<PAGE>
As filed with the Securities and Exchange Commission on July 31, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
LYONDELL PETROCHEMICAL COMPANY
LYONDELL TRUST I
(Exact name of each registrant as specified in its charter)
DELAWARE 95-4160558
APPLICATION PENDING
DELAWARE (I.R.S. EMPLOYER
(STATE OR OTHER JURISDICTION IDENTIFICATION NOS.)
OF INCORPORATION OR ORGANIZATION)
ONE HOUSTON CENTER, SUITE 1600
1221 MCKINNEY STREET
HOUSTON, TEXAS 77253-3646
(713) 652-7200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF EACH REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
KERRY A. GALVIN
ASSOCIATE GENERAL COUNSEL
ONE HOUSTON CENTER, SUITE 1600
1221 MCKINNEY STREET
HOUSTON, TEXAS 77253-3646
(713) 652-7200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
----------------
Copies to:
STEPHEN A. MASSAD JEFFREY SMALL
BAKER & BOTTS, L.L.P. DAVIS POLK & WARDWELL
3000 ONE SHELL PLAZA 450 LEXINGTON AVENUE
HOUSTON, TEXAS 77002 NEW YORK, NY 10017
(713) 229-1234 (212) 450-4000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
(continued on next page)
<PAGE>
CALCULATION OF REGISTRATION FEE
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<TABLE>
<S> <C> <C>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE (1), (2), (3) REGISTRATION FEE
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Senior Debt Securities and
Subordinated Debt Securities
(collectively, "Debt
Securities") of Lyondell
Petrochemical Company...........
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Preferred Stock $.01 par value of
Lyondell Petrochemical Company
("Preferred Stock").............
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Common Stock $1.00 par value of
Lyondell Petrochemical Company
("Common Stock")................
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Junior Subordinated Debt
Securities of Lyondell
Petrochemical Company for
issuance directly to Lyondell
Trust I ("Junior Subordinated
Debt Trust Securities").........
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Trust Convertible Preferred
Securities of Lyondell Trust I
("Preferred Securities")........
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Guarantee of Preferred Securities
of Lyondell Trust I by Lyondell
Petrochemical Company...........
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TOTAL............................ $4,000,000,000.00 $1,180,000.00
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) and exclusive of accrued interest and dividends,
if any. In no event will the aggregate initial offering price of all
securities issued from time to time pursuant to this Registration
Statement exceed $4,000,000,000 or the equivalent thereof in foreign
currencies, foreign currency units or composite currencies. Any securities
registered hereunder may be sold separately or as units with other
securities registered hereunder.
(2) Such indeterminate number or amount of Debt Securities, Junior
Subordinated Debt Trust Securities, Preferred Stock and Common Stock of
Lyondell Petrochemical Company and Preferred Securities of Lyondell Trust
I as may from time to time be issued at indeterminate prices. Junior
Subordinated Debt Trust Securities may be issued and sold to Lyondell
Trust I, in which event such Junior Subordinated Debt Trust Securities may
later be distributed to the holders of Preferred Securities upon a
dissolution of Lyondell Trust I and the distribution of assets thereof.
(3) Lyondell Petrochemical Company is also registering under this Registration
Statement all other obligations that it may have with respect to Preferred
Securities issued by Lyondell Trust I. No separate consideration will be
received for the Guarantee or any other such obligations.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
<PAGE>
EXPLANATORY NOTE
The Registration Statement contains two forms of prospectuses to be used in
connection with offerings of the following securities:
(1) Debt Securities (consisting of Senior Debt Securities and Subordinated
Debt Securities), Preferred Stock and Common Stock of Lyondell
Petrochemical Company.
(2) Preferred Securities of Lyondell Trust I, Junior Subordinated Debt Trust
Securities of Lyondell Petrochemical Company and the Guarantee by Lyondell
Petrochemical Company of Preferred Securities issued by Lyondell Trust I.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED JULY 31, 1998
PROSPECTUS [LOGO OF LYONDELL PETROCHEMICAL COMPANY APPEARS HERE]
$4,000,000,000
LYONDELL PETROCHEMICAL COMPANY
COMMON STOCK
PREFERRED STOCK
DEBT SECURITIES
Lyondell Petrochemical Company (the "Company" or "Lyondell") may from time to
time offer, together or separately, (i) shares of its common stock, par value
$1 per share (the "Common Stock"), (ii) shares of its preferred stock, par
value $.01 per share (the "Preferred Stock"), (iii) unsecured senior debt
securities (the "Senior Debt Securities") and (iv) unsecured subordinated debt
securities (the "Subordinated Debt Securities"), in each case in one or more
series and in amounts, at prices and on terms to be determined at or prior to
the time of sale. The Senior Debt Securities and Subordinated Debt Securities
are collectively referred to herein as the "Debt Securities." The Debt
Securities, Common Stock and Preferred Stock are collectively referred to
herein as the "Securities."
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The Common Stock and Preferred Stock offered pursuant to this Prospectus may
be issued in one or more series or issuances in U.S. dollars or in one or more
foreign currencies, currency units or composite securities to be determined at
or prior to the time of any offering. The Debt Securities offered pursuant to
this Prospectus may consist of debentures, notes or other evidences of
indebtedness in one or more series and in amounts, at prices and on terms to be
determined at or prior to the time of any such offering. As used herein, the
Debt Securities shall include securities denominated in United States dollars
or, at the option of the Company if so specified in an applicable Prospectus
Supplement, in any other currency, currency unit or composite currency, or in
amounts determined by reference to an index or formula. In addition, all or a
portion of the Debt Securities of a series may be issuable in temporary or
permanent global form. The Company's obligations under the Senior Debt
Securities will rank pari passu with all unsecured and unsubordinated debt (as
defined herein) of the Company. The Company's obligations under the
Subordinated Debt Securities will be subordinated in right of payment to the
prior payment in full of all Senior Debt (as defined herein). See "Description
of Debt Securities."
By separate prospectus, the form of which is included in the Registration
Statement of which this Prospectus forms a part, a Delaware statutory business
trust (the "Lyondell Trust"), which is a wholly owned subsidiary of the
Company, may offer preferred securities guaranteed by the Company to the extent
set forth therein, and the Company may offer from time to time junior
subordinated debt securities either directly or to the Lyondell Trust. The
aggregate public offering price of the securities to be offered pursuant to
this Prospectus and such other prospectus shall not exceed $4,000,000,000 (or
its equivalent in one or more foreign currencies, currency units or composite
currencies).
Specific terms of the Securities in respect of which this Prospectus is being
delivered (the "Offered Securities") will be set forth in a Prospectus
Supplement with respect to such Offered Securities, which Prospectus Supplement
will describe, without limitation and where applicable, the following: (i) in
the case of Common Stock, the specific designation, number of shares, purchase
price and the rights and privileges thereof, together with any qualifications
or restrictions thereon and any listing on a securities exchange; (ii) in the
case of Preferred Stock, the specific designation, number of shares, voting and
other powers, designations, preferences and relative participating, optional or
other special rights, and qualifications, limitations or restrictions
(including dividends, liquidation value, voting rights, terms for the
redemption, conversion or exchange thereof and any other specific terms of the
Preferred Stock) and any listing on a securities exchange; and (iii) in the
case of Debt Securities, the specific designation, aggregate principal amount,
ranking as senior debt or subordinated debt, authorized denomination, maturity,
rate (or method of determining the same) and times of payment of any interest,
any terms for optional or mandatory redemption, which may include redemption at
the option of holders upon the occurrence of certain events or payment of
additional amounts or any sinking fund provisions, any provisions with respect
to conversion or exchangeability, the initial public offering price, the net
proceeds to the Company, any listing on a securities exchange and any other
specific terms in connection with the offering. Unless otherwise indicated in
the Prospectus Supplement, the Company does not intend to list any of the
Securities other than the Common Stock on a national securities exchange.
The Offered Securities may be offered directly, through agents designated
from time to time, through dealers or through underwriters. Such agents or
underwriters may act alone or with other agents or underwriters. See "Plan of
Distribution." Any such agents, dealers or underwriters will be set forth in a
Prospectus Supplement. If an agent of the Company, or a dealer or underwriter
is involved in the offering of the Offered Securities, the agent's commission,
dealer's purchase price, underwriter's discount and net proceeds to the
Company, as the case may be, will be set forth in, or may be calculated from,
the Prospectus Supplement. Any underwriters, dealers or agents participating in
the offering may be deemed "underwriters" within the meaning of the Securities
Act of 1933.
The Common Stock is traded on the New York Stock Exchange under the symbol
"LYO." Any Common Stock offered will be traded, subject to notice of issuance,
on the New York Stock Exchange.
This Prospectus may not be used to consummate sales of Offered Securities
unless accompanied by a Prospectus Supplement.
The date of this Prospectus is , 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES
OFFERED HEREBY, INCLUDING, AMONG OTHERS, OVERALLOTMENT, STABILIZING AND SHORT-
COVERING TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID,
IN CONNECTION WITH THIS OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"PLAN OF DISTRIBUTION" IN THIS PROSPECTUS AND "PLAN OF DISTRIBUTION" OR
"UNDERWRITING" IN THE RELEVANT PROSPECTUS SUPPLEMENT.
THE COMPANY
Lyondell Petrochemical Company ("Lyondell" or the "Company") is a global,
vertically integrated chemical company with leading market positions, broad
product range, low cost operations and proprietary technology. The Company
conducts its operations through four businesses. Through its wholly-owned
subsidiary ARCO Chemical Company ("ARCO Chemical"), Lyondell is an
international manufacturer and marketer of intermediate chemicals and
specialty chemical products used in a broad range of consumer and industrial
products. Through its interests in three joint ventures, the Company is a
world-scale producer of petrochemicals and polymers, a major crude oil refiner
and a leading U.S. producer of methanol.
The following summarizes the Company's four businesses:
ARCO Chemical, which Lyondell acquired in July 1998, is the world's largest
producer of propylene oxide ("PO") and is a leading worldwide producer and
marketer of polyether polyols, propylene glycol, propylene glycol ethers,
toluene diisocyanate ("TDI"), styrene monomer ("SM") and methyl tertiary
butyl ether ("MTBE"). Key markets for PO and its derivatives are automotive
seating, home furnishings and other urethane applications such as coatings,
adhesives, sealants and elastomers, as well as resins, fibers, consumer
products, solvents, automotive coolants and aircraft deicers. TDI is a
precursor in the manufacture of urethanes. MTBE is a key component in
reformulated gasoline and an octane additive. SM is used in plastics, foam
cups and packaging products.
The Company has a 41 percent interest in Equistar Chemicals, LP
("Equistar"), an integrated, low-cost producer of petrochemicals and
polymers formed in December 1997. Equistar is North America's largest
producer of ethylene, polyethylene and propylene and third largest producer
of ethylene oxide and ethylene glycol. The formation of Equistar has
significantly enhanced the competitive position of the assets contributed
by the partners and provided the opportunity to realize significant cost
savings and operating synergies.
The Company has a 58.75 percent interest in LYONDELL-CITGO Refining Company
Ltd. ("LCR"), a leading refiner of low-cost, heavy crude oil, formed in
July 1993. LCR's refined petroleum products include gasoline, low-sulfur
diesel, jet fuel, aromatics and lubricants. In connection with its
formation, LCR entered into a long-term supply agreement and a product
sales agreement covering the majority of its feedstock and production,
which are intended to partially insulate LCR's earnings from fluctuations
in crude oil prices.
The Company has a 75 percent interest in Lyondell Methanol Company, L.P.
("Lyondell Methanol"), the third largest producer of methanol in the United
States. Lyondell Methanol was formed in December 1996 to better position
the business through alignment with a natural gas producer.
The Company's principal executive offices are located at 1221 McKinney
Street, Houston, Texas 77010 (Telephone (713) 652-7200).
2
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FORWARD-LOOKING STATEMENTS
Certain of the statements contained or incorporated by reference in this
Prospectus and the accompanying Prospectus Supplement 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 the risk factors set forth below and other factors set forth in or
incorporated by reference in this Prospectus and the accompanying Prospectus
Supplement. These factors include 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 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.
RISK FACTORS
The following should be considered carefully with the information provided
elsewhere in this Prospectus and the accompanying Prospectus Supplement and
the documents incorporated by reference herein in reaching a decision
regarding an investment in the Securities offered hereby.
HIGH LEVERAGE AND RELATED MATTERS
As a result of the acquisition of ARCO Chemical, as of July 30, 1998, the
Company had outstanding consolidated debt of approximately $7.2 billion. In
addition, the Company remains liable on $745 million of debt for which primary
responsibility was assumed by Equistar in connection with the formation of
Equistar. The credit facilities arranged by the Company in connection with the
acquisition of ARCO Chemical include four 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. The Company currently expects
to repay the one-year term loan with proceeds from the sale of equity
securities and to refinance the two-year term loan with proceeds from the sale
of debt securities.
The current amount of debt of the Company significantly exceeds the
Company's historical leverage and significantly increases its debt service
obligations. The Company's historical results and financial condition do not,
accordingly, reflect the potential constraints the increase in leverage may
impose on the Company. The Company's significant increase in leverage could
have adverse effects on the Company, including: (i) the leverage may make the
Company more vulnerable to industry cyclicality and may limit its ability to
withstand competitive pressures and adverse changes in environmental and other
government regulation, (ii) a substantial portion of cash flow from operations
(as well as cash generated from asset sales, if any, and financings) must be
dedicated to the payment of principal of and interest on debt and will not be
available for other uses such as capital expenditures or acquisitions, (iii)
additional financing may not be available to the Company upon terms as
favorable as those previously available to the Company, which may limit the
Company's business growth, including its ability to effect potential
acquisitions and (iv) the Company may not be able to maintain its current
dividend rate.
3
<PAGE>
The newly arranged credit facilities contain numerous financial and other
covenants that may affect and restrict the Company's business. The ability of
the Company to meet its debt service obligations and capital expenditure
needs, maintain its dividend rate and comply with the covenants and financial
requirements in the credit facilities will largely depend on the future
performance of the Company, which will be subject to prevailing economic and
competitive conditions and to other factors beyond its control. The breach of
any of the covenants or financial requirements in the credit facilities could
result in a default thereunder, which would permit the lenders to declare the
loans immediately payable and to terminate future lending commitments, which
in turn could result in bankruptcy for the Company.
As of March 31, 1998, Equistar, LCR and Lyondell Methanol (the "Joint
Ventures") had, in the aggregate, outstanding debt of approximately $2.4
billion and owners' equity of $3.6 billion. The ability of the Joint Ventures
to distribute cash to the Company is limited by their respective debt service
obligations. In addition, a default under certain Joint Venture debt
agreements would constitute a cross-default under the Company's credit
facilities. Certain debt instruments that were assumed by Equistar, but as to
which Lyondell remains an obligor as well, contain provisions that generally
provide that holders of such debt may, under certain limited circumstances,
require an obligor to repurchase the debt ("Put Rights"). The Put Rights would
be triggered by a specified decline in public ratings on such debt following
(i) certain events affecting control of Lyondell or Equistar or (ii) the
making by Lyondell or Equistar of certain dividends, distributions or
repurchases in excess of certain amounts. The debt subject to the Put Rights
consists of $150 million aggregate principal amount of notes maturing in June
1999, bearing interest at 10 percent, and $195 million aggregate principal
amount of medium-term notes maturing at various dates from 1998 through 2005,
with a weighted average interest rate at December 31, 1997 of 9.83 percent.
INDUSTRY CYCLICALITY AND OVERCAPACITY
The Company's historical operating results reflect the cyclical and volatile
nature of both the chemical and refining industries. Both industries are
mature and capital intensive, and industry margins are sensitive to supply and
demand balances, which have historically been cyclical. The chemical industry
historically has experienced alternating periods of tight supply, causing
prices and profit margins to increase, followed by periods of substantial
capacity additions, resulting in oversupply and declining prices and profit
margins. Due to the commodity nature of most of the Company's products, the
Company is not necessarily able to protect its market position by product
differentiation or pass on cost increases to its customers. Accordingly,
increases in raw material and other costs do not necessarily correlate with
changes in product prices, either in the direction of the price change or in
absolute magnitude. Moreover, a number of participants in various segments of
the chemical industry have announced plans for expansion of plant capacity.
There can be no assurance that future growth in product demand will be
sufficient to utilize this additional, or even current, capacity. Excess
industry capacity, to the extent it occurs, may depress the Company's volumes
and margins. As a result, the Company's earnings may be subject to significant
fluctuations.
External factors beyond the Company's control, such as general economic
conditions, competitor action, international events and circumstances and
governmental regulation in the United States and abroad, can cause volatility
in feedstock prices, as well as fluctuations in demand for the Company's
products, product prices, volumes and margins, and can magnify the impact of
economic cycles on the Company's business. A number of the Company's products
are highly dependent on durable goods markets, such as housing and automotive,
that are particularly cyclical. With respect to the Company's refining
business, however, management believes that the combination of the Crude
Supply Agreement entered into in 1993 and described below under "--Crude Oil
Supply Agreement" and a related products agreement tends to stabilize earnings
and to substantially reduce the market driven aspects of volatility.
INTENSE COMPETITION
The chemical industry is highly competitive. Many of the Company's
competitors are larger and have greater financial resources than the Company.
Among Lyondell's chemical competitors are some of the world's
4
<PAGE>
largest chemical companies, including The Dow Chemical Company, Shell
Chemical, BASF AG, Bayer AG and Union Carbide Corporation. In the past several
years, there have been a number of mergers, acquisitions and spin-offs in the
chemical industry. This restructuring activity may result in fewer but more
competitive producers with greater financial resources than the Company.
Competition within the chemical industry is affected by a variety of
factors, including product price, reliability of product supply, technical
support, customer service, product quality and availability to the market of
potential substitute materials. Changes in the competitive environment,
including (i) the emergence of new competitors, (ii) the rate of capacity
additions by competitors, (iii) the intensification of price competition in
the Company's markets, (iv) the introduction of new or substitute products by
competitors, (v) technological innovations by competitors and (vi) new
environmental laws and regulatory requirements, could have a material adverse
effect on the business and operations of the Company.
POTENTIAL DIFFICULTIES IN INTEGRATING RECENTLY ACQUIRED AND COMBINED
OPERATIONS
The Company acquired ARCO Chemical in July 1998. The Company combined its
other chemicals and polymers business with that of Millennium Chemicals Inc.
to form Equistar Chemicals, LP in December 1997. Equistar was expanded by the
addition of certain businesses previously held by Occidental Petroleum
Corporation in May 1998. The process of integrating the operations of ARCO
Chemical with the Company has only recently begun, and the process of
integrating the operations of Equistar is not complete.
As is the case with any integration of major businesses that previously
operated independently, the integration processes for ARCO Chemical and for
Equistar will require the dedication of significant management and operational
resources. The difficulties of combining operations may be exacerbated by the
necessity of coordinating geographically separated organizations, integrating
personnel with disparate business backgrounds and combining different
transaction processing and financial reporting systems, processes and
corporate cultures. The processes of integrating operations could cause an
interruption of, or loss of momentum in, the activities of the combined
enterprise's business. In addition, the Company may suffer a loss of key
employees, customers or suppliers, loss of revenues, increases in costs or
other difficulties. There can be no assurance that the Company will be able to
realize the operating efficiencies and other benefits that are sought from
such transactions. Difficulties encountered in the integration processes could
have a material adverse effect on the business and operations of the Company.
SHARED CONTROL OF JOINT VENTURES
All of the operations of the Company, other than those of ARCO Chemical, are
conducted through the Company's Joint Ventures. The Company shares control of
these Joint Ventures with unaffiliated third parties.
The Company's forecasts and plans with respect to these Joint Ventures
assume that its joint venture partners will observe their obligations with
respect to the Joint Ventures. In the event that any of the Company's joint
venture partners do not observe their commitments, it is possible that the
affected Joint Venture would not be able to operate in accordance with its
business plans or that the Company would be required to increase its level of
commitment in order to give effect to such plans.
As with any such joint venture arrangements, differences in views between
the joint venture participants may result in delayed decisions or in failures
to agree on major matters, potentially adversely affecting the business and
operations of the Joint Ventures and in turn the business and operations of
the Company.
IMPORTANCE OF CRUDE OIL SUPPLY AGREEMENT AND RELATED RISKS
Substantially all crude oil used by LCR as a feedstock for its refinery is
purchased under the Crude Supply Agreement with PDVSA Petroleo y Gas S.A.
("PDVSA Oil"), which, like CITGO Petroleum Corporation ("CITGO"), is a
subsidiary of Petroleos de Venezuela, S.A., the Venezuelan national oil
company. The Crude Supply Agreement was entered into in 1993 and the Company
experienced the full effects of the Crude Supply
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<PAGE>
Agreement beginning in 1997. The Crude Supply Agreement incorporates formula
prices to be paid by LCR for the crude oil supplied based on the market value
of a slate of refined products deemed to be produced from each particular
crude oil or feedstock, less (i) certain deemed refining costs adjustable for
inflation, (ii) certain actual costs, including crude oil transportation
costs, import duties and taxes and (iii) a deemed margin, which varies
according to the grade of crude oil or feedstock delivered. Deemed costs are
adjusted periodically based on inflation rates for specific deemed cost
components. Adjustments to margins track, but are less than, inflation rates.
Because deemed operating costs and the slate of refined products deemed to be
produced from a given barrel of crude oil or other feedstocks do not
necessarily reflect the actual costs and yields in any period and also because
the market value of the refined products used in the pricing formula does not
necessarily reflect the actual price received for the refined products, the
actual refining margin earned by LCR varies depending on, among other things,
the efficiency with which LCR conducts its operations from time to time.
Although LCR believes that the Crude Supply Agreement reduces the volatility
of its earnings and cash flows, the Crude Supply Agreement also limits LCR's
ability to enjoy higher margins during periods when the market price of crude
oil is low relative to the then current market prices for refined products. In
addition, if the actual yields, costs or volumes of the LCR refinery differ
substantially from those contemplated by the Crude Supply Agreement, the
benefits of this agreement to LCR could be substantially diminished, and could
result in lower earnings and cash flow for LCR. Furthermore, there may be
periods during which LCR's costs for crude oil under the Crude Supply
Agreement may be higher than might otherwise be available to LCR from other
sources.
There are risks associated with enforcing the provisions of contracts with
companies such as PDVSA Oil that are non-United States affiliates of a
sovereign nation. It is impossible to predict how governmental policies may
change under the current or any subsequent Venezuelan government. In addition,
there are risks associated with enforcing judgments of United States courts
against entities whose assets are located outside of the United States and
whose management does not reside in the United States. Although the parties
have negotiated alternative arrangements in the event of certain force majeure
conditions, including Venezuelan 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
Agreement. In addition, all of the crude oil supplied by PDVSA Oil under the
Crude Supply Agreement is produced in Venezuela, a country that has
experienced economic difficulties and attendant social and political unrest in
recent years. If the Crude Supply Agreement is modified or terminated or this
source of crude oil is otherwise interrupted due to production difficulties,
political or economic events in Venezuela or other factors, LCR could
experience significantly greater volatility in its earnings and cash flows. In
the event that CITGO were to transfer its interest in LCR to an unaffiliated
third party, PDVSA Oil would have an option to terminate the Crude Supply
Agreement. Depending on then current market conditions, any breach or
termination of the Crude Supply Agreement could adversely affect LCR, since
LCR would have to purchase all of its crude oil feedstocks in the merchant
market, which could subject LCR to significant price fluctuations. There can
be no assurance that alternative crude oil supplies providing similar margins
would be available for purchase by LCR.
OPERATING HAZARDS
The occurrence of material operating problems, including but not limited to
the events described below, may have a material adverse effect on the
productivity and profitability of a particular manufacturing facility, or on
the Company as a whole, during and after the period of such operational
difficulties. The Company's revenues are dependent on the continued operation
of its various production facilities (including the ability to complete
construction projects on schedule). The Company's operations are subject to
the usual hazards associated with chemical manufacturing and refining and the
related storage and transportation of feedstocks, products and wastes,
including pipeline leaks and ruptures, explosions, fires, inclement weather
and natural disasters, mechanical failure, unscheduled downtime,
transportation interruptions, remediation complications, chemical spills,
discharges or releases of toxic or hazardous substances or gases, storage tank
leaks and other environmental risks. These hazards can cause personal injury
and loss of life, severe damage to or destruction of property and equipment
and environmental damage, and may result in suspension of operations and the
imposition of civil or criminal penalties. Furthermore, the Company is also
subject to present and future claims
6
<PAGE>
with respect to workplace exposure, workers' compensation and other matters.
The Company maintains property, business interruption and casualty insurance
which it believes is in accordance with customary industry practices, but it
is not fully insured against all potential hazards incident to its business.
