As filed with the Securities and Exchange Commission on May 15, 2002
Registration No.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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Lyondell Chemical Company*
(Exact name of registrant as specified in its charter)
Delaware* One Houston Center, Suite 700 95-4160558*
(State or other 1221 McKinney Street (I.R.S. Employer
jurisdiction Houston, Texas 77010 Identification No.)
of incorporation or
organization)
(713) 652-7200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Kerry A. Galvin
Senior Vice President, General Counsel and Secretary
One Houston Center, Suite 700
1221 McKinney Street
Houston, Texas 77010
(713) 652-7200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copy to:
Stephen A. Massad
Baker Botts L.L.P.
3000 One Shell Plaza
910 Louisiana
Houston, Texas 77002-4995
(713) 229-1234
Fax: (713) 229-1522
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. [_]
CALCULATION OF REGISTRATION FEE
Proposed maximum
Title of each class of aggregate offering price Amount of
securities to be registered (1), (2) registration fee (9)
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Senior Secured and Senior
Unsecured Debt Securities and
Senior and Junior
Subordinated Debt Securities
of Lyondell Chemical
Company......................
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Guarantees of Debt Securities
and Trust Preferred
Securities (3)...............
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Preferred Stock, par value
$.01 per share, of Lyondell
Chemical Company ............
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Common Stock, par value $1.00
per share, of Lyondell
Chemical Company (4)(5) .....
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Warrants of Lyondell Chemical
Company......................
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Stock Purchase Contracts of
Lyondell Chemical Company
(6)..........................
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Securities Purchase Units of
Lyondell Chemical Company
(7)..........................
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Trust Preferred Securities of
Lyondell Trust I, Lyondell
Trust II and Lyondell Trust
III..........................
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Junior Subordinated Debt
Securities of Lyondell
Chemical Company for issuance
directly to Lyondell Trust I,
Lyondell II and Lyondell
Trust III (8) ...............
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Total (9)..................... $3,335,000,000 $ 0
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act and exclusive of accrued
interest, distributions and dividends, if any. The aggregate initial
offering price of all securities issued from time to time pursuant to this
registration statement will not exceed $3,335,000,000 or the equivalent
thereof in foreign currencies, foreign currency units or composite
currencies. Such amount represents the offering price of any preferred
stock or common stock, the principal amount of any debt securities issued
at their stated principal amount, the issue price rather than the principal
amount of any debt securities issued at an original issue discount, the
issue price of any warrants, the exercise price of any securities issuable
upon the exercise of warrants and the issue price of any securities issued
upon settlement of the stock purchase contracts or securities purchase
units. The aggregate principal amount of the debt securities may be
increased if any debt securities are issued at an original issue discount
by an amount such that the offering price to be received by the registrant
shall be equal to the above amount to be registered. Any offering of
securities denominated other than in U.S. dollars will be treated as the
equivalent of U.S. dollars based on the exchange rate applicable to the
purchase of such securities at the time of the initial offering. Any
securities registered hereunder may be sold separately or as units with
other securities registered hereunder.
(2) There is being registered hereunder such indeterminate principal number or
amount of senior and subordinated debt securities, common stock, preferred
stock, warrants, stock purchase contracts, securities purchase units and
junior subordinated debt securities of Lyondell Chemical Company and trust
preferred securities of Lyondell Trust I, Lyondell Trust II and Lyondell
Trust III as may from time to time be issued at indeterminate prices and as
may be issuable upon conversion, redemption, exchange or exercise of any
securities registered hereunder, including under any applicable
antidilution provisions. No separate consideration will be received for any
for any securities registered hereunder that are issued in exchange for, or
upon conversion of, as the case may be, the debt securities, preferred
stock or warrants.
(3) The registrants are also registering under this registration statement all
guarantees and other obligations that Lyondell Chemical Company, Lyondell
Chemical Nederland, Ltd., ARCO Chemical Technology, Inc., ARCO Chemical
Technology, L.P., Lyondell Trust I, Lyondell Trust II or Lyondell Trust III
may have with respect to securities that may be issued by Lyondell Chemical
Company, guarantees that may be issued by Lyondell Chemical Nederland,
Ltd., ARCO Chemical Technology, Inc. and ARCO Chemical Technology, L.P., or
trust preferred securities that may be issued by Lyondell Trust I, Lyondell
Trust II and Lyondell Trust III. No separate consideration will be received
for the guarantees or any other such obligations.
(4) Includes the associated rights to purchase common stock under the warrants
and stock purchase contracts registered hereby and the Rights Agreement
dated as of December 8, 1995 between Lyondell Chemical Company and The Bank
of New York. No separate consideration is payable for the associated rights
to purchase common stock. The registration fee for these securities is
included in the fee for the common stock.
(5) Includes an indeterminate number of shares of common stock to be issued by
Lyondell Chemical Company upon settlement of the stock purchase contracts.
(6) A stock purchase contract is a contract, under which the holder, upon
settlement, will purchase an indeterminate number of shares of Lyondell
Chemical Company. No separate consideration will be received for the stock
purchase contracts.
(7) Each security purchase unit consists of (i) a stock purchase contract,
under which the holder, upon settlement, will purchase an indeterminate
number of shares of common stock of Lyondell Chemical Company and (ii)
either a beneficial interest in trust preferred securities of Lyondell
Trust I, Lyondell Trust II and Lyondell Trust III, debt securities of
Lyondell Chemical Company or debt obligations of third parties, including
U.S. Treasury securities. Each beneficial interest will be pledged to
secure the obligation of such holder to purchase such shares of common
stock. No separate consideration will be received for the stock purchase
contracts.
(8) Subordinated debt securities of Lyondell Chemical Company may be issued and
sold to Lyondell Trust I, Lyondell Trust II and Lyondell Trust III, in
which event such debt securities may later be distributed to the holders of
preferred securities upon a dissolution of Lyondell Trust I, Lyondell Trust
II and Lyondell Trust III and the distribution of their assets.
(9) Lyondell Chemical Company, Lyondell Trust I, Lyondell Trust II and Lyondell
Trust III previously filed with the Securities and Exchange Commission on
July 31, 1998, a registration statement on Form S-3 (Registration No. 333-
60429) for the registration of $4,000,000,000 of securities and paid an
aggregate filing fee of $1,180,000 in connection therewith. As of the date
of this filing, unsold securities having an aggregate initial offering
price of $3,335,000,000 remain under such registration statement. The
filing fee paid by the registrants in connection with the remaining unsold
securities under such prior registration statement, $983,825, is offset,
pursuant to Rule 457(p) under the Securities Act, against the filing fee
due in connection with this registration statement, $306,820, resulting in
a net paid filing fee of $0. Pursuant to Rule 457(n) under the Securities
Act, no separate fee is payable with respect to the guarantees of the debt
securities being registered. Pursuant to Rule 429 under the Securities Act,
this registration statement shall act as a post-effective amendment of
Lyondell Chemical Company's registration statement on Form S-3 (No. 333-
60429), and the prospectuses included herein are combined prospectuses
under Rule 429.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
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.
TABLE OF ADDITIONAL REGISTRANTS*
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Exact Name of Additional
Registrants as Specified in their State of I.R.S. Employer
Respective Charters Organization Identification Number
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Lyondell Chemical Nederland, Ltd. Delaware 51-0110124
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ARCO Chemical Technology, Inc. Delaware 94-2400836
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ARCO Chemical Technology, L.P. Delaware 54-1613415
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Lyondell Trust I Delaware 76-0585767
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Lyondell Trust II Delaware 76-6470952
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Lyondell Trust III Delaware 76-6470953
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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 secured and unsecured debt securities
and senior and junior subordinated debt securities), preferred stock,
common stock, warrants, stock purchase contracts and securities purchase
units of Lyondell Chemical Company, guarantees by Lyondell Chemical
Nederland, Ltd., ARCO Chemical Technology, Inc. and ARCO Chemical
Technology, L.P. of debt securities that may be issued by Lyondell Chemical
Company and the guarantee by Lyondell Chemical Company of the subsidiary
guarantees that may be issued by Lyondell Chemical Nederland, Ltd., ARCO
Chemical Technology, Inc. and ARCO Chemical Technology, L.P.
(2) Trust preferred securities of Lyondell Trust I, Lyondell Trust II or
Lyondell Trust III, junior subordinated debt securities, common stock,
stock purchase contracts and securities purchase units of Lyondell Chemical
Company and guarantees by Lyondell Chemical Company of trust preferred
securities that may be issued by Lyondell Trust I, Lyondell Trust II or
Lyondell Trust III.
We may offer any combination of the securities described in these two
prospectuses in one or more offerings with a total initial offering price of up
to $3,335,000,000.
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+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated May 15, 2002
Prospectus
[LYONDELL LOGO]
Lyondell Chemical Company
One Houston Center, Suite 700
1221 McKinney Street
Houston, Texas 77010
(713) 652-7200
$3,335,000,000
Senior Secured Debt Securities
Senior Unsecured Debt Securities
Senior Subordinated Debt Securities
Junior Subordinated Debt Securities
Preferred Stock
Common Stock
Warrants
Stock Purchase Contracts
Securities Purchase Units
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Guarantees of Debt Securities or Subsidiary Guarantees by:
Lyondell Chemical Company
Lyondell Chemical Nederland, Ltd.
ARCO Chemical Technology, Inc.
ARCO Chemical Technology, L.P.
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The Offering
Consider carefully the Risk Factors We may offer from time to time:
beginning on page 4.
. senior secured or senior unsecured
We will provide additional terms of debt securities, whether or not
our securities in one or more guaranteed by our subsidiaries;
supplements to this prospectus. You
should read this prospectus and the . senior subordinated debt securities,
related prospectus supplement whether or not guaranteed by our
carefully before you invest in our subsidiaries;
securities. No person may use this
prospectus to offer and sell our . junior subordinated debt securities,
securities unless a prospectus whether or not guaranteed by our
supplement accompanies this subsidiaries;
prospectus.
. preferred stock;
. common stock;
. warrants to purchase our common
stock, preferred stock, senior
debt securities or subordinated
debt securities;
. stock purchase contracts; and
. securities purchase units,
consisting of a stock purchase
contract and either our debt
securities or debt obligations
of third parties.
Our common stock is listed on the New York Stock Exchange under the symbol
"LYO."
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
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The date of this prospectus is , 2002.
Table of Contents
About This Prospectus....................................................... 2
About Lyondell Chemical Company............................................. 2
The Subsidiary Guarantors................................................... 3
Risk Factors................................................................ 4
Forward-Looking Information................................................. 14
Use of Proceeds............................................................. 15
Ratio of Earnings to Fixed Charges.......................................... 15
Description of Debt Securities.............................................. 16
Description of Capital Stock................................................ 28
Market for Common Stock and Common Stock Dividends.......................... 33
Description of Warrants..................................................... 34
Description Of Stock Purchase Contracts and Securities Purchase Units....... 34
Plan of Distribution........................................................ 35
General Information......................................................... 36
Legal Opinions.............................................................. 36
Experts..................................................................... 36
Where You Can Find More Information......................................... 37
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we have filed with
the SEC under a "shelf" registration process. Using this process, we may offer
the securities this prospectus describes in one or more offerings with a total
initial offering price of up to $3,335,000,000. This prospectus provides you
with a general description of the securities we may offer. Each time we use
this prospectus to offer securities, we will provide a prospectus supplement
and, if applicable, a pricing supplement. The prospectus supplement and any
pricing supplement will describe the specific terms of that offering. The
prospectus supplement and any pricing supplement may also add to, update or
change the information this prospectus contains. Please carefully read this
prospectus, the prospectus supplement and any pricing supplement, in addition
to the information contained in the documents we refer to under the "Where You
Can Find More Information" section of this prospectus.
ABOUT LYONDELL CHEMICAL COMPANY
Lyondell Chemical Company is a global chemical company with low-cost
operations and leading producer positions in all of its major products.
Lyondell manufactures and markets a variety of intermediate and performance
chemicals, including propylene oxide (PO), propylene glycol (PG), propylene
glycol ethers (PGE), butanediol (BDO), toluene diisocyanate (TDI), styrene
monomer (SM), and tertiary butyl alcohol (TBA) and its derivative methyl
tertiary butyl ether (MTBE), which are collectively known as our intermediate
chemicals and derivatives business.
We currently own 41 percent of Equistar Chemicals, LP, a Delaware limited
partnership, which operates petrochemicals and polymers businesses. On January
31, 2002, we announced an agreement in principle with Occidental Petroleum
Corporation, one of our Equistar partners, to acquire its 29.5 percent share of
Equistar. Following completion of this transaction, which is subject to
completion and execution of definitive documentation, compliance with the
applicable provisions of the partnership agreement and the parent agreement,
approval by Lyondell's stockholders and other customary conditions, Lyondell
will own 70.5 percent of Equistar. Equistar's petrochemicals business
manufactures and markets olefins, oxygenated products, aromatics and specialty
products. Equistar's olefins are ethylene, propylene and butadiene, and its
oxygenated products include ethylene oxide, ethylene glycol, ethanol and MTBE.
Equistar's aromatics are benzene and toluene. Equistar's polymers business
manufactures and markets polyolefins, including high density
2
polyethylene, low density polyethylene, linear low density polyethylene,
polypropylene and performance polymers. Equistar's performance polymers include
enhanced grades of polyethylene, such as wire and cable insulating resins, and
polymeric powders.
We also own 58.75 percent of LYONDELL-CITGO Refining LP, a Delaware limited
partnership (LCR), which produces refined petroleum products, including
gasoline, low sulfur diesel, jet fuel, aromatics and lubricants. LCR sells its
principal refined products primarily to CITGO Petroleum Corporation (CITGO).
In addition, we own 75 percent of Lyondell Methanol Company, L.P., a Texas
limited partnership (LMC), which produces methanol.
In this prospectus, we refer to Lyondell, its wholly owned and majority
owned subsidiaries, and its ownership interest in equity affiliates as "we" or
"us," unless we specifically state otherwise or the context indicates
otherwise. Lyondell is a Delaware corporation with principal executive offices
located at 1221 McKinney Street, Suite 700, Houston, Texas 77010 (Telephone:
(713) 652-7200).
THE SUBSIDIARY GUARANTORS
Lyondell Chemical Nederland, Ltd., ARCO Chemical Technology, Inc. and ARCO
Chemical Technology, L.P. may jointly and severally and unconditionally
guarantee our payment obligations under any series of debt securities offered
by this prospectus, as set forth in a related prospectus supplement. We
sometimes refer to these companies in this prospectus as the "subsidiary
guarantors." Lyondell Chemical Nederland, Ltd. and ARCO Chemical Technology,
Inc. are both Delaware corporations and ARCO Chemical Technology, L.P. is a
Delaware limited partnership. The subsidiary guarantors have principal
executive offices located at c/o Lyondell Chemical Company, 1221 McKinney
Street, Suite 700, Houston, Texas 77010 (Telephone: (713) 652-7200).
3
RISK FACTORS
You should carefully consider the following matters, in addition to the
other information we have provided in this prospectus, the accompanying
prospectus supplement and the documents we incorporate by reference, before
reaching a decision regarding an investment in our securities.
The cyclicality of the chemical and refining industries may cause significant
fluctuation in our income and cash flow.
Our historical operating results reflect the cyclical and volatile nature of
the supply-demand balance in both the chemical and refining industries. These
industries historically have experienced alternating periods of inadequate
capacity and tight supply, causing prices and profit margins to increase,
followed by periods when substantial capacity is added, resulting in
oversupply, declining capacity utilization rates and declining prices and
profit margins. The cyclicality of these industries results in volatile profits
and cash flow over the business cycle.
Currently, there is overcapacity in the chemical industry. Moreover, a
number of participants in the chemical industry either have added or are
expecting to add 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 has depressed and may continue to depress
our and/or our joint ventures' volumes and margins. Such excess industry
capacity and weak demand for our products, as well as higher energy and raw
material prices last year, contributed to a significant decline in our EBITDA
during 2001 compared to 2000 and may continue to do so.
External factors beyond our and our joint ventures' control can cause
fluctuations in demand for our products and in our prices and margins, which
may negatively affect income and cash flow.
External factors can also cause significant fluctuations in demand for our
and our joint ventures' products and volatility in the price of raw materials
and other operating costs and can magnify the impact of economic cycles on us
and our joint ventures' businesses. Examples of external factors include:
. general economic conditions;
. competitor actions;
. international events and circumstances; and
. governmental regulation in the United States and abroad.
Demand for our products and our joint ventures' products is influenced by
general economic conditions. For example, during 2000 and in the first half of
2001, uncertainty regarding the global economy reduced market demand for some
of our and our joint ventures' products, which adversely affected our results
of operations. This reduction in market demand continued through 2001 until the
first quarter of 2002, during which we observed an increase in market demand.
In addition, a number of our products and our joint ventures' products are
highly dependent on durable goods markets, such as the housing and automotive
markets, which are themselves particularly cyclical. Many of our and our joint
ventures' products are components of other chemical products that, in turn, are
subject to the supply-demand balance of both the chemical and refining
industries and general economic conditions. For example, MTBE is used as a
blending component in gasoline, and therefore a substantial decline in gasoline
prices could result in decreased profitability from MTBE sales. If the global
economy does not improve, demand for our and our joint ventures' products and
our income and cash flow would be adversely affected.
We and our joint ventures may reduce production at or idle a facility for an
extended period of time or exit a business because of high raw material prices,
an oversupply of a particular product and/or a lack of demand
4
for that particular product, which makes production uneconomical. These
temporary outages sometimes last for several quarters or, in certain cases,
longer and cause us or our joint ventures to incur costs, including the
expenses of the outages and the restart of these facilities. It is possible
that factors like increases in raw material costs or lower demand in the future
will cause us or our joint ventures to further reduce operating rates or idle
facilities or exit uncompetitive businesses.
We and our joint ventures sell commodity products in highly competitive markets
and face significant price pressure.
We and our joint ventures sell our products in highly competitive markets.
Due to the commodity nature of certain of our and our joint ventures' products,
competition in these markets is based primarily on price and to a lesser extent
on product performance, product quality, product deliverability and customer
service. As a result, we and our joint ventures generally are not able to
protect our market position for these products by product differentiation and
may not be able to pass on cost increases to our customers. Accordingly,
increases in raw material and other costs may not necessarily correlate with
changes in prices for these products, either in the direction of the price
change or in magnitude. In addition, some of our and our joint ventures'
competitors may be able to drive down product prices. Moreover, some of our and
our joint ventures' competitors may have greater financial, technological and
other resources than ours, and may be better able to withstand changes in
market conditions. For certain products, our and our joint ventures'
competitors may be able to respond more quickly to new or emerging technologies
and changes in customer requirements than we can. The occurrence of any of
these events could adversely affect our financial condition and results of
operations.
Rising costs of raw materials and energy may result in increased operating
expenses and reduced results of operations.
We and our joint ventures purchase large amounts of raw materials and energy
for our business. The cost of these raw materials and energy, in the aggregate,
represents a substantial portion of our operating expenses. The prices of raw
materials and energy generally follow price trends of, and vary with market
conditions for, crude oil and natural gas, which may be highly volatile and
cyclical. Raw material costs began increasing during 1999 due to higher oil and
gas prices. These increases continued through 1999, and prices remained at high
levels during 2000. Surging natural gas costs late in 2000 and in the first
half of 2001 increased both the costs of natural gas liquids-based raw
materials, primarily ethane, as well as the cost of utilities. In the first
quarter of 2001, our results of operations and Equistar's results of operations
were significantly affected by the rising cost of natural gas. Benchmark
natural gas prices in the U.S. spiked at nearly $10 per million BTUs in January
2001, compared to a historical price range of $1.50 to $2.50 per million BTUs
in the period from 1991 to 1999. After the January 2001 spike, natural gas
prices began to decrease, reaching $2.30 per million BTUs in December 2001;
however, benchmark natural gas prices for the year still averaged $4.28 per
million BTUs, or 10 percent higher than in 2000. Our operating expenses and
Equistar's operating expenses will likely increase if these costs increase.
