-4140
[Signature blocks for Banks]
97
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<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 25
<SECURITIES> 0
<RECEIVABLES> 3
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 45
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,347
<CURRENT-LIABILITIES> 95
<BONDS> 345
0
0
<COMMON> 80
<OTHER-SE> 548
<TOTAL-LIABILITY-AND-EQUITY> 1,347
<SALES> 0
<TOTAL-REVENUES> 173
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 21
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13
<INCOME-PRETAX> 151
<INCOME-TAX> 57
<INCOME-CONTINUING> 94
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 94
<EPS-PRIMARY> 1.20
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