ENVIRONMENTAL CONSIDERATIONS
The Company's operations and ownership and use of real property are subject
to extensive environmental, health and safety laws and regulations promulgated
by federal, state, local and foreign governments. Many of these laws and
regulations impose requirements relating to the clean-up of contamination,
impose liability in the event of damage of natural resources and provide for
substantial fines and potential criminal sanctions for violations. The nature
of the chemical and refining industries exposes the Company to risks of
liability under such laws and regulations due to the production, refining,
storage, transportation and sale of materials that can cause contamination or
personal injury if released into the environment. In addition, individuals
could seek damages for alleged personal injury or property damage due to
exposure to chemicals at the Company's facilities or to chemicals otherwise
owned or controlled by the Company. Environmental laws may have a significant
effect on the nature and scope of cleanup of contamination at current and
former operating facilities, the costs of transportation and storage of
feedstocks and finished products and the costs of the storage and disposal of
wastes. Also, "Superfund" statutes may impose joint and several liability for
the costs of remedial investigations and actions on the entities that
generated waste, arranged for disposal of the wastes, transported to or
selected the disposal sites and the past and present owners and operators of
such sites. All such responsible parties (or any one of them, including the
Company) may be required to bear all of such costs regardless of fault,
legality of the original disposal or ownership of the disposal site.
The Company expects that the nature of its businesses will continue to
subject the Company to increasingly stringent environmental and health and
safety laws and regulations. It is difficult to predict the future
interpretation and development of such laws and regulations or their impact on
future earnings and operations, but the Company anticipates that these
standards will continue to require increased capital expenditures and
operating costs. In particular, the ultimate effect of the Clean Air Act on
the Company's operations will depend on how the law is interpreted and
implemented pursuant to regulations that are currently being developed and on
additional factors such as the evolution of environmental control
technologies.
The Company's policy is to accrue costs relating to environmental matters
when it is probable that such costs will be required and the related costs can
be reasonably estimated. Estimated costs for future environmental compliance
and remediation or other costs are necessarily imprecise due to such factors
as the continuing evolution of environmental laws and regulatory requirements,
the availability and application of technology, the identification of
presently unknown remediation sites and the allocation of costs among the
responsible parties under applicable statutes. On a quarterly basis, the
Company evaluates the status of all significant existing or potential
environmental issues, develops or revises estimates of costs to satisfy known
remediation requirements (including those relating to "Superfund"
requirements) and adjusts its accruals accordingly; as of March 31, 1998, the
reserve was $55 million (on a pro forma basis after giving effect to the
acquisition of ARCO Chemical). Based upon information presently available, the
Company does not expect that such future costs will have a material adverse
effect on its competitive or financial position or its ongoing results of
operations. However, it is not possible to predict accurately the amount or
timing of costs of any future environmental remediation requirements. Such
costs could be material to future quarterly or annual results of operations.
Pending or future legislative initiatives may materially adversely affect
the Company's MTBE sales. The presence of MTBE in some water supplies in
California and other states due to gasoline leaking from underground storage
tanks and in surface water from recreational water craft has led to public
concern that MTBE may contaminate drinking water supplies, and thereby result
in a possible health risk. There have been claims that MTBE travels more
rapidly through soil, and is more soluble in water, than most other gasoline
components, and is more difficult and more costly to remediate. Heightened
public awareness about MTBE has resulted in certain state and federal
legislative initiatives that have sought either to rescind the oxygenate
7
<PAGE>
requirement for reformulated gasoline sold in California and other states or
restrict the use of MTBE. While such legislative initiatives are currently
pending, there is ongoing study into this issue and the ultimate resolution of
the appropriateness of using MTBE could result in a significant reduction in
the Company's MTBE sales.
In addition, ARCO Chemical has a take-or-pay MTBE sales contract with
Atlantic Richfield Company ("ARCO"), which contributes significant pre-tax
margin. If such legislative initiatives were enacted, ARCO has indicated that
it might attempt to invoke a force majeure provision in the ARCO contract in
order to reduce the quantities of MTBE it purchases under, or to terminate,
the contract. The Company would vigorously dispute such action. The contract
has an initial term expiring December 31, 2002 and provides for formula-based
prices that are currently significantly above spot market prices for MTBE. A
significant reduction in the Company's sales under the ARCO contract could
have a negative impact on the Company's results of operations.
FOREIGN OPERATIONS, COUNTRY RISKS AND EXCHANGE RATE FLUCTUATIONS
International operations and exports to foreign markets are subject to a
number of risks, including currency exchange rate fluctuations, trade
barriers, exchange controls, national and regional labor strikes, political
risks and risks of increases in duties and taxes, as well as changes in laws
and policies governing operations of foreign-based companies. Although the
Company uses various types of foreign currency forward, option and swap
contracts to reduce foreign exchange exposures with respect to revenues,
capital commitments and other expenses denominated in foreign currencies,
there can be no assurance that such hedging techniques will protect the
Company's reported results against such risks or that the Company will not
incur material losses on such contracts. In addition, earnings of foreign
subsidiaries and intercompany payments may be subject to foreign income tax
rules that may reduce cash flow available to meet required debt service and
other obligations of the Company.
A number of Asian economies have experienced economic difficulties in recent
periods. Prolonged economic difficulties in the Asian market could
significantly impact worldwide demand and thereby place downward pressure on
margins, which, if material, could in turn have an adverse effect on the
business and operations of the Company.
SIGNIFICANT FLUCTUATIONS IN QUARTERLY RESULTS
The Company's quarterly results may vary significantly depending on various
factors, most of which are beyond the Company's control, including changes in
product prices, product demand, raw material costs or supply arrangements;
regional business activities, including a lower level of economic activity in
Europe during the summer; adverse developments in foreign markets;
fluctuations in shipments to customers; foreign exchange fluctuations;
unanticipated expenses; changes in interest rates; and the scheduling of plant
turnarounds which are expensed when incurred.
CHANGE OF CONTROL RELATED PROVISIONS
Under the Company's credit facilities, a change in control of the Company is
an event of default, which would permit the lenders to declare the loans
thereunder immediately payable and to terminate future lending commitments.
Under the credit facilities, a change in control is deemed to occur if any
person or group acquires 20% or more of the Company's Common Stock or there
has generally been a change in a majority of the Company's Board of Directors.
In addition, the Company has adopted a stockholders' rights plan, the Delaware
General Corporation Law contains provisions that impose restrictions on
business combinations with interested parties and the Company's By-Laws
contain certain advance notice provisions. The provisions of the credit
facilities, the Delaware General Corporation Law, the Company's stockholders'
rights plan and the Company's By-Laws (as well as the Put Rights described
under "--High Leverage and Related Matters" above) may have the effect of
delaying, deferring or preventing a change in control of the Company, which
could prevent the Company's stockholders from receiving a takeover premium for
their Common Stock.
8
<PAGE>
USE OF PROCEEDS
Except as otherwise described in any Prospectus Supplement, the net proceeds
from the sale of Securities will be used for general corporate purposes, which
may include, but are not limited to, refinancings of indebtedness, working
capital, capital expenditures, acquisitions and repurchases or redemptions of
Securities, and may initially be invested in short-term securities.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the periods indicated:
<TABLE>
<CAPTION>
QUARTER
ENDED YEARS ENDED DECEMBER 31,
MARCH 31, ------------------------
1998 1997 1996 1995 1994 1993
--------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges(a)....... 3.9x 4.6x 2.2x 6.8x 4.8x 1.2x
Pro Forma Ratio of Earnings to Fixed
Charges.................................... [ ] [ ]
</TABLE>
- --------
(a) The Ratio of Earnings to Fixed Charges has been calculated including
amounts for Lyondell and its proportionate share of amounts for Equistar
(57 percent for the quarter ended March 31, 1998 and for the month of
December 1997), LCR (58.75 percent for the quarter ended March 31, 1998,
86 percent for the first quarter of 1997 and 58.5 percent for the
remainder of 1997) and Lyondell Methanol (75 percent in 1998), for the
periods in which Lyondell accounted for its respective investment in each
such Joint Venture using the equity method of accounting.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company currently consists of
250,000,000 shares of Common Stock, par value $1 per share and 80,000,000
shares of preferred stock, par value $.01 per share. The following summary
description of the capital stock of the Company is qualified in its entirety
by reference to the Certificate of Incorporation, as amended (the "Certificate
of Incorporation") and the Amended and Restated By-Laws of the Company, as
amended (the "By-Laws"), copies of which are filed as exhibits to the
Company's Annual Report on Form 10-K.
COMMON STOCK
The Company is currently authorized to issue 250,000,000 shares of Common
Stock, of which 77,432,949 shares of Common Stock were outstanding at July 31,
1998.
Holders of Common Stock ("Stockholders") are entitled (i) to receive such
dividends as may from time to time be declared by the Board of Directors of
the Company; (ii) to one vote per share on all matters on which the
Stockholders are entitled to vote; (iii) to act by written consent in lieu of
voting at a meeting of Stockholders; and (iv) to share ratably in all assets
of the Company available for distribution to the Stockholders, in the event of
liquidation, dissolution or winding up of the Company. The holders of a
majority of the shares of Common Stock represented at a meeting can elect all
of the directors.
Shares of Common Stock are not liable to further calls or assessments by the
Company for any liabilities of the Company that may be imposed on its
Stockholders under the laws of the State of Delaware, the state of
incorporation of the Company. There are no preemptive rights for the Common
Stock in the Certificate of Incorporation.
The Transfer Agent, Registrar and Dividend Disbursing Agent for the Common
Stock is The Bank of New York.
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<PAGE>
PREFERRED STOCK
The Company is currently authorized to issue up to 80,000,000 shares of
Preferred Stock, $.01 par value per share. The Board of Directors is able to
specify the precise characteristics of the Preferred Stock to be issued, in
light of current market conditions and the nature of specific transactions,
and is not required to solicit further authorization from Stockholders for any
specific issue of Preferred Stock. The Board of Directors has no present
intention to issue any series of Preferred Stock.
The Board of Directors has adopted a policy providing that no future
issuance of Preferred Stock will be effected without Stockholder approval
unless the Board of Directors (whose decision shall be conclusive) determines
in good faith (i) that such issuance is primarily for the purpose of
facilitating a financing, an acquisition or another proper corporate objective
or transaction, and (ii) that any anti-takeover effects of such issuance are
not the Company's primary purpose for effecting such issuance. The Board of
Directors will not amend or revoke this policy without giving written notice
to the holders of all outstanding shares of the Company's stock; however, no
such amendment or revocation will be effective, without Stockholder approval,
to permit a subsequent issuance of Preferred Stock for the primary purpose of
obstructing a takeover of the Company by any person who has, prior to such
written notice to stockholders, notified the Board of Directors of such
person's desire to pursue a takeover of the Company.
RIGHTS TO PURCHASE COMMON STOCK
On December 8, 1995, the Board of Directors of Lyondell declared a dividend
of one right ("Right") for each outstanding share of the Company's Common
Stock, par value $1.00 per share, to Stockholders of record at the close of
business on December 20, 1995. Each Right entitles the registered holder to
purchase from the Company one share of Common Stock at a purchase price of $80
per share of Common Stock, subject to adjustment (the "Purchase Price"). The
description and terms of the Rights are set forth in a Rights Agreement dated
as of December 8, 1995 as it may from time to time be supplemented or amended
(the "Rights Agreement") between the Company and The Bank of New York, as
Rights Agent.
Initially, the Rights will be attached to all certificates representing
outstanding shares of Common Stock, and no separate certificates for the
Rights ("Rights Certificates") will be distributed. The Rights will separate
from the Common Stock and a "Distribution Date" will occur, with certain
exceptions, upon the earlier of (i) ten days following a public announcement
of the existence of an "Acquiring Person" (the date of the announcement being
the "Stock Acquisition Date"), or (ii) ten business days following the
commencement of a tender offer or exchange offer that would result in a
person's becoming an Acquiring Person. An "Acquiring Person" is any person or
group of affiliated or associated persons that has acquired or obtained the
right to acquire beneficial ownership of 15 percent or more of the outstanding
shares of Common Stock, except that ARCO will not be or become an Acquiring
Person unless and until such time as ARCO or any person affiliated or
associated with ARCO acquires or becomes the beneficial owner of (or ARCO
becomes affiliated or associated with any person who, collectively with ARCO,
is the beneficial owner of) more than the lesser of (i) 1,000,000 shares of
Common Stock in addition to those ARCO beneficially owned as of December 8,
1995 (or in addition to any lesser number of shares ARCO beneficially owns
from time to time thereafter) or (ii) one share less than 50 percent of the
shares of Common Stock outstanding at any time. In certain circumstances prior
to the time a person has become an Acquiring Person, the Distribution Date may
be deferred by the Board of Directors. Certain inadvertent acquisitions will
not result in a person's becoming an Acquiring Person if the person promptly
divests itself of sufficient Common Stock. Until the Distribution Date, (a)
the Rights will be evidenced by the Common Stock certificates (together with
this Summary of Rights or bearing the notation referred to below) and will be
transferred with and only with such Common Stock certificates, (b) new Common
Stock certificates issued after December 20, 1995 will contain a notation
incorporating the Rights Agreement by reference and (c) the surrender for
transfer of any certificate for Common Stock (with or without a copy of this
Summary of Rights) will also constitute the transfer of the Rights associated
with the Common Stock represented by such certificate. The Rights are not
exercisable until the Distribution Date and will expire at the close of
business on December 8, 2005, unless earlier redeemed or exchanged by the
Company as described below.
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<PAGE>
In the event (a "Flip-In Event") that a person becomes an Acquiring Person
(except pursuant to a tender or exchange offer for all outstanding shares of
Common Stock at a price and on terms that a majority of the independent
directors of the Company determines to be fair to and otherwise in the best
interests of the Company and its stockholders (a "Permitted Offer")), each
holder of a Right will thereafter have the right to receive, upon exercise of
such Right, a number of shares of Common Stock (or, in certain circumstances,
cash, property or other securities of the Company) having a Current Market
Price (as defined in the Rights Agreement) equal to two times the exercise
price of the Right. Notwithstanding the foregoing, following the occurrence of
any Flip-In Event, all Rights that are, or (under certain circumstances
specified in the Rights Agreement) were, beneficially owned by or transferred
to such Acquiring Person (or by certain related parties) will be null and void
in the circumstances set forth in the Rights Agreement.
In the event (a "Flip-Over Event") that, at any time from and after the time
an Acquiring Person becomes such, (i) the Company is acquired in a merger or
other business combination transaction (other than certain mergers that follow
a Permitted Offer), or (ii) 50 percent or more of the Company's assets or
earning power is sold or transferred, each holder of a Right (except Rights
owned by such Acquiring Person or certain related parties) shall thereafter
have the right to receive, upon exercise, a number of shares of common stock
of the acquiring company having a Current Market Price equal to two times the
exercise price of the Right.
At any time until the time a person becomes an Acquiring Person, the Company
may redeem the Rights in whole, but not in part, at a price of $.0005 per
Right, payable, at the option of the Company, in cash, shares of Common Stock
or such other consideration as the Board of Directors may determine. At any
time after the occurrence of a Flip-In Event and prior to the occurrence of a
Flip-Over Event or a person becoming the beneficial owner of 50 percent or
more of the shares of Common Stock then outstanding, the Company may exchange
the Rights (other than Rights owned by an Acquiring Person or an affiliate or
an associate of an Acquiring Person, which will have become void), in whole or
in part, at an exchange ratio of one share of Common Stock, and/or other
equity securities deemed to have the same value as one share of Common Stock,
per Right, subject to adjustment.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including, without limitation, the right to
vote or to receive dividends. While the distribution of the Rights should not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights
become exercisable for Common Stock (or other consideration) of the Company or
for the common stock of the acquiring company as set forth above or are
exchanged as provided in the preceding paragraph.
The Purchase Price payable, and the number of shares of Common Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a
stock dividend on, or a subdivision, combination or reclassification of, the
Common Stock, (ii) if holders of the Common Stock are granted certain rights
or warrants to subscribe for Common Stock or securities convertible into
Common Stock at less than the current market price of the Common Stock, or
(iii) upon the distribution to holders of the Common Stock of evidences of
indebtedness or assets (excluding regular quarterly cash dividends) or of
subscription rights or warrants (other than those referred to above).
Other than the redemption price, any of the provisions of the Rights
Agreement may be amended by the Board of Directors of the Company as long as
the Rights are redeemable. Thereafter, the provisions of the Rights Agreement
(other than the Redemption Price) may be amended by the Board of Directors in
order to cure any ambiguity, defect or inconsistency, to make changes that do
not materially adversely affect the interests of holders of Rights (excluding
the interests of any Acquiring Person), or to shorten or lengthen any time
period under the Rights Agreement; provided, however, that no amendment to
lengthen the time period governing redemption or amendment shall be made at
such time as the Rights are not redeemable.
The Rights have certain antitakeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by its Board of Directors, except pursuant to an
11
<PAGE>
offer conditioned on a substantial number of Rights being acquired. The Rights
should not interfere with any merger or other business combination approved by
the Board of Directors at a time when the Rights are redeemable.
A copy of the Rights Agreement is filed as an exhibit to the Company's
Annual Report on Form 10-K. This summary description of the Rights is
qualified in its entirety by reference thereto.
VOTING RIGHTS
Each holder of shares of Common Stock, except where otherwise provided by
law or the Certificate of Incorporation, is entitled to one vote, in person or
by proxy, for each share of Common Stock standing in his, her or its name on
the books of the Company. The Common Stock does not have cumulative voting
rights. Holders of the Preferred Stock, if any, will only be entitled to vote
upon the election of directors or upon any questions affecting the Company if
and to the extent that the holders of any series of Preferred Stock are
granted voting rights fixed for such series by the Board of Directors in the
resolution creating such series.
DELAWARE SECTION 203
The Company is a Delaware corporation and is subject to Section 203 of the
General Corporation Law of Delaware ("Delaware Law"). In general, Section 203
prevents an "interested stockholder" (defined generally as a person owning 15%
or more of the Company's outstanding voting stock) from engaging in a
"business combination" (as defined in Section 203) with the Company for three
years following the date that person becomes an interested stockholder unless
(a) before that person became an interested stockholder, the Company's Board
of Directors approved the transaction in which the interested stockholder
became an interested stockholder or approved the business combination, (b)
upon completion of the transaction that resulted in the interested
stockholder's becoming an interested stockholder, the interested stockholder
owns at least 85% of the Company's voting stock outstanding at the time the
transaction commenced (excluding stock held by directors who are also officers
of the Company and by employee stock plans that do not provide employees with
the right to determine confidentially whether shares held subject to the plan
will be tendered in a tender or exchange offer), or (c) following the
transaction in which that person became an interested stockholder, the
business combination is approved by the Company's Board of Directors and
authorized at a meeting of stockholders by the affirmative vote of the holders
of at least two-thirds of the outstanding Company voting stock not owned by
the interested stockholder.
Under Section 203, these restrictions also do not apply to certain business
combinations proposed by an interested stockholder following the announcement
or notification of one of certain extraordinary transactions involving the
Company and a person who was not an interested stockholder during the previous
three years or who became an interested stockholder with the approval of a
majority of the Company's directors, if that extraordinary transaction is
approved or not opposed by a majority of the directors who were directors
before any person became an interested stockholder in the previous three years
or who were recommended for election or elected to succeed such directors by a
majority of such directors then in office.
LIMITATION ON DIRECTORS' LIABILITY
Delaware Law authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of directors' fiduciary duty of care. The Certificate of
Incorporation limits the liability of directors of the Company to the Company
or its stockholders to the fullest extent permitted by Delaware Law.
Specifically, directors of the Company will not be personally liable for
monetary damages for breach of a director's fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware Law or (iv) for any
transaction from which the director derived an improper personal benefit.
12
<PAGE>
The inclusion of this provision in the Certificate of Incorporation may have
the effect of reducing the likelihood of derivative litigation against
directors and may discourage or deter stockholders or management from bringing
a lawsuit against directors for breach of their duty of care, even though such
an action, if successful, might otherwise have benefited the Company and its
stockholders.
PROVISIONS OF THE COMPANY'S BY-LAWS
Certain provisions of the By-Laws establish time periods during which
appropriate stockholder proposals must be delivered to the Company for
consideration at special and annual meetings called by the Company. The By-
Laws provide, among other things, that stockholders making nominations for the
Board of Directors at, or bringing other business before, an annual or special
meeting of stockholders must provide timely written notice to the Company
thereof (timely notice being required to be no later than 90 days in advance
of such meeting; provided, however, that in the event that the date of the
meeting was not publicly announced by a mailing to stockholders, in a press
release reported by the Dow Jones News Services, Associated Press or
comparable national news service or in a filing with the Securities and
Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities
Exchange Act of 1934 more than 90 days prior to the meeting, such notice, to
be timely, must be delivered to the Board of Directors not later than the
close of business on the tenth day following the day on which the date of the
meeting was first so publicly announced).
LIMITATION ON CHANGES IN CONTROL
The Rights and Rights Agreement, certain provisions of the Company's By-Laws
and the provisions of Section 203 of Delaware Law could have the effect of
delaying, deferring or preventing a change in control of the Company. This
could be the case, notwithstanding that a majority of the stockholders might
benefit from such a change in control or offer.
MARKET FOR COMMON STOCK AND COMMON STOCK DIVIDENDS
The Common Stock is listed on the New York Stock Exchange under the symbol
"LYO." The reported high and low sale prices of the Common Stock on the New
York Stock Exchange (New York Stock Exchange Composite Tape) for each quarter
from January 1, 1996 through July 30, 1998, inclusive, were as set forth
below.
<TABLE>
<CAPTION>
PERIOD HIGH LOW
------ ---- ---
<S> <C> <C>
1996:
First Quarter......................................... 32 1/4 22 1/2
Second Quarter........................................ 31 1/8 22 1/4
Third Quarter......................................... 24 3/4 21 5/8
Fourth Quarter........................................ 24 1/8 20 3/8
1997:
First Quarter......................................... 25 1/2 21 5/8
Second Quarter........................................ 23 5/8 18 3/8
Third Quarter......................................... 27 3/8 21 7/8
Fourth Quarter........................................ 27 1/4 23 15/16
1998:
First Quarter......................................... 36 1/8 23 1/4
Second Quarter........................................ 38 1/8 26 1/2
Third Quarter (through July 30, 1998)................. 30 1/2 25 1/16
</TABLE>
During the last ten quarters, Lyondell has declared $.225 per share
quarterly cash dividends (which were paid in the subsequent quarter). The
declaration and payment of dividends is at the discretion of the Board of
Directors. The future declaration and payment of dividends and the amount
thereof will be dependent upon the
13
<PAGE>
Company's results of operations, financial condition, cash position and
requirements, investment opportunities, future prospects and other factors
deemed relevant by the Board of Directors. Subject to these considerations and
to the legal considerations discussed in the following paragraph, the Company
currently intends to distribute to its Stockholders cash dividends on its
Common Stock at a quarterly rate of $.225 per share. During 1997 and the first
half of 1998, the Company paid $72 million and $35 million, respectively, in
dividends.
Certain debt instruments which were assumed by Equistar, but as to which
Lyondell remains an obligor as well, contain the Put Rights provisions. Among
other things, the Put Rights may be triggered by the making by either of
Lyondell or Equistar of certain unearned distributions to stockholders or
partners, respectively, other than regular dividends, that are followed by a
specified decline in public ratings on such debt. Regular dividends are those
quarterly cash dividends determined in good faith by the Board of Directors
(whose determination is conclusive) to be appropriate in light of the
Company's results of operations and capable of being sustained. These
determinations were made prior to the declaration of $.225 per share dividend
paid on June 15, 1998. Lyondell's credit facilities also could limit the
Company's ability to pay dividends under certain circumstances.
The operation of certain of the Company's employee benefit plans may result
in the issuance of Common Stock upon the exercise of options granted to
employees of the Company, including its officers. Although the terms of these
plans provide that additional shares may be issued to satisfy the Company's
obligations under the options, the Company generally intends to cause Common
Stock to be repurchased in the market in order to satisfy these obligations.
14
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The following description of the Debt Securities sets forth certain general
terms and provisions of the Debt Securities to which any Prospectus Supplement
may relate (the "Offered Debt Securities"). The particular terms of the
Offered Debt Securities and the extent to which such general provisions may
apply will be described in a Prospectus Supplement relating to such Offered
Debt Securities.
The Debt Securities will be general unsecured obligations of the Company and
will constitute either senior debt securities or subordinated debt securities.