In addition, higher natural gas prices early in 2001 adversely affected the
ability of many domestic chemicals producers to compete internationally since
U.S. producers are disproportionately reliant on natural gas as a feedstock and
an energy source. In addition to the impact that this has had on Equistar's
exports, reduced competitiveness of U.S. producers also has in the past
increased the availability of chemicals in North America as U.S. production
that would otherwise have been sold overseas was instead offered for sale
domestically, resulting in excess supply and lower prices in North America.
We have risks resulting from significant amounts of debt.
As of March 31, 2002, Lyondell had outstanding debt of approximately $3.84
billion, and Equistar had outstanding debt of approximately $2.29 billion. Our
level of debt and the limitations imposed on us by our existing or future debt
agreements could have significant consequences on our business and future
prospects, including the following:
. we may not be able to obtain necessary financing in the future for
working capital, capital expenditures, debt service requirements or other
purposes;
5
. our less leveraged competitors could have a competitive advantage because
they have greater flexibility to utilize their cash flow to improve their
operations; and
. we could be more vulnerable in the event of a downturn in our business
that would leave us less able to take advantage of significant business
opportunities and to react to changes in market or industry conditions.
Lyondell's, Equistar's and LCR's bank credit facilities and Lyondell's and
Equistar's indentures relating to their secured debt securities impose
restrictions on each of Lyondell, Equistar and LCR. These credit facilities and
indentures contain customary covenants that, subject to exceptions, restrict
the ability of each of Lyondell, Equistar and LCR to incur additional debt or
liens, dispose of assets, make restricted payments (as defined in the
agreements) or merge or consolidate with other entities. In addition, the
credit facilities require the maintenance of specified financial ratios as
provided in the agreements. The breach of these covenants could permit the
lenders to declare the loans immediately payable and could permit the lenders
under the credit facilities to terminate future lending commitments.
Shared control of joint ventures involving Lyondell may delay decisions or
actions.
A substantial portion of our operations is conducted through joint ventures.
We share control of these joint ventures with third parties.
Our forecasts and plans with respect to these joint ventures assume that our
joint venture partners will observe their obligations with respect to the joint
ventures. In the event that any of our 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 we would be
required to increase our level of commitment in order to give effect to such
plans.
As with any such joint venture arrangements, differences in views among 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 our business and operations.
Lyondell or any of the other owners of the joint ventures may transfer
control of their joint venture interests or engage in mergers or other business
combination transactions with a third party or one or more of the other owners
that could result in a change of control of Lyondell or the joint venture or
the other owners. In many instances, such a transfer would be subject to an
obligation to first offer the other owners an opportunity to purchase the
interest. Lyondell and the other joint venture owners have discussed, and from
time to time may continue to discuss, in connection with their ordinary course
dialog regarding the joint ventures or otherwise, transactions that could
result in a transfer or modification, directly or indirectly, of their
ownership in a joint venture. We cannot be certain that any of the joint
venture owners will not sell, transfer or otherwise modify their ownership
interest in a joint venture, whether in a transaction involving third parties
and/or one or more of the other owners. Upon a transfer of an interest in
Equistar, the partnership agreement and key agreements between Equistar and its
owners would remain in place and may not be modified without the consent of all
of the owners, but the transfer could affect the governance of Equistar,
particularly because Equistar's partnership agreement requires unanimous
approval for some decisions.
Equistar's credit facility provides that an event of default occurs if any
combination of Lyondell, Millennium and Occidental ceases to collectively hold
at least a 50 percent interest. LCR's credit facility provides that an event of
default occurs if Lyondell and CITGO cease to individually or collectively hold
at least a 35 percent interest. In addition, LCR's credit facility provides
that an event of default occurs if (i) Lyondell transfers its interest as a
member of LCR to a person other than an affiliate or (ii) neither CITGO nor any
of its affiliates is a member of LCR.
6
Distributions of cash from our joint ventures may be restricted.
We conduct a substantial amount of our operations through our joint
ventures. Our ability to meet our debt service and other obligations is
dependent, in part, upon the receipt of distributions from our joint ventures.
LCR's credit facility prohibits the payment of distributions to us during an
event of default thereunder. Subject to the provisions of the applicable debt
agreements, future borrowings by our joint ventures may contain other
restrictions or prohibitions on the payment of distributions by such joint
ventures to us. Dependent upon applicable state law, our joint ventures may be
limited in amounts that they are permitted to pay as distributions on their
equity interests. Our joint ventures' ability to distribute cash to us is also
dependent upon their economic performance, which is dependent on a variety of
factors, including factors described elsewhere in the "Risk Factors" section of
this prospectus. For example, Equistar did not make any distributions to its
owners in 2001, as its results of operations have been adversely affected by
increasing industry capacity for the products it sells, higher raw material
prices and reduced demand due to weak economic conditions.
LCR's crude oil supply agreement with PDVSA Petroleo, S.A. (PDVSA Oil) is
important to LCR's operations because it reduces the volatility of earnings and
cash flow. The agreement is currently subject to litigation and subject to the
risk of enforcing judgments against non-United States affiliates of a sovereign
nation and force majeure risks.
Most of the crude oil used by LCR as a feedstock for its refinery is
purchased under the crude supply agreement with PDVSA Oil, an affiliate of
Petroleos de Venezuela, S.A. (PDVSA), which was entered into in 1993. 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 and energy costs, (ii) certain
actual costs and (iii) a deemed margin, which varies according to the grade of
crude oil or other feedstock delivered. The actual refining margin earned by
LCR may vary from the formula amount 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. A
disparate increase in the price of heavy crude oil relative to the prices for
its products, such as experienced in 1999, has the tendency to make continued
performance of its obligations under the crude supply agreement less attractive
to PDVSA Oil.
Under the crude supply agreement, PDVSA Oil is required to sell, and LCR is
required to purchase, 230,000 barrels per day of extra heavy crude, which
constitutes approximately 86 percent of the LCR refinery's refining capacity of
268,000 barrels per day of crude oil. By letter dated April 16, 1998, PDVSA Oil
informed LCR that the Venezuelan government, through the Ministry of Energy and
Mines, had instructed that production of certain grades of crude oil be
reduced. The letter stated that PDVSA Oil declared itself in a force majeure
situation and that PDVSA Oil would reduce deliveries of crude oil. Such
reductions in deliveries were purportedly based on announced OPEC production
cuts. LCR began receiving reduced deliveries of crude oil from PDVSA Oil in
August 1998, amounting to 195,000 barrels per day in that month. LCR was
advised by PDVSA Oil in May 1999 of a further reduction in the deliveries of
crude oil supplied under the crude supply agreement to 184,000 barrels per day,
effective May 1999.
On several occasions since then, PDVSA Oil further reduced crude oil
deliveries, although it made payments under a different provision of the crude
supply agreement in partial compensation for such reductions. Subsequently,
PDVSA Oil unilaterally increased deliveries of crude oil to LCR to 195,000
barrels per day effective April 2000, to 200,000 barrels per day effective July
2000 and to 230,000 barrels per day effective October 2000.
7
During 2001, PDVSA Oil declared itself in a force majeure situation, but did
not reduce crude oil deliveries to LCR during 2001. In January 2002, PDVSA Oil
again declared itself in a force majeure situation and stated that crude oil
deliveries could be reduced by up to 20.3 percent beginning March 1, 2002. In
February 2002, LCR was advised by PDVSA Oil that deliveries of crude oil to LCR
in March 2002 would be reduced to approximately 198,000 barrels per day.
Lyondell currently expects second quarter 2002 deliveries under the crude
supply agreement to average 190,000 barrels per day. The recent political
uncertainty in Venezuela has not affected crude oil deliveries, the crude
supply agreement or related matters to date, and the long-term effects of these
events, if any, are not yet clear.
LCR has consistently contested the validity of PDVSA Oil's and PDVSA's
reductions in deliveries under the crude supply agreement. The parties have
different interpretations of the provisions of the contracts concerning the
delivery of crude oil. The contracts do not contain dispute resolution
procedures, and the parties have been unable to resolve their commercial
dispute. As a result, on February 1, 2002, LCR filed a lawsuit against PDVSA
and PDVSA Oil in connection with the January 2002 force majeure declaration, as
well as the claimed force majeure from April 1998 to September 2000.
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. All of the crude oil supplied by PDVSA Oil under the crude
supply agreement is produced in the Republic of Venezuela, which has
experienced economic difficulties and attendant social and political changes in
recent years. 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 to LCR as the crude supply
agreement.
In 1999, PDVSA announced its intention to renegotiate the crude supply
agreements with all third parties, including LCR. In light of PDVSA's announced
intent, we cannot assure you that PDVSA Oil will continue to perform its
obligations under the crude supply agreement. However, it has confirmed that it
expects to honor its commitments if a mutually acceptable restructuring of the
crude supply agreement is not achieved. From time to time, Lyondell and PDVSA
have had discussions covering both a restructuring of the crude supply
agreement and a broader restructuring of the LCR partnership. We are unable to
predict whether changes in either arrangement will occur.
If the crude supply agreement is modified or terminated or this source of
crude oil is otherwise interrupted due to production difficulties, OPEC-
mandated supply cuts, political or economic events in Venezuela or other
factors, LCR could experience significantly lower earnings and cash flows. The
parties each have a right to transfer their interests in LCR to unaffiliated
third parties in certain circumstances, subject to reciprocal rights of first
refusal. 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 or reduction in supplies thereunder
could adversely affect LCR, since LCR would have to purchase all or a portion
of its crude oil feedstocks in the merchant market, which could subject LCR to
significant volatility and price fluctuations. We cannot assure you that
alternative crude oil supplies with similar margins will be available for
purchase by LCR.
Operating problems in our business may adversely affect our income and cash
flow.
The occurrence of material operating problems at our facilities or any of
our joint ventures' facilities, 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 our operations as a
whole, during and after the period of such operational difficulties. Our income
and cash flow are dependent on the continued operation of our various
production facilities, our joint ventures' production facilities and the
ability to complete
8
construction projects on a schedule. Although we and our joint ventures take
precautions to enhance the safety of operations and minimize the risk of
disruptions, our operations and our joint ventures' operations, along with the
operations of other members of the chemical and refining industries, are
subject to hazards inherent in chemical manufacturing and refining and the
related storage and transportation of raw materials, products and wastes. These
hazards include:
. pipeline leaks and ruptures;
. explosions;
. fires;
. severe weather and natural disasters;
. mechanical failure;
. unscheduled downtime;
. labor difficulties;
. transportation interruptions;
. remediation complications;
. chemical spills;
. discharges or releases of toxic or hazardous substances or gases;
. storage tank leaks;
. other environmental risks; and
. potential terrorist acts.
Some of 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, we are also subject to present and future
claims with respect to workplace exposure, workers' compensation and other
matters. We are not fully insured against all potential hazards incident to our
business, including losses resulting from war risks or terrorist acts. As a
result of market conditions, premiums and deductibles for certain insurance
policies can increase substantially, and in some instances, certain insurance
may become unavailable or available only for reduced amounts of coverage. If we
were to incur a significant liability for which we were not fully insured, it
could have a material adverse effect on our financial position.
Our operations and assets are subject to extensive environmental, health and
safety laws and regulations.
We cannot predict with certainty the extent of our, our subsidiaries' or our
joint ventures' future liabilities and costs under environmental, health and
safety laws and regulations and we cannot assure you that they will not be
material. In addition, we, our subsidiaries or our joint ventures may face
liability for alleged personal injury or property damage due to exposure to
chemicals or other hazardous substances at our facilities or chemicals that we
otherwise manufacture and sell, handle or own. Although these claims have not
historically had a material impact on our, our subsidiaries' or our joint
ventures' operations, a significant increase in the number or success of these
claims could materially adversely affect our, our subsidiaries' or our joint
ventures' business, financial condition, operating results or cash flow.
The production facilities of Lyondell, Equistar, LCR and LMC are generally
required to have permits and licenses regulating air emissions, discharges to
water and storage, treatment and disposal of hazardous wastes. Companies such
as Lyondell and its joint ventures that are permitted to treat, store or
dispose of hazardous
9
waste and maintain underground storage tanks pursuant to the Resource
Conservation and Recovery Act (RCRA) also are required to meet certain
financial responsibility requirements. We believe that we and our joint
ventures have all permits and licenses generally necessary to conduct business
or, where necessary, are applying for additional, amended or modified permits
and that we and our joint ventures meet applicable financial responsibility
requirements.
The policy of each of Lyondell, Equistar, LCR and LMC is to be in compliance
with all applicable environmental laws. Lyondell and Equistar also are each
committed to Responsible Care(R), an international chemical industry initiative
to enhance the industry's responsible management of chemicals. Our subsidiaries
and joint ventures (together with the industries in which they operate) are
subject to extensive national, state and local environmental laws and
regulations concerning emissions to the air, discharges onto land or waters and
the generation, handling, storage, transportation, treatment and disposal of
waste materials. Many of these laws and regulations provide for substantial
fines and potential criminal sanctions for violations. Some of these laws and
regulations are subject to varying and conflicting interpretations. In
addition, we cannot accurately predict future developments, such as
increasingly strict environmental laws, and inspection and enforcement
policies, as well as higher compliance costs therefrom, which might affect the
handling, manufacture, use, emission or disposal of products, other materials
or hazardous and nonhazardous waste. Some risk of environmental costs and
liabilities is inherent in particular operations and products of ours, and our
joint ventures, as it is with other companies engaged in similar businesses,
and there is no assurance that material costs and liabilities will not be
incurred. In general, however, with respect to the capital expenditures and
risks described above, we do not expect that we or our joint ventures will be
affected differently from the rest of the chemicals and refining industry where
our facilities or our joint ventures' facilities are located.
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 raw materials and finished products and the
costs of the storage and disposal of wastewater. Also, U.S. "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 us) may be required to bear all of such
costs regardless of fault, legality of the original disposal or ownership of
the disposal site. As of March 31, 2002, our, our subsidiaries' and our joint
ventures' environmental liability for future assessment and remediation costs
at the above-mentioned sites totaled $28 million. The liabilities per site
range from less than $1 million to $11 million and are expected to be incurred
over the next two to seven years. It is possible that new information about the
sites for which the accrual has been established, new technology or future
developments, such as involvement in other Comprehensive Environmental Response
Compensation and Liability Act, as amended (CERCLA), RCRA, Texas Natural
Resource Conservation Commission (TNRCC) or other comparable state or foreign
law investigations, could require us to reassess our potential exposure related
to environmental matters.
The LCR refinery contains on-site solid-waste landfills, which were used in
the past to dispose of waste generated at this facility. It is anticipated that
corrective measures will be necessary to comply with federal and state
requirements with respect to this facility. We are also subject to certain
assessment and remedial actions at the LCR refinery under RCRA. In addition, we
negotiated an order with the TNRCC for assessment and remediation of
groundwater and soil contamination at the refinery. We also have liabilities
under RCRA and various state and foreign government regulations related to five
current plant sites and three former plant sites. We are also responsible for a
portion of the remediation of certain off-site waste disposal facilities. We
are currently contributing funds to the cleanup of two waste sites located near
Houston, Texas under CERCLA and the Superfund Amendments and Reauthorization
Act of 1986. Lyondell has also been named, along with several other companies,
as a potentially responsible party for a third CERCLA site near Houston, Texas.
The $28 million accrual described above includes, where applicable, costs to
address these RCRA, TNRCC and CERCLA matters. In addition, Lyondell is involved
in administrative proceedings or lawsuits relating to a minimal number of other
CERCLA sites. We estimate, based upon currently available information, that
10
potential loss contingencies associated with the latter CERCLA sites,
individually and in the aggregate, are not significant.
In some cases, compliance with environmental, health and safety laws and
regulations can be achieved only by capital expenditures. In the years ended
December 31, 2001, 2000 and 1999, we, our subsidiaries and our joint ventures
(on a 100 percent basis) spent, in the aggregate, approximately $34 million,
$20 million and $21 million, respectively, for environmentally related capital
expenditures at existing facilities. We, our subsidiaries and our joint
ventures anticipate spending approximately $99 million for 2002 and
approximately $240 million for 2003 for environmentally related capital
expenditures. The increased level of such expenditures for 2001, 2002 and 2003
is a result of, among other things, implementation of a plan for the
Houston/Galveston region to comply with the ozone standard, as discussed below.
The eight-county Houston/Galveston region has been designated a severe
nonattainment area for ozone by the U.S. Environmental Protection Agency (EPA).
As a result, in December 2000, the TNRCC submitted a plan to the EPA to reach
and demonstrate compliance with the ozone standard by November 2007. Ozone is a
product of the reaction between volatile organic compounds (VOCs) and nitrogen
oxides (NOx) in the presence of sunlight, and is a principal component of smog.
The proposed plans for meeting the ozone standard focus on significant
reductions in NOx emissions. NOx emission reduction controls must be installed
at LCR's refinery and each of Lyondell's two facilities and Equistar's six
facilities in the Houston/Galveston region during the next several years, well
in advance of the 2007 deadline. Compliance with the provisions of the plan
will result in increased capital investment during the next several years and
higher annual operating costs for Equistar, Lyondell and LCR. As a result,
Lyondell estimates that aggregate related capital expenditures could total
between $400 million and $500 million for Lyondell, Equistar and LCR before the
2007 deadline. Lyondell's direct share of such expenditures could total between
$65 million and $80 million. Lyondell's proportionate share of Equistar's
expenditures could total between $85 million and $105 million, and Lyondell's
proportionate share of LCR's expenditures could total between $75 million and
$95 million. The timing and amount of these expenditures are subject to
regulatory and other uncertainties, as well as obtaining the necessary permits
and approvals.
Lyondell has been actively involved with a number of organizations to help
solve the ozone problem in the most cost-effective manner and, in January 2001,
Lyondell and the BCCA Appeal Group (a group of industry participants) filed a
lawsuit against the TNRCC to encourage adoption of their alternative plan to
achieve the same air quality improvement with less negative economic impact on
the region. In June 2001, the parties entered into a consent order with respect
to the lawsuit. Pursuant to the consent order, the TNRCC agreed to review, by
June 2002, the scientific data for ozone formation in the Houston/Galveston
region. In October 2001, the EPA approved the TNRCC plan, and the BCCA Appeal
Group filed a timely petition for judicial review of that action on January 11,
2002. If the TNRCC scientific review supports the industry group proposal, the
TNRCC has agreed to revise the NOx emission reduction requirements set forth in
its original plan. Any revisions will have to be approved by the EPA. Such
revisions of the NOx emission reduction requirements are expected to reduce the
estimated capital investments for NOx reductions required by Lyondell, Equistar
and LCR to comply with the plans for meeting the ozone standards. However,
there can be no guarantees as to the ultimate capital cost of implementing any
final plan developed to ensure ozone attainment by the 2007 deadline.
The Clean Air Act specified certain emissions standards for vehicles
beginning in the 1994 model year and required the EPA to study whether further
emissions reductions from vehicles were necessary, starting no earlier than the
2004 model year. In 1998, the EPA concluded that more stringent vehicle
emissions standards were needed and that additional controls on gasoline and
diesel were necessary to meet these emissions standards. New standards for
gasoline were finalized in 1999 and will require refiners to produce a low
sulfur gasoline by 2004, with final compliance by 2006. A new "on-road" diesel
standard was adopted in January 2001 and will require refiners to produce ultra
low sulfur diesel by June 2006, with some allowance for a conditional phase-in
period that could extend final compliance until 2009. Lyondell estimates that
these
11
standards will result in increased capital investment for LCR, totaling between
$175 million to $225 million for the new gasoline standards and $250 million to
$300 million for the new diesel standards, between now and the implementation
dates. Lyondell's share of LCR's capital expenditures would be between $250
million and $300 million. In addition, these standards could result in higher
operating costs for LCR. Equistar's business may also be impacted if these
standards increase the cost for processing fuel components.
Pending or future legislative initiatives or litigation may adversely affect
Lyondell's MTBE sales.
In the United States, the Clean Air Act Amendments of 1990 set minimum
levels for oxygenates, such as MTBE, in gasoline sold in areas not meeting
specified air quality standards. In Europe, demand for MTBE has benefited from
new legislation in the 15-nation European Union. The so-called "Auto/Oil
Legislation" aimed at reducing air pollution from vehicle emissions was enacted
in 1998, and refineries increased consumption of MTBE to meet the new blending
requirements. However, while studies by federal and state agencies and other
world organizations have shown that MTBE is safe for use in gasoline, is not
carcinogenic and is effective in reducing automotive emissions, 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
watercraft has led to public concern, and some litigation, that MTBE may, in
certain limited circumstances, affect the taste and odor of drinking water
supplies.
Certain federal and state governmental initiatives have sought either to
rescind the oxygenate requirement for reformulated gasoline or to restrict or
ban the use of MTBE. On April 25, 2002, the U.S. Senate passed its version of
an omnibus energy bill, which, among other things, would ban the use of MTBE as
a fuel oxygenate. The Senate bill is not law and must be reconciled with the
version of the omnibus energy bill passed by the U.S. House of Representatives
in 2001. Lyondell does not expect these initiatives to have a significant
impact on MTBE margins and volumes in 2002. Lyondell's MTBE sales represented
approximately 35 percent of its total 2001 revenues.
We have developed technologies to convert TBA into alternate gasoline
blending components should it be necessary to reduce MTBE production in the
future. However, implementation of such technologies would require additional
capital investment. The profit margin on such alternate gasoline blending
components could differ from those historically realized on MTBE.
Our international operations are subject to exchange rate fluctuations,
exchange controls, political risks and other risks relating to foreign
operations.
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. 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 Lyondell.
Lyondell and Equistar pursue acquisitions, dispositions and joint ventures.
Lyondell and Equistar both seek opportunities to maximize efficiency or
value through various transactions. These transactions may include various
business combinations, purchases or sales of assets or contractual arrangements
or joint ventures that are intended to result in the realization of synergies,
the creation of efficiencies or the generation of cash to reduce debt. To the
extent permitted under Lyondell's and Equistar's credit facilities and other
debt, some of these transactions may be financed by additional borrowings by
Lyondell or Equistar or by the issuance of equity securities. Although these
transactions are expected to yield longer-term benefits if the expected
efficiencies and synergies of the transactions are realized, they could
adversely affect the results of operations of Lyondell or Equistar in the short
term because of the costs associated with such transactions.
12
Our quarterly results will vary significantly.
Our quarterly results will vary significantly depending on various factors,
most of which are beyond our control, including:
. changes in product prices, product demand, including seasonal demand for
certain products, such as MTBE, raw material costs or supply
arrangements;
. the scheduling of plant turnarounds;
. fluctuations in shipments to customers;
. adverse developments in foreign or domestic markets;
. regional business activities;
. changes in interest rates;
. foreign exchange fluctuations; and
. unanticipated expenses.
13
FORWARD-LOOKING INFORMATION
This prospectus, including the information we incorporate by reference,
includes forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
You can identify our forward-looking statements by words such as "estimate,"
"project," "predict," "believe," "expect," "anticipate," "plan," "forecast,"
"budget," "goal" or other words that convey the uncertainty of future events or
outcomes. When considering these forward-looking statements, you should keep in
mind the risk factors and other cautionary statements contained in this
prospectus, any prospectus supplement and the documents we have incorporated by
reference.
The forward-looking statements are not guarantees of future performance, and
we caution you not to rely unduly on them. We have based many of these forward-
looking statements on expectations and assumptions about future events that may
prove to be inaccurate. While our management considers these expectations and
assumptions to be reasonable, they are inherently subject to significant
business, economic, competitive, regulatory and other risks, contingencies and
uncertainties, most of which are difficult to predict and many of which are
beyond our control. These risks, contingencies and uncertainties relate to,
among other matters, the following:
. the cyclical nature of the chemical and refining industries;
. uncertainties associated with the United States and worldwide economies;
. substantial chemical and refinery capacity additions resulting in
oversupply and declining prices and margins;
. the availability and cost of raw materials and utilities;
. access to capital markets;
. technological developments;
. current and potential governmental regulatory actions in the United
States and other countries;
. potential terrorist attacks;
. operating interruptions (including leaks, explosions, fires, mechanical
failure, unscheduled downtime, labor difficulties, transportation
interruptions, spills and releases, and other environmental risks); and
. our ability to implement our business strategies, including cost
reductions.
We have discussed some of these factors in more detail in the "Risk Factors"
section of this prospectus and in our other filings with the SEC, including
those filings incorporated by reference into this prospectus. These factors are
not necessarily all the important factors that could affect us or our joint
ventures. We advise you that you should (i) be aware that important factors we
do not refer to above could affect the accuracy of our forward-looking
statements and (ii) use caution and common sense when considering our forward-
looking statements. We do not intend to update these statements unless the
securities laws require us to do so.
14
USE OF PROCEEDS
Unless we inform you otherwise in the prospectus supplement, we will use the
net proceeds from the sale of the offered securities for general corporate
purposes. These purposes may include funding working capital requirements,
capital expenditures, repayment and refinancing of indebtedness and repurchases
and redemptions of securities, and may initially be invested in short-term
marketable securities. We will determine any specific allocation of the net
proceeds of an offering to a specific purpose at the time of such offering and
will describe the specific allocation in the related prospectus supplement.
RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges for each of the periods shown is as
follows:
For the Three Years Ended December 31,
Months Ended ------------------------
March 31, 2002 2001 2000 1999 1998 1997
-------------- ---- ---- ---- ---- ----
Ratio of earnings to fixed charges
(a).................................. -- -- 2.0x -- 1.2x 4.6x
- --------
(a) For the three months ended March 31, 2002 and for the years ended December
31, 2001 and 1999, earnings were insufficient to cover fixed charges by $75
million, $224 million and $104 million, respectively. The ratio of earnings
to fixed charges has been calculated including amounts for Lyondell and its
current proportionate share of amounts for Equistar (57 percent through May
15, 1998 and 41 percent thereafter), LCR (58.75 percent for the year ended
December 31, 1998 and thereafter, 86 percent for the first quarter of 1997
and 58.49 percent for the remainder of 1997) and LMC (75 percent for the
year ended December 31, 1998 and thereafter), for the periods in which
Lyondell accounted for its respective investment in each such joint venture
using the equity method of accounting. Lyondell remains a guarantor of $300
million of Equistar's debt and a co-obligor with Equistar for $31 million
of debt for which Equistar assumed responsibility in connection with its
formation. Fixed charges include interest expense plus capitalized interest
and the portion of rental expense that represents an interest factor.
15
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the debt securities sets forth
certain general terms that may apply to the debt securities that we may issue
separately, upon conversion of preferred stock, upon exercise of a warrant, in
connection with a stock purchase contract, as part of a stock purchase unit or
upon exercise of a subscription right from time to time in the form of one or
more series. The particular terms of any debt securities will be described in
the prospectus supplement relating to those debt securities. For purposes of
this "Description of Debt Securities" section of this prospectus, references to
the terms "Lyondell," "us" or "we" mean Lyondell Chemical Company only, unless
we state otherwise or the context clearly indicates otherwise.
Any senior secured debt securities will be issued in one or more series
under an indenture, as supplemented or amended from time to time, between us
and an institution that we will name in the related prospectus supplement, as
trustee. Any senior unsecured debt securities will be issued in one or more
series under an indenture, as supplemented or amended form time to time,
between us and an institution that we will name in the related prospectus
supplement, as trustee. Any senior subordinated debt securities will be issued
in one or more series under an indenture, as supplemented or amended from time
to time, between us and an institution that we will name in the related
prospectus supplement, as trustee. Any junior subordinated debt securities will
be issued in one or more series under an indenture, as supplemented or amended
from time to time, between us and an institution that we will name in the
related prospectus supplement, as trustee. For ease of reference, we will refer
to the indenture relating to any senior secured or senior unsecured debt
securities as the senior indenture(s). For ease of reference, we will refer to
the indenture relating to the senior subordinated debt securities as the senior
subordinated indenture, to the indenture relating to the junior subordinated
debt securities as the junior subordinated indenture, and to the senior
subordinated indenture together with the junior subordinated indenture as the
subordinated indentures.
This summary of the terms and provisions of the debt securities and the
indentures is not complete. You should read the forms of the indentures which
are filed as exhibits to the registration statement of which this prospectus
forms a part. Whenever we refer to particular defined terms of the indentures
in this section or in a prospectus supplement, we are incorporating these
definitions into this prospectus or the prospectus supplement.
General
We will issue the debt securities in one or more series in accordance with a
supplemental indenture or a resolution of our board of directors or a committee
of the board. Unless otherwise specified in a prospectus supplement, each
series of senior secured debt securities will rank equally in right of payment
with all of our other senior secured obligations, and each series of our senior
unsecured debt securities will rank equally in right of payment with all of our
other senior unsecured obligations. Any senior unsecured debt securities will
be effectively subordinated to all of our existing and future senior secured
debt, to the extent of the value securing our senior secured debt. Each series
of senior and junior subordinated debt securities will be subordinated and
junior in right of payment to the extent and in the manner described in the
subordinated indenture and any supplemental indenture relating to the
subordinated debt securities. Except as otherwise provided in a prospectus
supplement, the indentures do not limit our ability to incur additional secured
or unsecured debt, whether under the indentures, any other indenture that we
may enter into in the future or otherwise. For more information, you should
read the prospectus supplement relating to a particular offering of securities.
The applicable prospectus supplement will describe the following terms of
the series of debt securities with respect to which this prospectus is being
delivered:
. the title of the debt securities of the series and whether the series is
senior secured or senior unsecured debt securities or senior or junior
subordinated debt securities;
. any limit on the aggregate principal amount of the debt securities of the
series;
. the person to whom any interest on a debt security shall be payable, if
other than the person in whose name that debt security is registered on
the regular record date;
16
. the date or dates on which the principal and premium, if any, of the debt
securities of the series are payable or the method of that determination
or the right to defer any interest payments;
. the rate or rates (which may be fixed or variable) at which the debt
securities will bear interest, if any, or the method of determining the
rate or rates;
. the date or dates from which interest will accrue and the interest
payment dates on which any such interest will be payable or the method by
which the dates will be determined;
. the regular record date for any interest payable on any interest payment
date and the basis upon which interest will be calculated if other than
that of a 360-day year of twelve 30-day months;
. the place or places where the principal of and premium, if any, and any
interest on the debt securities of the series will be payable, if other
than the Borough of Manhattan, The City of New York;
. the period or periods within which, the date or dates on which, the price
or prices at which and the terms and conditions upon which the debt
securities of the series may be redeemed, in whole or in part, at our
option or otherwise;
. our obligation, if any, to redeem, purchase or repay the debt securities
of the series pursuant to any sinking fund or otherwise or at the option
of the holders and the period or periods within which, the price or
prices at which, the currency or currencies including currency unit or
units in which and the terms and conditions upon which, the debt
securities will be redeemed, purchased or repaid, in whole or in part;
. the terms, if any, upon which the debt securities of the series may be
convertible into or exchanged for other debt securities, preferred stock
or common stock of Lyondell and the terms and conditions upon which the
conversion or exchange may be effected, including the initial conversion
or exchange price or rate, the conversion or exchange period and any
other additional provisions;
. the denominations in which any debt securities will be issuable, if other
than denominations of $1,000 and any integral multiple thereof;
. the currency in which payment of principal of and premium, if any, and
interest on debt securities of the series shall be payable, if other than
United States dollars;
. any index, formula or other method used to determine the amount of
payments of principal of and premium, if any, and interest on the debt
securities;
. if the principal amount payable at the stated maturity of debt securities
of the series will not be determinable as of any one or more dates before
the stated maturity, the amount that will be deemed to be the principal
amount as of any date for any purpose, including the principal amount
which will be due and payable upon any maturity other than the stated
maturity or which will be deemed to be outstanding as of any date (or, in
any such case, the manner in which the deemed principal amount is to be
determined), and if necessary, the manner of determining the equivalent
thereof in United States currency;
. if the principal of or premium, if any, or interest on any debt
securities is to be payable, at our election or the election of the
holders, in one or more currencies or currency units other than that or
those in which such debt securities are stated to be payable, the
currency, currencies or currency units in which payment of the principal
of and premium, if any, and interest on such debt securities shall be
payable, and the periods within which and the terms and conditions upon
which such election is to be made;
. if other than the stated principal amount, the portion of the principal
amount of the debt securities which will be payable upon declaration of
the acceleration of the maturity of the debt securities or provable in
bankruptcy;
. the applicability of, and any addition to or change in, the covenants and
definitions then set forth in the applicable indenture or in the terms
then set forth in such indenture relating to permitted consolidations,
mergers or sales of assets;
17
. any changes or additions to the provisions of the applicable indenture
dealing with defeasance, including the addition of additional covenants
that may be subject to our covenant defeasance option;
. whether any of the debt securities are to be issuable in permanent global
form and, if so, the depositary or depositaries for such global security
and the terms and conditions, if any, upon which interests in such debt
securities in global form may be exchanged, in whole or in part, for the
individual debt securities represented thereby in definitive registered
form, and the form of any legend or legends to be borne by the global
security in addition to or in lieu of the legend referred to in the
applicable indenture;
. the appointment of any trustee, any authenticating or paying agents,
transfer agent or registrars;
. the terms, if any, of any guarantee of the payment of principal, premium,
if any, and interest with respect to debt securities of the series and
any corresponding changes to the provisions of the applicable indenture
as then in effect;
. the terms, if any, of the transfer, mortgage, pledge or assignment as
security for the debt securities of the series of any properties, assets,
moneys, proceeds, securities or other collateral, including whether
certain provisions of the Trust Indenture Act are applicable and any
corresponding changes to provisions of the applicable indenture as then
in effect;
. any addition to or change in the events of default with respect to the
debt securities of the series and any change in the right of the trustee
or the holders to declare the principal, premium, if any, and interest
with respect to the debt securities due and payable;
. any applicable subordination provisions for any subordinated debt
securities in addition to or in lieu of those set forth in this
prospectus;
. if the securities of the series are to be secured, the property covered
by the security interest, the priority of the security interest, the
method of perfecting the security interest and any escrow arrangements
related to the security interest; and
. any other terms of the debt securities, including any restrictive
covenants.
We may sell debt securities at a substantial discount below their stated
principal amount or debt securities that bear no interest or bear interest at a
rate which at the time of issuance is below market rates. We will describe the
material United States federal income tax consequences, accounting and other
special considerations applicable to the debt securities in the applicable
prospectus supplement.
If the purchase price of any of the debt securities is payable in one or
more foreign currencies or currency units or if any debt securities are
denominated in one or more foreign currencies or currency units or if the
principal of, premium, if any, or interest, if any, on any debt securities is
payable in one or more foreign currencies or currency units, we will set forth
the restrictions, elections, specific terms and other information with respect
to the issue of debt securities and such foreign currency or currency units in
the applicable prospectus supplement.
Form, Exchange, Registration and Transfer
Unless otherwise indicated in the applicable prospectus supplement, 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 us 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. The 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.
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We have 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
us with respect to any series of debt securities, we may at any time rescind
the designation of the transfer agent or approve a change in the location
through which any such transfer agent acts. We are 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. We may
at any time designate additional transfer agents with respect to any series of
debt securities.
In the event of any redemption in part, we shall not be required to:
. 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 the notice or
. 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.
Book-Entry System
The provisions set forth in this "Book-Entry System" section of this
prospectus will apply to the debt securities of any series if the prospectus
supplement relating to such series so indicates.
Unless otherwise indicated in the applicable prospectus supplement, the debt
securities of such series will be represented by one or more global securities
registered with The Depository Trust Company, or DTC, or a depositary named in
the prospectus supplement relating to such series. Except as set forth below, a
global security may be transferred, in whole but not in part, only to the
depositary or another nominee of the depositary.
The general terms of the depositary arrangement with DTC, with respect to a
series of debt securities are described in the "Description of the Depository"
section of this prospectus, unless otherwise indicated in the prospectus
supplement relating to the series. We anticipate that the following provisions
will generally apply to depositary arrangements.
Unless otherwise provided in the applicable prospectus supplement, debt
securities represented by a global security will be exchangeable for debt
securities in definitive form of like tenor as such global security in
denominations of $1,000 and in any greater amount that is an integral multiple
thereof if:
. the depositary notifies us and the trustee that it is unwilling or unable
to continue as depositary for such global security or if at any time the
depositary ceases to be a clearing agency registered under the Exchange
Act and a successor depositary is not appointed by us within 90 days;
. we, in our sole discretion, determine not to have all of the debt
securities represented by a global security and notify the trustee; or
. there shall have occurred and be continuing an event of default or an
event which, with the giving of notice or lapse of time, or both, would
constitute an event of default with respect to the debt securities.
Any debt security that is exchangeable pursuant to the preceding sentence is
exchangeable for debt securities registered in such names as the depositary
shall instruct the trustee. It is expected that such instructions may be based
upon directions received by the depositary from its participants with respect
to ownership of beneficial interests in such global security. Subject to the
foregoing, a global security is not exchangeable except for a global security
or global securities of the same aggregate denominations to be registered in
the name of the depositary or its nominee.
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Description of the Depository
Unless otherwise provided in the applicable prospectus supplement, DTC (New
York, NY), will act as securities depository for the debt securities. The debt
securities will be issued as fully registered securities registered in the name
of Cede & Co. (DTC's partnership nominee) or such other name as may be
requested by an authorized representative of DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants (the "Direct
Participants") deposit with DTC. DTC also facilitates the settlement among
Direct Participants of securities transactions, such as transfers and pledges,
in deposited securities through electronic computerized book-entry changes in
Direct Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. DTC is owned by a number of its Direct Participants and by
the New York Stock Exchange, Inc., the American Stock Exchange LLC and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and
trust companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly (the "Indirect
Participants"). The rules applicable to DTC and its Direct and Indirect
participants are on file with the Securities and Exchange Commission.
Purchases of the debt securities under the DTC system must be made by or
through Direct Participants, which will receive a credit for the debt
securities on DTC's records. The ownership interest of each actual purchaser of
each debt security, a "beneficial owner," is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial owners will not receive
written confirmation from DTC of their purchase, but beneficial owners are
expected to receive written confirmations providing details of the transaction,
as well as periodic statements of their holdings, from the Direct or Indirect
Participant through which the beneficial owner entered into the transaction.
Transfers of ownership interests in the debt securities are to be accomplished
by entries made on the books of Direct and Indirect Participants acting on
behalf of beneficial owners. Beneficial owners will not receive certificates
representing their ownership interests in the debt securities, except in the
event that use of the book-entry system for the debt securities is
discontinued.
To facilitate subsequent transfers, all debt securities deposited by Direct
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. or such other name as may be requested by an authorized
representative of DTC. The deposit of debt securities with DTC and their
registration in the name of Cede & Co. or such other nominee do not effect any
change in beneficial ownership. DTC has no knowledge of the actual beneficial
owners of the debt securities; DTC's records reflect only the identity of the
Direct Participants to whose accounts such debt securities are credited, which
may or may not be the beneficial owners. The Direct and Indirect Participants
will remain responsible for keeping account of their holdings on behalf of
their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Neither DTC nor Cede & Co. (nor such DTC nominee) will consent or vote with
respect to the debt securities. Under its usual procedures, DTC will mail an
omnibus proxy to us as soon as possible after the record date. The Omnibus
Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the debt securities are credited on the record
date (identified in a listing attached to the omnibus proxy).