In the case of Debt Securities that will be senior debt securities ("Senior
Debt Securities"), such Debt Securities will be issued under an Indenture (the
"Senior Indenture") between the Company and a trustee under the Senior
Indenture (the "Senior Trustee"), and will rank pari passu with all other
unsecured and unsubordinated debt of the Company. In the case of Debt
Securities that will be subordinated debt securities ("Subordinated Debt
Securities"), such Debt Securities will be issued under an Indenture (the
"Subordinated Indenture") between the Company and a trustee under the
Subordinated Indenture (the "Subordinated Trustee"), and will rank junior to
all Senior Indebtedness (as defined below) of the Company (including any
Senior Debt Securities) that may be outstanding from time to time. The Senior
Indenture and the Subordinated Indenture are sometimes hereinafter referred to
individually as an "Indenture" and collectively as the "Indentures," and the
Senior Trustee and the Subordinated Trustee are sometimes hereinafter referred
to individually as a "Trustee" and collectively as the "Trustees." The
statements under this caption relating to the Debt Securities and the
Indentures are summaries only and do not purport to be complete. Such
summaries make use of terms defined in the Indentures. Wherever such terms are
used herein or particular provisions of the Indentures are referred to, such
terms or provisions, as the case may be, are incorporated by reference as part
of the statements made herein, and such statements are qualified in their
entirety by such reference. Certain defined terms in the Indentures are
capitalized herein.
PROVISIONS APPLICABLE TO BOTH SENIOR AND SUBORDINATED DEBT SECURITIES
GENERAL
The Indentures do not limit the aggregate principal amount of Debt
Securities that can be issued thereunder and provide that Debt Securities may
be issued from time to time thereunder in one or more series, each in an
aggregate principal amount authorized by the Company prior to issuance. The
Indentures do not limit the amount of other unsecured indebtedness or
securities that may be issued by the Company.
Unless otherwise indicated in a Prospectus Supplement, the Debt Securities
will not benefit from any covenant or other provision that would afford
Holders of such Debt Securities special protection in the event of a highly
leveraged transaction involving the Company or that would give holders of the
Debt Securities the right to require the Company to repurchase their
securities in the event of a decline in the credit rating of the Company's
debt securities resulting from a takeover, recapitalization or similar
restructuring or otherwise.
Reference is made to the Prospectus Supplement for the following terms of
the Offered Debt Securities: (i) the title and aggregate principal amount of
the Offered Debt Securities; (ii) whether such Offered Debt Securities will be
issued in the form of one or more global securities and whether such global
securities are to be issuable in temporary global form or permanent global
form, and if so, whether beneficial owners of interests in any such global
security may exchange such interests for physical securities, and the initial
depositary for any global security; (iii) the date or dates on which the
principal of and premium, if any, on the Offered Debt Securities are payable
or the method of determination thereof; (iv) the rate or rates, or the method
of determination thereof, at which the Offered Debt Securities will bear
interest, if any; (v) whether and under what circumstances Additional Amounts
with respect to the Offered Debt Securities will be payable; (vi) the date or
dates from which such interest will accrue; (vii) the interest payment dates
on which such interest will be payable and the record date for the interest
payable on any Offered Debt Securities on any interest payment date; (viii)
the place or places where the principal of, premium (if any) and interest and
any Additional Amounts with respect to the Offered
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Debt Securities will be payable; (ix) the period or periods within which, the
price or prices at which and the terms and conditions upon which Offered Debt
Securities may be redeemed, in whole or in part, at the option of the Company,
if the Company is to have that option; (x) the obligation, if any, of the
Company to redeem, purchase or repay Offered Debt Securities pursuant to any
sinking fund or analogous provisions or at the option of a holder thereof and
the period or periods within which, the price or prices (whether denominated
in cash, securities or otherwise) at which and the terms and conditions upon
which Offered Debt Securities will be redeemed, purchased or repaid in whole
or in part pursuant to such obligation; (xi) if other than denominations of
$1,000 and any integral multiple thereof, the denomination in which the
Offered Debt Securities will be issuable; (xii) the currency or currencies
(including composite currencies), if other than U.S. dollars, in which payment
of principal, premium (if any) and interest on and any Additional Amounts with
respect to the Offered Debt Securities will be payable; (xiii) if such
payments are to be payable, at the election of the Company or a holder
thereof, in a currency or currencies (including composite currencies) other
than that in which the Offered Debt Securities are stated to be payable, the
currency or currencies (including composite currencies) in which such payments
as to which such election is made will be payable, and the periods within
which and the terms and conditions upon which such election is to be made;
(xiv) if the amount of such payments may be determined with reference to any
commodities, currencies or indices, values, rates or prices or any other index
or formula, the manner in which such amounts will be determined; (xv) if other
than the entire principal amount thereof, the portion of the principal amount
of Offered Debt Securities that will be payable upon declaration of
acceleration of the maturity thereof; (xvi) any additional means of
satisfaction and discharge of the applicable Indenture and any additional
conditions or limitations to discharge with respect to Offered Debt Securities
pursuant to the applicable Indenture or any modifications of or deletions from
such conditions or limitations; (xvii) any deletions or modifications of or
additions to the Events of Default or covenants of the Company pertaining to
the Offered Debt Securities; (xviii) any restrictions or other provisions with
respect to the transfer or exchange of Offered Debt Securities; (xix) if the
Offered Debt Securities are to be convertible into or exchangeable for capital
stock, other debt securities (including Debt Securities), warrants, other
equity securities or any other securities or property of the Company or any
other Person, at the option of the Company or the holder or upon the
occurrence of any condition or event, the terms and conditions for such
conversion or exchange; and (xx) any other terms of the Offered Debt
Securities.
The Debt Securities will be issued in registered form. No service charge
will be made for any registration of transfer or exchange of the Debt
Securities, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Substantially all of the Company's operating income and cash flow is
generated by its subsidiaries and joint ventures. As a result, funds necessary
to meet the Company's debt service obligations are provided in part by
distributions or advances from its subsidiaries and joint ventures. Under
certain circumstances, contractual and legal restrictions, as well as the
financial condition and operating requirements of the Company's subsidiaries
and joint ventures, could limit the Company's ability to obtain cash from its
subsidiaries and joint ventures for the purpose of meeting its debt service
obligations, including the payment of principal and interest on Debt
Securities. The claims of creditors of the subsidiaries and joint ventures
will effectively have priority with respect to the assets and earnings of such
companies over the claims of creditors of the Company, including the holders
of Debt Securities.
Offered Debt Securities may be sold at a discount (which may be substantial)
below their stated principal amount bearing no interest or interest at a rate
that at the time of issuance is below market rates. Any material United States
federal income tax consequences and other special considerations applicable
thereto will be described in the Prospectus Supplement relating to any such
Offered Debt Securities.
If any of the Offered Debt Securities are sold for any foreign currency or
currency unit (including a composite currency) or if the principal, premium
(if any) or interest on or any Additional Amounts with respect to any of the
Offered Debt Securities is payable in any foreign currency or currency unit,
the restrictions, elections, tax consequences, specific terms and other
information with respect to such Offered Debt Securities and such foreign
currency or currency unit will be set forth in the Prospectus Supplement
relating thereto.
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CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indentures provide that the Company will not, in any transaction or
series of transactions, consolidate with or merge into any Person, or sell,
lease, convey, transfer or otherwise dispose of all or substantially all of
its assets to any Person, unless: (i) either (a) the Company shall be the
continuing corporation or (b) the Person (if other than the Company) formed by
such consolidation or into which the Company is merged, or the Person which
acquires, by sale, lease, conveyance, transfer or other disposition, all or
substantially all of the assets of the Company, shall be organized and validly
existing under the laws of the United States of America, any political
subdivision thereof or any state thereof or the District of Columbia, and
shall expressly assume, by a supplemental indenture, the due and punctual
payment of the principal of (and premium, if any) and interest on and
Additional Amounts with respect to all the Debt Securities and the performance
of the Company's covenants and obligations under such Indenture and the Debt
Securities; (ii) immediately after giving effect to such transaction or series
of transactions, no default or Event of Default shall have occurred and be
continuing or would result therefrom; and (iii) certain other conditions are
met.
EVENTS OF DEFAULT
Unless otherwise provided with respect to any series of Debt Securities, the
following are Events of Default under each Indenture with respect to the Debt
Securities of such series issued under such Indenture: (i) default by the
Company for 30 days in payment of any interest or any Additional Amounts with
respect to any Debt Securities of such series; (ii) default by the Company in
the payment of (A) any principal of any Debt Securities of such series at its
maturity or (B) of premium (if any) on any Debt Securities of such series when
the same becomes due and payable; (iii) default by the Company in the deposit
of any sinking fund payment, when and as due by the terms of a Debt Security
of such series, continued for 30 days; (iv) default by the Company in
compliance with any of its other covenants or agreements in, or provisions of,
the Debt Securities of such series or the applicable Indenture (other than an
agreement, covenant or provision that has expressly been included in such
Indenture solely for the benefit of one or more series of Debt Securities
other than that series) which shall not have been remedied within 90 days
after written notice by the Trustee or by the holders of at least 25% in
principal amount of the then outstanding Debt Securities affected by such
default; (v) certain events involving bankruptcy, insolvency or reorganization
of the Company; and (vi) any other Event of Default provided with respect to
Debt Securities of that series. The Indentures provide that the Trustee may
withhold notice to the holders of the Debt Securities of any default or Event
of Default (except in payment of principal of, premium (if any) and interest
on and Additional Amounts or any sinking fund installment with respect to Debt
Securities of such series) if the Trustee considers it in the interest of the
holders of such Debt Securities to do so.
Each Indenture provides that if an Event of Default with respect to any Debt
Securities of any series at the time outstanding occurs and is continuing, the
applicable Trustee or the holders of at least 25% in principal amount of the
then outstanding Debt Securities of the series affected by such default (or in
the event of a default pursuant to (iv) above, 25% in principal amount of the
securities affected) may declare the principal of and accrued and unpaid
interest on all then outstanding Debt Securities of such series or of all
series affected, as the case may be, to be due and payable. Upon such a
declaration, the amounts due and payable on such Debt Securities will be due
and payable immediately. Under certain circumstances, the holders of a
majority in principal amount of the outstanding Debt Securities of the series
affected by such default or all series, as the case may be, may rescind any
such acceleration and its consequences.
Each Indenture provides that no holder of a Debt Security of any series may
pursue any remedy under such Indenture unless (i) the holder gives the
applicable Trustee written notice of a continuing Event of Default with
respect to such series, (ii) the holders of at least 25% in principal amount
of the then outstanding Debt Securities of such series make a written request
to the applicable Trustee to pursue such remedy, (iii) such holder or holders
offer to the applicable Trustee indemnity reasonably satisfactory to such
Trustee, (iv) the Trustee shall have failed to act for a period of 60 days
after receipt of such notice and offer of indemnity and (v) during such 60-day
period, the holders of a majority in principal amount of the Debt Securities
of that series do not give such Trustee a direction inconsistent with the
request; however, such provision does not affect the right of a holder of a
Debt Security to sue for enforcement of any overdue payment thereon.
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Each Indenture provides that the holders of a majority in principal amount
of the then outstanding Debt Securities of a series or of all series affected,
as the case may be, may direct the time, method and place of conducting any
proceeding for any remedy available to the applicable Trustee or exercising
any trust or power conferred on it not relating to or arising under an Event
of Default, subject to certain limitations specified in such Indenture. Each
Indenture requires the annual filing by the Company with the applicable
Trustee of a written statement as to compliance with the covenants contained
in such Indenture.
MODIFICATION AND WAIVER
Modifications and amendments of each Indenture or the Debt Securities may be
made by the Company and the applicable Trustee with the consent of the Holders
of a majority in principal amount of the outstanding Debt Securities of all
series affected by such amendment (acting as one class) under the applicable
Indenture; provided, however, that no such modification or amendment may,
without the consent of the Holder of each Debt Security then outstanding
affected thereby, (i) reduce the amount of Debt Securities whose holders must
consent to an amendment, supplement or waiver; (ii) reduce the rate of or
change the time for payment of interest, including default interest, on any
Debt Security; (iii) reduce the principal of or premium on, or change the
stated maturity of any Debt Security; (iv) reduce the premium, if any, payable
upon the redemption of any Debt Security or change the time at which any Debt
Security may or shall be redeemed; (v) change any obligation of the Company to
pay Additional Amounts with respect to any Debt Security; (vi) make any Debt
Security payable in money other than that stated in the Debt Security; (vii)
impair the right to institute suit for the enforcement of any payment of
principal of, premium (if any) or interest on or any Additional Amounts with
respect to any Debt Security; (vii) make any change in the percentage of
principal amount of Debt Securities necessary to waive compliance with certain
provisions of the applicable Indenture; or (viii) waive a continuing Default
or Event of Default in the payment of principal of, premium (if any) or
interest on or Additional Amounts with respect to the Debt Securities. In
addition, in the case of the Subordinated Debt Securities, no modification or
amendment may be made to the Subordinated Indenture with respect to the
subordination of any Subordinated Debt Security in a manner adverse to the
Holder thereof without the consent of the Holder of each Subordinated Debt
Security then outstanding affected thereby. The Indentures provide that
amendments and supplements to, or waivers of any provision of, such Indenture
may be made by the Company and the Trustee without the consent of any holders
of Debt Securities in certain circumstances, including (a) to cure any
ambiguity, omission, defect or inconsistency, (b) to provide for the
assumption of the obligations of the Company under such Indenture upon the
merger, consolidation or sale or other disposition of all or substantially all
of the assets of the Company, (c) to provide for uncertificated Debt
Securities in addition to or in place of certificated Debt Securities, (d) to
secure any series of Debt Securities or provide for guarantees of any series
of Debt Securities, (e) to comply with any requirement in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act of
1939, or (f) to make any change that does not adversely affect any outstanding
Debt Securities of any series in any material respect.
The Indentures provide that the Holders of a majority in principal amount of
the then outstanding Debt Securities of any series or of all series (acting as
one class) may waive any existing or past default or Event of Default with
respect to such series or all series, as the case may be, except (a) in the
payment of the principal of, or premium (if any) or interest on or any
Additional Amounts with respect to any Debt Securities or (b) in respect of a
provision that under the proviso to the prior paragraph cannot be amended or
supplemented without the consent of each Holder affected.
DEFEASANCE
The Indentures provide that the Company may, at its option, elect (a) to
have all of the obligations of the Company discharged with respect to the Debt
Securities (except for certain obligations to register the transfer or
exchange of Debt Securities, replace stolen, lost or mutilated Debt Securities
or maintain paying agencies and hold moneys for payment in trust) ("legal
defeasance") or (b) to have its obligations terminated with respect to certain
restrictive covenants of the Indenture ("covenant defeasance"), in which event
certain Events of Default will no longer constitute Events of Default with
respect to any Debt Securities, upon the deposit with the Trustee,
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in trust, of money or U.S. Government Obligations, or a combination thereof,
which through the payment of interest thereon and principal thereof in
accordance with their terms will provide money in an amount sufficient to pay
all the principal of (and premium, if any, on) and interest on such Debt
Securities on the dates such payments are due in accordance with the terms of
the Debt Securities on their stated maturity or any redemption date. The
Company is required to deliver to the Trustee an Opinion of Counsel to the
effect that the deposit and related defeasance would not cause the Holders of
the Debt Securities to recognize income, gain or loss for federal income tax
purposes and, in the case of a legal defeasance pursuant to clause (a), such
opinion must be based upon a ruling from the United States Internal Revenue
Service or a change in law to that effect.
GOVERNING LAW
Each Indenture and the Debt Securities will be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
applicable principles of conflicts of laws to the extent the laws of another
jurisdiction would be required thereby.
TRUSTEES
Each Indenture contains certain limitations on the right of the applicable
Trustee, should it become a creditor of the Company, to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim, as security or otherwise. Each Trustee is permitted to
engage in other transactions; however, if it acquires any conflicting interest
(as defined), it must eliminate such conflict or resign.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Debt Securities of any series will be exchangeable for other Debt Securities
of the same series and of a like aggregate principal amount and tenor of
different authorized denominations in accordance with the applicable
Indenture. Debt Securities may be presented for registration of transfer (with
the form of transfer endorsed thereon duly executed), at the office of the
Security Registrar or at the office of any transfer agent designated by the
Company for such purpose with respect to any series of Debt Securities and
referred to in an applicable Prospectus Supplement, without service charge and
upon payment of any taxes and other governmental charges as described in the
applicable Indenture. Such transfer or exchange will be effected upon the
Security Registrar or such transfer agent, as the case may be, being satisfied
with the documents of title and identity of the Person making the request. The
Company has appointed the Trustee under each Indenture as Security Registrar
for Debt Securities issued thereunder. If a Prospectus Supplement refers to
any transfer agents (in addition to the Security Registrar) initially
designated by the Company with respect to any series of Debt Securities, the
Company may at any time rescind the designation of any such transfer agent or
approve a change in the location through which any such transfer agent acts.
The Company is required to maintain an office or agency (which may be the
office of the Trustee, the Security Registrar or the Paying Agent) in each
Place of Payment for such series. The Company may at any time designate
additional transfer agents with respect to any series of Debt Securities.
In the event of any redemption in part, the Company shall not be required to
(i) register the transfer or exchange of any Debt Security of any series
during a period beginning 15 Business Days prior to the mailing of the
relevant notice of redemption and ending on the close of business on the day
of mailing of such notice or (ii) register the transfer of or exchange any
Debt Security called for redemption in whole or in part, except the unredeemed
portion of any Debt Security being redeemed in part.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal, premium (if any) and interest on and any Additional Amounts with
respect to Debt Securities will be made in Dollars at the office of the
applicable Trustee, except that, at the option of the Company, payment of such
amounts may be made by check mailed to the holder's registered address or with
respect to Global Debt Securities, by wire transfer. Unless otherwise
indicated in an applicable Prospectus Supplement, payment of any installment
of interest on Debt
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Securities will be made to the Person in whose name such Debt Security is
registered at the close of business on the record date for such interest.
Unless otherwise indicated in an applicable Prospectus Supplement, the
Trustee will be designated as a Paying Agent for the Company for payments with
respect to Debt Securities issued under the applicable Indenture. The Company
may at any time designate additional Paying Agents or rescind the designation
of any Paying Agent or approve a change in the office through which any Paying
Agent acts.
Subject to the requirements of any applicable abandoned property laws, each
Trustee and Paying Agent shall pay to the Company upon written request any
money held by them for the payment of principal, premium (if any), interest or
any Additional Amounts that remains unclaimed for two years after the date
upon which such payment shall have become due. After payment to the Company,
Holders entitled to the money must look to the Company for payment as general
creditors unless an applicable abandoned property law designates another
Person, and all liability of such Trustee or Paying Agent with respect to such
money shall cease.
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued, in whole or in part, in the
form of one or more global Debt Securities that would be deposited with a
depositary or its nominee identified in the applicable Prospectus Supplement.
Global Debt Securities may be issued in either temporary or permanent form.
The specific terms of any depositary arrangement with respect to any portion
of a series of Debt Securities and the rights of, and limitations on, owners
of beneficial interests in any such global Debt Security representing all or a
portion of a series of Debt Securities will be described in the applicable
Prospectus Supplement.
DEFINITIONS
"Indebtedness" of any Person means, without duplication, (i) all
indebtedness of such Person for borrowed money (whether or not the recourse of
the lender is to the whole of the assets of such Person or only to a portion
thereof), (ii) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (iii) all obligations of such Person in
respect of letters of credit or other similar instruments (or reimbursement
obligations with respect thereto), other than standby letters of credit,
performance bonds and other obligations issued by or for the account of such
Person in the ordinary course of business, to the extent not drawn or, to the
extent drawn, if such drawing is reimbursed not later than the third Business
Day following demand for reimbursement, (iv) all obligations of such Person to
pay the deferred and unpaid purchase price of property or services, except
trade payables and accrued expenses incurred in the ordinary course of
business, (v) all Capitalized Lease Obligations of such Person, (vi) all
Indebtedness of others secured by a Lien on any asset of such Person, whether
or not such Indebtedness is assumed by such Person (provided that if the
obligations so secured have not been assumed in full by such Person or are not
otherwise such Person's legal liability in full, then such obligations shall
be deemed to be in an amount equal to the greater of (a) the lesser of (1) the
full amount of such obligations and (2) the fair market value of such assets,
as determined in good faith by the Board of Directors of such Person, which
determination shall be evidenced by a Board Resolution, and (b) the amount of
obligations as have been assumed by such Person or which are otherwise such
Person's legal liability), and (vii) all Indebtedness of others (other than
endorsements in the ordinary course of business) guaranteed by such Person to
the extent of such guarantee.
"Lien" means any mortgage, pledge, lien, encumbrance, charge or security
interest. For purposes of the Indenture, a person 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,
Capitalized Lease Obligation or other title retention agreement relating to
such asset.
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PROVISIONS APPLICABLE SOLELY TO SUBORDINATED DEBT SECURITIES
The payment of the principal of, premium, if any, and interest on and any
Additional Amounts with respect to the Subordinated Debt Securities is
expressly subordinated, to the extent and in the manner set forth in the
Subordinated Indenture, to the prior payment in full of all Senior
Indebtedness of the Company.
The Subordinated Indenture provides that no payment may be made by or on
behalf the Company on account of the principal of, premium, if any, or
interest on or any Additional Amounts with respect to the Subordinated Debt
Securities, or to acquire any of the Subordinated Debt Securities (including
repurchases of Subordinated Debt Securities at the option of the Holder
thereof) for cash or property (other than certain junior securities of the
Company), or on account of the redemption provisions of the Subordinated Debt
Securities, in the event of (i) default in the payment of any principal of,
premium, if any, or interest on any Senior Indebtedness of the Company when it
becomes due and payable, whether at maturity or at a date fixed for prepayment
or by declaration or otherwise (a "Payment Default"), unless and until such
Payment Default has been cured or waived or otherwise has ceased to exist, or
(ii) any other event of default with respect to any Designated Senior
Indebtedness permitting the holders of such Designated Senior Indebtedness (or
a trustee or other representative on behalf of the holders thereof) to declare
such Designated Senior Indebtedness due and payable prior to the date on which
it would otherwise have become due and payable, upon written notice thereof to
the Company and the Subordinated Trustee by any holders of such Designated
Senior Indebtedness (or a trustee or other representative on behalf of the
holders thereof) (the "Default Notice"), unless and until such event of
default shall have been cured or waived or otherwise has ceased to exist,
provided that such payments may not be prevented under clause (ii) above for
more than 179 days after an applicable Default Notice has been received by the
Subordinated Trustee unless the Designated Senior Indebtedness in respect of
which such event of default exists has been declared due and payable in its
entirety, in which case no such payment may be made until such acceleration
has been rescinded or annulled or such Designated Senior Indebtedness has been
paid in full. In the case of (ii) above, no event of default that existed or
was continuing on the date of any Default Notice (whether or not such event of
default is on the same issue of Designated Senior Indebtedness) may be made
the basis for the giving of a second Default Notice, and only one such Default
Notice may be given in any 365-day period.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company (other than certain junior securities of
the Company) is received by the Subordinated Trustee or the Holders of
Subordinated Debt Securities at a time when such payment or distribution is
prohibited by the foregoing provisions, then, unless such payment or
distribution is no longer prohibited by the foregoing provisions, such payment
or distribution shall be received and held in trust by the Subordinated
Trustee or such Holders or the Paying Agent for the benefit of the holders of
Senior Indebtedness of the Company, and shall be paid or delivered by the
Subordinated Trustee or such Holders or the Paying Agent, as the case may be,
to the holders of the Senior Indebtedness of the Company remaining unpaid or
unprovided for or their representative or representatives, or to the trustee
or trustees under any indenture pursuant to which any instruments evidencing
such Senior Indebtedness of the Company may have been issued, ratably
according to the aggregate amounts remaining unpaid on account of the Senior
Indebtedness of the Company held or represented by each, for application to
the payment of all Senior Indebtedness in full after giving effect to any
concurrent payment or distribution to or for the holders of such Senior
Indebtedness.
Upon any distribution of assets of the Company or upon any dissolution,
winding up, total or partial liquidation or reorganization of the Company,
whether voluntary or involuntary, in bankruptcy, insolvency, receivership or a
similar proceeding or upon assignment for the benefit of creditors, (i) the
holders of all Senior Indebtedness of the Company will first be entitled to
receive payment in full before the Holders of Subordinated Debt Securities are
entitled to receive any payment on account of the principal of, premium, if
any, and interest on or any Additional Amounts with respect to the
Subordinated Debt Securities (other than certain junior securities of the
Company) and (ii) any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities (other than certain
junior securities of the Company) to which the Holders of Subordinated Debt
Securities or the Subordinated Trustee on behalf of such Holders would be
entitled, except for the subordination provisions contained in the
Subordinated Indenture, will be paid by the
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liquidating trustee or agent or other person making such a payment or
distribution directly to the holders of Senior Indebtedness of the Company or
their representative, ratably according to the respective amounts of Senior
Indebtedness held or represented by each, to the extent necessary to make
payment in full of all such Senior Indebtedness remaining unpaid, after giving
effect to any concurrent payment or distribution to the holders of such Senior
Indebtedness.
No provision contained in the Subordinated Indenture or the Subordinated
Debt Securities affects the obligation of the Company, which is absolute and
unconditional, to pay, when due, principal of, premium, if any, and interest
on and any Additional Amounts with respect to the Subordinated Debt
Securities. The subordination provisions of the Subordinated Indenture and the
Subordinated Debt Securities do not prevent the occurrence of any default or
Event of Default under the Subordinated Indenture or limit the rights of the
Subordinated Trustee or any Holder of Subordinated Debt Securities, subject to
the two preceding paragraphs, to pursue any other rights or remedies with
respect to the Subordinated Debt Securities.