20
Redemption proceeds, distributions and dividend payments on the debt
securities will be made to Cede & Co., or such other nominee as may be
requested by an authorized representative of DTC. DTC's practice is to credit
Direct Participants' accounts upon DTC's receipt of funds and corresponding
detail information from us on the payment date in accordance with their
respective holdings shown on DTC's records. Payments by Direct or Indirect
Participants to beneficial owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of the Direct or Indirect Participant and not of DTC, or the
agent, or us, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of redemption proceeds, distributions and
dividends to Cede & Co. (or such other nominee as may be requested by an
authorized representative of DTC) is our responsibility, disbursement of such
payments to Direct Participants shall be the responsibility of DTC, and
disbursement of such payments to the beneficial owners shall be the
responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depositary with
respect to the debt securities at any time by giving reasonable notice to us.
Under such circumstances, in the event that a successor securities depository
is not obtained, debt security certificates will be printed and delivered.
We may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor securities depository). In that event, debt
security certificates will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that we believe are reliable, but we take no
responsibility for the accuracy thereof.
Option to Defer Interest Payments or to Pay-In-Kind
If so described in the applicable prospectus supplement, we will have the
right, at any time and from time to time during the term of any series of debt
securities, to defer the payment of interest for the number of consecutive
interest payment periods as may be specified in the applicable prospectus
supplement, subject to the terms, conditions and covenants, if any, specified
in such prospectus supplement. However, any extension period may not extend
beyond the stated maturity of the final installment of principal of the series
of debt securities. If provided in the applicable prospectus supplement, we
will have the right, at any time and from time to time during the term of any
series of debt securities, to make payments of interest by delivering
additional debt securities of the same series.
Covenants
The covenants, if any, that will apply to a particular series of debt
securities will be set forth in the indenture relating to such series of debt
securities. Except as otherwise specified in the applicable prospectus
supplement with respect to any series of debt securities, we may remove or add
covenants without the consent of holders of the securities.
Defeasance
Except as otherwise specified in the applicable prospectus supplement with
respect to any series of debt securities, we may, at our option, elect:
. to have substantially all of our obligations 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), which we call legal defeasance; or
. to have substantially all of our obligations terminated with respect to
certain restrictive covenants of the applicable indenture, which we call
covenant defeasance.
21
In the event of legal or covenant defeasance, certain events of default will no
longer constitute events of default with respect to any debt securities, upon
the deposit with the applicable trustee, in trust, of money or U.S. government
obligations, or a combination thereof, which through the payment of interest
and principal on those monies or obligations in accordance with their terms
will provide sufficient money to pay all the principal of and premium, if any,
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.
Except as otherwise specified in the applicable prospectus supplement with
respect to any series of debt securities, we will be 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, such opinion must be based upon a ruling from the United
States Internal Revenue Service or a change in law to that effect.
The Guarantees
Our payment obligations under any series of debt securities may be jointly
and severally, fully and unconditionally guaranteed by the subsidiary
guarantors. If a series of debt securities are so guaranteed, the subsidiary
guarantors will execute a notation of guarantee or a supplemental indenture as
further evidence of their guarantee. In addition, Lyondell may fully and
unconditionally guarantee the payment obligations of the subsidiary guarantors
under the subsidiary guarantees of any series of debt securities. The
applicable prospectus supplement will describe the terms of any guarantee by
the subsidiary guarantors and Lyondell, as well as any covenants of or
restrictions on the subsidiary guarantors or Lyondell under the applicable
indenture.
The obligations of each guarantor under its guarantee will be limited to the
maximum amount that will not result in the obligations of the guarantor under
the guarantee constituting a fraudulent conveyance or fraudulent transfer under
federal or state law. The applicable prospectus will set forth the provisions
under which a guarantor may be released and discharged from its guarantee.
If a series of debt securities is guaranteed by and is designated as
subordinate to our senior indebtedness (as defined in the "Subordination of
Subordinated Debt Securities" section of this prospectus), then the guarantees
by those guarantors will be subordinated to the senior indebtedness of the
guarantors on substantially the same extent as the series is subordinated to
our senior indebtedness. See the "Subordination of Subordinated Debt
Securities" section of this prospectus.
Events of Default
Unless otherwise provided in the prospectus supplement with respect to any
series of debt securities, the following will be events of default under an
indenture with respect to the debt securities of such series issued under such
indenture:
. default by us for 30 days in payment of any interest or any additional
amounts with respect to any debt securities of such series;
. default by us in the payment of (i) any principal of any debt securities
of such series at its maturity or (ii) premium, if any, on any debt
securities of such series when the same becomes due and payable;
. default by us for 30 days in the deposit of any sinking fund payment,
when and as due by the terms of a debt security of such series;
. default by us in compliance with any of our 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 percent in principal amount of the then
outstanding debt securities affected by such default;
22
. certain events involving bankruptcy, insolvency or reorganization of
Lyondell; and
. any other event of default provided with respect to debt securities of
that series.
The indentures will 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 any 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.
Unless otherwise provided in the applicable prospectus supplement with
respect to any series of debt securities, each indenture will provide that if
an event of default with respect to any debt securities of any series at the
time outstanding occurs, and is continuing (other than an event of default
involving the bankruptcy, insolvency or reorganization of Lyondell), the
applicable trustee or the holders of at least 25 percent in principal amount of
the then outstanding debt securities of the series affected by the default 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. If an
event of default involving the bankruptcy, insolvency or reorganization of
Lyondell occurs, then the principal of and accrued and unpaid interest on all
then outstanding debt securities shall become immediately due and payable
without any declaration, notice or other act on the part of the trustee or any
holder. 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 acceleration and its
consequences.
Unless otherwise provided in the applicable prospectus supplement with
respect to any series of debt securities, each indenture will provide that no
holder of a debt security of any series may pursue any remedy under such
indenture unless:
. the holder gives the applicable trustee written notice of a continuing
event of default with respect to the series;
. the holders of at least 25 percent in principal amount of the then
outstanding debt securities of the series make a written request to the
applicable trustee to pursue such remedy;
. such holder or holders offer to the applicable trustee indemnity
reasonably satisfactory to the trustee;
. the trustee shall have failed to act for a period of 60 days after
receipt of the notice and offer of indemnity; and
. during such 60-day period, the holders of a majority in principal amount
of the debt securities of that series do not give the 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.
Unless otherwise provided in the applicable prospectus supplement with
respect to any series of debt securities, each indenture will provide 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 us to
periodically file with the applicable trustee a written statement as to our
compliance with the indenture covenants.
Modification and Waiver
Unless otherwise provided in the applicable prospectus supplement with
respect to any series of debt securities, modifications and amendments of each
indenture or the debt securities may be made by us and the applicable trustee
with the consent of the holders of a majority in principal amount of the
outstanding debt
23
securities of all series affected by such amendment (acting as one class) under
the applicable indenture. However, no such modification, amendment, supplement
or waiver may, without the consent of each holder of any outstanding debt
security so affected, accomplish the following events:
. reduce the amount of debt securities whose holders must consent to an
amendment, supplement or waiver;
. reduce the rate of or change the time for payment of interest, including
default interest, on any debt security;
. reduce the principal of or premium, if any, on, or change the stated
maturity of, any debt security;
. 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;
. change any obligation of us to pay additional amounts with respect to any
debt security;
. make any debt security payable in money other than that stated in the
debt security;
. 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;
. make any change in the percentage of principal amount of debt securities
necessary to waive compliance with certain provisions of the applicable
indenture; or
. 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 holder without the consent of the holder of each subordinated debt
security then outstanding affected by the modification or amendment. Unless
otherwise provided in the applicable prospectus supplement with respect to any
series of debt securities, the indentures will provide that amendments and
supplements to, or waivers of any provision of, such indenture may be made by
us and the trustee without the consent of any holders of debt securities in
certain circumstances, including, among other things:
. to cure any ambiguity, omission, defect or inconsistency;
. to provide for the assumption of the obligations of us under the
indenture upon the merger, consolidation or sale or other disposition of
all or substantially all of our assets;
. to provide for uncertificated debt securities in addition to or in place
of certificated debt securities, or to provide for the issuance of bearer
debt securities (with or without coupons);
. to secure any series of debt securities or to add guarantees of any
series of debt securities;
. to comply with any requirement in order to effect or maintain the
qualification of the indenture under the Trust Indenture Act; or
. to make any change that does not adversely affect any outstanding debt
securities of any series in any material respect.
Unless otherwise provided in the applicable prospectus supplement with
respect to any series of debt securities, the indentures will 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 a series or all
series, as the case may be, except (i) 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 (ii) 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.
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Subordination of Subordinated Debt Securities
Unless otherwise indicated in the applicable prospectus supplement, the
following provisions will apply to the subordinated debt securities.
Senior Subordinated Debt Securities
The senior subordinated indenture may provide that the senior subordinated
debt securities are subordinate in right of payment to the prior payment in
full of all of our senior indebtedness, which includes our indebtedness and
other monetary obligations (including expenses and fees) under our 9.625
percent senior secured notes, series A, due 2007, the 9.875 percent senior
secured notes, Series B, due 2007, and 9.5 percent senior secured notes, due
2008, our bank credit facility and any senior secured or senior unsecured debt
securities that we may issue under a senior indenture.
The holders of all of our senior indebtedness outstanding at the time of
acceleration will first be entitled to receive payment in full of all amounts
due on our senior indebtedness before the holders of the senior subordinated
debt securities will be entitled to receive any payment upon the principal of,
or premium, if any, or interest, if any, on the senior subordinated debt
securities in the following circumstances:
. upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the
benefit of creditors, or any bankruptcy, insolvency, debt restructuring
or similar proceedings in connection with any insolvency or bankruptcy
proceeding of Lyondell;
. (i) in the event and during the continuation of any default in the
payment of principal, premium or interest on any senior indebtedness
beyond any applicable grace period or (ii) in the event that any event of
default with respect to any of our senior indebtedness has occurred and
is continuing, permitting the holders of that senior indebtedness (or a
trustee) to accelerate the maturity of that senior indebtedness, whether
or not the maturity is in fact accelerated (unless, in the case of (i) or
(ii), the payment default or event of default has been cured or waived or
ceased to exist and any related acceleration has been rescinded) or (iii)
in the event that any judicial proceeding is pending with respect to a
payment default or event of default described in (i) or (ii); or
. in the event that any senior subordinated debt securities have been
declared due and payable before their stated maturity.
By reason of this subordination, in the event of liquidation or insolvency,
holders of senior subordinated debt securities may recover less than holders of
our senior indebtedness and may recover more than the holders of junior
subordinated debt securities.
For purposes of the subordination provisions, the payment, issuance and
delivery of cash, property or securities, other than stock and some of our
subordinated securities, upon conversion or exchange of a senior subordinated
debt security will be deemed to constitute payment upon the principal of the
senior subordinated debt security.
Junior Subordinated Debt Securities
The junior subordinated debt indenture may provide that the junior
subordinated debt securities are subordinate in right of payment to the prior
payment in full of all of our senior debt, which includes any senior
subordinated debt securities that we may issue under the senior subordinated
indenture.
The holders of all of our senior debt outstanding at the time of
acceleration will first be entitled to receive payment in full of all amounts
due on our senior debt before the holders of the junior subordinated debt
25
securities will be entitled to receive any payment upon the principal of, or
premium, if any, or interest, if any, on the junior subordinated debt
securities in the following circumstances:
. upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the
benefit of creditors, or any bankruptcy, insolvency, debt restructuring
or similar proceedings in connection with any insolvency or bankruptcy
proceeding of Lyondell;
. (i) in the event and during the continuation of any default in the
payment of principal, premium or interest on any senior debt beyond any
applicable grace period or (ii) in the event that any event of default
with respect to any of our senior debt has occurred and is continuing,
permitting the holders of that senior debt (or a trustee) to accelerate
the maturity of that senior debt, whether or not the maturity is in fact
accelerated (unless, in the case of (i) or (ii), the payment default or
event of default has been cured or waived or ceased to exist and any
related acceleration has been rescinded) or (iii) in the event that any
judicial proceeding is pending with respect to a payment default or event
of default described in (i) or (ii); or
. in the event that any junior subordinated debt securities have been
declared due and payable before their stated maturity.
By reason of this subordination, in the event of liquidation or insolvency,
holders of the junior subordinated debt securities may recover less than
holders of our senior debt, including the holders of any senior subordinated
debt securities.
For purposes of the subordination provisions, the payment, issuance and
delivery of cash, property or securities, other than stock and some of our
subordinated securities, upon conversion or exchange of a junior subordinated
debt security will be deemed to constitute payment upon the principal of the
junior subordinated debt security.
Definitions
Unless otherwise indicated in the applicable prospectus supplement, the
following definitions are applicable to the subordinated indentures relating to
the subordinated debt securities. You should refer to the applicable
subordinated indenture for the full definition of each term.
"Debt" means, without duplication, with respect to any person or entity,
whether recourse is to all or a portion of the assets of that person or entity
and whether or not contingent:
. every obligation of that person or entity for money borrowed;
. every obligation of that person or entity evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in
connection with the acquisition of property, assets or businesses;
. every reimbursement obligation of that person or entity with respect to
letters of credit, bankers' acceptances or similar facilities issued for
the account of that person or entity;
. every obligation of that person or entity issued or assumed as the
deferred purchase price of property or services;
. all indebtedness of that person or entity, whether incurred on or prior
to the date of the applicable subordinated indenture or incurred later,
for claims in respect of derivative products, including interest rate,
foreign exchange rate and commodity forward contracts, options and swaps
and similar arrangements; and
. every obligation of the type referred to in the foregoing clauses of
another person or entity and all dividends of another person or entity
the payment of which, in either case, that person or entity has
26
guaranteed or is responsible or liable, directly or indirectly, as
obligor, guarantor or otherwise; provided that this definition does not
include trade accounts payable or accrued liabilities arising in the
ordinary course of business.
"Senior debt" means the principal of, and premium, if any, and interest if
any, on debt (as defined above), whether incurred on or prior to the date of
the junior subordinated indenture or created later, unless, in the instrument
creating or evidencing the same or pursuant to which the same is outstanding,
it is provided that the obligations are not superior in right of payment to the
junior subordinated debt securities or to other debt that is equal with, or
subordinated to, the junior subordinated debt securities. Senior debt will not
include any debt (as defined above) that, when incurred and without respect to
any election under Section 1111(b) of the Bankruptcy Reform Act of 1978, was
without recourse to us, debt to any of our employees, and the junior
subordinated debt securities.
"Senior indebtedness" means the principal of, and premium, if any, and
interest on all indebtedness for borrowed money, whether incurred on or prior
to the date of the senior subordinated indenture or incurred later, excluding
(i) the subordinated debt securities, (ii) obligations that by their terms are
not superior in right of payment to the senior subordinated securities or to
other indebtedness that is equal with, or subordinated to, the senior
subordinated securities and (iii) any deferrals, renewals or extensions of any
indebtedness for money borrowed. The term "indebtedness for money borrowed" as
used in the prior sentence means any obligation of, or any obligation
guaranteed by, Lyondell for the repayment of borrowed money, whether or not
evidenced by bonds, debentures, notes or other written instruments, and any
deferred obligation for the payment of the purchase price of property or
assets.
Unless otherwise provided in the prospectus supplement, neither subordinated
indenture limits or prohibits the incurrence of additional senior debt or
senior indebtedness, either of which may include indebtedness that is senior to
the subordinated debt securities, but subordinate to other obligations of ours.
In connection with the future issuances of securities, the subordinated
indentures may be amended or supplemented to limit the amount of indebtedness
incurred by us.
The applicable prospectus supplement may further describe the provisions, if
any, applicable to the subordination of the subordinated debt securities of a
particular series.
Consolidation, Merger and Sale of Assets
Unless otherwise provided in the applicable prospectus supplement with
respect to any series of debt securities, the indentures will provide that we
will not, in any transaction or series of transactions, consolidate with or
merge into any person, or sell, convey, transfer or otherwise dispose of all or
substantially all of its assets to any person, unless:
. either (i) we shall be the continuing corporation or (ii) the person (if
other than Lyondell) formed by such consolidation or into which Lyondell
is merged, or to which such sale, lease, conveyance, transfer or other
disposition shall be made, is a corporation 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, premium, if any, and interest on and
additional amounts with respect to all the debt securities and the
performance of our covenants and obligations under the indenture and the
debt securities;
. immediately after giving effect to the transaction or series of
transactions, no default or event of default shall have occurred and be
continuing or would result from the transaction;
. we deliver to the applicable trustee an officer's certificate and an
opinion of counsel, each stating that the transaction and the
supplemental indenture comply with the applicable indenture; and
. we comply with any provisions provided for with respect to any series of
debt securities.
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Conversion or Exchange
If and to the extent indicated in the applicable prospectus supplement, the
debt securities of any series may be convertible or exchangeable into other
securities. The specific terms on which debt securities of any series may be so
converted or exchanged will be set forth in the applicable prospectus
supplement. These terms may include provisions for conversion or exchange,
either mandatory, at the option of the holder, or at our option, in which case
the number of shares of other securities to be received by the holders of debt
securities would be calculated as of a time and in the manner stated in the
applicable prospectus supplement.
Governing Law
The indentures, the guarantees and the debt securities will be governed by
and construed in accordance with the laws of the State of New York.
Regarding the Trustee
Each indenture will contain certain limitations on the right of the
applicable trustee, should it become a creditor of us, 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, the trustee generally must eliminate any
conflicting interest it acquires or resign.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of Lyondell Chemical Company currently consists
of 250,000,000 shares of common stock, par value $1.00 per share, and
80,000,000 shares of preferred stock, par value $.01 per share. The following
summary description of our capital stock is qualified in its entirety by
reference to our certificate of incorporation, and our by-laws, each as
amended, copies of which have been filed as exhibits to Lyondell's Annual
Report on Form 10-K. You should read our certificate of incorporation and by-
laws as currently in effect for more details regarding the provisions we
describe below and for other provisions that may be important to you.
Common Stock
We are currently authorized to issue 250,000,000 shares of common stock, of
which 117,564,920 shares of common stock were outstanding at March 31, 2002.
Holders of our common stock are entitled:
. to receive any dividends as may from time to time be declared by our
board of directors;
. to one vote per share on all matters on which the holders of our common
stock are entitled to vote;
. to act by written consent in lieu of voting at a meeting of the holders
of our common stock; and
. to share ratably in all of our assets available for distribution to the
holders of our common stock, in the event of our liquidation, dissolution
or winding up.
The holders of a majority of the shares of common stock represented at a
meeting can elect all of the directors.
Shares of our common stock are not liable to further calls or assessments by
us for any of our liabilities that may be imposed on the holders of our common
stock under the laws of the State of Delaware, the state of our incorporation.
There are no preemptive rights for our common stock in our certificate of
incorporation.
The transfer agent, registrar and dividend disbursing agent for our common
stock is the American Stock Transfer & Trust Company.
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Preferred Stock
We are currently authorized to issue up to 80,000,000 shares of preferred
stock, $.01 par value per share. Our board of directors will 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 the holders of our common stock
for any specific issue of preferred stock.
Our board of directors has adopted a policy providing that no future
issuance of preferred stock will be effected without the approval of the
holders of our common stock unless the board of directors (whose decision shall
be conclusive) determines in good faith:
. that the issuance is primarily for the purpose of facilitating a
financing, an acquisition or another proper corporate objective or
transaction; and
. that any anti-takeover effects of the issuance are not our primary
purpose for effecting such issuance.
Our board of directors will not amend or revoke this policy without giving
written notice to the holders of all outstanding shares of our stock. However,
no such amendment or revocation will be effective, without the approval of the
holders of our common stock, to permit a subsequent issuance of preferred stock
for the primary purpose of obstructing a takeover of Lyondell by any person who
has, prior to such written notice to stockholders, notified the board of
directors of its desire to pursue a takeover of Lyondell.