As a result of these subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceeding or an assignment for the benefit of the creditors of the Company or
any of its subsidiaries or joint ventures or a marshaling of assets or
liabilities of the Company and its subsidiaries and joint ventures, Holders of
Subordinated Debt Securities may receive ratably less than other creditors.
The term "Senior Indebtedness" of the Company, unless otherwise provided
with respect to the Subordinated Debt Securities of a series and described in
the Prospectus Supplement relating thereto, is defined in the Subordinated
Indenture as (i) all Indebtedness (as described above under "--Definitions")
of the Company, unless, by the terms of the instrument creating or evidencing
such Indebtedness, it is provided that such Indebtedness is not superior in
right of payment to the Subordinated Debt Securities or to other Indebtedness
which is pari passu with or subordinated to the Subordinated Debt Securities
and (ii) any modifications, refunding, deferrals, renewals or extensions of
any such Indebtedness or securities, notes or other evidences of Indebtedness
issued in exchange for such Indebtedness; provided that in no event shall
"Senior Indebtedness" include (a) Indebtedness of the Company owed or owing to
any subsidiary or joint venture of the Company or any officer, director or
employee of the Company or any subsidiary or joint venture of the Company, (b)
Indebtedness to trade creditors or (c) any liability for taxes owed or owing
by the Company.
The term "Designated Senior Indebtedness," unless otherwise provided with
respect to the Subordinated Debt Securities of a series and described in the
Prospectus Supplement relating thereto, is defined in the Subordinated
Indenture to mean any Senior Indebtedness of the Company that (i) in the
instrument evidencing the same or the assumption or guarantee thereof (or
related documents to which the Company is a party) is expressly designated as
"Designated Senior Indebtedness" for purposes of the Subordinated Indenture
and (ii) satisfies such other conditions as may be provided with respect to
the Subordinated Debt Securities of such series (provided that such instrument
or documents may place limitations and conditions on the rights of the holders
of such Senior Indebtedness to exercise the rights of Designated Senior
Indebtedness).
If Subordinated Debt Securities are issued under the Subordinated Indenture,
the aggregate principal amount of Senior Indebtedness outstanding as of a
recent date will be set forth in the Prospectus Supplement. The Subordinated
Indenture does not restrict the amount of Senior Indebtedness that the Company
may incur.
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PLAN OF DISTRIBUTION
The Company may sell the Offered Securities in any of three ways (or in any
combination thereof): (i) through underwriters or dealers; (ii) directly to a
limited number of purchasers or to a single purchaser; or (iii) through
agents. The Prospectus Supplement with respect to any Offered Securities will
set forth the terms of the offering of such Offered Securities, including the
name or names of any underwriters, dealers or agents and the respective
amounts of such Offered Securities underwritten or purchased by each of them,
the initial public offering price of such Offered Securities and the proceeds
to the Company from such sale, any discounts, commissions or other items
constituting compensation from the Company and any discounts, commissions or
concessions allowed or reallowed or paid to dealers and any securities
exchanges on which such Offered Securities may be listed. Any initial public
offering price and any discounts or concessions allowed or reallowed or paid
to dealers may be changed from time to time.
If underwriters are used in the sale of any Offered Securities, such Offered
Securities will be acquired by the underwriters for their own account and may
be resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. Such Offered Securities may be either offered to the
public through underwriting syndicates represented by managing underwriters,
or directly by underwriters. Unless otherwise set forth in the Prospectus
Supplement, the obligations of the underwriters to purchase such Offered
Securities will be subject to certain conditions precedent and the
underwriters will be obligated to purchase all of such Offered Securities if
any are purchased.
Offered Securities may be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer
or sale of Offered Securities in respect of which this Prospectus is delivered
will be named, and any commissions payable by the Company to such agent will
be set forth, in the Prospectus Supplement. Unless otherwise indicated in the
Prospectus Supplement, any such agent will be acting on a best efforts basis
for the period of its appointment.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters, dealers or agents to solicit offers by certain purchasers to
purchase Offered Securities from the Company at the public offering price set
forth in the Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on a specified date in the future. Such
contracts will be subject only to those conditions set forth in the Prospectus
Supplement, and the Prospectus Supplement will set forth the commission
payable for solicitation of such contracts.
Agents and underwriters may be entitled under agreements entered into with
the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments which the agents or underwriters may be
required to make in respect thereof. Agents and underwriters may be customers
of, engage in transactions with, or perform services for the Company and/or
any of its affiliates in the ordinary course of business.
In connection with the offering, the underwriters or agents, as the case may
be, may purchase and sell the Offered Securities in the open market. These
transactions may include overallotment and stabilizing transactions and
purchases to cover syndicate short positions created in connection with the
offering. Stabilizing transactions consist of certain bids or purchases for
the purpose or preventing or retarding a decline in the market price of the
Offered Securities; and syndicate short positions involve the sale by the
underwriters or agents, as the case may be, of a greater number of Offered
Securities than they are required to purchase from the Company in the
offering. The underwriters may also impose a penalty bid, whereby selling
concessions allowed to syndicate members or other broker-dealers for the
Offered Securities sold for their account may be reclaimed by the syndicate if
such Offered Securities are repurchased by the syndicate in stabilizing or
covering transactions. These activities may stabilize, maintain or otherwise
affect the market price of the Offered Securities, which may be higher than
the price that might otherwise prevail in the open market, and, if commenced,
may be discontinued at any time. These transactions may be effected on the New
York Stock Exchange, in the over-the-counter market or otherwise.
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The Securities may or may not be listed on a national securities exchange.
No assurances can be given that there will be a market for the Securities.
LEGAL MATTERS
Certain legal matters in connection with the Securities offered hereby will
be passed upon for the Company by Baker & Botts, L.L.P., Houston, Texas.
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Annual Report on Form 10-K of Lyondell Petrochemical Company for the year
ended December 31, 1997 have been so incorporated in reliance on the reports
of PricewaterhouseCoopers LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"), which can be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549;
and at the regional offices of the Commission at 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and at Seven World Trade Center, New York,
New York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549 at prescribed rates. The Commission maintains an
Internet web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission (http://www.sec.gov). The Common Stock is listed on the New York
Stock Exchange, and such material also can be inspected at the offices of the
New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
This Prospectus, which constitutes part of a registration statement on Form
S-3 (the "Registration Statement") filed by the Company with the Commission
under the Securities Act of 1933, as amended (the "Securities Act"), omits
certain of the information contained in the Registration Statement. Reference
is hereby made to the Registration Statement and the exhibits thereto, which
may be obtained at the public reference facilities maintained by the
Commission as described in the preceding paragraph, for further information
with respect to the Company and the securities offered hereby. Statements
contained herein concerning the provisions of such documents are necessarily
summaries of such documents, and each such statement is qualified in its
entirety by reference to the copy of the applicable document filed with the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which the Company has filed with the Commission
pursuant to the Exchange Act (File No. 1-10145), are incorporated in this
Prospectus by reference and shall be deemed to be a part hereof:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997;
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998;
(c) The Company's Current Reports on Form 8-K filed on December 12, 1997,
March 26, 1998, May 29, 1998 and June 22, 1998;
(d) The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed on December 16, 1988, as such
Registration Statement may be amended from time to time for the purpose of
updating, changing or modifying such description; and
24
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(e) The description of the Rights to Purchase Common Stock contained in
the Company's Registration Statement on Form 8-A filed on December 12,
1995, as such Registration Statement may be amended from time to time for
the purpose of updating, changing or modifying such description.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering made hereby shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such document. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus is
delivered, upon the written or oral request of such person, a copy of any or
all documents that have been incorporated herein by reference (not including
exhibits to the documents that have been incorporated herein by reference
unless such exhibits are specifically incorporated by reference in the
documents this Prospectus incorporates). Requests should be directed to
Corporate Secretary, Lyondell Petrochemical Company, 1221 McKinney, Houston,
Texas 77010 (telephone number: (713) 652-7200).
25
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED JULY 31, 1998
PROSPECTUS [LOGO OF LYONDELL PETROCHEMICAL COMPANY APPEARS HERE]
$4,000,000,000
LYONDELL PETROCHEMICAL COMPANY
JUNIOR SUBORDINATED DEBT SECURITIES
LYONDELL TRUST I
PREFERRED TRUST SECURITIES FULLY AND UNCONDITIONALLY GUARANTEED, AS SET FORTH
HEREIN, BY
LYONDELL PETROCHEMICAL COMPANY
Lyondell Petrochemical Company (the "Company" or "Lyondell") may from time to
time offer, together or separately, unsecured junior subordinated debt
securities (the "Junior Subordinated Debt Trust Securities") consisting of
debentures, notes or other evidences of indebtedness in one or more series and
in amounts, at prices and on terms to be determined at or prior to the time of
any such offering. The Junior Subordinated Debt Trust Securities when issued
will be unsecured obligations of the Company. The Company's obligations under
the Junior Subordinated Debt Trust Securities will be subordinate and junior in
right of payment to all Senior and Subordinated Debt (as defined herein) of the
Company.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Lyondell Trust I (the "Lyondell Trust"), a statutory business trust created
under the laws of the State of Delaware, may offer and sell, from time to time,
preferred trust securities representing undivided beneficial interests in the
assets of the Lyondell Trust (the "Preferred Securities" and, together with the
Junior Subordinated Debt Trust Securities, the "Securities"). The Preferred
Securities may be offered in amounts, at prices and on terms to be determined
at or prior to the time of any such offering. The payment of periodic cash
distributions ("distributions") with respect to Preferred Securities out of
moneys held by the Property Trustee (as defined herein) of the Lyondell Trust,
and payments on liquidation of the Lyondell Trust and on redemption of
Preferred Securities, will be guaranteed by the Company fully and
unconditionally as described herein (the "Preferred Securities Guarantee"). See
"Description of the Preferred Securities Guarantee." The Company's obligation
under the Preferred Securities Guarantee is an unsecured obligation of the
Company and will rank (i) subordinate and junior in right of payment to all
other liabilities of the Company, including the Junior Subordinated Debt Trust
Securities, except those made pari passu or subordinate by their terms, and
(ii) pari passu in right of payment with the most senior preferred stock
issued, from time to time, if any, by the Company. Junior Subordinated Debt
Trust Securities may be issued and sold from time to time in one or more series
by the Company to the Lyondell Trust in connection with the investment of the
proceeds from the offering of Preferred Securities and Common Securities (as
defined herein) of the Lyondell Trust. The Junior Subordinated Debt Trust
Securities purchased by the Lyondell Trust may be subsequently distributed pro
rata to holders of Preferred Securities and Common Securities in connection
with the dissolution of the Lyondell Trust, upon the occurrence of certain
events as may be described in an accompanying Prospectus Supplement.
Specific terms of the Junior Subordinated Debt Trust Securities and Preferred
Securities in respect of which this Prospectus is being delivered (the "Offered
Securities") will be set forth in a Prospectus Supplement with respect to such
Offered Securities, which will describe, without limitation and where
applicable, the following: (i) in the case of Junior Subordinated Debt Trust
Securities, the specific designation, aggregate principal amount, authorized
denomination, maturity, premium, if any, exchangeability, redemption,
conversion, prepayment or sinking fund provisions, if any, interest rate (which
may be fixed or variable), if any, method, if any, of calculating interest
payments, and dates for payment thereof, dates on which premium, if any, will
be payable, the right of the Company, if any, to defer payment of interest on
the Junior Subordinated Debt Trust Securities and the maximum length of such
deferral period, the public offering price, any listing on a securities
exchange and other specific terms of the offering; and (ii) in the case of
Preferred Securities, the specific designation, number of securities,
liquidation amount per security, initial public offering price, and any listing
on a securities exchange, distribution rate (or method of calculation thereof),
dates on which distributions shall be payable and dates from which
distributions shall accumulate, voting rights (if any), terms for any
conversion or exchange into other securities, any redemption or sinking fund
provisions, any other rights, preferences, privileges, limitations or
restrictions relating to the Preferred Securities and the terms upon which the
proceeds of the sale of the Preferred Securities shall be used to purchase a
specific series of Junior Subordinated Debt Trust Securities of the Company.
Unless otherwise indicated in the Prospectus Supplement, the Company does not
intend to list any of the Offered Securities on a national securities exchange.
By separate prospectus, the form of which is included in the Registration
Statement of which this Prospectus is a part, the Company may offer from time
to time debt securities, common stock or preferred stock. The aggregate initial
public offering price of the securities to be offered pursuant to this
Prospectus and such other prospectus shall not exceed $4,000,000,000.
The Offered Securities may be offered directly, through agents designated
from time to time, through dealers or through underwriters. Such agents or
underwriters may act alone or with other agents or underwriters. See "Plan of
Distribution." Any such agents, dealers or underwriters will be set forth in
the Prospectus Supplement. If an agent of the Company and/or the Lyondell
Trust, or a dealer or underwriter is involved in the offering of the Offered
Securities, the agent's commission, dealer's purchase price, underwriter's
discount and net proceeds to the Company and/or the Lyondell Trust, as the case
may be, will be set forth in, or may be calculated from, the Prospectus
Supplement. Any underwriters, dealers or agents participating in the offering
may be deemed "underwriters" within the meaning of the Securities Act of 1933.
This Prospectus may not be used to consummate sales of Offered Securities
unless accompanied by a Prospectus Supplement.
The date of this Prospectus is , 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES
OFFERED HEREBY, INCLUDING, AMONG OTHERS, OVERALLOTMENT, STABILIZING AND SHORT-
COVERING TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID,
IN CONNECTION WITH THIS OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"PLAN OF DISTRIBUTION" IN THIS PROSPECTUS AND "PLAN OF DISTRIBUTION" OR
"UNDERWRITING" IN THE RELEVANT PROSPECTUS SUPPLEMENT.
THE COMPANY
Lyondell Petrochemical Company ("Lyondell" or the "Company") is a global,
vertically integrated chemical company with leading market positions, broad
product range, low cost operations and proprietary technology. The Company
conducts its operations through four businesses. Through its wholly-owned
subsidiary ARCO Chemical Company ("ARCO Chemical"), Lyondell is an
international manufacturer and marketer of intermediate chemicals and
specialty chemical products used in a broad range of consumer and industrial
products. Through its interests in three joint ventures, the Company is a
world-scale producer of petrochemicals and polymers, a major crude oil refiner
and a leading U.S. producer of methanol.
The following summarizes the Company's four businesses:
ARCO Chemical, which Lyondell acquired in July 1998, is the world's largest
producer of propylene oxide ("PO") and is a leading worldwide producer and
marketer of polyether polyols, propylene glycol, propylene glycol ethers,
toluene diisocyanate ("TDI"), styrene monomer ("SM") and methyl tertiary
butyl ether ("MTBE"). Key markets for PO and its derivatives are automotive
seating, home furnishings and other urethane applications such as coatings,
adhesives, sealants and elastomers, as well as resins, fibers, consumer
products, solvents, automotive coolants and aircraft deicers. TDI is a
precursor in the manufacture of urethanes. MTBE is a key component in
reformulated gasoline and an octane additive. SM is used in plastics, foam
cups and packaging products.
The Company has a 41 percent interest in Equistar Chemicals, LP
("Equistar"), an integrated, low-cost producer of petrochemicals and
polymers formed in December 1997. Equistar is North America's largest
producer of ethylene, polyethylene and propylene and third largest producer
of ethylene oxide and ethylene glycol. The formation of Equistar has
significantly enhanced the competitive position of the assets contributed
by the partners and provided the opportunity to realize significant cost
savings and operating synergies.
The Company has a 58.75 percent interest in LYONDELL-CITGO Refining Company
Ltd. ("LCR"), a leading refiner of low-cost, heavy crude oil, formed in
July 1993. LCR's refined petroleum products include gasoline, low-sulfur
diesel, jet fuel, aromatics and lubricants. In connection with its
formation, LCR entered into a long-term supply agreement and a product
sales agreement covering the majority of its feedstock and production,
which are intended to partially insulate LCR's earnings from fluctuations
in crude oil prices.
The Company has a 75 percent interest in Lyondell Methanol Company, L.P.
("Lyondell Methanol"), the third largest producer of methanol in the United
States. Lyondell Methanol was formed in December 1996 to better position
the business through alignment with a natural gas producer.
The Company's principal executive offices are located at 1221 McKinney
Street, Houston, Texas 77010 (Telephone (713) 652-7200).
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<PAGE>
FORWARD-LOOKING STATEMENTS
Certain of the statements contained or incorporated by reference in this
Prospectus and the accompanying Prospectus Supplement, 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 the risk factors set forth below and other factors set forth in or
incorporated by reference in this Prospectus and the accompanying Prospectus
Supplement. These factors include 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 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
Prospectus.
RISK FACTORS
The following should be considered carefully with the information provided
elsewhere in this Prospectus and the accompanying Prospectus Supplement and
the documents incorporated by reference herein in reaching a decision
regarding an investment in the Securities offered hereby.
HIGH LEVERAGE AND RELATED MATTERS
As a result of the acquisition of ARCO Chemical, as of July 30, 1998, the
Company had outstanding consolidated debt of approximately $7.2 billion. In
addition, the Company remains liable on $745 million of debt for which primary
responsibility was assumed by Equistar in connection with the formation of
Equistar. The credit facilities arranged by the Company in connection with the
acquisition of ARCO Chemical include four 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. The Company currently expects
to repay the one-year term loan with proceeds from the sale of equity
securities and to refinance the two-year term loan with proceeds from the sale
of debt securities.
The current amount of debt of the Company significantly exceeds the
Company's historical leverage and significantly increases its debt service
obligations. The Company's historical results and financial condition do not,
accordingly, reflect the potential constraints the increase in leverage may
impose on the Company. The Company's significant increase in leverage could
have adverse effects on the Company, including: (i) the leverage may make the
Company more vulnerable to industry cyclicality and may limit its ability to
withstand competitive pressures and adverse changes in environmental and other
government regulation, (ii) a substantial portion of cash flow from operations
(as well as cash generated from asset sales, if any, and financings) must be
dedicated to the payment of principal of and interest on debt and will not be
available for other uses such as capital expenditures or acquisitions, (iii)
additional financing may not be available to the Company upon terms as
favorable as those previously available to the Company, which may limit the
Company's business growth, including its ability to effect potential
acquisitions and (iv) the Company may not be able to maintain its current
dividend rate.
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<PAGE>
The newly arranged credit facilities contain numerous financial and other
covenants that may affect and restrict the Company's business. The ability of
the Company to meet its debt service obligations and capital expenditure
needs, maintain its dividend rate and comply with the covenants and financial
requirements in the credit facilities will largely depend on the future
performance of the Company, which will be subject to prevailing economic and
competitive conditions and to other factors beyond its control. The breach of
any of the covenants or financial requirements in the credit facilities could
result in a default thereunder, which would permit the lenders to declare the
loans immediately payable and to terminate future lending commitments, which
in turn could result in bankruptcy for the Company.
As of March 31, 1998, Equistar, LCR and Lyondell Methanol (the "Joint
Ventures") had, in the aggregate, outstanding debt of approximately $2.4
billion and owners' equity of $3.6 billion. The ability of the Joint Ventures
to distribute cash to the Company is limited by their respective debt service
obligations. In addition, a default under certain Joint Venture debt
agreements would constitute a cross-default under the Company's credit
facilities. Certain debt instruments that were assumed by Equistar, but as to
which Lyondell remains an obligor as well, contain provisions that generally
provide that holders of such debt may, under certain limited circumstances,
require an obligor to repurchase the debt ("Put Rights"). The Put Rights would
be triggered by a specified decline in public ratings on such debt following
(i) certain events affecting control of Lyondell or Equistar or (ii) the
making by Lyondell or Equistar of certain dividends, distributions or
repurchases in excess of certain amounts. The debt subject to the Put Rights
consists of $150 million aggregate principal amount of notes maturing in June
1999, bearing interest at 10 percent, and $195 million aggregate principal
amount of medium-term notes maturing at various dates from 1998 through 2005,
with a weighted average interest rate at December 31, 1997 of 9.83 percent.
INDUSTRY CYCLICALITY AND OVERCAPACITY
The Company's historical operating results reflect the cyclical and volatile
nature of both the chemical and refining industries. Both industries are
mature and capital intensive, and industry margins are sensitive to supply and
demand balances, which have historically been cyclical. The chemical industry
historically has experienced alternating periods of tight supply, causing
prices and profit margins to increase, followed by periods of substantial
capacity additions, resulting in oversupply and declining prices and profit
margins. Due to the commodity nature of most of the Company's products, the
Company is not necessarily able to protect its market position by product
differentiation or pass on cost increases to its customers. Accordingly,
increases in raw material and other costs do not necessarily correlate with
changes in product prices, either in the direction of the price change or in
absolute magnitude. Moreover, a number of participants in various segments of
the chemical industry have announced plans for expansion of plant capacity.
There can be no assurance that future growth in product demand will be
sufficient to utilize this additional, or even current, capacity. Excess
industry capacity, to the extent it occurs, may depress the Company's volumes
and margins. As a result, the Company's earnings may be subject to significant
fluctuations.
External factors beyond the Company's control, such as general economic
conditions, competitor action, international events and circumstances and
governmental regulation in the United States and abroad, can cause volatility
in feedstock prices, as well as fluctuations in demand for the Company's
products, product prices, volumes and margins, and can magnify the impact of
economic cycles on the Company's business. A number of the Company's products
are highly dependent on durable goods markets, such as housing and automotive,
that are particularly cyclical. With respect to the Company's refining
business, however, management believes that the combination of the Crude
Supply Agreement entered into in 1993 and described below under "--Crude Oil
Supply Agreement" and a related products agreement tends to stabilize earnings
and to substantially reduce the market driven aspects of volatility.
INTENSE COMPETITION
The chemical industry is highly competitive. Many of the Company's
competitors are larger and have greater financial resources than the Company.
Among Lyondell's chemical competitors are some of the world's
4
<PAGE>
largest chemical companies, including The Dow Chemical Company, Shell
Chemical, BASF AG, Bayer AG and Union Carbide Corporation. In the past several
years, there have been a number of mergers, acquisitions and
spin-offs in the chemical industry. This restructuring activity may result in
fewer but more competitive producers with greater financial resources than the
Company.
Competition within the chemical industry is affected by a variety of
factors, including product price, reliability of product supply, technical
support, customer service, product quality and availability to the market of
potential substitute materials. Changes in the competitive environment,
including (i) the emergence of new competitors, (ii) the rate of capacity
additions by competitors, (iii) the intensification of price competition in
the Company's markets, (iv) the introduction of new or substitute products by
competitors, (v) technological innovations by competitors and (vi) new
environmental laws and regulatory requirements, could have a material adverse
effect on the business and operations of the Company.
POTENTIAL DIFFICULTIES IN INTEGRATING RECENTLY ACQUIRED AND COMBINED
OPERATIONS
The Company acquired ARCO Chemical in July 1998. The Company combined its
other chemicals and polymers business with that of Millennium Chemicals Inc.
to form Equistar Chemicals, LP in December 1997. Equistar was expanded by the
addition of certain businesses previously held by Occidental Petroleum
Corporation in May 1998. The process of integrating the operations of ARCO
Chemical with the Company has only recently begun, and the process of
integrating the operations of Equistar is not complete.
As is the case with any integration of major businesses that previously
operated independently, the integration processes for ARCO Chemical and for
Equistar will require the dedication of significant management and operational
resources. The difficulties of combining operations may be exacerbated by the
necessity of coordinating geographically separated organizations, integrating
personnel with disparate business backgrounds and combining different
transaction processing and financial reporting systems, processes and
corporate cultures. The processes of integrating operations could cause an
interruption of, or loss of momentum in, the activities of the combined
enterprise's business. In addition, the Company may suffer a loss of key
employees, customers or suppliers, loss of revenues, increases in costs or
other difficulties. There can be no assurance that the Company will be able to
realize the operating efficiencies and other benefits that are sought from
such transactions. Difficulties encountered in the integration processes could
have a material adverse effect on the business and operations of the Company.
SHARED CONTROL OF JOINT VENTURES
All of the operations of the Company, other than those of ARCO Chemical, are
conducted through the Company's Joint Ventures. The Company shares control of
these Joint Ventures with unaffiliated third parties.
The Company's forecasts and plans with respect to these Joint Ventures
assume that its joint venture partners will observe their obligations with
respect to the Joint Ventures. In the event that any of the Company's joint
venture partners do not observe their commitments, it is possible that the
affected Joint Venture would not be able to operate in accordance with its
business plans or that the Company would be required to increase its level of
commitment in order to give effect to such plans.
As with any such joint venture arrangements, differences in views between
the joint venture participants may result in delayed decisions or in failures
to agree on major matters, potentially adversely affecting the business and
operations of the Joint Ventures and in turn the business and operations of
the Company.
IMPORTANCE OF CRUDE OIL SUPPLY AGREEMENT AND RELATED RISKS
Substantially all crude oil used by LCR as a feedstock for its refinery is
purchased under the Crude Supply Agreement with PDVSA Petroleo y Gas S.A.
("PDVSA Oil"), which, like CITGO Petroleum Corporation ("CITGO"), is a
subsidiary of Petroleos de Venezuela, S.A., the Venezuelan national oil
company. The Crude Supply Agreement was entered into in 1993 and the Company
experienced the full effects of the Crude Supply
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Agreement beginning in 1997. The Crude Supply Agreement incorporates formula
prices to be paid by LCR for the crude oil supplied based on the market value
of a slate of refined products deemed to be produced from each particular
crude oil or feedstock, less (i) certain deemed refining costs adjustable for
inflation, (ii) certain actual costs, including crude oil transportation
costs, import duties and taxes and (iii) a deemed margin, which varies
according to the grade of crude oil or feedstock delivered. Deemed costs are
adjusted periodically based on inflation rates for specific deemed cost
components. Adjustments to margins track, but are less than, inflation rates.
Because deemed operating costs and the slate of refined products deemed to be
produced from a given barrel of crude oil or other feedstocks do not
necessarily reflect the actual costs and yields in any period and also because
the market value of the refined products used in the pricing formula does not
necessarily reflect the actual price received for the refined products, the
actual refining margin earned by LCR varies depending on, among other things,
the efficiency with which LCR conducts its operations from time to time.
Although LCR believes that the Crude Supply Agreement reduces the volatility
of its earnings and cash flows, the Crude Supply Agreement also limits LCR's
ability to enjoy higher margins during periods when the market price of crude
oil is low relative to the then current market prices for refined products. In
addition, if the actual yields, costs or volumes of the LCR refinery differ
substantially from those contemplated by the Crude Supply Agreement, the
benefits of this agreement to LCR could be substantially diminished, and could
result in lower earnings and cash flow for LCR. Furthermore, there may be
periods during which LCR's costs for crude oil under the Crude Supply
Agreement may be higher than might otherwise be available to LCR from other
sources.
There are risks associated with enforcing the provisions of contracts with
companies such as PDVSA Oil that are non-United States affiliates of a
sovereign nation. It is impossible to predict how governmental policies may
change under the current or any subsequent Venezuelan government. In addition,
there are risks associated with enforcing judgments of United States courts
against entities whose assets are located outside of the United States and
whose management does not reside in the United States. Although the parties
have negotiated alternative arrangements in the event of certain force majeure
conditions, including Venezuelan 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
Agreement. In addition, all of the crude oil supplied by PDVSA Oil under the
Crude Supply Agreement is produced in Venezuela, a country that has
experienced economic difficulties and attendant social and political unrest in
recent years. If the Crude Supply Agreement is modified or terminated or this
source of crude oil is otherwise interrupted due to production difficulties,
political or economic events in Venezuela or other factors, LCR could
experience significantly greater volatility in its earnings and cash flows. In
the event that CITGO were to transfer its interest in LCR to an unaffiliated
third party, PDVSA Oil would have an option to terminate the Crude Supply
Agreement. Depending on then current market conditions, any breach or
termination of the Crude Supply Agreement could adversely affect LCR, since
LCR would have to purchase all of its crude oil feedstocks in the merchant
market, which could subject LCR to significant price fluctuations. There can
be no assurance that alternative crude oil supplies providing similar margins
would be available for purchase by LCR.
OPERATING HAZARDS
The occurrence of material operating problems, including but not limited to
the events described below, may have a material adverse effect on the
productivity and profitability of a particular manufacturing facility, or on
the Company as a whole, during and after the period of such operational
difficulties. The Company's revenues are dependent on the continued operation
of its various production facilities (including the ability to complete
construction projects on schedule). The Company's operations are subject to
the usual hazards associated with chemical manufacturing and refining and the
related storage and transportation of feedstocks, products and wastes,
including pipeline leaks and ruptures, explosions, fires, inclement weather
and natural disasters, mechanical failure, unscheduled downtime,
transportation interruptions, remediation complications, chemical spills,
discharges or releases of toxic or hazardous substances or gases, storage tank
leaks and other environmental risks. These hazards can cause personal injury
and loss of life, severe damage to or destruction of property and equipment
and environmental damage, and may result in suspension of operations and the
imposition of civil or criminal penalties. Furthermore, the Company is also
subject to present and future claims
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with respect to workplace exposure, workers' compensation and other matters.
The Company maintains property,
business interruption and casualty insurance which it believes is in
accordance with customary industry practices, but it is not fully insured
against all potential hazards incident to its business.
ENVIRONMENTAL CONSIDERATIONS
The Company's operations and ownership and use of real property are subject
to extensive environmental, health and safety laws and regulations promulgated
by federal, state, local and foreign governments. Many of these laws and
regulations impose requirements relating to the clean-up of contamination,
impose liability in the event of damage of natural resources and provide for
substantial fines and potential criminal sanctions for violations. The nature
of the chemical and refining industries exposes the Company to risks of
liability under such laws and regulations due to the production, refining,
storage, transportation and sale of materials that can cause contamination or
personal injury if released into the environment. In addition, individuals
could seek damages for alleged personal injury or property damage due to
exposure to chemicals at the Company's facilities or to chemicals otherwise
owned or controlled by the Company. Environmental laws may have a significant
effect on the nature and scope of cleanup of contamination at current and
former operating facilities, the costs of transportation and storage of
feedstocks and finished products and the costs of the storage and disposal of
wastes. Also, "Superfund" statutes may impose joint and several liability for
the costs of remedial investigations and actions on the entities that
generated waste, arranged for disposal of the wastes, transported to or
selected the disposal sites and the past and present owners and operators of
such sites. All such responsible parties (or any one of them, including the
Company) may be required to bear all of such costs regardless of fault,
legality of the original disposal or ownership of the disposal site.
The Company expects that the nature of its businesses will continue to
subject the Company to increasingly stringent environmental and health and
safety laws and regulations. It is difficult to predict the future
interpretation and development of such laws and regulations or their impact on
future earnings and operations, but the Company anticipates that these
standards will continue to require increased capital expenditures and
operating costs. In particular, the ultimate effect of the Clean Air Act on
the Company's operations will depend on how the law is interpreted and
implemented pursuant to regulations that are currently being developed and on
additional factors such as the evolution of environmental control
technologies.
The Company's policy is to accrue costs relating to environmental matters
when it is probable that such costs will be required and the related costs can
be reasonably estimated. Estimated costs for future environmental compliance
and remediation or other costs are necessarily imprecise due to such factors
as the continuing evolution of environmental laws and regulatory requirements,
the availability and application of technology, the identification of
presently unknown remediation sites and the allocation of costs among the
responsible parties under applicable statutes. On a quarterly basis, the
Company evaluates the status of all significant existing or potential
environmental issues, develops or revises estimates of costs to satisfy known
remediation requirements (including those relating to "Superfund"
requirements) and adjusts its accruals accordingly; as of March 31, 1998, the
reserve was $55 million (on a pro forma basis after giving effect to the
acquisition of ARCO Chemical). Based upon information presently available, the
Company does not expect that such future costs will have a material adverse
effect on its competitive or financial position or its ongoing results of
operations. However, it is not possible to predict accurately the amount or
timing of costs of any future environmental remediation requirements. Such
costs could be material to future quarterly or annual results of operations.
Pending or future legislative initiatives may materially adversely affect
the Company's MTBE sales. The presence of MTBE in some water supplies in
California and other states due to gasoline leaking from underground storage
tanks and in surface water from recreational water craft has led to public
concern that MTBE may contaminate drinking water supplies, and thereby result
in a possible health risk. There have been claims that MTBE travels more
rapidly through soil, and is more soluble in water, than most other gasoline
components, and is more difficult and more costly to remediate. Heightened
public awareness about MTBE has resulted in certain state and federal
legislative initiatives that have sought either to rescind the oxygenate
requirement for reformulated gasoline sold in California and other states or
restrict the use of MTBE. While such
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<PAGE>
legislative initiatives are currently pending, there is ongoing study into
this issue and the ultimate resolution of the appropriateness of using MTBE
could result in a significant reduction in the Company's MTBE sales.
In addition, ARCO Chemical has a take-or-pay MTBE sales contract with
Atlantic Richfield Company ("ARCO"), which contributes significant pre-tax
margin. If such legislative initiatives were enacted, ARCO has indicated that
it might attempt to invoke a force majeure provision in the ARCO contract in
order to reduce the quantities of MTBE it purchases under, or to terminate,
the contract. The Company would vigorously dispute such action. The contract
has an initial term expiring December 31, 2002 and provides for formula-based
prices that are currently significantly above spot market prices for MTBE. A
significant reduction in the Company's sales under the ARCO contract could
have a negative impact on the Company's results of operations.
FOREIGN OPERATIONS, COUNTRY RISKS AND EXCHANGE RATE FLUCTUATIONS
International operations and exports to foreign markets are subject to a
number of risks, including currency exchange rate fluctuations, trade
barriers, exchange controls, national and regional labor strikes, political
risks and risks of increases in duties and taxes, as well as changes in laws
and policies governing operations of foreign-based companies. Although the
Company uses various types of foreign currency forward, option and swap
contracts to reduce foreign exchange exposures with respect to revenues,
capital commitments and other expenses denominated in foreign currencies,
there can be no assurance that such hedging techniques will protect the
Company's reported results against such risks or that the Company will not
incur material losses on such contracts. In addition, earnings of foreign
subsidiaries and intercompany payments may be subject to foreign income tax
rules that may reduce cash flow available to meet required debt service and
other obligations of the Company.
A number of Asian economies have experienced economic difficulties in recent
periods. Prolonged economic difficulties in the Asian market could
significantly impact worldwide demand and thereby place downward pressure on
margins, which, if material, could in turn have an adverse effect on the
business and operations of the Company.
SIGNIFICANT FLUCTUATIONS IN QUARTERLY RESULTS
The Company's quarterly results may vary significantly depending on various
factors, most of which are beyond the Company's control, including changes in
product prices, product demand, raw material costs or supply arrangements;
regional business activities, including a lower level of economic activity in
Europe during the summer; adverse developments in foreign markets;
fluctuations in shipments to customers; foreign exchange fluctuations;
unanticipated expenses; changes in interest rates; and the scheduling of plant
turnarounds which are expensed when incurred.
CHANGE OF CONTROL RELATED PROVISIONS
Under the Company's credit facilities, a change in control of the Company is
an event of default, which would permit the lenders to declare the loans
thereunder immediately payable and to terminate future lending commitments.
Under the credit facilities, a change in control is deemed to occur if any
person or group acquires 20% or more of the Company's Common Stock or there
has generally been a change in a majority of the Company's Board of Directors.
In addition, the Company has adopted a stockholders' rights plan, the Delaware
General Corporation Law contains provisions that impose restrictions on
business combinations with interested parties and the Company's By-Laws
contain certain advance notice provisions. The provisions of the credit
facilities, the Delaware General Corporation Law, the Company's stockholders'
rights plan and the Company's By-Laws (as well as the Put Rights described
under "--High Leverage and Related Matters" above) may have the effect of
delaying, deferring or preventing a change in control of the Company, which
could prevent the Company's stockholders from receiving a takeover premium for
their Common Stock.
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USE OF PROCEEDS
Except as otherwise described in any Prospectus Supplement, the net proceeds
from the sale of Securities will be used for general corporate purposes, which
may include, but are not limited to, refinancings of indebtedness, working
capital, capital expenditures, acquisitions and repurchases or redemptions of
Securities, and may initially be invested in short-term securities.
The Lyondell Trust will use all proceeds received from the sale of its Trust
Securities (as defined herein) to purchase Junior Subordinated Debt Trust
Securities from the Company.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the periods indicated:
<TABLE>
<CAPTION>
QUARTER
ENDED YEARS ENDED DECEMBER 31,
MARCH 31, ------------------------
1998 1997 1996 1995 1994 1993
--------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges(a)....... 3.9x 4.6x 2.2x 6.8x 4.8x 1.2x
Pro Forma Ratio of Earnings to Fixed
Charges.................................... [ ] [ ]
</TABLE>
- --------
(a) The Ratio of Earnings to Fixed Charges has been calculated including
amounts for Lyondell and its proportionate share of amounts for Equistar
(57 percent for the quarter ended March 31, 1998 and for the month of
December 1997), LCR (58.75 percent for the quarter ended March 31, 1998,
86 percent for the first quarter of 1997 and 58.5 percent for the
remainder of 1997) and Lyondell Methanol (75 percent in 1998), for the
periods in which Lyondell accounted for its respective investment in each
such Joint Venture using the equity method of accounting.
THE LYONDELL TRUST
The Lyondell Trust is a statutory business trust created on July 29, 1998
under the Delaware Business Trust Act (the "Business Trust Act") pursuant to a
declaration of trust among the Trustees (as defined herein) of the Lyondell
Trust and the Company and the filing of a certificate of trust with the
Secretary of State of the State of Delaware. Such declaration will be amended
and restated in its entirety (as so amended and restated, the "Declaration")
substantially in the form filed as an exhibit to the Registration Statement of
which this Prospectus forms a part, as of the date the Preferred Securities
are initially issued. The Declaration will be qualified under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act").
This description summarizes the material terms of the Declaration and is
qualified in its entirety by reference to the form of Declaration, which has
been filed as an exhibit to the Registration Statement of which this
Prospectus is a part, and the Trust Indenture Act.
The principal office of the Lyondell Trust is c/o Lyondell Petrochemical
Company, 1221 McKinney Street, Suite 1600, Houston, Texas 77010 and the
telephone number of the Lyondell Trust is (713) 652-7200.
PREFERRED SECURITIES
Upon issuance of any Preferred Securities by the Lyondell Trust, the holders
thereof will own all of the issued and outstanding Preferred Securities. The
Company will, directly or indirectly, acquire securities representing common
undivided beneficial interests in the assets of the Lyondell Trust (the
"Common Securities" and, together with the Preferred Securities, the "Trust
Securities") in an amount equal to at least 3% of the total capital of the
Lyondell Trust and will own, directly or indirectly, all of the issued and
outstanding Common Securities. The Preferred Securities and the Common
Securities will rank pari passu with each other
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<PAGE>
and will have equivalent terms; provided that (i) if a Declaration Event of
Default (as defined under "--Events of Default") occurs and is continuing, the
holders of Preferred Securities will have a priority over holders of the
Common Securities with respect to payments in respect of distributions and
payments upon liquidation, redemption and maturity and (ii) holders of Common
Securities have the exclusive right to appoint, remove or replace the Trustees
and to increase or decrease the number of Trustees. The Lyondell Trust exists
for the purpose of (a) issuing the Preferred Securities, (b) issuing the
Common Securities to the Company, (c) investing the gross proceeds from the
sale of the Trust Securities in Junior Subordinated Debt Trust Securities of
the Company and (d) engaging in only such other activities as are necessary,
convenient or incidental thereto or are specifically authorized in the
Declaration. The rights of the holders of the Preferred Securities, including
economic rights, rights to information and voting rights, are set forth in the
Declaration, the Business Trust Act and the Trust Indenture Act.
POWERS AND DUTIES OF TRUSTEES
The number of trustees (the "Trustees") of the Lyondell Trust shall
initially be five. Three of such Trustees (the "Regular Trustees") are
individuals who are employees or officers of the Company. The fourth such
Trustee will be The First National Bank of Chicago, which is unaffiliated with
the Company and which will serve as the property trustee (the "Property
Trustee") and act as the indenture trustee under the Declaration for purposes
of the Trust Indenture Act. The fifth such Trustee is First Chicago Delaware
Inc. that has its principal place of business in the State of Delaware (the
"Delaware Trustee"). Pursuant to the Declaration, legal title to the Junior
Subordinated Debt Trust Securities purchased by the Lyondell Trust will be
held by the Property Trustee for the benefit of the holders of the Trust
Securities, and the Property Trustee will have the power to exercise all
rights, powers and privileges under the Indenture (as defined under
"Description of the Junior Subordinated Debt Trust Securities") with respect
to the Junior Subordinated Debt Trust Securities. In addition, the Property
Trustee will maintain exclusive control of a segregated non-interest bearing
bank account (the "Property Account") to hold all payments in respect of the
Junior Subordinated Debt Trust Securities purchased by the Lyondell Trust for
the benefit of the holders of Trust Securities. The Property Trustee will
promptly make distributions to the holders of the Trust Securities out of
funds from the Property Account. The Preferred Securities Guarantee is
separately qualified under the Trust Indenture Act and will be held by The
First National Bank of Chicago (the "Guarantee Trustee"), acting in its
capacity as indenture trustee with respect thereto, for the benefit of the
holders of the Preferred Securities. As used in this Prospectus and any
accompanying Prospectus Supplement, the term "Property Trustee" with respect
to the Lyondell Trust refers to The First National Bank of Chicago acting
either in its capacity as a Trustee under the Declaration and the holder of
legal title to the Junior Subordinated Debt Trust Securities purchased by the
Lyondell Trust or in its capacity as the Guarantee Trustee, as the context may
require. The Company, as the direct or indirect owner of all of the Common
Securities, will have the exclusive right to appoint, remove or replace
Trustees and to increase or decrease the number of Trustees, provided that the
number of Trustees shall be, except under certain circumstances, at least five
and the majority of Trustees shall be Regular Trustees. The term of the
Lyondell Trust will be set forth in the Prospectus Supplement, but may
dissolve earlier as provided in the Declaration.
The duties and obligations of the Trustees shall be governed by the
Declaration, the Business Trust Act and the Trust Indenture Act. Under the
Declaration, the Lyondell Trust shall not, and the Trustees shall cause the
Lyondell Trust not to, engage in any activity other than in connection with
the purposes of the Lyondell Trust or other than as required or authorized by
the Declaration. In particular, the Lyondell Trust shall not and the Trustees
shall cause the Lyondell Trust not to (a) invest any proceeds received by the
Lyondell Trust from holding the Junior Subordinated Debt Trust Securities
purchased by the Lyondell Trust but shall promptly distribute from the
Property Account all such proceeds to holders of Trust Securities pursuant to
the terms of the Declaration and of the Trust Securities; (b) acquire any
assets other than as expressly provided in the Declaration; (c) possess
property of the Lyondell Trust for other than a trust purpose; (d) make any
loans, other than loans represented by the Junior Subordinated Debt Trust
Securities; (e) possess any power or otherwise act in such a way as to vary
the assets of the Lyondell Trust or the terms of the Trust Securities in any
way whatsoever, except as expressly provided in the Declaration; (f) issue any
securities or other evidences of beneficial ownership of,
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<PAGE>
or beneficial interests in, the Lyondell Trust other than the Trust
Securities; (g) incur any indebtedness for borrowed money; (h) direct the
time, method and place of exercising any trust or power conferred upon the
Indenture Trustee (as defined under "Description of the Junior Subordinated
Debt Trust Securities") with respect to the Junior Subordinated Debt Trust
Securities deposited in the Lyondell Trust as trust assets; (i) waive any past
default that is waivable under the Indenture; (j) exercise any right to
rescind or annul any declaration that the principal of all of the Junior
Subordinated Debt Trust Securities deposited in the Lyondell Trust as trust
assets shall be due and payable; (k) consent to any amendment, modification or
termination of the Indenture or the Junior Subordinated Debt Trust Securities,
in each case where such consent shall be required, unless in the case of
clauses (h), (i), (j) and (k) the Property Trustee shall have received an
opinion of counsel experienced in such matters to the effect that such action
will not cause more than an insubstantial risk that for United States federal
income tax purposes the Lyondell Trust will not be classified as a grantor
trust; (l) take or consent to any action that would result in the placement of
a lien, pledge, charge, mortgage or other encumbrance on any of the property
of the Lyondell Trust; (m) vary the investment (within the meaning of Treasury
Regulation Section 301.7701-4(c)) of the Lyondell Trust or of the holders of
Preferred Securities; (n) after the issuance of the Preferred Securities,
enter into any contract or agreement (other than any depositary agreement or
any agreement with any securities exchange or automated quotation system) that
does not expressly provide that the holders of Preferred Securities, in their
capacities as such, have limited liability (in accordance with the provisions
of the Business Trust Act) for the liabilities and obligations of the Lyondell
Trust or (o) revoke any action previously authorized or approved by a vote of
the holders of the Preferred Securities except by subsequent vote of such
holders.
BOOKS AND RECORDS
The books and records of the Lyondell Trust will be maintained at the
principal office of the Trust and will be open for inspection by a holder of
Preferred Securities of the Trust or his representative for any purpose
reasonably related to his interest in the Lyondell Trust during normal
business hours.
VOTING
Holders of Preferred Securities generally will have limited voting rights,
relating only to the modification of the Preferred Securities, and under
certain circumstances, to the exercise of the Lyondell Trust's rights as
holder of the Junior Subordinated Debt Trust Securities and the Preferred
Securities Guarantee. The holders of the Preferred Securities will not be able
to appoint, remove or replace, or to increase or decrease the number of,
Trustees, which rights are vested exclusively in the Common Securities.
THE PROPERTY TRUSTEE
The Property Trustee, for the benefit of the holders of the Trust
Securities, is authorized under the Declaration to exercise all rights under
the Indenture with respect to the Junior Subordinated Debt Trust Securities
deposited in the Lyondell Trust as trust assets, including its rights as the
holder of such Junior Subordinated Debt Trust Securities to enforce the
Company's obligations under such Junior Subordinated Debt Trust Securities
upon the occurrence of an Indenture Event of Default (as defined herein under
"Description of the Junior Subordinated Debt Trust Securities--Indenture
Events of Default"). The Property Trustee shall also be authorized to enforce
the rights of holders of the Preferred Securities under the Preferred
Securities Guarantee. If the Lyondell Trust's failure to make distributions on
the Preferred Securities is a consequence of the Company's exercise of any
right under the terms of the Junior Subordinated Debt Trust Securities
deposited in the Lyondell Trust as trust assets to extend the interest payment
period for such Junior Subordinated Debt Trust Securities, the Property
Trustee will have no right to enforce the payment of distributions on the
Preferred Securities until a Declaration Event of Default shall have occurred.
If a Declaration Event of Default has occurred and is continuing, then the
holders of at least a majority in liquidation amount of the Preferred
Securities will have the right to direct the Property Trustee with respect to
certain matters under the Declaration and the Preferred Securities Guarantee.
If the Property Trustee fails to enforce its rights under the Indenture any
holder of Preferred Securities, to the extent permitted by applicable law,
may, after a period of 30 days has elapsed from such Holder's written request
to the Property Trustee to enforce such rights, institute a legal proceeding
directly against the Company to enforce such rights. Notwithstanding the
foregoing, if an Event of Default under
11
<PAGE>
the Declaration has occurred and is continuing and such event is attributable
to the failure of the Company to pay interest or principal on the Junior
Subordinated Debt Trust Securities on the date such interest or principal is
otherwise payable (or in the case of redemption, on the redemption date), then
a holder of Preferred Securities may directly institute a proceeding for
enforcement of payment to such holder of the principal of or interest on the
Junior Subordinated Debt Trust Securities having a principal amount equal to
the aggregate liquidation amount of the Preferred Securities of such holder (a
"Holder Direct Action") on or after the respective due date specified in the
Junior Subordinated Debt Trust Securities. In connection with such Holder
Direct Action, the Company will be subrogated to the rights of such holder of
Preferred Securities under the Declaration to the extent of any payment made
by the Company to such holder of Preferred Securities in such Holder Direct
Action.
DISTRIBUTIONS
Pursuant to the Declaration, distributions on the Preferred Securities must
be paid on the dates payable to the extent that the Property Trustee has cash
on hand in the Property Account to permit such payment. The funds available
for distribution to the holders of the Preferred Securities will be limited to
payments received by the Property Trustee in respect of the Junior
Subordinated Debt Trust Securities that are deposited in the Lyondell Trust as
trust assets. If the Company does not make interest payments on the Junior
Subordinated Debt Trust Securities deposited in the Lyondell Trust as trust
assets, the Property Trustee will not make distributions on the Preferred
Securities. Under the Declaration, if and to the extent the Company does make
interest payments on the Junior Subordinated Debt Trust Securities deposited
in the Lyondell Trust as trust assets, the Property Trustee is obligated to
make distributions on the Trust Securities on a Pro Rata Basis (as defined
below). The payment of distributions on the Preferred Securities is guaranteed
by the Company on a subordinated basis as and to the extent set forth under
"Description of the Preferred Securities Guarantee." The Preferred Securities
Guarantee is a guarantee from the time of issuance of the Preferred
Securities, but the Preferred Securities Guarantee covers distributions and
other payments on the Preferred Securities only if and to the extent that the
Company has made a payment to the Property Trustee of interest or principal on
the Junior Subordinated Debt Trust Securities deposited in the Lyondell Trust
as trust assets. As used in this Prospectus, the term "Pro Rata Basis" shall
mean pro rata to each holder of Trust Securities according to the aggregate
liquidation amount of the Trust Securities held by the relevant holder in
relation to the aggregate liquidation amount of all Trust Securities
outstanding unless, in relation to a payment, a Declaration Event of Default
has occurred and is continuing, in which case any funds available to make such
payment shall be paid first to each holder of the Preferred Securities pro
rata according to the aggregate liquidation amount of the Preferred Securities
held by the relevant holder in relation to the aggregate liquidation amount of
all the Preferred Securities outstanding, and only after satisfaction of all
amounts owed to the holders of such Preferred Securities, to each holder of
Common Securities pro rata according to the aggregate liquidation amount of
such Common Securities held by the relevant holder in relation to the
aggregate liquidation amount of all Common Securities outstanding.