The prospectus supplement will describe the terms of any preferred stock we
offer, including without limitation the specific designation, number of shares,
liquidation preference, maturity (if any), redemption or repurchases
provisions, dividend rates and payment dates, voting rights, whether
convertible or exchangeable into other securities and any other rights,
preferences, privileges, limitations and restrictions.
Rights to Purchase Common Stock
On December 8, 1995, our board of directors declared a dividend of one right
for each outstanding share of our common stock, par value $1.00 per share, to
the holders of our common stock of record at the close of business on December
20, 1995. Each right entitles the registered holder to purchase from us one
share of our common stock at a purchase price of $80.00 per share of common
stock, subject to adjustment. 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 between Lyondell 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
will be distributed. The rights will separate from our common stock and a
"distribution date" will occur, with certain exceptions, upon the earlier of:
. ten days following a public announcement of the existence of an
"Acquiring Person"; or
. ten business days following the commencement of a tender offer or an
exchange offer that would result in a person 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 our 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:
. 1,000,000 shares of our 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
. one share less than 50 percent of the shares of our common stock
outstanding at any time.
29
In certain circumstances prior to the time a person has become an Acquiring
Person, the distribution date may be deferred by our board of directors.
Certain inadvertent acquisitions will not result in a person's becoming an
Acquiring Person if the person promptly divests itself of a sufficient amount
of our common stock. Until the distribution date:
. the rights will be evidenced by the common stock certificates (together
with this summary of the rights or bearing the notation referred to
below) and will be transferred with and only with our common stock
certificates;
. new common stock certificates issued after December 20, 1995 will contain
a notation incorporating the rights agreement by reference; and
. the surrender for transfer of any certificate for our common stock (with
or without a copy of this summary of the 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 us as described below.
In the event (a "Flip-In Event") that a person becomes an Acquiring Person
(except pursuant to a tender or an exchange offer for all outstanding shares of
our common stock at a price and on terms that a majority of our independent
directors determines to be fair to and otherwise in the best interests of us
and our 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 our common stock (or, in certain circumstances, cash, property or
other securities of Lyondell) 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) we are 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 our 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, we may
redeem the rights in whole, but not in part, at a price of $.0005 per right,
payable, at our option, in cash, shares of our 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 our common stock then outstanding, we 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 our common stock, and/or other equity securities
deemed to have the same value as one share of our 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 Lyondell, 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 us, stockholders may, depending upon the
circumstances, recognize taxable income in the event that the rights become
exercisable for our common stock (or other consideration) or for the common
stock of the acquiring company as set forth above or are exchanged as provided
in the preceding paragraph.
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The purchase price payable, and the number of shares of our 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, our common
stock, (ii) if holders of our common stock are granted certain rights or
warrants to subscribe for our common stock or securities convertible into our
common stock at less than the current market price of our common stock or (iii)
upon the distribution to holders of our 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 our board of directors 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 us on terms
not approved by our board of directors, except pursuant to an 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 has been filed as an exhibit to our 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 our common stock, except where otherwise provided
by law or our 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
our books. Our common stock does not have cumulative voting rights. Holders of
any of our preferred stock, if any, will be entitled to vote upon the election
of directors or upon any questions affecting us only if and to the extent that
the holders of any series of our preferred stock are granted voting rights
fixed for such series by our board of directors in the resolution creating such
series.
Delaware Section 203
We are a Delaware corporation and are subject to Section 203 of the General
Corporation Law of Delaware. In general, Section 203 prevents an "interested
stockholder" (defined generally as a person owning 15 percent or more of our
outstanding voting stock) from engaging in a "business combination" (as defined
in Section 203) with us for three years following the time that person becomes
an interested stockholder unless (i) before that person became an interested
stockholder, our board of directors approved the transaction in which the
interested stockholder became an interested stockholder or approved the
business combination, (ii) upon completion of the transaction that resulted in
the interested stockholder's becoming an interested stockholder, the interested
stockholder owns at least 85 percent of our voting stock outstanding at the
time the transaction commenced (excluding stock held by directors who are also
officers of Lyondell 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 an exchange offer) or (iii) at the time of
or subsequent to the transaction in which that person became an interested
stockholder, the business combination is approved by our board of directors and
authorized at a meeting of stockholders by the affirmative vote of the holders
of at least two-thirds of our outstanding 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 Lyondell
and a person who was not an interested stockholder during the previous three
years or who
31
became an interested stockholder with the approval of a majority of our
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.
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. Our certificate of
incorporation limits the liability of our directors to us or the holders of our
common stock to the fullest extent permitted by Delaware law. Specifically, a
director will not be personally liable for monetary damages for breach of a
director's fiduciary duty as a director, except for the following liabilities:
. for any breach of the director's duty of loyalty to us or the holders of
our common stock;
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the General Corporation Law of
Delaware; or
. for any transaction from which the director derived an improper personal
benefit.
The inclusion of this provision in our 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 us and the holders of
our common stock.
Provisions of Lyondell's By-Laws
Certain provisions of our by-laws establish time periods during which
appropriate stockholder proposals must be delivered to us for consideration at
special and annual meetings called by us. Our by-laws provide, among other
things, that stockholders making nominations for our board of directors at, or
bringing other business before, an annual or a special meeting of stockholders
must provide timely written notice to us thereof, timely notice being required
to be no later than 90 days in advance of the meeting. However, if 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 SEC 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 our 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 our by-laws and the
provisions of Section 203 of the General Corporation Law of Delaware could have
the effect of delaying, deferring or preventing a change in control of
Lyondell. This could be the case, notwithstanding that a majority of the
stockholders might benefit from such a change in control or offer.
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MARKET FOR COMMON STOCK AND COMMON STOCK DIVIDENDS
Our common stock is listed on the New York Stock Exchange under the symbol
"LYO." The reported high and low sales prices of our common stock on the New
York Stock Exchange (New York Stock Exchange Composite Tape) for each quarter
from January 1, 2000 through March 31, 2002, inclusive, were as set forth
below.
Period High Low
------ ------ -------
2000:
First Quarter.................................................. 14.875 8.4375
Second Quarter................................................. 19.500 13.5000
Third Quarter.................................................. 17.750 11.0000
Fourth Quarter................................................. 16.750 11.3125
2001:
First Quarter.................................................. 17.950 12.625
Second Quarter................................................. 17.650 13.940
Third Quarter.................................................. 15.400 9.450
Fourth Quarter................................................. 15.930 10.900
2002:
First Quarter.................................................. 17.590 12.070
Second Quarter (through May 14, 2002).......................... 17.140 14.180
During the last two years, Lyondell has declared $.225 per share quarterly
cash dividends (which were paid in the subsequent quarter). On May 2, 2002 our
Board of Directors declared a dividend of $.225 per share for the second
quarter of 2002, payable June 17, 2002. The declaration and payment of
dividends is at the discretion of our board of directors. The future
declaration and payment of dividends and the amount of the dividend will be
dependent upon Lyondell's results of operations, financial condition, cash
position and requirements, investment opportunities, future prospects,
contractual restrictions and other factors deemed relevant by our board of
directors. Subject to these considerations and to the legal considerations
discussed in the following paragraph, we currently intend to distribute to our
holders of common stock cash dividends on our common stock at a quarterly rate
of $.225 per share. During 2001, we paid $106 million in dividends. During the
first quarter of 2002, we paid $26 million in dividends.
Lyondell's credit facilities and indentures limit Lyondell's ability to pay
dividends under certain circumstances. In addition, pursuant to a settlement
agreement entered into with the Pension Benefit Guaranty Corporation in 1998,
Lyondell may not pay extraordinary dividends (as defined by regulations under
the Employee Retirement Income Security Act of 1974, as amended) without
providing a letter of credit meeting certain specified requirements. In
February 2002, Lyondell provided a letter of credit meeting these requirements.
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DESCRIPTION OF WARRANTS
We may issue warrants to purchase debt securities, common stock, preferred
stock or other securities. We may issue warrants independently or together with
other securities. Warrants sold with other securities may be attached to or
separate from the other securities. We will issue warrants under one or more
warrant agreements between us and a warrant agent that we will name in the
prospectus supplement. The prospectus supplement relating to any warrants we
offer will include specific terms relating to the offering. The terms will
include some or all of the following:
. the title of the warrants;
. the aggregate number of warrants offered;
. the designation, number and terms of the debt securities, common stock,
preferred stock or other securities purchasable upon exercise of the
warrants and procedures by which those numbers may be adjusted;
. the exercise price of the warrants;
. the dates or periods during which the warrants are exercisable;
. the designation and terms of any securities with which the warrants are
issued;
. if the warrants are issued as a unit with another security, the date on
and after which the warrants and the other security will be separately
transferable;
. if the exercise price is not payable in U.S. dollars, the foreign
currency, currency unit or composite currency in which the exercise price
is denominated;
. any minimum or maximum amount of warrants that may be exercised at any
one time;
. any terms relating to the modification of the warrants; and
. any terms, procedures and limitations relating to the transferability,
exchange or exercise of the warrants.
The description in the prospectus supplement will not necessarily be
complete, and reference will be made to the warrant agreements, which will be
filed with the SEC.
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND SECURITIES PURCHASE UNITS
We may issue stock purchase contracts, including contracts obligating
holders to purchase from us, and us to sell to the holders, a specified number
of shares of common stock at a future date or dates. The price per share of
common stock and number of shares of common stock may be fixed at the time the
stock purchase contracts are issued or may be determined by reference to a
specific formula set forth in the stock purchase contracts. The stock purchase
contracts may be issued separately or as a part of securities purchase units
consisting of a stock purchase contract and either (i) our debt securities or
(ii) debt obligations of third parties, including U.S. Treasury securities,
which will secure the holders' obligations to purchase the common stock under
the stock purchase contracts. The stock purchase contracts may require holders
to secure their obligations thereunder in a specified manner. The stock
purchase contracts also may require us to make periodic payments to the holders
of the securities purchase units or vice versa and such payments may be
unsecured or prefunded on some basis.
The prospectus supplement will describe the terms of any stock purchase
contracts or securities purchase units. The description in the prospectus
supplement will not necessarily be complete, and reference will be made to the
stock purchase contracts, and, if applicable, collateral or depositary
arrangements, relating to the stock purchase contracts or securities purchase
units. Material United States federal income tax considerations applicable to
the securities purchase units and the stock purchase contracts will also be
discussed in the applicable prospectus supplement.
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PLAN OF DISTRIBUTION
We may sell the offered securities in and outside the United States through
underwriters or dealers, directly to purchasers, including our affiliates,
through agents or through a combination of any of these methods. The prospectus
supplement will include the following information:
. the terms of the offering;
. the names of any underwriters, dealers or agents, and the respective
amounts of securities underwritten or purchased by each of them;
. the name or names of any managing underwriter or underwriters;
. the purchase price of the securities from us;
. the net proceeds to us from the sale of the securities;
. any delayed delivery arrangements;
. any underwriting discounts, commissions and other items constituting
underwriters' compensation;
. any initial public offering price;
. any discounts or concessions allowed or reallowed or paid to dealers; and
. any commissions paid to agents.
Sale through Underwriters or Dealers
If we use underwriters in the sale, the underwriters will acquire the
securities for their own account. The underwriters may resell the securities
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. Underwriters may offer securities to the public either
through underwriting syndicates represented by one or more managing
underwriters or directly by one or more firms acting as underwriters. Unless we
inform you otherwise in the prospectus supplement, the obligations of the
underwriters to purchase the securities will be subject to certain conditions,
and the underwriters will be obligated to purchase all the offered securities
if they purchase any of them. The underwriters may change from time to time any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers.
During and after an offering through underwriters, the underwriters may
purchase and sell the securities in the open market as may be further described
in any prospectus supplement. These transactions may include overallotment and
stabilizing transactions and purchases to cover syndicate short positions
created in connection with the offering. The underwriters may also impose a
penalty bid, which means that 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 the 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. If commenced, the underwriters may discontinue these
activities at any time.
If we use dealers in the sale of securities, we will sell the securities to
them as principals. They may then resell those securities to the public at
varying prices determined by the dealers at the time of resale. We will include
in the prospectus supplement the names of the dealers and the terms of the
transaction.
Direct Sales and Sales through Agents
We may sell the securities directly. In this case, no underwriters or agents
would be involved. We may also sell the securities through agents we designate
from time to time. In the prospectus supplement, we will name any agent
involved in the offer or sale of the offered securities, and we will describe
any commissions payable
35
by us to the agent. Unless we inform you otherwise in the prospectus
supplement, any agent will agree to use its reasonable best efforts to solicit
purchases for the period of its appointment. We may sell the securities
directly to institutional investors or others who may be deemed to be
underwriters within the meaning of the Securities Act of 1933 with respect to
any sale of those securities. We will describe the terms of any such sales in
the prospectus supplement.
Delayed Delivery Contracts
If we so indicate in the prospectus supplement, we may authorize agents,
underwriters or dealers to solicit offers from certain types of institutions to
purchase securities from us at the public offering price under delayed delivery
contracts. These contracts would provide for payment and delivery on a
specified date in the future. The contracts would be subject only to those
conditions described in the prospectus supplement. The prospectus supplement
will describe the commission payable for solicitation of those contracts.
GENERAL INFORMATION
We may have agreements with the agents, dealers and underwriters to
indemnify them against certain civil liabilities, including liabilities under
the Securities Act of 1933, or to contribute with respect to payments that the
agents, dealers or underwriters may be required to make. Agents, dealers and
underwriters may be customers of, engage in transactions with or perform
services for us in the ordinary course of their businesses.
LEGAL OPINIONS
Except as set forth in the applicable prospectus supplement, Baker Botts
L.L.P., Houston, Texas, will issue an opinion about the legality of any debt
securities (whether secured or unsecured or senior or subordinated), common
stock, preferred stock, warrants, stock purchase contracts, securities purchase
units or guarantees we offer through this prospectus. Any underwriters will be
advised about issues relating to any offering by their own legal counsel.
EXPERTS
The consolidated financial statements of Lyondell Chemical Company as of
December 31, 2001 and 2000 and for each of the three years in the period ended
December 31, 2001, incorporated in this prospectus by reference to the Lyondell
Chemical Company Annual Report on Form 10-K for the year ended December 31,
2001, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The consolidated financial statements of Equistar Chemicals, LP as of
December 31, 2001 and 2000 and for each of the three years in the period ended
December 31, 2001, incorporated in this prospectus by reference to the Lyondell
Chemical Company Annual Report on Form 10-K for the year ended December 31,
2001, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The financial statements of LYONDELL-CITGO Refining LP as of December 31,
2001 and 2000 and for each of the three years in the period ended December 31,
2001, incorporated in this prospectus by reference to the Lyondell Chemical
Company Annual Report on Form 10-K for the year ended December 31, 2001, have
been so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
36
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You can read and copy any materials we file with the
SEC at the SEC's public reference room at 450 Fifth Street, N.W., Washington,
D.C. 20549. You can obtain information about the operation of the SEC's public
reference room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a
web site that contains information we file electronically with the SEC, which
you can access over the Internet at http://www.sec.gov, and our electronic SEC
filings are also available from our web site at www.lyondell.com. Information
contained on our web site or any other web site is not incorporated into this
prospectus and does not constitute a part of this prospectus. You can also
obtain information about us at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
This prospectus is part of a registration statement we have filed with the
SEC relating to the securities. This prospectus does not contain all the
information the registration statement sets forth or includes in its exhibits
and schedules, in accordance with the rules and regulations of the SEC, and we
refer you to that omitted information. The statements this prospectus makes
pertaining to the content of any contract, agreement or other document that is
an exhibit to the registration statement necessarily are summaries of their
material provisions, and we qualify them in their entirety by reference to
those exhibits for complete statements of their provisions. The registration
statement and its exhibits and schedules are available at the SEC's public
reference room or through its Web site.
The SEC allows us to incorporate by reference the information we file with
it, which means we can disclose important information to you by referring you
to those documents. The information we incorporate by reference is an important
part of this prospectus, and later information we file with the SEC will
automatically update and supersede that information. We incorporate by
reference the documents listed below, and any future filings we make with the
SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934 until we sell all the offered securities. The documents we incorporate by
reference are:
. our annual report on Form 10-K for the year ended December 31, 2001;
. our quarterly report on Form 10-Q for the quarter ended March 31, 2002;
. our current report on Form 8-K filed on January 11, 2002;
. the description of the common stock, par value $1.00 per share, of
Lyondell contained in Lyondell's registration statement on Form 8-A dated
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
. the description of the rights to purchase common stock contained in
Lyondell's registration statement on Form 8-A dated December 12, 1995, as
such registration statement may be amended from time to time for the
purpose of updating, changing or modifying such description.
We will provide without charge to each person, including any beneficial
owner, to whom a copy of this prospectus has been delivered, upon written or
oral request, a copy of any or all the documents we incorporate by reference in
this prospectus, other than any exhibit to any of those documents, unless we
have specifically incorporated that exhibit by reference into the information
this prospectus incorporates. You may request copies by writing or telephoning
us at the following address:
Lyondell Chemical Company
1221 McKinney Street, Suite 700
Houston, Texas 77010
Attention: Investor Relations
Telephone: (713) 652-7200
You should rely only on the information we have provided or incorporated by
reference in this prospectus or any prospectus supplement. We have not
authorized any person to provide information other than that provided in this
prospectus or any prospectus supplement. We have not authorized anyone to
provide you with different information. We are not making an offer of the
securities in any jurisdiction where the offer is not
37
permitted. You should not assume that the information in this prospectus or any
prospectus supplement is accurate as of any date other than the date on its
cover page or that any information contained in any document we have
incorporated by reference is accurate as of any date other than the date of the
document incorporated by reference. Accordingly, we urge you to review each
document we subsequently file with the SEC and incorporate by reference as we
describe above for updated information.
38
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated May 15, 2002
Prospectus
[LYONDELL LOGO]
Lyondell Chemical Company
One Houston Center, Suite 700
1221 McKinney Street
Houston, Texas 77010
(713) 652-7200
$3,335,000,000
Junior Subordinated Debt Securities
Common Stock
Stock Purchase Contracts
Securities Purchase Units
-----------
Lyondell Trust I
Lyondell Trust II
Lyondell Trust III
Trust Preferred Securities
-----------
The Offering
Consider carefully the Risk Factors We may offer from time to time:
beginning on page 5.
. trust preferred securities,
We will provide additional terms of guaranteed by Lyondell Chemical
our securities in one or more Company;
supplements to this prospectus. You
should read this prospectus and the . junior subordinated debt
related prospectus supplement securities;
carefully before you invest in our
securities. No person may use this . common stock;
prospectus to offer and sell our
securities unless a prospectus . stock purchase contracts; and
supplement accompanies this
prospectus. . securities purchase units,
consisting of a stock purchase
contract and either trust
preferred securities or debt
obligations of third parties.
Our common stock is listed on the New York Stock Exchange under the symbol
"LYO."
-----------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
-----------
The date of this prospectus is , 2002.
Table of Contents
About This Prospectus....................................................... 2
About Lyondell Chemical Company............................................. 3
The Lyondell Trusts......................................................... 3
Risk Factors................................................................ 5
Forward-Looking Information................................................. 15
Use of Proceeds............................................................. 16
Ratio of Earnings to Fixed Charges.......................................... 16
Description of Trust Preferred Securities and Trust Guarantees.............. 17
Description of The Junior Subordinated Debt Securities...................... 20
Description of Capital Stock................................................ 22
Description of Stock Purchase Contracts and Securities Purchase Units....... 28
Plan of Distribution........................................................ 28
General Information......................................................... 29
Legal Opinions.............................................................. 29
Experts..................................................................... 30
Where You Can Find More Information......................................... 30
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we have filed with
the SEC under a "shelf" registration process. Using this process, we may offer
the securities this prospectus describes in one or more offerings with a total
initial offering price of up to $3,335,000,000. This prospectus provides you
with a general description of the securities we may offer. Each time we use
this prospectus to offer securities, we will provide a prospectus supplement
and, if applicable, a pricing supplement. The prospectus supplement and any
pricing supplement will describe the specific terms of that offering. The
prospectus supplement and any pricing supplement may also add to, update or
change the information this prospectus contains. Please carefully read this
prospectus, the prospectus supplement and any pricing supplement, in addition
to the information contained in the documents we refer to in the "Where You Can
Find More Information" section of this prospectus. We have not included
separate financial statements of the trusts in this prospectus. We do not
consider that such financial statements are material to holders of the trust
preferred securities because:
. each trust is a special purpose entity;
. none of the trusts has any operating history or independent operations;
and
. none of the trusts is engaged in, nor will it engage in, any activity
other than issuing preferred and common securities, investing in and
holding Lyondell's junior subordinated debt securities, and engaging in
related activities.