EVENTS OF DEFAULT
If an Indenture Event of Default occurs and is continuing with respect to
Junior Subordinated Debt Trust Securities deposited in the Lyondell Trust as
trust assets, an Event of Default under the Declaration (a "Declaration Event
of Default") will occur and be continuing with respect to any outstanding
Trust Securities. In such event, the Declaration provides that the holders of
Common Securities will be deemed to have waived any such Declaration Event of
Default with respect to the Common Securities until all Declaration Events of
Default with respect to the Preferred Securities have been cured or waived.
Until all such Declaration Events of Default with respect to the Preferred
Securities have been so cured or waived, the Property Trustee will be deemed
to be acting solely on behalf of the holders of the Preferred Securities and
only the holders of such Preferred Securities will have the right to direct
the Property Trustee with respect to certain matters under the Declaration and
consequently under the Indenture. In the event that any Declaration Event of
Default with respect to the Preferred Securities is waived by the holders of
the Preferred Securities as provided in the Declaration, the holders of Common
Securities pursuant to such Declaration have agreed that such waiver also
constitutes a waiver of such Declaration Event of Default with respect to the
Common Securities for all purposes under the Declaration without any further
act, vote or consent of the holders of the Common Securities. The Property
Trustee shall notify each holder of Preferred Securities of any notice of
default with respect to the Junior Subordinated Debt Trust Securities.
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<PAGE>
RECORD HOLDERS
The Declaration provides that the Trustees may treat the person in whose
name a certificate representing the Preferred Securities is registered on the
books and records of the Lyondell Trust as the sole holder thereof and of the
Preferred Securities represented thereby for purposes of receiving
distributions and for all other purposes and, accordingly, shall not be bound
to recognize any equitable or other claim to or interest in such certificate
or in the Preferred Securities represented thereby on the part of any person,
whether or not the Trustees shall have actual or other notice thereof.
Preferred Securities will be issued in fully registered form. Unless otherwise
specified in a Prospectus Supplement, Preferred Securities will be represented
by a global certificate registered on the books and records of the Lyondell
Trust in the name of a depositary (the "Depositary") named in an accompanying
Prospectus Supplement or its nominee. Under the Declaration:
(i) the Lyondell Trust and the Trustees shall be entitled to deal with
the Depositary (or any successor depositary) for all purposes, including
the payment of distributions and receiving approvals, votes or consents
under the Declaration, and except as set forth in the Declaration with
respect to the Property Trustee, shall have no obligation to persons owning
a beneficial interest in Preferred Securities ("Preferred Security
Beneficial Owners") registered in the name of and held by the Depositary or
its nominee; and
(ii) the rights of Preferred Security Beneficial Owners shall be
exercised only through the Depositary (or any successor depositary) and
shall be limited to those established by law and agreements between such
Preferred Security Beneficial Owners and the Depositary and/or its
participants. With respect to Preferred Securities registered in the name
of and held by the Depositary or its nominee, all notices and other
communications required under the Declaration shall be given to, and all
distributions on such Preferred Securities shall be given or made to, the
Depositary (or its successor).
The specific terms of the depositary arrangement with respect to the
Preferred Securities will be disclosed in the applicable Prospectus
Supplement.
DEBTS AND OBLIGATIONS
In the Declaration, the Company has agreed to pay for all debts and
obligations (other than with respect to the Trust Securities) and all costs
and expenses of the Lyondell Trust, including the fees and expenses of its
Trustees and any taxes and all costs and expenses with respect thereto, to
which the Lyondell Trust may become subject, except for United States
withholding taxes. The foregoing obligations of the Company under the
Declaration are for the benefit of, and shall be enforceable by, any person to
whom any such debts, obligations, costs, expenses and taxes are owed (a
"Creditor") whether or not such Creditor has received notice thereof. Any such
Creditor may enforce such obligations of the Company directly against the
Company and the Company has irrevocably waived any right or remedy to require
that any such Creditor take any action against the Lyondell Trust or any other
person before proceeding against the Company.
DESCRIPTION OF THE PREFERRED SECURITIES
The Lyondell Trust may issue, from time to time, only one series of
Preferred Securities having terms described in the Prospectus Supplement
relating thereto. The Declaration authorizes the Regular Trustees to issue on
behalf of the Lyondell Trust one series of Preferred Securities. The
Declaration will be qualified as an indenture under the Trust Indenture Act.
The Preferred Securities will have such terms, including distributions,
redemption, voting, liquidation rights and such other preferred, deferred or
other special rights or such restrictions as shall be set forth in the
Declaration or made part of such Declaration by the Trust Indenture Act.
Reference is made to the Prospectus Supplement relating to the Preferred
Securities for specific terms, including (i) the specific designation of such
Preferred Securities, (ii) the number of Preferred Securities issued by the
Lyondell Trust, (iii) the annual distribution rate (or method of calculation
thereof) for Preferred Securities issued by the Lyondell Trust, the date or
dates upon which such distributions shall be payable and the record date or
dates for the payment of such distributions, (iv) whether distributions on the
Preferred Securities shall be cumulative, and, in the case of Preferred
Securities having such cumulative distribution rights, the date
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or dates or method of determining the date or dates from which distribution on
Preferred Securities issued by the Lyondell Trust shall be cumulative, (v) the
amount or amounts which shall be paid out of the assets of the Lyondell Trust
to the holders of Preferred Securities upon voluntary or involuntary
dissolution, winding-up or termination of the Lyondell Trust, (vi) the
obligation or right, if any, of the Lyondell Trust to purchase or redeem
Preferred Securities and the price or prices at which, the period or periods
within which and the terms and conditions upon which Preferred Securities
shall or may be purchased or redeemed, in whole or in part, pursuant to such
obligation or right, (vii) the voting rights, if any, of Preferred Securities
in addition to those required by law, including the number of votes per
Preferred Security and any requirement for the approval by the holders of
Preferred Securities as a condition to specified actions or amendments to the
Declaration, (viii) terms for any conversion or exchange into other securities
and (ix) any other relevant rights, preferences, privileges, limitations or
restrictions of Preferred Securities consistent with the Declaration or with
applicable law. All Preferred Securities offered hereby will be guaranteed by
the Company as and to the extent set forth below under "Description of the
Preferred Securities Guarantees." Certain United States federal income tax
considerations applicable to any offering of Preferred Securities will be
described in the Prospectus Supplement relating thereto.
In connection with the issuance of Preferred Securities, the Lyondell Trust
will issue one series of Common Securities. The Declaration authorizes the
Regular Trustees to issue on behalf of the Lyondell Trust one series of Common
Securities having such terms including distributions, redemption, voting,
liquidation rights or such restrictions as shall be set forth therein. The
terms of the Common Securities will be substantially identical to the terms of
the Preferred Securities and the Common Securities will rank pari passu, and
payments will be made thereon on a Pro Rata Basis with the Preferred
Securities except that if a Declaration Event of Default occurs and is
continuing, the rights of the holders of the Common Securities to payment in
respect of distributions and payments upon liquidation, redemption and
maturity will be subordinated to the rights of the holders of the Preferred
Securities. Except in certain limited circumstances, the Common Securities
will also carry the right to vote and to appoint, remove or replace any of the
Trustees. All of the Common Securities will be directly or indirectly owned by
the Company.
DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEE
Set forth below is a summary of information concerning the Preferred
Securities Guarantee that will be executed and delivered by the Company for
the benefit of the holders from time to time of Preferred Securities. The
Preferred Security Guarantee will be separately qualified under the Trust
Indenture Act and will be held by The First National Bank of Chicago, acting
in its capacity as indenture trustee with respect thereto, for the benefit of
holders of the Preferred Securities. The terms of the Preferred Securities
Guarantee will be those set forth in the Preferred Securities Guarantee and
those made part of the Guarantee by the Trust Indenture Act. This description
summarizes the material terms of the Preferred Securities Guarantee and is
qualified in its entirety by reference to the form of Preferred Securities
Guarantee, which is filed as an exhibit to the Registration Statement of which
this Prospectus forms a part, and the Trust Indenture Act. Section and Article
references used herein are references to the provisions of the form of
Preferred Securities Guarantee.
GENERAL
Pursuant to the Preferred Securities Guarantee, the Company will irrevocably
and unconditionally agree, to the extent set forth therein, to pay in full, to
the holders of the Preferred Securities, the Guarantee Payments (as defined
herein) (without duplication of amounts theretofore paid by the Lyondell
Trust), as and when due, regardless of any defense, right of set-off or
counterclaim that the Lyondell Trust may have or assert. The following
payments or distributions with respect to Preferred Securities issued by the
Lyondell Trust to the extent not paid or made by the Lyondell Trust (the
"Guarantee Payments"), will be subject to the Preferred Securities Guarantee
(without duplication): (i) any accumulated and unpaid distributions on the
Preferred Securities, and the redemption price, including all accumulated and
unpaid distributions to the date of redemption, with respect to the Preferred
Securities called for redemption by the Lyondell Trust but if and only to the
extent that in each case the Company has made a payment to the Property
Trustee of interest or principal on the Junior Subordinated
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Debt Trust Securities deposited in the Lyondell Trust as trust assets and (ii)
upon a voluntary or involuntary dissolution, winding-up or termination of the
Lyondell Trust (other than in connection with the distribution of Junior
Subordinated Debt Trust Securities to the holders of Preferred Securities in
exchange for Preferred Securities or the redemption of all of the Preferred
Securities upon the maturity or redemption of the Junior Subordinated Debt
Trust Securities), the lesser of (a) the aggregate of the liquidation amount
and all accumulated and unpaid distributions on the Preferred Securities to
the date of payment, to the extent the Lyondell Trust has funds on hand
legally available therefor and (b) the amount of assets of the Lyondell Trust
remaining available for distribution to holders of the Preferred Securities in
liquidation of the Lyondell Trust as required by applicable law. The Company's
obligation to make a Guarantee Payment may be satisfied by direct payment of
the required amounts by the Company to the holders of Preferred Securities or
by causing the Lyondell Trust to pay such amounts to such holders.
The Preferred Securities Guarantee is a guarantee from the time of issuance
of the Preferred Securities, but the Preferred Securities Guarantee covers
distributions and other payments on the Preferred Securities only if and to
the extent that the Company has made a payment to the Property Trustee of
interest or principal on the Junior Subordinated Debt Trust Securities
deposited in the Lyondell Trust as trust assets. If the Company does not make
interest or principal payments on the Junior Subordinated Debt Trust
Securities deposited in the Lyondell Trust as trust assets, the Property
Trustee will not make distributions on the Preferred Securities and the
Lyondell Trust will not have funds available therefor.
The Company's obligations under the Declaration, the Preferred Securities
Guarantee, the Junior Subordinated Debt Trust Securities purchased by the
Lyondell Trust and the Indenture (as defined below), in the aggregate, will
provide a full and unconditional guarantee on a subordinated basis by the
Company of payments due on the Preferred Securities.
CERTAIN COVENANTS OF THE COMPANY
In the Preferred Securities Guarantee, the Company will covenant that, so
long as any Preferred Securities remain outstanding, the Company will not
declare or pay any dividends on, or redeem, purchase, acquire or make a
distribution or liquidation payment with respect to, any of its common stock
or preferred stock (other than (a) dividends or distributions in shares of, or
options, warrants, rights to subscribe for or purchase shares of, common stock
of the Company, (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) as a result of a reclassification of the
Company's capital stock or the exchange or the conversion of one class or
series of the Company's capital stock for another class or series of the
Company's capital stock, (d) the payment of accrued dividends and the purchase
of fractional interests in shares of the Company's capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged, or (e) purchases of the Company's common stock
related to the issuance of the Company's common stock or rights under any of
the Company's benefit plans for its directors, officers, employees or any of
the Company's dividend reinvestment plans) or make any guarantee payment with
respect thereto, if at such time (i) the Company shall be in default with
respect to its Guarantee Payments or other payment obligations under the
Preferred Securities Guarantee, (ii) there shall have occurred any Declaration
Event of Default under the Declaration or (iii) the Company shall have given
notice of its election to defer payments of interest on the Junior
Subordinated Debt Trust Securities by extending the interest payment period as
provided in the terms of the Junior Subordinated Debt Trust Securities
deposited in the Lyondell Trust as trust assets and such period, or any
extension thereof, is continuing. In addition, so long as any Preferred
Securities remain outstanding, the Company has agreed (i) to remain the sole
direct or indirect owner of all of the outstanding Common Securities and shall
not cause or permit the Common Securities to be transferred except to the
extent permitted by the Declaration; provided that any permitted successor of
the Company under the Indenture may succeed to the Company's ownership of the
Common Securities and (ii) to use reasonable efforts to cause the Lyondell
Trust to continue to be treated as a grantor trust for United States federal
income tax purposes except in connection with a distribution of Junior
Subordinated Debt Trust Securities as provided in the Declaration.
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AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Preferred Securities in any material respect (in which case no
consent will be required), the Preferred Securities Guarantee may be amended
only with the prior approval of the Company and the holders of not less than a
majority in liquidation amount of the outstanding Preferred Securities. The
manner of obtaining any such approval of holders of the Preferred Securities
will be set forth in an accompanying Prospectus Supplement. All guarantees and
agreements contained in a Preferred Securities Guarantee shall bind the
successors, assignees, receivers, trustees and representatives of the Company
and shall inure to the benefit of the holders of the Preferred Securities then
outstanding. Except in connection with a consolidation, merger or sale
involving the Company that is permitted under the Indenture, the Company may
not assign its obligations under the Preferred Securities Guarantee.
TERMINATION OF THE PREFERRED SECURITIES GUARANTEE
The Preferred Securities Guarantee will terminate and be of no further force
and effect (i) upon full payment of the redemption price of all Preferred
Securities, (ii) upon distribution of the Junior Subordinated Debt Trust
Securities to the holders of the Preferred Securities in exchange for all of
the Preferred Securities or (iii) upon full payment of the amounts payable
upon liquidation of the Lyondell Trust. Notwithstanding the foregoing, the
Preferred Securities Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of Preferred
Securities must restore payment of any sums paid under the Preferred
Securities or the Preferred Securities Guarantee.
STATUS OF THE PREFERRED SECURITIES GUARANTEE
The Company's obligations under the Preferred Securities Guarantee to make
the Guarantee Payments will constitute an unsecured obligation of the Company
and will rank (i) subordinate and junior in right of payment to all other
liabilities of the Company, including the Junior Subordinated Debt Trust
Securities, except those made pari passu or subordinate by their terms, and
(ii) senior to all capital stock (other than the most senior preferred stock
issued, from time to time, if any, by the Company, which preferred stock will
rank pari passu with the Preferred Securities Guarantee) now or hereafter
issued by the Company and to any guarantee now or hereafter entered into by
the Company in respect of any of its capital stock (other than the most senior
preferred stock issued, from time to time, if any, by the Company). The
Company's obligations under the Preferred Securities Guarantee are also
effectively subordinated to all existing and future liabilities, including
trade payables, of the Company's subsidiaries and Joint Ventures, except to
the extent that the Company is a creditor of the subsidiaries and Joint
Ventures and is recognized as such. The Declaration provides that each holder
of Preferred Securities by acceptance thereof agrees to the subordination
provisions and other terms of the Preferred Securities Guarantee.
The Preferred Securities Guarantee will constitute a guarantee of payment
and not of collection (that is, the guaranteed party may institute a legal
proceeding directly against the guarantor to enforce its rights under the
guarantee without first instituting a legal proceeding against any other
person or entity). The Preferred Securities Guarantee will be deposited with
the Guarantee Trustee, as indenture trustee, to be held for the benefit of the
holders of the Preferred Securities. The Guarantee Trustee shall enforce the
Preferred Securities Guarantee on behalf of the holders of the Preferred
Securities. The holders of not less than a majority in aggregate liquidation
amount of the Preferred Securities have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of the Preferred Securities Guarantee. If the
Guarantee Trustee fails to enforce the Preferred Securities Guarantee as above
provided, any holder of Preferred Securities may institute a legal proceeding
directly against the Company to enforce its rights under the Preferred
Securities Guarantee without first instituting a legal proceeding against the
Lyondell Trust or any other person or entity. Notwithstanding the foregoing,
if the Company has failed to make a Guarantee Payment, a holder of Preferred
Securities may directly institute a proceeding against the Company for
enforcement of the Preferred Securities Guarantee for such payment.
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MISCELLANEOUS
The Company will be required to provide annually to the Guarantee Trustee a
statement as to the performance by the Company of certain of its obligations
under the Preferred Securities Guarantee and as to any default in such
performance. The Company is required to file annually with the Guarantee
Trustee an officer's certificate as to the Company's compliance with all
conditions under the Preferred Securities Guarantee.
The Guarantee Trustee, prior to the occurrence of an event of default under
the Preferred Securities Guarantee and after the curing of all events of
default that may have occurred, undertakes to perform only such duties as are
specifically set forth in the Preferred Securities Guarantee and, after
default with respect to the Preferred Securities Guarantee, shall exercise the
same degree of care and skill as a prudent individual would exercise or use in
the conduct of his or her own affairs. Subject to such provision, the
Guarantee Trustee is under no obligation to exercise any of the powers vested
in it by the Preferred Securities Guarantee at the request or direction of any
holder of Preferred Securities unless it is offered reasonable security and
indemnity against the costs, expenses and liabilities that might be incurred
thereby.
GOVERNING LAW
The Preferred Securities Guarantee will be governed by, and construed in
accordance with, the laws of the State of New York.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBT TRUST SECURITIES
Junior Subordinated Debt Trust Securities may be issued from time to time in
one or more series under an Indenture (the "Indenture") between the Company
and The First National Bank of Chicago, as trustee (the "Indenture Trustee").
The form of Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. The following description
summarizes the material terms of the Indenture, and is qualified in its
entirety by reference to the Indenture and the Trust Indenture Act. Whenever
particular provisions or defined terms in the Indenture are referred to
herein, such provisions or defined terms are incorporated by reference herein.
Section and article references used herein are references to provisions of the
Indenture.
GENERAL
The Junior Subordinated Debt Trust Securities will be unsecured, junior
subordinated obligations of the Company. The Indenture does not limit the
amount of additional indebtedness the Company or any of its subsidiaries or
Joint Ventures may incur. Since the Company is a holding company, the
Company's rights and the rights of its creditors, including the holders of
Junior Subordinated Debt Trust Securities, to participate in the assets of any
subsidiary or Joint Venture upon the latter's liquidation or recapitalization
will be subject to the prior claims of the subsidiary's or Joint Venture's
creditors, except to the extent that the Company may itself be a creditor with
recognized claims against the subsidiary or Joint Venture.
The Indenture does not limit the aggregate principal amount of indebtedness
which may be issued thereunder and provides that Junior Subordinated Debt
Trust Securities may be issued thereunder from time to time in one or more
series. The Junior Subordinated Debt Trust Securities are issuable in one or
more series pursuant to an indenture supplemental to the Indenture.
In the event Junior Subordinated Debt Trust Securities are issued to the
Lyondell Trust in connection with the issuance of Trust Securities, such
Junior Subordinated Debt Trust Securities subsequently may be distributed pro
rata to the holders of the Trust Securities in connection with the dissolution
of the Lyondell Trust upon the occurrence of certain events described in the
Prospectus Supplement relating to the Trust Securities. Only one series of
Junior Subordinated Debt Trust Securities will be issued to the Lyondell Trust
in connection with the issuance of Trust Securities.
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Reference is made to the Prospectus Supplement which will accompany this
Prospectus for the following terms of the series of Junior Subordinated Debt
Trust Securities being offered thereby (to the extent such terms are
applicable to the Junior Subordinated Debt Trust Securities): (i) the specific
designation of such Junior Subordinated Debt Trust Securities, aggregate
principal amount, purchase price and premium, if any; (ii) any limit on the
aggregate principal amount of such Junior Subordinated Debt Trust Securities;
(iii) the date or dates on which the principal of such Junior Subordinated
Debt Trust Securities is payable and the right, to extend or defer such date
or dates; (iv) the rate or rates at which such Junior Subordinated Debt Trust
Securities will bear interest or the method of calculating such rate or rates,
if any; (v) the date or dates from which such interest shall accrue, the
interest payment dates on which such interest will be payable or the manner of
determination of such interest payment dates and the record dates for the
determination of holders to whom interest is payable on any such interest
payment dates; (vi) the right, if any, to extend the interest payment periods
and the duration of such extension; (vii) the period or periods within which,
the price or prices at which, and the terms and conditions upon which, such
Junior Subordinated Debt Trust Securities may be redeemed, in whole or in
part, at the option of the Company; (viii) the obligation, if any, of the
Company to redeem or purchase such Junior Subordinated Debt Trust Securities
pursuant to any sinking fund or analogous provisions or at the option of the
holder thereof and the period or periods for which, the price or prices at
which, and the terms and conditions upon which, such Junior Subordinated Debt
Trust Securities shall be redeemed or purchased, in whole or part, pursuant to
such obligation; (ix) any exchangeability, conversion or prepayment provisions
of the Junior Subordinated Debt Trust Securities; (x) any applicable United
States federal income tax consequences, including whether and under what
circumstances the Company will pay additional amounts on the Junior
Subordinated Debt Trust Securities held by a person who is not a U.S. person
in respect of any tax, assessment or governmental charge withheld or deducted
and, if so, whether the Company will have the option to redeem such Junior
Subordinated Debt Trust Securities rather than pay such additional amounts;
(xi) the form of such Junior Subordinated Debt Trust Securities; (xii) if
other than denominations of $25 or any integral multiple thereof, the
denominations in which such Junior Subordinated Debt Trust Securities shall be
issuable; (xiii) any and all other terms with respect to such series,
including any modification of or additions to the events of default or
covenants provided for with respect to such series and any terms which may be
required by or advisable under applicable laws or regulations not inconsistent
with the Indenture; and (xiv) whether such Junior Subordinated Debt Trust
Securities are issuable as a global security, and in such case, the identity
of the depositary. (Section 2.01)
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Junior Subordinated Debt Trust Securities will be issued in United States
dollars in fully registered form without coupons in denominations of $25 or
integral multiples thereof. Junior Subordinated Debt Trust Securities may be
presented for exchange and Junior Subordinated Debt Trust Securities in
registered form may be presented for transfer in the manner, at the places and
subject to the restrictions set forth in the Junior Subordinated Debt Trust
Securities and the Prospectus Supplement. Such services will be provided
without charge, other than any tax or other governmental charge payable in
connection therewith, but subject to the limitations provided in the Junior
Subordinated Debt Trust Securities. Junior Subordinated Debt Trust Securities
in bearer form and the coupons, if any, appertaining thereto will be
transferable by delivery.
Junior Subordinated Debt Trust Securities may bear interest at a fixed rate
or a floating rate. Junior Subordinated Debt Trust Securities bearing no
interest or interest at a rate that at the time of issuance is below the
prevailing market rate will be sold at a discount below their stated principal
amount. Special United States federal income tax considerations applicable to
any such discounted Junior Subordinated Debt Trust Securities or to certain
Junior Subordinated Debt Trust Securities issued at par which are treated as
having been issued at a discount for United States federal income tax purposes
will be described in the relevant Prospectus Supplement.
CERTAIN COVENANTS OF THE COMPANY APPLICABLE TO THE JUNIOR SUBORDINATED DEBT
SECURITIES
If Junior Subordinated Debt Trust Securities are issued to the Lyondell
Trust in connection with the issuance of Trust Securities, the Company will
covenant in the Indenture that, so long as the Preferred Securities issued by
the Lyondell Trust remain outstanding, the Company will not declare or pay any
dividends on, or redeem,
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purchase, acquire or make a distribution or liquidation payment with respect
to, any of its common stock or preferred stock (other than (a) dividends or
distributions in shares of, or options, warrants, rights to subscribe for or
purchase shares of, common stock of the Company, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the issuance of stock under any such plan in the future, or the redemption
or repurchase of any such rights pursuant thereto, (c) as a result of a
reclassification of the Company's capital stock or the exchange or the
conversion of one class or series of the Company's capital stock for another
class or series of the Company's capital stock, (d) the payment of accrued
dividends and the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such
capital stock or the security being converted or exchanged, or (e) purchases
of the Company's common stock related to the issuance of the Company's common
stock or rights under any of the Company's benefit plans for its directors,
officers, employees or any of the Company's dividend reinvestment plans) or
make any guarantee payment with respect thereto, if at such time (i) the
Company shall be in default with respect to its Guarantee Payments or other
payment obligations under the Preferred Securities Guarantee, (ii) there shall
have occurred any Indenture Event of Default with respect to the Junior
Subordinated Debt Trust Securities or (iii) the Company shall have given
notice of its election to defer payments of interest on the Junior
Subordinated Debt Trust Securities by extending the interest payment period as
provided in the terms of the Junior Subordinated Debt Trust Securities
deposited in the Lyondell Trust as trust assets and such period, or any
extension thereof, is continuing. In addition, if Junior Subordinated Debt
Trust Securities are issued to the Lyondell Trust in connection with the
issuance of Trust Securities, for so long as the Preferred Securities remain
outstanding, the Company has agreed (i) to remain the sole direct or indirect
owner of all of the outstanding Common Securities and not to cause or permit
the Common Securities to be transferred except to the extent permitted by the
Declaration; provided that any permitted successor of the Company under the
Indenture may succeed to the Company's ownership of the Common Securities,
(ii) to comply fully with all of its obligations and agreements contained in
the Declaration and (iii) not to take any action which would cause the
Lyondell Trust to cease to be treated as a grantor trust for United States
federal income tax purposes, except in connection with a distribution of
Junior Subordinated Debt Trust Securities as provided in the Declaration.
SUBORDINATION
The payment of principal of, premium, if any, and interest on the Junior
Subordinated Trust Securities will, to the extent and in the manner set forth
in the Indenture, be subordinated in right of payment to the prior payment in
full, in cash or cash equivalents, of all Senior and Subordinated Debt of the
Company.
Upon any payment by the Company or distribution of assets of the Company to
creditors upon any liquidation, dissolution, winding up, receivership,
reorganization, assignment for the benefit of creditors, marshaling of assets
and liabilities or any bankruptcy, insolvency or similar proceedings of the
Company, the holders of all Senior and Subordinated Debt will first be
entitled to receive payment in full of all amounts due or to become due
thereon before the holders of the Junior Subordinated Debt Trust Securities
will be entitled to receive any payment in respect of the principal of,
premium, if any, or interest on the Junior Subordinated Debt Trust Securities.
In the event and during the continuation of any default by the Company in
the payment of principal, premium, interest or any other payment due on any
Senior and Subordinated Debt, or in the event that the maturity of any Senior
and Subordinated Debt has been accelerated because of a default, then, in
either case, no payment shall be made by the Company with respect to the
principal (including redemption payments) of or premium, if any, or interest
on the Junior Subordinated Debt Trust Securities until such default shall have
been cured or waived in writing or shall have ceased to exist or such Senior
and Subordinated Debt shall have been discharged or paid in full.
In the event of the acceleration of the maturity of the Junior Subordinated
Debt Trust Securities, then no payments shall be made by the Company with
respect to the principal (including redemption payments) of or premium, if
any, or interest on the Junior Subordinated Debt Trust Securities until the
holders of all Senior and
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Subordinated Debt outstanding at the time of such acceleration shall receive
payment in full of such Senior and Subordinated Debt (including any amounts
due upon acceleration).
In the event that, notwithstanding the foregoing, any payment shall be
received by the Indenture Trustee or any holder of Junior Subordinated Debt
Trust Securities when such payment is prohibited by the preceding paragraphs,
such payment shall be held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Senior and Subordinated Debt or their
respective representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior and Subordinated Debt may have been
issued, as their respective interests may appear.
By reason of such subordination, in the event of insolvency, funds that
would otherwise be payable to holders of Junior Subordinated Debt Trust
Securities will be paid to the holders of Senior and Subordinated Debt of the
Company to the extent necessary to pay such Debt in full, and the Company may
be unable to meet fully its obligations with respect to the Junior
Subordinated Debt Trust Securities.
"Debt" is defined to mean, with respect to any person at any date of
determination (without duplication), (i) all indebtedness of such person for
borrowed money, (ii) all obligations of such person evidenced by bonds,
debentures, notes or other similar instruments, including obligations incurred
in connection with the acquisition of property, assets or businesses, (iii)
all obligations of such person in respect of letters of credit or bankers'
acceptance or other similar instruments (or reimbursement obligations with
respect thereto) issued on the account of such person, (iv) all obligations of
such person to pay the deferred purchase price of property or services, except
trade payables, (v) all obligations of such person as lessee under capitalized
leases, (vi) all Debt of others secured by a lien on any asset of such person,
whether or not such Debt is assumed by such person; provided that, for
purposes of determining the amount of any Debt of the type described in this
clause, if recourse with respect to such Debt is limited to such asset, the
amount of such Debt shall be limited to the lesser of the fair market value of
such asset or the amount of such Debt, (vii) all redeemable stock valued at
the greater of its voluntary or involuntary liquidation preference plus
accrued and unpaid dividends, (viii) all Debt of others guaranteed by such
person to the extent such Debt is guaranteed by such person and (ix) to the
extent not otherwise included in this definition, all obligations of such
person for claims in respect of derivative products, including interest rate,
foreign exchange rate and commodity forward contracts, options, swaps and
similar arrangements.
"Senior and Subordinated Debt" is defined to mean the principal of (and
premium, if any) and interest on all Debt of the Company whether created,
incurred or assumed before, on or after the date of the Indenture; provided
that such Senior and Subordinated Debt shall not include (i) Debt of the
Company that, when incurred and without respect to any election under Section
1111(b) of Title 11, U.S. Code, was without recourse, (ii) any other Debt of
the Company which by the terms of the instrument creating or evidencing the
same is specifically designated as being subordinated to or pari passu with
the Junior Subordinated Debt Trust Securities, and in particular the Junior
Subordinated Debt Trust Securities shall rank pari passu with all other debt
securities and guarantees issued to any trust, partnership or other entity
affiliated with the Company which is a financing vehicle of the Company in
connection with an issuance of preferred securities (similar to the Preferred
Securities) by such financing entity, and (iii) redeemable stock of the
Company.
INDENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Indenture Event
of Default" with respect to each series of Junior Subordinated Debt
Securities:
(a) failure for 30 days to pay interest on the Junior Subordinated Debt
Trust Securities of such series when due; provided that a valid extension
of the interest payment period by the Company shall not constitute a
default in the payment of interest for this purpose;
(b) failure to pay principal of or premium, if any, on the Junior
Subordinated Debt Trust Securities of such series when due whether at
maturity, upon redemption, by declaration or otherwise;
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(c) failure for 30 days to pay any sinking fund or analogous fund payment
with respect to the Junior Subordinated Debt Trust Securities of such
series;
(d) failure to observe or perform, in any material respect, any other
covenant contained in the Indenture with respect to such series for 90 days
after written notice to the Company from the Indenture Trustee or the
holders of at least 25% in principal amount of the outstanding Junior
Subordinated Debt Trust Securities of such series; or
(e) certain events in bankruptcy, insolvency or reorganization of the
Company.
In each and every such case, unless the principal of all the Junior
Subordinated Debt Trust Securities of that series shall have already become
due and payable, either the Indenture Trustee or the holders of not less than
25% in aggregate principal amount of the Junior Subordinated Debt Trust
Securities of that series then outstanding, by notice in writing to the
Company (and to the Indenture Trustee if given by such holders), may declare
the principal of all the Junior Subordinated Debt Trust Securities of that
series to be due and payable immediately, and upon any such declaration the
same shall become and shall be immediately due and payable. (Section 6.01)
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debt Trust Securities of that series have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee. (Section 6.06) The Indenture Trustee or
the holders of not less than 25% in aggregate outstanding principal amount of
the Junior Subordinated Debt Trust Securities of that series may declare the
principal due and payable immediately upon an Indenture Event of Default with
respect to such series, but the holders of a majority in aggregate outstanding
principal amount of Junior Subordinated Debt Trust Securities of such series
may annul such declaration and waive the default if the default has been cured
and a sum sufficient to pay all matured installments of interest and principal
otherwise than by acceleration and any premium has been deposited with the
Indenture Trustee. (Sections 6.01 and 6.06)
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debt Trust Securities of that series may, on behalf of the
holders of all the Junior Subordinated Debt Trust Securities of that series,
waive any past default, except a default in the payment of principal, premium,
if any, or interest (unless such default has been cured and a sum sufficient
to pay all matured installments of interest and principal otherwise than by
acceleration and any premium has been deposited with the Indenture Trustee) or
a call for redemption of Junior Subordinated Debt Trust Securities. (Section
6.06) The Company is required to file annually with the Indenture Trustee a
certificate as to whether or not the Company is in compliance with all the
conditions and covenants under the Indenture. (Section 5.03)
If Junior Subordinated Debt Trust Securities are issued to the Lyondell
Trust in connection with the issuance of Trust Securities, then under the
Declaration an Indenture Event of Default with respect to the Junior
Subordinated Debt Trust Securities will constitute a Declaration Event of
Default.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Indenture
Trustee, with the consent of the holders of not less than a majority in
principal amount of the outstanding Junior Subordinated Debt Trust Securities
to modify the Indenture or any supplemental indenture affecting the rights of
the holders of the Junior Subordinated Debt Securities; provided that no such
modification may, without the consent of the holder of each outstanding Junior
Subordinated Debt Trust Security affected thereby, (i) extend the fixed
maturity of any Junior Subordinated Debt Trust Securities, reduce the
principal amount thereof, reduce the rate or extend the time of payment of
interest thereon, reduce any premium payable upon the redemption thereof or
(ii) reduce the percentage of Junior Subordinated Debt Trust Securities, the
holders of which are required to consent to any such modification. (Section
9.02)
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BOOK-ENTRY AND SETTLEMENT
If any Junior Subordinated Debt Trust Securities are represented by one or
more global securities (each, a "Global Security"), the applicable Prospectus
Supplement will describe the circumstances, if any, under which beneficial
owners of interests in any such Global Security may exchange such interests
for Junior Subordinated Debt Trust Securities of like tenor and principal
amount in any authorized form and denomination. Principal of and any premium
and interest on a Global Security will be payable in the manner described in
the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any portion
of a series of Junior Subordinated Debt Trust Securities to be represented by
a Global Security will be described in the applicable Prospectus Supplement.
CONSOLIDATION, MERGER AND SALE
The Indenture will provide that the Company may not consolidate with or
merge into any other person or transfer or lease its properties and assets
substantially as an entirety to any person and may not permit any person to
merge into or consolidate with the Company unless (i) either the Company will
be the resulting or surviving entity or any successor or purchaser is a
corporation organized under the laws of the United States of America, any
State or the District of Columbia, and any such successor or purchaser
expressly assumes the Company's obligations under the Indenture and (ii)
immediately after giving effect to the transaction no Event of Default shall
have occurred and be continuing. (Section 10.01)
DEFEASANCE AND DISCHARGE
Under the terms of the Indenture, the Company will be discharged from any
and all obligations in respect of the Junior Subordinated Debt Trust
Securities (except in each case for certain obligations to register the
transfer or exchange of such Junior Subordinated Debt Trust Securities,
replace stolen, lost or mutilated Junior Subordinated Debt Trust Securities,
maintain paying agencies and hold moneys for payment in trust) if (i) the
Company irrevocably deposits with the Indenture Trustee cash or U.S.
Government Obligations or a combination thereof, as trust funds in an amount
certified to be sufficient to pay at maturity (or upon redemption) the
principal of, premium, if any, and interest on all outstanding Junior
Subordinated Debt Trust Securities; (ii) such deposit will not result in a
breach or violation of, or constitute a default under, any agreement or
instrument to which the Company is a party or by which it is bound; (iii) the
Company delivers to the Indenture Trustee an opinion of counsel to the effect
that the holders of the Junior Subordinated Debt Trust Securities will not
recognize income, gain or loss for United States federal income tax purposes
as a result of such defeasance and that defeasance will not otherwise alter
holders' United States federal income tax treatment of principal, premium and
interest payments on such Junior Subordinated Debt Trust Securities (such
opinion must be based on a ruling of the Internal Revenue Service or a change
in United States federal income tax law occurring after the date of such
Junior Subordinated Debt Trust Securities Indenture, since such a result would
not occur under current tax law); (iv) the Company has delivered to the
Indenture Trustee an Officer's Certificate and an opinion of counsel, each
stating that all conditions precedent provided for relating to the defeasance
contemplated by such provision have been complied with; and (v) no event or
condition shall exist that, pursuant to the applicable subordination
provisions, would prevent the Company from making payments of principal of,
premium, if any, and interest on the Junior Subordinated Debt Trust Securities
at the date of the irrevocable deposit referred to above. (Section 11.01)
GOVERNING LAW
The Indenture and the Junior Subordinated Debt Trust Securities will be
governed by the laws of the State of New York. (Section 13.05)
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INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee, prior to the occurrence of an Indenture Event of
Default and after the curing of all Indenture Events of Default, undertakes to
perform only such duties as are specifically set forth in the Indenture and,
after an Indenture Event of Default has occurred, shall exercise the same
degree of care as a prudent individual would exercise in the conduct of his or
her own affairs. (Section 7.01) Subject to such provision, the Indenture
Trustee is under no obligation to exercise any of the powers vested in it by
the Indenture at the request of any holder of Junior Subordinated Debt Trust
Securities, unless offered reasonable security or indemnity by such holder
against the costs, expenses and liabilities that might be incurred thereby.
(Section 7.02) The Indenture Trustee is not required to expend or risk its own
funds or otherwise incur personal financial liability in the performance of
its duties if the Indenture Trustee reasonably believes that repayment or
adequate indemnity is not reasonably assured to it. (Section 7.01)
The Company and its subsidiaries and Joint Ventures maintain ordinary
banking and trust relationships with the Indenture Trustee and its affiliates.
MISCELLANEOUS
The Company will have the right at all times to assign any of its rights or
obligations under the Indenture to a direct or indirect wholly-owned
subsidiary of the Company; provided that, in the event of any such assignment,
the Company will remain jointly and severally liable for all such obligations.
Subject to the foregoing, the Indenture will be binding upon and inure to the
benefit of the parties thereto and their respective successors and assigns.
The Indenture provides that it may not otherwise be assigned by the parties
thereto other than by the Company to a successor or purchaser pursuant to a
consolidation, merger or sale permitted by the Indenture. (Section 13.11)
PLAN OF DISTRIBUTION
The Company may sell any Junior Subordinated Debt Trust Securities and the
Lyondell Trust may sell the Preferred Securities being offered hereby in any
of three ways (or in any combination thereof): (i) through underwriters or
dealers; (ii) directly to a limited number of purchasers or to a single
purchaser; or (iii) through agents. The Prospectus Supplement with respect to
any Offered Securities will set forth the terms of the offering of such
Offered Securities, including the name or names of any underwriters, dealers
or agents and the respective amounts of such Offered Securities underwritten
or purchased by each of them, the initial public offering price of such
Offered Securities and the proceeds to the Company or the Lyondell Trust, as
the case may be, from such sale, any discounts, commissions or other items
constituting compensation from the Company or the Lyondell Trust, as the case
may be, and any discounts, commissions or concessions allowed or reallowed or
paid to dealers and any securities exchanges on which such Offered Securities
may be listed. Any public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
If underwriters are used in the sale of any Offered Securities, such Offered
Securities will be acquired by the underwriters for their own account and may
be resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. Such Offered Securities may be either offered to the
public through underwriting syndicates represented by managing underwriters,
or directly by underwriters. Unless otherwise set forth in the Prospectus
Supplement, the obligations of the underwriters to purchase such Offered
Securities will be subject to certain conditions precedent and the
underwriters will be obligated to purchase all of such Offered Securities if
any are purchased.
Offered Securities may be sold directly by the Company or the Lyondell
Trust, as the case may be, or through agents designated by the Company or the
Lyondell Trust, as the case may be, from time to time. Any agent involved in
the offer or sale of Offered Securities in respect of which this Prospectus is
delivered will be named, and any commissions payable by the Company or the
Lyondell Trust, as the case may be, to such agent
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will be set forth, in the Prospectus Supplement. Unless otherwise indicated in
the Prospectus Supplement, any such agent will be acting on a best efforts
basis for the period of its appointment.
If so indicated in the Prospectus Supplement, the Company or the Lyondell
Trust, as the case may be, will authorize underwriters, dealers or agents to
solicit offers by certain purchasers to purchase Offered Securities from the
Company or the Lyondell Trust, as the case may be, at the public offering
price set forth in the Prospectus Supplement pursuant to delayed delivery
contracts providing for payment and delivery on a specified date in the
future. Such contracts will be subject only to those conditions set forth in
the Prospectus Supplement, and the Prospectus Supplement will set forth the
commission payable for solicitation of such contracts.
Agents and underwriters may be entitled under agreements entered into with
the Company and the Lyondell Trust to indemnification by the Company and the
Lyondell Trust against certain civil liabilities, including liabilities under
the Securities Act, or to contribution with respect to payments which the
agents or underwriters may be required to make in respect thereof. Agents and
underwriters may be customers of, engage in transactions with, or perform
services for the Company, the Lyondell Trust and/or any of their affiliates in
the ordinary course of business.
In connection with the offering, the underwriters or agents, as the case may
be, may purchase and sell the Offered Securities in the open market. These
transactions may include overallotment and stabilizing transactions and
purchases to cover syndicate short positions created in connection with the
offering. Stabilizing transactions consist of certain bids or purchases for
the purpose of preventing or retarding a decline in the market price of the
Offered Securities; and syndicate short positions involve the sale by the
underwriters or agents, as the case may be, of a greater number of Offered
Securities than they are required to purchase from the Company or the Lyondell
Trust, as the case may be, in the offering. The underwriters may also impose a
penalty bid, whereby selling concessions allowed to syndicate members or other
broker-dealers for the Offered Securities sold for their account may be
reclaimed by the syndicate if such Offered Securities are repurchased by the
syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Offered
Securities, which may be higher than the price that might otherwise prevail in
the open market, and, if commenced, may be discontinued at any time. These
transactions may be effected on the New York Stock Exchange, in the over-the-
counter market or otherwise.
Unless otherwise indicated in the Prospectus Supplement, the Company does
not intend to list any of the Offered Securities on a national securities
exchange. No assurances can be given that there will be a market for the
Offered Securities.
LEGAL MATTERS
Unless otherwise indicated in the applicable Prospectus Supplement, certain
matters of Delaware law relating to the validity of the Preferred Securities,
the enforceability of the Declaration and the formation of the Lyondell Trust
will be passed upon by Richards, Layton & Finger, P.A., Wilmington, Delaware,
special Delaware counsel to the Lyondell Trust and the Company. The validity
of the Preferred Securities Guarantee and the Junior Subordinated Debt Trust
Securities offered hereby will be passed upon for the Company by Baker &
Botts, L.L.P., Houston, Texas.
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Annual Report on Form 10-K of Lyondell Petrochemical Company for the year
ended December 31, 1997 have been so incorporated in reliance on the reports
of PricewaterhouseCoopers LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"), which can be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549;
and at the regional offices of the Commission at 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and at Seven World Trade Center, New York,
New York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549 at prescribed rates. The Commission maintains an
Internet web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission (http://www.sec.gov). The Common Stock is listed on the New York
Stock Exchange, and such material also can be inspected at the offices of the
New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
This Prospectus, which constitutes part of a registration statement on Form
S-3 (the "Registration Statement") filed by the Company and the Lyondell Trust
with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"), omits certain of the information contained in the
Registration Statement. Reference is hereby made to the Registration Statement
and the exhibits thereto, which may be obtained at the public reference
facilities maintained by the Commission as described in the preceding
paragraph, for further information with respect to the Company and the
Securities offered hereby. Statements contained herein concerning the
provisions of such documents are necessarily summaries of such documents, and
each such statement is qualified in its entirety by reference to the copy of
the applicable document filed with the Commission.
No separate financial statements of the Lyondell Trust have been included
herein. The Company and the Lyondell Trust do not consider that such financial
statements would be material to holders of the Preferred Securities because
the Lyondell Trust is a newly formed special purpose entity, has no operating
history or independent operations and is not engaged in and does not propose
to engage in any activity other than holding as trust assets the Junior
Subordinated Debt Trust Securities and issuing the Trust Securities.
Furthermore, taken together, the Company's obligations under the Junior
Subordinated Debt Trust Securities, the Indenture, the Declaration and the
Preferred Securities Guarantee provide, in the aggregate, a full, irrevocable
and unconditional guarantee of payments of distributions and other amounts due
on the Preferred Securities. See "The Lyondell Trust," "Description of the
Preferred Securities," "Description of the Preferred Securities Guarantee" and
"Description of the Junior Subordinated Debt Trust Securities." In addition,
the Company does not expect that the Lyondell Trust will be filing reports
under the Exchange Act with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which the Company has filed with the Commission
pursuant to the Exchange Act (File No. 1-10145), are incorporated in this
Prospectus by reference and shall be deemed to be a part hereof:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997;
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998; and
(c) The Company's Current Reports on Form 8-K dated December 12, 1997,
March 26, 1998, May 29, 1998 and June 22, 1998, respectively.
All documents filed by the Company and/or the Lyondell Trust with the
Commission pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering made hereby shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such document.
Any statement contained in a document incorporated
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or deemed to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document that
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus is
delivered, upon the written or oral request of such person, a copy of any or
all documents that have been incorporated herein by reference (not including
exhibits to the documents that have been incorporated herein by reference
unless such exhibits are specifically incorporated by reference in the
documents this Prospectus incorporates). Requests should be directed to
Corporate Secretary, Lyondell Petrochemical Company, 1221 McKinney, Houston,
Texas 77010 (telephone number: (713) 652-7200).
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses payable by the Company
in connection with the offering described in this Registration Statement.
<TABLE>
<S> <C>
Registration fee........................................... $1,180,000.00
Printing expenses.......................................... *
Accounting fees and expenses............................... *
Legal fees and expenses.................................... *
Trustee fees and expenses.................................. *
Rating agency fees......................................... *
Miscellaneous.............................................. *
-------------
Total.................................................. $ *
=============
</TABLE>
- --------
* To be provided by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
By-Law Provisions.
The Company's By-Laws provide that the Company will indemnify each of its
officers and directors to the fullest extent authorized by Section 145 of the
General Corporation Law of the State of Delaware. Article V of the By-Laws
reads as follows:
(a) Indemnification of Officers and Directors. The Company shall
indemnify the officers and directors of the Company with respect to all
matters to which Section 145 of the General Corporation Law of the State of
Delaware may in any way relate, to the fullest extent permitted or allowed
by the laws of the State of Delaware, whether or not specifically required,
permitted or allowed by said Section 145. Any repeal or modification of
this Section shall not in any way diminish any rights to indemnification of
such person or the obligations of the Company that may have previously
arisen hereunder.
(b) Non-Exclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Section shall not be exclusive of any
other right which any person may have or hereafter acquire under any
statute, the Company's Certificate of Incorporation, any By-Law, any
agreement, a vote of Company stockholders or of disinterested Company
directors or otherwise, both as to action in that person's official
capacity and as to action in any other capacity by holding such office, and
shall continue after the person ceases to serve the Company as a director
or officer or to serve another entity at the request of the Company.
(c) Insurance. The Company may maintain insurance, at its expense, to
protect itself and any director or officer of the Company or another
corporation, partnership, joint venture, trust or other enterprise against
any expense, liability or loss, whether or not the Company would have the
power to indemnify such person against such expense, liability or loss
under the General Corporation Law of Delaware.
(d) Indemnity Agreements. The Company may from time to time enter into
indemnity agreements with the persons who are members of its Board of
Directors, its elected officers and with such other persons as the Board
may designate, the form of such indemnity agreements to be approved by a
majority of the Board of Directors then in office.
(e) Indemnification of Employees and Agents of the Company. The Company
may, under procedures authorized from time to time by the Board of
Directors, grant rights to indemnification, and to be paid by the Company
the expenses incurred in defending any proceeding in advance of its final
disposition to any employee or agent of the Company to the fullest extent
of the provisions of this Article V.
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Delaware General Corporation Law Provisions.
Section 145 of the General Corporation Law of the State of Delaware
provides:
(a) A corporation shall have power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by the
person in connection with such action, suit or proceeding if the person
acted in good faith and in a manner the person reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe
the person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
the person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the person's conduct was
unlawful.
(b) A corporation shall have power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and
reasonable incurred by the person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in
a manner the person reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the present or former director, officer, employee or agent is proper in
the circumstances because the person has met the applicable standard of
conduct set forth in subsections (a) and (b) of this section. Such
determination shall be made, with respect to a person who is a director or
officer at the time of such determination, (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) by a committee of such directors
designated by majority vote of such directors, even though less than a
quorum, or (3) if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion, or (4) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative, or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the corporation as authorized in this
section. Such expenses (including attorneys' fees) incurred by former
directors and officers and other employees and agents may be so paid upon
such terms and conditions, if any, as the corporation deems appropriate.