Furthermore, Lyondell's obligations under the junior subordinated debt
securities, the associated indenture, the declarations of trust and the
guarantees provide a full, irrevocable and unconditional guarantee of payments
of distributions and other amounts due on the trust preferred securities. In
addition, we do not expect that the trusts will file reports with the SEC under
the Securities Exchange Act of 1934.
2
ABOUT LYONDELL CHEMICAL COMPANY
Lyondell Chemical Company is a global chemical company with low-cost
operations and leading producer positions in all of its major products.
Lyondell manufactures and markets a variety of intermediate and performance
chemicals, including propylene oxide (PO), propylene glycol (PG), propylene
glycol ethers (PGE), butanediol (BDO), toluene diisocyanate (TDI), styrene
monomer (SM), and tertiary butyl alcohol (TBA) and its derivative methyl
tertiary butyl ether (MTBE), which are collectively known as our intermediate
chemicals and derivatives business.
We currently own 41 percent of Equistar Chemicals, LP, a Delaware limited
partnership, which operates petrochemicals and polymers businesses. On January
31, 2002, we announced an agreement in principle with Occidental Petroleum
Corporation, one of our Equistar partners, to acquire its 29.5 percent share of
Equistar. Following completion of this transaction, which is subject to
completion and execution of definitive documentation, compliance with the
applicable provisions of the partnership agreement and the parent agreement,
approval by Lyondell's stockholders and other customary conditions, Lyondell
will own 70.5 percent of Equistar. Equistar's petrochemicals business
manufactures and markets olefins, oxygenated products, aromatics and specialty
products. Equistar's olefins are ethylene, propylene and butadiene, and its
oxygenated products include ethylene oxide, ethylene glycol, ethanol and MTBE.
Equistar's aromatics are benzene and toluene. Equistar's polymers business
manufactures and markets polyolefins, including high density polyethylene, low
density polyethylene, linear low density polyethylene, polypropylene and
performance polymers. Equistar's performance polymers include enhanced grades
of polyethylene, such as wire and cable insulating resins, and polymeric
powders.
We also own 58.75 percent of LYONDELL-CITGO Refining LP, a Delaware limited
partnership (LCR), which produces refined petroleum products, including
gasoline, low sulfur diesel, jet fuel, aromatics and lubricants. LCR sells its
principal refined products primarily to CITGO Petroleum Corporation (CITGO).
In addition, we own 75 percent of Lyondell Methanol Company, L.P., a Texas
limited partnership (LMC), which produces methanol.
In this prospectus, we refer to Lyondell, its wholly owned and majority
owned subsidiaries, and its ownership interest in equity affiliates as "we" or
"us," unless we specifically state otherwise or the context indicates
otherwise. Lyondell is a Delaware corporation with principal executive offices
located at 1221 McKinney Street, Suite 700, Houston, Texas 77010 (Telephone:
(713) 652-7200).
THE LYONDELL TRUSTS
Each of Lyondell Trust I, Lyondell Trust II and Lyondell Trust III
(together, the "Lyondell Trusts," and each, a "Lyondell Trust") is a statutory
business trust formed under Delaware law through the filing of a certificate of
trust with the Delaware Secretary of State. Each Lyondell Trust's business will
be defined in a declaration of trust, which will be executed by Lyondell, as
sponsor and depositor for each of the trusts, and the trustees for each of the
trusts. Unless stated otherwise in the prospectus supplement, each Lyondell
Trust exists exclusively to:
. issue and sell the trust preferred securities and the trust common
securities;
. invest the gross proceeds of the sale of the trust preferred securities
and trust common securities in a specific series of junior subordinated
debt securities of Lyondell; and
. engage in only those other activities necessary, convenient or
incidental to carrying out the first two purposes.
Unless stated otherwise in the prospectus supplement, all of the trust
common securities will be owned by us. Unless stated otherwise in the
prospectus supplement, the trust common securities will rank equally, and
payments will be made on the trust common securities pro rata, with the trust
preferred securities. However,
3
upon an event of default under the indenture governing the subordinated debt
securities, holders of the trust preferred securities have a right to be paid
before the holders of the trust common securities on distribution and on
liquidation, redemption and otherwise.
Unless otherwise stated in the prospectus supplement, Lyondell will acquire
trust common securities having an aggregate liquidation amount equal to a
minimum of three percent of the total capital of each Lyondell Trust. Unless
otherwise stated in the prospectus supplement, each Lyondell Trust will have a
term of at least 20 but not more than 50 years, but may terminate earlier as
provided in the applicable declaration of trust.
Each Lyondell Trust's business and affairs will be conducted by its
trustees, whose obligations and duties will be governed by the declaration of
trust. Subject to limited exceptions, the holder(s) of the trust common
securities will be entitled to appoint, remove or replace any of, or increase
or reduce the number of, the trustees of each Lyondell Trust. At least one of
the trustees of each of the Lyondell Trusts will be a person who is an employee
or officer of or an affiliate of us. One trustee of each Lyondell Trust will be
a financial institution that is not affiliated with us and will act as property
trustee and as indenture trustee for the purposes of the Trust Indenture Act of
1939, as amended. A more detailed description of these provisions will be
contained in the prospectus supplement.
Unless the property trustee maintains a principal place of business in
Delaware and otherwise meets the requirements of applicable law, one trustee of
each Lyondell Trust will be either an individual or a company that has a
residence or a principal place of business in Delaware. We will pay all fees
and expenses related to each Lyondell Trust and the offering of securities. The
property trustee and the Delaware trustee will be set forth in a prospectus
supplement.
The principal place of business of the Lyondell Trusts is c/o Lyondell
Chemical Company, 1221 McKinney Street, Suite 700, Houston, Texas 77010
(Telephone: (713) 652-7200).
4
RISK FACTORS
You should carefully consider the following matters, in addition to the
other information we have provided in this prospectus, the accompanying
prospectus supplement and the documents we incorporate by reference, before
reaching a decision regarding an investment in our securities.
The cyclicality of the chemical and refining industries may cause significant
fluctuation in our income and cash flow.
Our historical operating results reflect the cyclical and volatile nature of
the supply-demand balance in both the chemical and refining industries. These
industries historically have experienced alternating periods of inadequate
capacity and tight supply, causing prices and profit margins to increase,
followed by periods when substantial capacity is added, resulting in
oversupply, declining capacity utilization rates and declining prices and
profit margins. The cyclicality of these industries results in volatile profits
and cash flow over the business cycle.
Currently, there is overcapacity in the chemical industry. Moreover, a
number of participants in the chemical industry either have added or are
expecting to add 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 has depressed and may continue to depress
our and/or our joint ventures' volumes and margins. Such excess industry
capacity and weak demand for our products, as well as higher energy and raw
material prices last year, contributed to a significant decline in our EBITDA
during 2001 compared to 2000 and may continue to do so.
External factors beyond our and our joint ventures' control can cause
fluctuations in demand for our products and in our prices and margins, which
may negatively affect income and cash flow.
External factors can also cause significant fluctuations in demand for our
and our joint ventures' products and volatility in the price of raw materials
and other operating costs and can magnify the impact of economic cycles on us
and our joint ventures' businesses. Examples of external factors include:
. general economic conditions;
. competitor actions;
. international events and circumstances; and
. governmental regulation in the United States and abroad.
Demand for our products and our joint ventures' products is influenced by
general economic conditions. For example, during 2000 and in the first half of
2001, uncertainty regarding the global economy reduced market demand for some
of our and our joint ventures' products, which adversely affected our results
of operations. This reduction in market demand continued through 2001 until the
first quarter of 2002, during which we observed an increase in market demand.
In addition, a number of our products and our joint ventures' products are
highly dependent on durable goods markets, such as the housing and automotive
markets, which are themselves particularly cyclical. Many of our and our joint
ventures' products are components of other chemical products that, in turn, are
subject to the supply-demand balance of both the chemical and refining
industries and general economic conditions. For example, MTBE is used as a
blending component in gasoline, and therefore a substantial decline in gasoline
prices could result in decreased profitability from MTBE sales. If the global
economy does not improve, demand for our and our joint ventures' products and
our income and cash flow would be adversely affected.
We and our joint ventures may reduce production at or idle a facility for an
extended period of time or exit a business because of high raw material prices,
an oversupply of a particular product and/or a lack of demand
5
for that particular product, which makes production uneconomical. These
temporary outages sometimes last for several quarters or, in certain cases,
longer and cause us or our joint ventures to incur costs, including the
expenses of the outages and the restart of these facilities. It is possible
that factors like increases in raw material costs or lower demand in the future
will cause us or our joint ventures to further reduce operating rates or idle
facilities or exit uncompetitive businesses.
We and our joint ventures sell commodity products in highly competitive markets
and face significant price pressure.
We and our joint ventures sell our products in highly competitive markets.
Due to the commodity nature of certain of our and our joint ventures' products,
competition in these markets is based primarily on price and to a lesser extent
on product performance, product quality, product deliverability and customer
service. As a result, we and our joint ventures generally are not able to
protect our market position for these products by product differentiation and
may not be able to pass on cost increases to our customers. Accordingly,
increases in raw material and other costs may not necessarily correlate with
changes in prices for these products, either in the direction of the price
change or in magnitude. In addition, some of our and our joint ventures'
competitors may be able to drive down product prices. Moreover, some of our and
our joint ventures' competitors may have greater financial, technological and
other resources than ours, and may be better able to withstand changes in
market conditions. For certain products, our and our joint ventures'
competitors may be able to respond more quickly to new or emerging technologies
and changes in customer requirements than we can. The occurrence of any of
these events could adversely affect our financial condition and results of
operations.
Rising costs of raw materials and energy may result in increased operating
expenses and reduced results of operations.
We and our joint ventures purchase large amounts of raw materials and energy
for our business. The cost of these raw materials and energy, in the aggregate,
represents a substantial portion of our operating expenses. The prices of raw
materials and energy generally follow price trends of, and vary with market
conditions for, crude oil and natural gas, which may be highly volatile and
cyclical. Raw material costs began increasing during 1999 due to higher oil and
gas prices. These increases continued through 1999, and prices remained at high
levels during 2000. Surging natural gas costs late in 2000 and in the first
half of 2001 increased both the costs of natural gas liquids-based raw
materials, primarily ethane, as well as the cost of utilities. In the first
quarter of 2001, our results of operations and Equistar's results of operations
were significantly affected by the rising cost of natural gas. Benchmark
natural gas prices in the U.S. spiked at nearly $10 per million BTUs in January
2001, compared to a historical price range of $1.50 to $2.50 per million BTUs
in the period from 1991 to 1999. After the January 2001 spike, natural gas
prices began to decrease, reaching $2.30 per million BTUs in December 2001;
however, benchmark natural gas prices for the year still averaged $4.28 per
million BTUs, or 10 percent higher than in 2000. Our operating expenses and
Equistar's operating expenses will likely increase if these costs increase.
In addition, higher natural gas prices early in 2001 adversely affected the
ability of many domestic chemicals producers to compete internationally since
U.S. producers are disproportionately reliant on natural gas as a feedstock and
an energy source. In addition to the impact that this has had on Equistar's
exports, reduced competitiveness of U.S. producers also has in the past
increased the availability of chemicals in North America as U.S. production
that would otherwise have been sold overseas was instead offered for sale
domestically, resulting in excess supply and lower prices in North America.
We have risks resulting from significant amounts of debt.
As of March 31, 2002, Lyondell had outstanding debt of approximately $3.84
billion, and Equistar had outstanding debt of approximately $2.29 billion. Our
level of debt and the limitations imposed on us by our existing or future debt
agreements could have significant consequences on our business and future
prospects, including the following:
6
. we may not be able to obtain necessary financing in the future for
working capital, capital expenditures, debt service requirements or
other purposes;
. our less leveraged competitors could have a competitive advantage
because they have greater flexibility to utilize their cash flow to
improve their operations; and
. we could be more vulnerable in the event of a downturn in our business
that would leave us less able to take advantage of significant business
opportunities and to react to changes in market or industry conditions.
Lyondell's, Equistar's and LCR's bank credit facilities and Lyondell's and
Equistar's indentures relating to their secured debt securities impose
restrictions on each of Lyondell, Equistar and LCR. These credit facilities and
indentures contain customary covenants that, subject to exceptions, restrict
the ability of each of Lyondell, Equistar and LCR to incur additional debt or
liens, dispose of assets, make restricted payments (as defined in the
agreements) or merge or consolidate with other entities. In addition, the
credit facilities require the maintenance of specified financial ratios as
provided in the agreements. The breach of these covenants could permit the
lenders to declare the loans immediately payable and could permit the lenders
under the credit facilities to terminate future lending commitments.
Shared control of joint ventures involving Lyondell may delay decisions or
actions.
A substantial portion of our operations is conducted through joint ventures.
We share control of these joint ventures with third parties.
Our forecasts and plans with respect to these joint ventures assume that our
joint venture partners will observe their obligations with respect to the joint
ventures. In the event that any of our 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 we would be
required to increase our level of commitment in order to give effect to such
plans.
As with any such joint venture arrangements, differences in views among 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 our business and operations.
Lyondell or any of the other owners of the joint ventures may transfer
control of their joint venture interests or engage in mergers or other business
combination transactions with a third party or one or more of the other owners
that could result in a change of control of Lyondell or the joint venture or
the other owners. In many instances, such a transfer would be subject to an
obligation to first offer the other owners an opportunity to purchase the
interest. Lyondell and the other joint venture owners have discussed, and from
time to time may continue to discuss, in connection with their ordinary course
dialog regarding the joint ventures or otherwise, transactions that could
result in a transfer or modification, directly or indirectly, of their
ownership in a joint venture. We cannot be certain that any of the joint
venture owners will not sell, transfer or otherwise modify their ownership
interest in a joint venture, whether in a transaction involving third parties
and/or one or more of the other owners. Upon a transfer of an interest in
Equistar, the partnership agreement and key agreements between Equistar and its
owners would remain in place and may not be modified without the consent of all
of the owners, but the transfer could affect the governance of Equistar,
particularly because Equistar's partnership agreement requires unanimous
approval for some decisions.
Equistar's credit facility provides that an event of default occurs if any
combination of Lyondell, Millennium and Occidental ceases to collectively hold
at least a 50 percent interest. LCR's credit facility provides that an event of
default occurs if Lyondell and CITGO cease to individually or collectively hold
at least a 35 percent interest. In addition, LCR's credit facility provides
that an event of default occurs if (i) Lyondell transfers its interest as a
member of LCR to a person other than an affiliate or (ii) neither CITGO nor any
of its affiliates is a member of LCR.
7
Distributions of cash from our joint ventures may be restricted.
We conduct a substantial amount of our operations through our joint
ventures. Our ability to meet our debt service and other obligations is
dependent, in part, upon the receipt of distributions from our joint ventures.
LCR's credit facility prohibits the payment of distributions to us during an
event of default thereunder. Subject to the provisions of the applicable debt
agreements, future borrowings by our joint ventures may contain other
restrictions or prohibitions on the payment of distributions by such joint
ventures to us. Dependent upon applicable state law, our joint ventures may be
limited in amounts that they are permitted to pay as distributions on their
equity interests. Our joint ventures' ability to distribute cash to us is also
dependent upon their economic performance, which is dependent on a variety of
factors, including factors described elsewhere in the "Risk Factors" section of
this prospectus. For example, Equistar did not make any distributions to its
owners in 2001, as its results of operations have been adversely affected by
increasing industry capacity for the products it sells, higher raw material
prices and reduced demand due to weak economic conditions.
LCR's crude oil supply agreement with PDVSA Petroleo, S.A. (PDVSA Oil) is
important to LCR's operations because it reduces the volatility of earnings and
cash flow. The agreement is currently subject to litigation and subject to the
risk of enforcing judgments against non-United States affiliates of a sovereign
nation and force majeure risks.
Most of the crude oil used by LCR as a feedstock for its refinery is
purchased under the crude supply agreement with PDVSA Oil, an affiliate of
Petroleos de Venezuela, S.A. (PDVSA), which was entered into in 1993. 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 and energy costs, (ii) certain
actual costs and (iii) a deemed margin, which varies according to the grade of
crude oil or other feedstock delivered. The actual refining margin earned by
LCR may vary from the formula amount 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. A
disparate increase in the price of heavy crude oil relative to the prices for
its products, such as experienced in 1999, has the tendency to make continued
performance of its obligations under the crude supply agreement less attractive
to PDVSA Oil.
Under the crude supply agreement, PDVSA Oil is required to sell, and LCR is
required to purchase, 230,000 barrels per day of extra heavy crude, which
constitutes approximately 86 percent of the LCR refinery's refining capacity of
268,000 barrels per day of crude oil. By letter dated April 16, 1998, PDVSA Oil
informed LCR that the Venezuelan government, through the Ministry of Energy and
Mines, had instructed that production of certain grades of crude oil be
reduced. The letter stated that PDVSA Oil declared itself in a force majeure
situation and that PDVSA Oil would reduce deliveries of crude oil. Such
reductions in deliveries were purportedly based on announced OPEC production
cuts. LCR began receiving reduced deliveries of crude oil from PDVSA Oil in
August 1998, amounting to 195,000 barrels per day in that month. LCR was
advised by PDVSA Oil in May 1999 of a further reduction in the deliveries of
crude oil supplied under the crude supply agreement to 184,000 barrels per day,
effective May 1999.
On several occasions since then, PDVSA Oil further reduced crude oil
deliveries, although it made payments under a different provision of the crude
supply agreement in partial compensation for such reductions. Subsequently,
PDVSA Oil unilaterally increased deliveries of crude oil to LCR to 195,000
barrels
8
per day effective April 2000, to 200,000 barrels per day effective July 2000
and to 230,000 barrels per day effective October 2000.
During 2001, PDVSA Oil declared itself in a force majeure situation, but did
not reduce crude oil deliveries to LCR during 2001. In January 2002, PDVSA Oil
again declared itself in a force majeure situation and stated that crude oil
deliveries could be reduced by up to 20.3 percent beginning March 1, 2002. In
February 2002, LCR was advised by PDVSA Oil that deliveries of crude oil to LCR
in March 2002 would be reduced to approximately 198,000 barrels per day.
Lyondell currently expects second quarter 2002 deliveries under the crude
supply agreement to average 190,000 barrels per day. The recent political
uncertainty in Venezuela has not affected crude oil deliveries, the crude
supply agreement or related matters to date, and the long-term effects of these
events, if any, are not yet clear.
LCR has consistently contested the validity of PDVSA Oil's and PDVSA's
reductions in deliveries under the crude supply agreement. The parties have
different interpretations of the provisions of the contracts concerning the
delivery of crude oil. The contracts do not contain dispute resolution
procedures, and the parties have been unable to resolve their commercial
dispute. As a result, on February 1, 2002, LCR filed a lawsuit against PDVSA
and PDVSA Oil in connection with the January 2002 force majeure declaration, as
well as the claimed force majeure from April 1998 to September 2000.
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. All of the crude oil supplied by PDVSA Oil under the crude
supply agreement is produced in the Republic of Venezuela, which has
experienced economic difficulties and attendant social and political changes in
recent years. 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 to LCR as the crude supply
agreement.