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(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in such person's official capacity and as to action in another capacity
while holding such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not
the corporation would have the power to indemnify such person against such
liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan;
and references to "serving at the request of the corporation" shall include
any service as a director, officer, employee or agent of the corporation
which imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in
a manner such person reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees).
Certificate of Incorporation Provisions.
The Company's Certificate of Incorporation limits the personal liability of
directors to the Company and its stockholders for monetary damages resulting
from certain breaches of the directors' fiduciary duties. Article VII of the
Certificate of Incorporation provides as follows:
To the fullest extent permitted by the General Corporation Law of
Delaware as the same exists or may hereafter be amended, a director of the
Company shall not be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director. If the General
Corporation Law of Delaware is amended to authorize corporate action
further eliminating or limiting the personal liability of directors, then
the liability of a director of the Company shall be eliminated or limited
to the fullest extent permitted by the General Corporation Law of Delaware,
as so amended. Any repeal or modification of this Article VII by the
stockholders of the Company shall not adversely affect any right or
protection of a director of the
II-3
<PAGE>
Company existing at the time of such repeal or modification or with respect
to events occurring prior to such time. Notwithstanding anything contained
in this Certificate to the contrary, the affirmative vote of the holders of
not less than 66 2/3 percent of all votes entitled to be cast by the
holders of stock of the Company shall be required to amend or repeal this
Article VII or to adopt any provision inconsistent herewith.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a corporation's Certificate of Incorporation may contain the
following:
(7) A provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, provided that such provision shall
not eliminate or limit the liability of a director: (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders; (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (iii) under section 174 of this
title; or (iv) for any transaction from which the director derived an
improper personal benefit. No such provision shall eliminate or limit the
liability of a director for any act or omission occurring prior to the date
when such provision becomes effective. All references in this paragraph to
a director shall also be deemed to refer (x) to a member of the governing
body of a corporation which is not authorized to issue capital stock, and
(y) to such other person or persons, if any, who, pursuant to a provision
of the certificate of incorporation in accordance with section 141(a) of
this title, exercise or perform any of the powers or duties otherwise
conferred or imposed upon the board of directors by this title.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ---------------------------------------------------------------------
<C> <S>
*1.1 Form of Underwriting Agreement (Debt Securities)
*1.2 Form of Underwriting Agreement (Common Stock and Preferred Stock)
*1.3 Form of Underwriting Agreement (Preferred Securities)
+4.1 Form of Senior Debt Securities Indenture of the Company
+4.2 Form of Subordinated Debt Securities Indenture of the Company
+4.3 Form of Junior Subordinated Debt Trust Securities Indenture between
the Company and The First National Bank of Chicago
4.4 Declaration of Trust of Lyondell Trust I
+4.5 Form of Amended and Restated Declaration of Trust of Lyondell Trust I
4.6 Certificate of Trust of Lyondell Trust I
+4.7 Form of Preferred Security
+4.8 Form of Supplemental Indenture to be used in connection with issuance
of Junior Subordinated Debt Trust Securities and Preferred Securities
+4.9 Form of Junior Subordinated Debt Trust Security
+4.10 Form of Preferred Securities Guarantee with respect to Preferred
Securities
*4.11 Form of Senior Debt Security
*4.12 Form of Subordinated Debt Security
4.13 Amended and Restated Certificate of Incorporation of the Company
(filed as an exhibit to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996 and incorporated herein by
reference)
4.14 Amended and Restated By-Laws of the Company (Filed as an exhibit to
the Company's Quarterly Report on Form 10-Q for the period ended June
30, 1997 and incorporated herein by reference)
+5.1 Opinion of Baker & Botts, L.L.P.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- --------------------------------------------------------------------
<C> <S>
+5.2 Opinion of Richards, Layton & Finger, P.A.
*8 Opinion of counsel to the Company as to certain tax matters relative
to the Securities offered hereby
12.1 Statement re Computation of Ratios
23.1 Consent of PricewaterhouseCoopers LLP
+23.2 Consent of Baker & Botts, L.L.P. (included in Exhibit 5.1)
+23.3 Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2)
24.1 Powers of Attorney for the Company
24.2 Powers of Attorney for the Company as sponsor, to sign the
Registration Statement on behalf of Lyondell Trust I (included in
Exhibit 4.4)
*25.1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of the Senior Trustee under the Senior Debt Securities
Indenture
*25.2 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of the Subordinated Trustee under the Subordinated Debt
Securities Indenture
+25.3 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago as Trustee under the
Junior Subordinated Debt Trust Securities Indenture
+25.4 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago with respect to the
Preferred Securities of Lyondell Trust I
+25.5 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago as Trustee under the
Preferred Securities Guarantee of the Company with respect to the
Preferred Securities of Lyondell Trust I
</TABLE>
- --------
* The Company will file as an exhibit to a Current Report on Form 8-K (i) any
underwriting agreement relating to Securities offered hereby, (ii) the
instruments setting forth the terms of any Debt Securities, (iii) any
required opinion of counsel to the Company as to certain tax matters
relative to Securities offered hereby or (iv) any Statement of Eligibility
and Qualification under the Trust Indenture Act of 1939 of the applicable
trustee.
+ To be filed by amendment.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) of the Securities Act if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement;
II-5
<PAGE>
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrants' annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrants pursuant to the foregoing provisions, or otherwise, the
registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrants will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, the State of Texas, on July 31, 1998.
LYONDELL PETROCHEMICAL COMPANY
/s/ Dan F. Smith
By: _________________________________
Dan F. Smith
President and Chief Executive
Officer
POWER OF ATTORNEY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED
AND ON JULY 31, 1998.
SIGNATURE TITLE
William T. Butler* Chairman of the Board
- -----------------------------------
(WILLIAM T. BUTLER)
/s/ Dan F. Smith President, Chief Executive
- ----------------------------------- Officer and Director
(DAN F. SMITH, PRINCIPAL EXECUTIVE
OFFICER)
Travis Engen* Director
- -----------------------------------
(TRAVIS ENGEN)
Stephen F. Hinchliffe, Jr.* Director
- -----------------------------------
(STEPHEN F. HINCHLIFFE, JR.)
Dudley C. Mecum II* Director
- -----------------------------------
(DUDLEY C. MECUM II)
Paul R. Staley* Director
- -----------------------------------
(PAUL R. STALEY)
Edward W. Rich Vice President,
- ----------------------------------- Finance and
(EDWARD W. RICH, PRINCIPAL Treasurer
FINANCIAL OFFICER)
/s/ Van Billet Vice President and
- ----------------------------------- Controller
(VAN BILLET, PRINCIPAL ACCOUNTING
OFFICER)
/s/ Jeffrey R. Pendergraft
*By: ______________________________
JEFFREY R. PENDERGRAFT
AS ATTORNEY-IN-FACT
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Lyondell Trust I
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on July 31, 1998.
LYONDELL TRUST I
By: Lyondell Petrochemical Company,
as Sponsor
By: /s/ Jeffrey R. Pendergraft
-------------------------------
Name: Jeffrey R. Pendergraft
Title: Executive Vice
President and Chief
Administrative Officer
II-8
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ---------------------------------------------------------------------
<C> <S>
*1.1 Form of Underwriting Agreement (Debt Securities)
*1.2 Form of Underwriting Agreement (Common Stock and Preferred Stock)
*1.3 Form of Underwriting Agreement (Preferred Securities)
+4.1 Form of Senior Debt Securities Indenture of the Company
+4.2 Form of Subordinated Debt Securities Indenture of the Company
+4.3 Form of Junior Subordinated Debt Trust Securities Indenture between
the Company and The First National Bank of Chicago
4.4 Declaration of Trust of Lyondell Trust I
+4.5 Form of Amended and Restated Declaration of Trust of Lyondell Trust I
4.6 Certificate of Trust of Lyondell Trust I
+4.7 Form of Preferred Security
+4.8 Form of Supplemental Indenture to be used in connection with issuance
of Junior Subordinated Debt Trust Securities and Preferred Securities
+4.9 Form of Junior Subordinated Debt Trust Security
+4.10 Form of Preferred Securities Guarantee with respect to Preferred
Securities
*4.11 Form of Senior Debt Security
*4.12 Form of Subordinated Debt Security
4.13 Amended and Restated Certificate of Incorporation of the Company
(filed as an exhibit to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996 and incorporated herein by
reference)
4.14 Amended and Restated By-Laws of the Company (Filed as an exhibit to
the Company's Quarterly Report on Form 10-Q for the period ended June
30, 1997 and incorporated herein by reference)
+5.1 Opinion of Baker & Botts, L.L.P.
+5.2 Opinion of Richards, Layton & Finger, P.A.
*8 Opinion of counsel to the Company as to certain tax matters relative
to the Securities offered hereby
12.1 Statement re Computation of Ratios
23.1 Consent of PricewaterhouseCoopers LLP
+23.2 Consent of Baker & Botts, L.L.P. (included in Exhibit 5.1)
+23.3 Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2)
24.1 Powers of Attorney for the Company
24.2 Powers of Attorney for the Company as sponsor, to sign the
Registration Statement on behalf of Lyondell Trust I (included in
Exhibit 4.4)
*25.1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of the Senior Trustee under the Senior Debt Securities
Indenture
*25.2 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of the Subordinated Trustee under the Subordinated Debt
Securities Indenture
+25.3 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago as Trustee under the
Junior Subordinated Debt Trust Securities Indenture
+25.4 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago with respect to the
Preferred Securities of Lyondell Trust I
+25.5 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago as Trustee under the
Preferred Securities Guarantee of the Company with respect to the
Preferred Securities of Lyondell Trust I
</TABLE>
- --------
* The Company will file as an exhibit to a Current Report on Form 8-K (i) any
underwriting agreement relating to Securities offered hereby, (ii) the
instruments setting forth the terms of any Debt Securities, (iii) any
required opinion of counsel to the Company as to certain tax matters relative
to Securities offered hereby or (iv) any Statement of Eligibility and
Qualification under the Trust Indenture Act of 1939 of the applicable
trustee.
+ To be filed by amendment.
<PAGE>
EXHIBIT 4.4
DECLARATION OF TRUST, dated as of July 29, 1998 between Lyondell
Petrochemical Company, a Delaware corporation, as Sponsor (the "Sponsor"), and
The First National Bank of Chicago, not in its individual capacity but solely as
trustee (the "Property Trustee"), First Chicago Delaware Inc., not in its
individual capacity but solely as trustee (the "Delaware Trustee"), and Kerry A.
Galvin, not in her individual capacity but solely as trustee (the Property
Trustee, Delaware Trustee and such individual as trustee, collectively the
"Trustees"). The Sponsor and the Trustees hereby agree as follows:
1. The Delaware business trust created hereby shall be known as "Lyondell
Trust I", in which name the Trustees, or the Sponsor to the extent provided
herein, may conduct the business of the Trust, make and execute contracts, and
sue and be sued.
2. The Sponsor hereby assigns, transfers, conveys and sets over to the
Trust the sum of $10. The Trust hereby acknowledges receipt of such amount from
the Sponsor, which amount shall constitute the initial trust estate. It is the
intention of the parties hereto that the Trust created hereby constitute a
business trust under Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code
(S) 3801 et seq. (the "Business Trust Act"), and that this document constitutes
the governing instrument of the Trust. The Trustees are hereby authorized and
directed to execute and file a certificate of trust with the Secretary of State
of the State of Delaware in the form attached hereto in accordance with the
provisions of the Business Trust Act. The Trust is hereby established by the
Sponsor and the Trustees for the purposes of (i) issuing preferred securities
representing undivided beneficial interests in the assets of the Trust
("Preferred Securities") in exchange for cash and investing the proceeds thereof
in junior subordinated debentures of the Sponsor, (ii) issuing and selling
common securities representing undivided beneficial interest in the assets of
the Trust to the Sponsor in exchange for cash and investing the proceeds thereof
in additional junior subordinated debentures of the Sponsor and (iii) engaging
in such other activities as are necessary, convenient or incidental thereto.
3. The Sponsor and the Trustees will enter into an amended and restated
Declaration of Trust, satisfactory to each such party and substantially in the
form included as an exhibit to the 1933 Act Registration Statement referred to
below, to provide for the contemplated operation of the Trust created hereby and
the issuance of the Preferred Securities and Common Securities referred to
therein. Prior to the execution and delivery of such amended and restated
Declaration of Trust, the Trustees shall not have any duty or obligation
hereunder or with respect to the trust estate, except as otherwise required by
applicable law or as may be necessary to obtain prior to such execution and
delivery any licenses, consents or approvals required by applicable law or
otherwise.
4. The Sponsor, as the sponsor of the Trust, is hereby authorized (i) to
prepare and file with the Securities and Exchange Commission (the "Commission")
and execute, in each case on behalf of the Trust, (a) a Registration Statement
on Form S-3 (the "1933
<PAGE>
Act Registration Statement"), including any pre-effective or post-effective
amendments to such Registration Statement, relating to the registration under
the Securities Act of 1933, as amended, of the Preferred Securities and certain
other securities of the Sponsor and (b) if the Sponsor shall deem it desirable,
a Registration Statement on Form 8-A (the "1934 Act Registration Statement")
(including all pre-effective and post-effective amendments thereto) relating to
the registration of the Preferred Securities under Section 12 of the Securities
Exchange Act of 1934, as amended; (ii) if the Sponsor shall deem it desirable,
to prepare and file with the New York Stock Exchange or one or more national
securities exchange(s) (each, an "Exchange") or the National Association of
Securities Dealers, Inc. (the "NASD") and execute on behalf of the Trust a
listing application or applications and all other applications, statements,
certificates, agreements and other instruments as shall be necessary or
desirable to cause the Preferred Securities to be listed on any such Exchange or
the NASD's Nasdaq National Market ("Nasdaq"); (iii) to prepare and file and
execute on behalf of the Trust such applications, reports, surety bonds,
irrevocable consents, appointments of attorney for service of process and other
papers and documents as the Sponsor, on behalf of the Trust, may deem necessary
or desirable to register the Preferred Securities under the securities or "Blue
Sky" laws of such jurisdictions as the Sponsor, on behalf of the Trust, may deem
necessary or desirable, (iv) to negotiate the terms of and execute on behalf of
the Trust an underwriting agreement among the Trust, the Sponsor and any
underwriter(s), dealer(s) or agent(s) relating to the Preferred Securities, as
the Sponsor, on behalf of the Trust, may deem necessary or desirable and (v) to
execute and deliver on behalf of the Trust letters or documents to, or
instruments for filing with, a depository relating to the Preferred Securities.
In the event that any filing referred to in clauses (i)-(iii) above is required
by the rules and regulations of the Commission, any Exchange, Nasdaq, the NASD
or state securities or blue sky laws, to be executed on behalf of the Trust by
the Trustees, any Trustee appointed pursuant to Section 6 hereof, in their
capacities as Trustees of the Trust, and the Sponsor are hereby authorized and
directed to join in any such filing and to execute on behalf of the Trust any
and all of the foregoing, it being understood that the Property Trustee, the
Delaware Trustee and Kerry A. Galvin, in her capacity as a Trustee of the Trust,
shall not be required to join in any such filing or execute on behalf of the
Trust any such document unless required by the rules and regulations of the
Commission, any Exchange, Nasdaq, the NASD or state securities or blue sky laws.
In connection with all of the foregoing, the Sponsor and each Trustee, solely in
its capacity as Trustee of the Trust, hereby constitutes and appoints Dan F.
Smith, Jeffrey R. Pendergraft and Kerry A. Galvin, and each of them, his, her or
its, as the case may be, true and lawful attorneys-in-fact, and agents, with
full power of substitution and resubstitution, for the Sponsor or such Trustee
and in the Sponsor's or such Trustee's name, place and stead, in any and all
capacities, to sign and file (i) any and all amendments (including post-
effective amendments) to the 1933 Act Registration Statement and the 1934 Act
Registration Statement with all exhibits thereto, and other documents in
connection therewith, and (ii) a registration statement, and any and all
amendments thereto, relating thereto filed pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, with the Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
2
<PAGE>
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as the Sponsor or such Trustee might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents or any of them, or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
5. This Declaration of Trust may be executed in one or more counterparts.
6. The number of Trustees initially shall be three (3) and thereafter the
number of Trustees shall be such number as shall be fixed from time to time by a
written instrument signed by the Sponsor which may increase or decrease the
number of Trustees; provided, however, that the number of Trustees shall in no
event be less than three (3); and provided, further that to the extent required
by the Business Trust Act, one Trustee shall either be a natural person who is a
resident of the State of Delaware or, if not a natural person, an entity which
has its principal place of business in the State of Delaware and meets other
requirements imposed by applicable law. Subject to the foregoing, the Sponsor
is entitled to appoint or remove without cause any Trustee at any time. The
Trustees may resign upon thirty days' prior notice to the Sponsor.
7. First Chicago Delaware Inc., in its capacity as Trustee, shall not
have any of the powers or duties of the Trustees set forth herein and shall be a
Trustee of the Trust for the sole purpose of satisfying the requirements of
Section 3807(a) of the Business Trust Act.
8. The Trust shall dissolve and terminate before the issuance of any
Preferred Securities at the election of the Sponsor.
9. This Declaration of Trust shall be governed by, and construed in
accordance with, the laws of the State of Delaware (without regard to conflict
of laws principles).
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Declaration of
Trust to be duly executed as of the day and year first above written.
Lyondell Petrochemical Company,
as Sponsor
By: /s/ Kerry A. Galvin
----------------------------
Name: Kerry A. Galvin
Title: Associate General Counsel
The First National Bank of Chicago,
not in its individual capacity but solely as
Property Trustee
By: /s/ Sandra L. Caruba
----------------------------
Name: Sandra L. Caruba
Title: Vice President
First Chicago Delaware Inc.,
not in its individual capacity but solely as
Delaware Trustee
By: /s/ Sandra L. Caruba
----------------------------
Name: Sandra L. Caruba
Title: Vice President
Kerry A. Galvin,
not in her individual capacity but solely as
Trustee
By: /s/ Kerry A. Galvin
----------------------------
4
<PAGE>
EXHIBIT 4.6
CERTIFICATE OF TRUST
OF
LYONDELL TRUST I
THIS CERTIFICATE OF TRUST of Lyondell Trust I (the "TRUST"), dated as of
July 29, 1998, is being duly executed and filed by the undersigned, as trustees,
with the Secretary of State of the State of Delaware to form a business trust
under the Delaware Business Trust Act (12 Del. Code (S) 3801 et seq.).
1. Name. The name of the business trust being formed hereby is Lyondell
Trust I.
2. Delaware Trustee. The name and business address of the trustee of the
Trust with a principal place of business in the State of Delaware are First
Chicago Delaware Inc., 300 King Street, Wilmington, Delaware 19801.
3. Effective Date. This Certificate of Trust shall be effective at the
time of its filing with the Secretary of State of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the sole trustees of the Trust
at the time of filing this Certificate of Trust, have executed this Certificate
of Trust as of the date first above written.
First Chicago Delaware Inc.,
as Delaware Trustee
By: /s/ Sandra L. Caruba
-------------------------
Name: Sandra L. Caruba
Title: Vice President
The First National Bank of Chicago,
as Property Trustee
By: /s/ Sandra L. Caruba
-------------------------
Name: Sandra L. Caruba
Title: Vice President
Kerry A. Galvin,
as Regular Trustee
By: /s/ Kerry A. Galvin
-------------------------
2
<PAGE>
EXHIBIT 12.1
STATEMENT SETTING FORTH DETAIL FOR COMPUTATION OF
RATIO OF EARNINGS TO FIXED CHARGES
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
MARCH 31, ----------------------------
1998 1997 1996 1995 1994 1993
--------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL INFORMATION
Income from continuing
operations before income
taxes and cumulative effect
of accounting changes........ A $104 $456 $196 $618 $350 $ 16
Fixed charges:
Interest expenses, gross.... 31 103 81 80 74 74
Portion of rentals
representative of interest. 5 19 22 20 17 14
---- ---- ---- ---- ---- ----
Total fixed charges before
capitalized interest..... B 36 122 103 100 91 88
Capitalized interest........ -- 5 33 6 -- --
---- ---- ---- ---- ---- ----
Total fixed charges
including capitalized
interest................. C 36 127 136 106 91 88
---- ---- ---- ---- ---- ----
Earnings (A + B).............. D $140 $583 $299 $718 $441 $104
Ratio of earnings to fixed
charges (D/C)................ 3.9x 4.6x 2.2x 6.8x 4.8x 1.2x
==== ==== ==== ==== ==== ====
</TABLE>
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of this Registration Statement on Form S-3 of our report
dated February 16, 1998, except as to the information presented in Note 23
which is as of March 20, 1998, relating to the consolidated financial
statements of Lyondell Petrochemical Company appearing on page 41 of Lyondell
Petrochemical Company's Annual Report on Form 10-K for the year ended December
31, 1997, our report dated February 16, 1998, except as to the information
presented in Note 18 which is as of March 20, 1998, relating to the financial
statements of Equistar Chemicals, LP appearing on page 66 of Lyondell
Petrochemical Company's Annual Report on Form 10-K for the year ended
December 31, 1997 and our report dated February 6, 1998 relating to the
financial statements of LYONDELL-CITGO Refining Company Ltd. appearing on page
81 of Lyondell Petrochemical Company's Annual Report on Form 10-K for the year
ended December 31, 1997. We also consent to the reference to us under the
heading "Experts" in such Prospectuses.
PRICEWATERHOUSECOOPERS LLP
Houston, Texas
July 31, 1998
<PAGE>
EXHIBIT 24.1
LYONDELL PETROCHEMICAL COMPANY
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Dan F. Smith, Jeffrey R. Pendergraft and Edward W. Rich, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, in connection with any outstanding
securities of Lyondell Petrochemical Company (the "Company"), or any public
offering or other issuance of any securities of the Company authorized by the
Board of Directors of the Company, or by the Executive Committee thereof
pursuant to due authorization by such Board, (1) to execute and file, or cause
to be filed, with the United States Securities and Exchange Commission (the
"Commission"), (A) Registration Statements and any and all amendments
(including post-effective amendments) thereto and to file, or cause to be
filed, all exhibits thereto and other documents in connection therewith as
required by the Commission in connection with such registration under the
Securities Act of 1933, as amended, and (B) any report or other document
required to be filed by the Company with the Commission pursuant to the
Securities Exchange Act of 1934, as amended, (2) to execute and file, or cause
to be filed, any application for registration or exemption therefrom, any
report or any other document required to be filed by the Company under the
Blue Sky or securities law of any of the United States and to furnish any
other information required in connection therewith, (3) to execute and file,
or cause to be filed, any application for registration or exemption therefrom
under the securities laws of any jurisdiction outside the United States,
including any reports or other documents required to be filed subsequent to
the issuance of such securities, and (4) to execute and file, or cause to be
filed, any application for listing such securities on the New York Stock
Exchange, or any other securities exchange in any other jurisdiction where any
such securities are proposed to be sold, granting to such attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each
and every act required to be done as he or she might or could do in person,
hereby ratifying and confirming all that such attorneys-in-fact and agents,
and each of them, may lawfully do or cause to be done by virtue of this power
of attorney. Each person whose signature appears below may at any time revoke
this power of attorney as to himself or herself only by an instrument in
writing specifying that this power of attorney is revoked as to him or her as
of the date of execution of such instrument or at a subsequent specified date.
This power of attorney shall be revoked automatically with respect to any
person whose signature appears below effective on the date he or she ceases to
be a member of the Board of Directors or an officer of the Company. Any
revocation hereof shall not void or otherwise affect any acts performed by any
attorney-in-fact and agent named herein pursuant to this power of attorney
prior to the effective date of such revocation.
Dated: March 13, 1998
SIGNATURE TITLE
/s/ Dan F. Smith President, Chief
- ----------------------------------- Executive Officer and
(DAN F. SMITH, PRINCIPAL EXECUTIVE Director
OFFICER)
/s/ Jeffrey R. Pendergraft Senior Vice President
- ----------------------------------- and Chief
(JEFFREY R. PENDERGRAFT, PRINCIPAL Administrative
FINANCIAL OFFICER) Officer
/s/ Edward W. Rich Vice President and
- ----------------------------------- Treasurer
(EDWARD W. RICH, PRINCIPAL
ACCOUNTING OFFICER)
1
<PAGE>
SIGNATURE TITLE
/s/ Dr. William T. Butler Chairman and Director
- -----------------------------------
Dr. William T. Butler
/s/ Curtis J. Crawford Director
- -----------------------------------
Curtis J. Crawford
/s/ Travis Engen Director
- -----------------------------------
Travis Engen
/s/ Stephen F. Hinchliffe, Jr. Director
- -----------------------------------
Stephen F. Hinchliffe, Jr.
/s/ Dudley C. Mecum II Director
- -----------------------------------
Dudley C. Mecum II
/s/ Paul R. Staley Director
- -----------------------------------
Paul R. Staley
2