In 1999, PDVSA announced its intention to renegotiate the crude supply
agreements with all third parties, including LCR. In light of PDVSA's announced
intent, we cannot assure you that PDVSA Oil will continue to perform its
obligations under the crude supply agreement. However, it has confirmed that it
expects to honor its commitments if a mutually acceptable restructuring of the
crude supply agreement is not achieved. From time to time, Lyondell and PDVSA
have had discussions covering both a restructuring of the crude supply
agreement and a broader restructuring of the LCR partnership. We are unable to
predict whether changes in either arrangement will occur.
If the crude supply agreement is modified or terminated or this source of
crude oil is otherwise interrupted due to production difficulties, OPEC-
mandated supply cuts, political or economic events in Venezuela or other
factors, LCR could experience significantly lower earnings and cash flows. The
parties each have a right to transfer their interests in LCR to unaffiliated
third parties in certain circumstances, subject to reciprocal rights of first
refusal. 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 or reduction in supplies thereunder
could adversely affect LCR, since LCR would have to purchase all or a portion
of its crude oil feedstocks in the merchant market, which could subject LCR to
significant volatility and price fluctuations. We cannot assure you that
alternative crude oil supplies with similar margins will be available for
purchase by LCR.
Operating problems in our business may adversely affect our income and cash
flow.
The occurrence of material operating problems at our facilities or any of
our joint ventures' facilities, including, but not limited to, the events
described below, may have a material adverse effect on the productivity
9
and profitability of a particular manufacturing facility, or on our operations
as a whole, during and after the period of such operational difficulties. Our
income and cash flow are dependent on the continued operation of our various
production facilities, our joint ventures' production facilities and the
ability to complete construction projects on a schedule. Although we and our
joint ventures take precautions to enhance the safety of operations and
minimize the risk of disruptions, our operations and our joint ventures'
operations, along with the operations of other members of the chemical and
refining industries, are subject to hazards inherent in chemical manufacturing
and refining and the related storage and transportation of raw materials,
products and wastes. These hazards include:
. pipeline leaks and ruptures;
. explosions;
. fires;
. severe weather and natural disasters;
. mechanical failure;
. unscheduled downtime;
. labor difficulties;
. transportation interruptions;
. remediation complications;
. chemical spills;
. discharges or releases of toxic or hazardous substances or gases;
. storage tank leaks;
. other environmental risks; and
. potential terrorist acts.
Some of 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, we are also subject to present and future
claims with respect to workplace exposure, workers' compensation and other
matters. We are not fully insured against all potential hazards incident to our
business, including losses resulting from war risks or terrorist acts. As a
result of market conditions, premiums and deductibles for certain insurance
policies can increase substantially, and in some instances, certain insurance
may become unavailable or available only for reduced amounts of coverage. If we
were to incur a significant liability, for which we were not fully insured, it
could have a material adverse effect on our financial position.
Our operations and assets are subject to extensive environmental, health and
safety laws and regulations.
We cannot predict with certainty the extent of our, our subsidiaries' or our
joint ventures' future liabilities and costs under environmental, health and
safety laws and regulations and we cannot assure you that they will not be
material. In addition, we, our subsidiaries or our joint ventures may face
liability for alleged personal injury or property damage due to exposure to
chemicals or other hazardous substances at our facilities or chemicals that we
otherwise manufacture and sell, handle or own. Although these claims have not
historically had a material impact on our, our subsidiaries' or our joint
ventures' operations, a significant increase in the number or success of these
claims could materially adversely affect our, our subsidiaries' or our joint
ventures' business, financial condition, operating results or cash flow.
10
The production facilities of Lyondell, Equistar, LCR and LMC are generally
required to have permits and licenses regulating air emissions, discharges to
water and storage, treatment and disposal of hazardous wastes. Companies such
as Lyondell and its joint ventures that are permitted to treat, store or
dispose of hazardous waste and maintain underground storage tanks pursuant to
the Resource Conservation and Recovery Act (RCRA) also are required to meet
certain financial responsibility requirements. We believe that we and our joint
ventures have all permits and licenses generally necessary to conduct business
or, where necessary, are applying for additional, amended or modified permits
and that we and our joint ventures meet applicable financial responsibility
requirements.
The policy of each of Lyondell, Equistar, LCR and LMC is to be in compliance
with all applicable environmental laws. Lyondell and Equistar also are each
committed to Responsible Care(R), an international chemical industry initiative
to enhance the industry's responsible management of chemicals. Our subsidiaries
and joint ventures (together with the industries in which they operate) are
subject to extensive national, state and local environmental laws and
regulations concerning emissions to the air, discharges onto land or waters and
the generation, handling, storage, transportation, treatment and disposal of
waste materials. Many of these laws and regulations provide for substantial
fines and potential criminal sanctions for violations. Some of these laws and
regulations are subject to varying and conflicting interpretations. In
addition, we cannot accurately predict future developments, such as
increasingly strict environmental laws, and inspection and enforcement
policies, as well as higher compliance costs therefrom, which might affect the
handling, manufacture, use, emission or disposal of products, other materials
or hazardous and nonhazardous waste. Some risk of environmental costs and
liabilities is inherent in particular operations and products of ours, and our
joint ventures, as it is with other companies engaged in similar businesses,
and there is no assurance that material costs and liabilities will not be
incurred. In general, however, with respect to the capital expenditures and
risks described above, we do not expect that we or our joint ventures will be
affected differently from the rest of the chemicals and refining industry where
our facilities or our joint ventures' facilities are located.
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 raw materials and finished products and the
costs of the storage and disposal of wastewater. Also, U.S. "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 us) may be required to bear all of such
costs regardless of fault, legality of the original disposal or ownership of
the disposal site. As of March 31, 2002, our, our subsidiaries' and our joint
ventures' environmental liability for future assessment and remediation costs
at the above-mentioned sites totaled $28 million. The liabilities per site
range from less than $1 million to $11 million and are expected to be incurred
over the next two to seven years. It is possible that new information about the
sites for which the accrual has been established, new technology or future
developments, such as involvement in other Comprehensive Environmental Response
Compensation and Liability Act, as amended (CERCLA), RCRA, Texas Natural
Resource Conservation Commission (TNRCC) or other comparable state or foreign
law investigations, could require us to reassess our potential exposure related
to environmental matters.
The LCR refinery contains on-site solid-waste landfills, which were used in
the past to dispose of waste generated at this facility. It is anticipated that
corrective measures will be necessary to comply with federal and state
requirements with respect to this facility. We are also subject to certain
assessment and remedial actions at the LCR refinery under RCRA. In addition, we
negotiated an order with the TNRCC for assessment and remediation of
groundwater and soil contamination at the refinery. We also have liabilities
under RCRA and various state and foreign government regulations related to five
current plant sites and three former plant sites. We are also responsible for a
portion of the remediation of certain off-site waste disposal facilities. We
are currently contributing funds to the cleanup of two waste sites located near
Houston, Texas under CERCLA and the Superfund Amendments and Reauthorization
Act of 1986. Lyondell has also been named, along with several other companies,
as a potentially responsible party for a third CERCLA site near Houston, Texas.
The
11
$28 million accrual described above includes, where applicable, costs to
address these RCRA, TNRCC and CERCLA matters. In addition, Lyondell is involved
in administrative proceedings or lawsuits relating to a minimal number of other
CERCLA sites. We estimate, based upon currently available information, that
potential loss contingencies associated with the latter CERCLA sites,
individually and in the aggregate, are not significant.
In some cases, compliance with environmental, health and safety laws and
regulations can be achieved only by capital expenditures. In the years ended
December 31, 2001, 2000 and 1999, we, our subsidiaries and our joint ventures
(on a 100 percent basis) spent, in the aggregate, approximately $34 million,
$20 million and $21 million, respectively, for environmentally related capital
expenditures at existing facilities. We, our subsidiaries and our joint
ventures anticipate spending approximately $99 million for 2002 and
approximately $240 million for 2003 for environmentally related capital
expenditures. The increased level of such expenditures for 2001, 2002 and 2003
is a result of, among other things, implementation of a plan for the
Houston/Galveston region to comply with the ozone standard, as discussed below.
The eight-county Houston/Galveston region has been designated a severe
nonattainment area for ozone by the U.S. Environmental Protection Agency (EPA).
As a result, in December 2000, the TNRCC submitted a plan to the EPA to reach
and demonstrate compliance with the ozone standard by November 2007. Ozone is a
product of the reaction between volatile organic compounds (VOCs) and nitrogen
oxides (NOx) in the presence of sunlight, and is a principal component of smog.
The proposed plans for meeting the ozone standard focus on significant
reductions in NOx emissions. NOx emission reduction controls must be installed
at LCR's refinery and each of Lyondell's two facilities and Equistar's six
facilities in the Houston/Galveston region during the next several years, well
in advance of the 2007 deadline. Compliance with the provisions of the plan
will result in increased capital investment during the next several years and
higher annual operating costs for Equistar, Lyondell and LCR. As a result,
Lyondell estimates that aggregate related capital expenditures could total
between $400 million and $500 million for Lyondell, Equistar and LCR before the
2007 deadline. Lyondell's direct share of such expenditures could total between
$65 million and $80 million. Lyondell's proportionate share of Equistar's
expenditures could total between $85 million and $105 million, and Lyondell's
proportionate share of LCR's expenditures could total between $75 million and
$95 million. The timing and amount of these expenditures are subject to
regulatory and other uncertainties, as well as obtaining the necessary permits
and approvals.
Lyondell has been actively involved with a number of organizations to help
solve the ozone problem in the most cost-effective manner and, in January 2001,
Lyondell and the BCCA Appeal Group (a group of industry participants) filed a
lawsuit against the TNRCC to encourage adoption of their alternative plan to
achieve the same air quality improvement with less negative economic impact on
the region. In June 2001, the parties entered into a consent order with respect
to the lawsuit. Pursuant to the consent order, the TNRCC agreed to review, by
June 2002, the scientific data for ozone formation in the Houston/Galveston
region. In October 2001, the EPA approved the TNRCC plan, and the BCCA Appeal
Group filed a timely petition for judicial review of that action on January 11,
2002. If the TNRCC scientific review supports the industry group proposal, the
TNRCC has agreed to revise the NOx emission reduction requirements set forth in
its original plan. Any revisions will have to be approved by the EPA. Such
revisions of the NOx emission reduction requirements are expected to reduce the
estimated capital investments for NOx reductions required by Lyondell, Equistar
and LCR to comply with the plans for meeting the ozone standards. However,
there can be no guarantees as to the ultimate capital cost of implementing any
final plan developed to ensure ozone attainment by the 2007 deadline.
The Clean Air Act specified certain emissions standards for vehicles
beginning in the 1994 model year and required the EPA to study whether further
emissions reductions from vehicles were necessary, starting no earlier than the
2004 model year. In 1998, the EPA concluded that more stringent vehicle
emissions standards were needed and that additional controls on gasoline and
diesel were necessary to meet these emissions standards. New standards for
gasoline were finalized in 1999 and will require refiners to produce a low
sulfur
12
gasoline by 2004, with final compliance by 2006. A new "on-road" diesel
standard was adopted in January 2001 and will require refiners to produce ultra
low sulfur diesel by June 2006, with some allowance for a conditional phase-in
period that could extend final compliance until 2009. Lyondell estimates that
these standards will result in increased capital investment for LCR, totaling
between $175 million to $225 million for the new gasoline standards and $250
million to $300 million for the new diesel standards, between now and the
implementation dates. Lyondell's share of LCR's capital expenditures would be
between $250 million and $300 million. In addition, these standards could
result in higher operating costs for LCR. Equistar's business may also be
impacted if these standards increase the cost for processing fuel components.
Pending or future legislative initiatives or litigation may adversely affect
Lyondell's MTBE sales.
In the United States, the Clean Air Act Amendments of 1990 set minimum
levels for oxygenates, such as MTBE, in gasoline sold in areas not meeting
specified air quality standards. In Europe, demand for MTBE has benefited from
new legislation in the 15-nation European Union. The so-called "Auto/Oil
Legislation" aimed at reducing air pollution from vehicle emissions was enacted
in 1998, and refineries increased consumption of MTBE to meet the new blending
requirements. However, while studies by federal and state agencies and other
world organizations have shown that MTBE is safe for use in gasoline, is not
carcinogenic and is effective in reducing automotive emissions, 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
watercraft has led to public concern, and some litigation, that MTBE may, in
certain limited circumstances, affect the taste and odor of drinking water
supplies.
Certain federal and state governmental initiatives have sought either to
rescind the oxygenate requirement for reformulated gasoline or to restrict or
ban the use of MTBE. On April 25, 2002, the U.S. Senate passed its version of
an omnibus energy bill, which, among other things, would ban the use of MTBE as
a fuel oxygenate. The Senate bill is not law and must be reconciled with the
version of the omnibus energy bill passed by the U.S. House of Representatives
in 2001. Lyondell does not expect these initiatives to have a significant
impact on MTBE margins and volumes in 2002. Lyondell's MTBE sales represented
approximately 35 percent of its total 2001 revenues.
We have developed technologies to convert TBA into alternate gasoline
blending components should it be necessary to reduce MTBE production in the
future. However, implementation of such technologies would require additional
capital investment. The profit margin on such alternate gasoline blending
components could differ from those historically realized on MTBE.
Our international operations are subject to exchange rate fluctuations,
exchange controls, political risks and other risks relating to foreign
operations.
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. 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 Lyondell.
Lyondell and Equistar pursue acquisitions, dispositions and joint ventures.
Lyondell and Equistar both seek opportunities to maximize efficiency or
value through various transactions. These transactions may include various
business combinations, purchases or sales of assets or contractual arrangements
or joint ventures that are intended to result in the realization of synergies,
the creation of efficiencies or the generation of cash to reduce debt. To the
extent permitted under Lyondell's and Equistar's credit facilities and other
debt, some of these transactions may be financed by additional borrowings by
13
Lyondell or Equistar or by the issuance of equity securities. Although these
transactions are expected to yield longer-term benefits if the expected
efficiencies and synergies of the transactions are realized, they could
adversely affect the results of operations of Lyondell or Equistar in the short
term because of the costs associated with such transactions.
Our quarterly results will vary significantly.
Our quarterly results will vary significantly depending on various factors,
most of which are beyond our control, including:
. changes in product prices, product demand, including seasonal demand for
certain products, such as MTBE, raw material costs or supply
arrangements;
. the scheduling of plant turnarounds;
. fluctuations in shipments to customers;
. adverse developments in foreign or domestic markets;
. regional business activities;
. changes in interest rates;
. foreign exchange fluctuations; and
. unanticipated expenses.
14
FORWARD-LOOKING INFORMATION
This prospectus, including the information we incorporate by reference,
includes forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
You can identify our forward-looking statements by words such as "estimate,"
"project," "predict," "believe," "expect," "anticipate," "plan," "forecast,"
"budget," "goal" or other words that convey the uncertainty of future events or
outcomes. When considering these forward-looking statements, you should keep in
mind the risk factors and other cautionary statements contained in this
prospectus, any prospectus supplement and the documents we have incorporated by
reference.
The forward-looking statements are not guarantees of future performance, and
we caution you not to rely unduly on them. We have based many of these forward-
looking statements on expectations and assumptions about future events that may
prove to be inaccurate. While our management considers these expectations and
assumptions to be reasonable, they are inherently subject to significant
business, economic, competitive, regulatory and other risks, contingencies and
uncertainties, most of which are difficult to predict and many of which are
beyond our control. These risks, contingencies and uncertainties relate to,
among other matters, the following:
. the cyclical nature of the chemical and refining industries;
. uncertainties associated with the United States and worldwide economies;
. substantial chemical and refinery capacity additions resulting in
oversupply and declining prices and margins;
. the availability and cost of raw materials and utilities;
. access to capital markets;
. technological developments;
. current and potential governmental regulatory actions in the United
States and other countries;
. potential terrorist attacks;
. operating interruptions (including leaks, explosions, fires, mechanical
failure, unscheduled downtime, labor difficulties, transportation
interruptions, spills and releases, and other environmental risks); and
. our ability to implement our business strategies, including cost
reductions.
We have discussed some of these factors in more detail in the "Risk Factors"
section of this prospectus and in our other filings with the SEC, including
those filings incorporated by reference into this prospectus. These factors are
not necessarily all the important factors that could affect us or our joint
ventures. We advise you that you should (i) be aware that important factors we
do not refer to above could affect the accuracy of our forward-looking
statements and (ii) use caution and common sense when considering our forward-
looking statements. We do not intend to update these statements unless the
securities laws require us to do so.
15
USE OF PROCEEDS
Unless we inform you otherwise in the prospectus supplement, we will use the
net proceeds from the sale of the offered securities for general corporate
purposes. These purposes may include funding working capital requirements,
capital expenditures, repayment and refinancing of indebtedness and repurchases
and redemptions of securities, and may initially be invested in short-term
marketable securities. We will determine any specific allocation of the net
proceeds of any offering to a specific purpose at the time of such offering and
will describe the specific allocation in the related prospectus supplement.
Unless otherwise provided in the prospectus supplement, each Lyondell Trust
will use proceeds from the sale of the trust preferred securities to purchase
junior subordinated debt securities from us.
Accounting Treatment Relating to Trust Preferred Securities
The financial statements of any Lyondell Trust issuing securities will be
consolidated with our financial statements, with the trust preferred securities
shown on our consolidated financial statements as Lyondell-obligated
mandatorily convertible preferred capital trust securities of a subsidiary
trust. Our consolidated financial statements will include a footnote that
discloses, among other things, that the assets of the trust consist of our
junior subordinated debt securities and will specify the designation, principal
amount, interest rate and maturity date of the junior subordinated debt
securities.
RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges for each of the periods shown is as
follows:
For the Three Years Ended December 31,
Months Ended ------------------------
March 31, 2002 2001 2000 1999 1998 1997
-------------- ---- ---- ---- ---- ----
Ratio of earnings to fixed charges
(a).................................. -- -- 2.0x -- 1.2x 4.6x
- --------
(a) For the three months ended March 31, 2002 and for the years ended December
31, 2001 and 1999, earnings were insufficient to cover fixed charges by $75
million, $224 million and $104 million, respectively. The ratio of earnings
to fixed charges has been calculated including amounts for Lyondell and its
current proportionate share of amounts for Equistar (57 percent through May
15, 1998 and 41 percent thereafter), LCR (58.75 percent for the year ended
December 31, 1998 and thereafter, 86 percent for the first quarter of 1997
and 58.49 percent for the remainder of 1997) and LMC (75 percent for the
year ended December 31, 1998 and thereafter), for the periods in which
Lyondell accounted for its respective investment in each such joint venture
using the equity method of accounting. Lyondell remains a guarantor of $300
million of Equistar's debt and a co-obligor with Equistar for $31 million
of debt for which Equistar assumed responsibility in connection with its
formation. Fixed charges include interest expense plus capitalized interest
and the portion of rental expense that represents an interest factor.
16
DESCRIPTION OF TRUST PREFERRED
SECURITIES AND TRUST GUARANTEES
Trust Preferred Securities
Each declaration of trust will authorize its trustees to issue one series of
trust preferred securities and one series of trust common securities, together,
the "trust securities." Each declaration will be qualified as an indenture
under the Trust Indenture Act.
The trust preferred securities will have the terms set forth in the
applicable declaration or made part of the declaration by the Trust Indenture
Act. You should read the prospectus supplement relating to the particular trust
preferred securities of a trust for specific terms, including:
. the distinctive designation of trust preferred securities;
. the number of trust preferred securities to be issued;
. the annual distribution rate (or method of determining such rate) for
trust preferred securities and the date or dates upon which such
distributions will be payable;
. whether distributions on trust preferred securities will be cumulative,
and, in the case of trust preferred securities having cumulative
distribution rights, the date or dates or method of determining the date
or dates from which distributions on the securities will be cumulative;
. the amount or amounts that will be paid out of the assets of the trust
to the holders of trust preferred securities upon voluntary or
involuntary dissolution, winding-up or termination of the trust;
. any conversion or exchange provisions applicable to the trust preferred
securities;
. the terms and conditions, if any, upon which the related series of the
applicable subordinated debt securities may be distributed to holders of
trust preferred securities;
. the obligation, if any, of the Lyondell Trust to purchase or redeem the
trust preferred securities it issued and the price or prices at which,
the period or periods within which and the terms and conditions upon
which these securities will be purchased or redeemed, in whole or in
part, pursuant to such obligation;
. the voting rights, if any, of trust preferred securities in addition to
those required by law, including the number of votes per trust preferred
security and any requirement for the approval by the holders of trust
preferred securities as a condition to specified action or amendments to
the declaration of the trust; and
. any other specific terms of the trust preferred securities.
Pursuant to each declaration, the property trustee will own the subordinated
debt securities purchased by the applicable trust for the benefit of the
holders of the trust preferred securities. Lyondell will guarantee to the
extent described in the "Trust Guarantees" section of this prospectus the
payment of distributions out of money held by the trusts and payments upon
redemption of trust preferred securities or liquidation of any trust.
The material federal income tax considerations applicable to an investment
in trust preferred securities will be described in the prospectus supplement
relating thereto.
Trust Common Securities
In connection with the issuance of trust preferred securities, each Lyondell
Trust will also issue one series of trust common securities. Each declaration
of trust will authorize the administrative trustee of a trust to issue on
behalf of the trust one series of trust common securities with the terms set
forth in the declaration of trust. Except as otherwise provided in the
prospectus supplement relating to the trust preferred securities, the terms of
17
the trust common securities will be substantially identical to the terms of
each trust preferred security. The trust common securities will rank equally
and payments will be made pro rata with the trust preferred securities.
However, upon an event of default under the indenture governing any
subordinated debt securities issued to a Lyondell Trust, the rights of the
holders of the trust common securities to payment in respect of distributions
and payments upon liquidation, redemption and otherwise will be subordinated to
the rights of the holders of the trust preferred securities. Except in limited
circumstances, the trust common securities will also carry the right to vote
and to appoint, remove or replace any of the trustees of a trust. Lyondell will
own, directly or indirectly, all of the trust common securities of each trust.
Trust Guarantees
Set forth below is a summary of information concerning the trust guarantees
that Lyondell will execute and deliver for the benefit of the holders of trust
preferred securities of the respective trusts. The prospectus supplement will
describe any significant differences between the actual terms of the trust
guarantees and the summary below. Because this is a summary, it does not
contain all of the information in the trust guarantee. You should read the
entire trust guarantee, which will be filed with the SEC and incorporated by
reference as an exhibit to the registration statement of which this prospectus
forms a part.
General
Lyondell will irrevocably and unconditionally agree, to the extent set forth
in the trust guarantee, to pay in full, to the holders of trust preferred
securities as and when due, regardless of any defense, right of set-off or
counterclaim which the applicable trust may have or assert, to the extent not
paid or made by the applicable trust:
. any accumulated and unpaid distributions and the redemption price,
including all accumulated and unpaid distributions to the date of the
redemption, payable out of available funds with respect to any trust
preferred securities called for redemption by the trust; and
. upon a voluntary or an involuntary dissolution, winding up or
termination of the trust, except in connection with the distribution of
subordinated debt securities to the holders of trust preferred
securities or the redemption of all of the trust preferred securities
issued by the trust, the lesser of:
. the aggregate of the liquidation preference and all accumulated and
unpaid distributions on the trust preferred securities of the series
to the date of payment, to the extent the applicable trust has funds
legally available therefor; or
. the amount of assets of the trust remaining available for
distribution to holders of trust preferred securities of the series
in liquidation as required by applicable law.
Lyondell's obligation to make a trust guarantee payment may be satisfied by
direct payment of the required amounts by us to the holders of trust preferred
securities or by causing the applicable trust to pay the required amounts to
the holders.
Amendments and Assignment
Generally, the trust guarantee with respect to any series of trust
securities may be changed only with the prior approval of Lyondell and the
holders of at least a majority in liquidation preference of the outstanding
trust preferred securities of the series. However, if the changes do not
adversely affect the rights of holders of trust preferred securities of any
series in any material respect, no vote will be required. We will describe the
manner of obtaining any approval of holders of the trust preferred securities
of each series in an accompanying prospectus supplement. All guarantees and
agreements contained in each trust guarantee will bind Lyondell's successors,
assigns, receivers, trustees and representatives and will be for the benefit of
the holders of the applicable series of trust preferred securities then
outstanding.
18
Termination of the Trust Guarantees
Each trust guarantee will terminate as to the trust preferred securities
issued by the applicable Lyondell Trust upon:
. full payment of the redemption price of all trust preferred securities
of the trust;
. distribution of the subordinated debt securities of Lyondell held by the
trust to the holders of the trust securities of the trust; or
. full payment of the amounts payable in accordance with the declaration
of the trust upon liquidation of the trust.
Each trust guarantee will continue to be effective or will be reinstated, as
the case may be, if at any time any holder of trust preferred securities issued
by the applicable Lyondell Trust must restore payment of any sums paid under
the trust preferred securities or the trust guarantee. The subordination
provisions of the subordinated debt securities and the trust guarantees,
respectively, will provide that in the event payment is made on the
subordinated debt securities or the trust guarantees in contravention of such
provisions, such payments will be paid over to the holders of senior
indebtedness.
Ranking of the Trust Guarantee
Except as otherwise provided in a prospectus supplement, each trust
guarantee will constitute Lyondell's unsecured obligation and will rank:
. either subordinate and junior or equally in right of payment to all of
Lyondell's other liabilities;
. equally with the most senior preferred or preference stock, if any,
hereafter issued by Lyondell and with any guarantee hereafter entered
into by Lyondell in respect of any preferred or preference stock or
interests of any affiliate of Lyondell; and
. senior to Lyondell's common stock.
Each declaration will provide that each holder of trust securities by
accepting the security agrees to the subordination provisions and other terms
of the applicable trust guarantee.
Each trust guarantee will constitute a guarantee of payment and not of
collection. Each trust guarantee will be deposited with the guarantee trustee
to be held for the benefit of any series of trust preferred securities. The
guarantee trustee will have the right to enforce the trust guarantee on behalf
of the holders of any series of trust preferred securities. The holders of not
less than a majority in aggregate liquidation preference of a series of trust
preferred securities will 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 trust guarantee applicable to the series of trust preferred
securities or exercising any trust or other power conferred upon the guarantee
trustee under the trust guarantee applicable to the series of trust preferred
securities. If the guarantee trustee fails to enforce the trust guarantee, any
holder of trust preferred securities of a series to which the trust guarantee
pertains may institute a legal proceeding directly against Lyondell to enforce
its rights under the trust guarantee, without first instituting a legal
proceeding against the trust, or any other person or entity. Each trust
guarantee will not be discharged except by payment of the trust guarantee
payments in full to the extent not paid by the applicable trust, and by
complete performance of all obligations under such trust guarantee.
Governing Law
Each trust guarantee will be governed by and construed in accordance with
the laws of the State of New York.
19
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBT SECURITIES
Lyondell may issue to the Lyondell Trusts from time to time one or more
series of junior subordinated debt securities under an indenture, but Lyondell
will issue only one series of junior subordinated debt securities to each
Lyondell Trust.
Ranking
The junior subordinated debt securities will be the unsecured junior
subordinated obligations of Lyondell. In any liquidation, reorganization or
insolvency proceeding involving Lyondell, the rights of Lyondell and its
creditors, including the holders of the junior subordinated debt securities,
will be effectively junior to the claims of holders of any debt or preferred
stock of our subsidiaries or our joint ventures.
Subsequent Distribution to Holders of Trust Securities
If we issue junior subordinated debt securities to a trust in connection
with the issuance of trust preferred securities and common securities by that
trust, those junior subordinated debt securities subsequently may be
distributed to the holders of the trust preferred securities and common
securities either:
. upon the dissolution of the trust; or
. upon the occurrence of events that we will describe in the prospectus
supplement.
Terms
The prospectus supplement will include specific terms relating to the junior
subordinated debt securities. These terms will include some or all of the
following:
. the designation of the securities;
. the total principal amount of the securities;
. the purchase price of and any premium on the securities;
. the date or dates, if any, on which the principal of the securities will
be payable and the right to shorten, extend or defer the dates;
. the interest rate, whether fixed or variable, the date from which
interest will accrue, interest payment dates and record dates for
interest payments;
. any right to extend or defer the interest payment periods and the
duration of the extension;
. whether interest payments will be cumulative and compounding and, if so,
the dates from which interest payments will be so cumulative or
compounded;
. any provisions for redemption;
. any provisions that would obligate us to redeem or purchase the
securities;
. any provisions for exchange, conversion or prepayment of the securities;
. whether and under what circumstances we will pay any additional amounts
on the securities and whether we will have the option to redeem the
securities rather than pay the additional amounts;
. the form of the securities;
. any changes or additions to the events of default or covenants described
in this prospectus;
. whether we will issue the securities in the form of one or more global
securities and the identity of any depositary;
20
. the places where you can receive any payments on the securities, present
the securities for registration of transfer or exchange and make any
notices and demands to us concerning the securities;
. the portion of the principal amount of the securities that will be
payable if the maturity is accelerated, if other than the entire
principal amount;
. any additional means of defeasance of the securities, any additional
conditions or limitations to defeasance of the securities or any changes
to those conditions or limitations;
. the identity of any paying agent; and
. any other specific terms, including restrictive covenants, of the junior
subordinated debt securities.
Subordination
Payment of principal of and premium, if any, and interest on the junior
subordinated debt securities will generally be subordinated and junior in right
of payment to the prior payment in full of all senior debt of Lyondell. Unless
the prospectus supplement specifies otherwise, the indenture will provide that
no payment of principal of or premium, if any, or interest on the junior
subordinated debt securities may be made if Lyondell fails to pay the
principal, premium, interest or any other amounts on any senior debt when due,
whether at maturity or acceleration of maturity. This restriction on payment
will continue until the default has been cured or waived or has ceased to exist
or until we have discharged or paid the senior debt in full.
Unless the prospectus supplement specifies otherwise, if the maturity of the
junior subordinated debt securities is accelerated, Lyondell will make no
payments on those debt securities until the holders of all senior debt are paid
all principal, premium, if any, and interest then due in full, including any
amounts due upon acceleration. If Lyondell pays any amount or distributes any
assets to creditors in a liquidation, dissolution, reorganization, bankruptcy
or any similar proceeding, all senior debt will be paid first before any
payment is made on the junior subordinated debt securities.
The subordination will not affect Lyondell's absolute and unconditional
obligation to pay, when due, principal of, premium, if any, and interest on the
junior subordinated debt securities. In addition, the subordination does not
prevent the occurrence of any default under the indenture.
Unless the prospectus supplement specifies otherwise, the indenture will not
limit the amount of senior debt that we may incur. As a result of the
subordination of the junior subordinated debt securities, if we became
insolvent, holders of junior subordinated debt securities may receive less on a
proportionate basis than other Lyondell creditors.
Unless we inform you otherwise in the prospectus supplement, the term
"senior debt" means the principal of and premium, if any, and interest on
"debt" of Lyondell, but excludes any debt that:
. is without recourse; or
. states that it is subordinated to or ranks equal with the junior
subordinated debt securities.
Unless we inform you otherwise in the prospectus supplement, the term "debt"
means:
. indebtedness for borrowed money;
. obligations evidenced by bonds, debentures, notes or similar
instruments;
. undrawn obligations relating to letters of credit or similar
instruments, other than standby letters of credit and bid or performance
bonds issued in the ordinary course of business;
. reimbursement obligations relating to drawn letters of credit and
similar instruments described in the preceding item if the drawing is
reimbursed within 30 business days following demand for reimbursement;
21
. obligations 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;
. capitalized lease obligations;
. debt of a third party secured by a lien on any asset of Lyondell;
. debt of others guaranteed by Lyondell to the extent of the guarantee;
and
. obligations for claims under derivative products.
The applicable prospectus supplement may further describe the provisions, if
any, applicable to the subordination of the junior subordinated debt securities
of a particular series.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of Lyondell Chemical Company currently consists
of 250,000,000 shares of common stock, par value $1.00 per share, and
80,000,000 shares of preferred stock, par value $.01 per share. The following
summary description of our capital stock is qualified in its entirety by
reference to our certificate of incorporation, and our by-laws, each as
amended, copies of which have been filed as exhibits to Lyondell's Annual
Report on Form 10-K. You should read our certificate of incorporation and by-
laws as currently in effect for more details regarding the provisions we
describe below and for other provisions that may be important to you.
Common Stock
We are currently authorized to issue 250,000,000 shares of common stock, of
which 117,564,920 shares of common stock were outstanding at March 31, 2002.
Holders of our common stock are entitled:
. to receive any dividends as may from time to time be declared by our
board of directors;
. to one vote per share on all matters on which the holders of our common
stock are entitled to vote;
. to act by written consent in lieu of voting at a meeting of the holders
of our common stock; and
. to share ratably in all of our assets available for distribution to the
holders of our common stock, in the event of our liquidation,
dissolution or winding up.
The holders of a majority of the shares of common stock represented at a
meeting can elect all of the directors.
Shares of our common stock are not liable to further calls or assessments by
us for any of our liabilities that may be imposed on the holders of our common
stock under the laws of the State of Delaware, the state of our incorporation.
There are no preemptive rights for our common stock in our certificate of
incorporation.
The transfer agent, registrar and dividend disbursing agent for our common
stock is the American Stock Transfer & Trust Company.
Preferred Stock
We are currently authorized to issue up to 80,000,000 shares of preferred
stock, $.01 par value per share. Our board of directors will 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 the holders of our common stock
for any specific issue of preferred stock.
22
Our board of directors has adopted a policy providing that no future
issuance of preferred stock will be effected without the approval of the
holders of our common stock unless our board of directors (whose decision shall
be conclusive) determines in good faith:
. that the issuance is primarily for the purpose of facilitating a
financing, an acquisition or another proper corporate objective or
transaction; and
. that any anti-takeover effects of the issuance are not our primary
purpose for effecting such issuance.
Our board of directors will not amend or revoke this policy without giving
written notice to the holders of all outstanding shares of our stock. However,
no such amendment or revocation will be effective, without the approval of the
holders of our common stock, to permit a subsequent issuance of preferred stock
for the primary purpose of obstructing a takeover of Lyondell by any person who
has, prior to such written notice to stockholders, notified the board of
directors of its desire to pursue a takeover of Lyondell.
The prospectus supplement will describe the terms of any preferred stock we
offer, including without limitation the specific designation, number of shares,
liquidation preference, maturity (if any), redemption or repurchase provisions,
dividend rates and payment dates, voting rights, whether convertible or
exchangeable into other securities and any other rights, preferences,
privileges, limitations, and restrictions.
Rights to Purchase Common Stock
On December 8, 1995, our board of directors declared a dividend of one right
for each outstanding share of our common stock, par value $1.00 per share, to
the holders of our common stock of record at the close of business on December
20, 1995. Each right entitles the registered holder to purchase from us one
share of our common stock at a purchase price of $80.00 per share of common
stock, subject to adjustment. 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 between Lyondell 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
will be distributed. The rights will separate from our common stock and a
"distribution date" will occur, with certain exceptions, upon the earlier of:
. ten days following a public announcement of the existence of an
"Acquiring Person"; or
. ten business days following the commencement of a tender offer or an
exchange offer that would result in a person 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 our 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:
. 1,000,000 shares of our 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
. one share less than 50 percent of the shares of our 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 our board of directors.
Certain inadvertent acquisitions will not result in a person's
23
becoming an Acquiring Person if the person promptly divests itself of a
sufficient amount of our common stock. Until the distribution date:
. the rights will be evidenced by the common stock certificates (together
with this summary of the rights or bearing the notation referred to
below) and will be transferred with and only with such common stock
certificates;
. new common stock certificates issued after December 20, 1995 will contain
a notation incorporating the rights agreement by reference; and
. the surrender for transfer of any certificate for our common stock (with
or without a copy of this summary of the 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 us as described below.
In the event (a "Flip-In Event") that a person becomes an Acquiring Person
(except pursuant to a tender or an exchange offer for all outstanding shares of
our common stock at a price and on terms that a majority of our independent
directors determines to be fair to and otherwise in the best interests of us
and our 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 our common stock (or, in certain circumstances, cash, property or
other securities of Lyondell) 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) we are 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 our 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, we may
redeem the rights in whole, but not in part, at a price of $.0005 per right,
payable, at our option, in cash, shares of our 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 our common stock then outstanding, we 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 our common stock, and/or other equity securities
deemed to have the same value as one share of our 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 Lyondell, 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 us, stockholders may, depending upon the
circumstances, recognize taxable income in the event that the rights become
exercisable for our common stock (or other consideration) 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 our 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, our common
stock, (ii) if
24
holders of our common stock are granted certain rights or warrants to subscribe
for our common stock or securities convertible into our common stock at less
than the current market price of our common stock or (iii) upon the
distribution to holders of our 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 our board of directors 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 us on terms
not approved by our board of directors, except pursuant to an 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 has been filed as an exhibit to our 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 our common stock, except where otherwise provided
by law or our 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
our books. Our common stock does not have cumulative voting rights. Holders of
any of our preferred stock, if any, will be entitled to vote upon the election
of directors or upon any questions affecting us only if and to the extent that
the holders of any series of our preferred stock are granted voting rights
fixed for such series by our board of directors in the resolution creating such
series.
Delaware Section 203
We are a Delaware corporation and are subject to Section 203 of the General
Corporation Law of Delaware. In general, Section 203 prevents an "interested
stockholder" (defined generally as a person owning 15 percent or more of our
outstanding voting stock) from engaging in a "business combination" (as defined
in Section 203) with us for three years following the time that person becomes
an interested stockholder unless (i) before that person became an interested
stockholder, our board of directors approved the transaction in which the
interested stockholder became an interested stockholder or approved the
business combination, (ii) upon completion of the transaction that resulted in
the interested stockholder's becoming an interested stockholder, the interested
stockholder owns at least 85 percent of our voting stock outstanding at the
time the transaction commenced (excluding stock held by directors who are also
officers of Lyondell 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 an exchange offer) or (iii) at the time of
or subsequent to the transaction in which that person became an interested
stockholder, the business combination is approved by our board of directors and
authorized at a meeting of stockholders by the affirmative vote of the holders
of at least two-thirds of our outstanding 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 Lyondell
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 our 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.
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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. Our certificate of
incorporation limits the liability of our directors to us or the holders of our
common stock to the fullest extent permitted by Delaware law. Specifically, a
director will not be personally liable for monetary damages for breach of a
director's fiduciary duty as a director, except for the following liabilities:
. for any breach of the director's duty of loyalty to us or the holders of
our common stock;
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the General Corporation Law of
Delaware; or
. for any transaction from which the director derived an improper personal
benefit.
The inclusion of this provision in our 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 us and the holders of
our common stock.
Provisions of Lyondell's By-Laws
Certain provisions of our by-laws establish time periods during which
appropriate stockholder proposals must be delivered to us for consideration at
special and annual meetings called by us. Our by-laws provide, among other
things, that stockholders making nominations for our board of directors at, or
bringing other business before, an annual or a special meeting of stockholders
must provide timely written notice to us thereof, timely notice being required
to be no later than 90 days in advance of meeting. However, if 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 SEC 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 our 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 our by-laws and the
provisions of Section 203 of the General Corporation Law of Delaware could have
the effect of delaying, deferring or preventing a change in control of
Lyondell. This could be the case, notwithstanding that a majority of the
stockholders might benefit from such a change in control or offer.
26
MARKET FOR COMMON STOCK AND COMMON STOCK DIVIDENDS
Our common stock is listed on the New York Stock Exchange under the symbol
"LYO." The reported high and low sales prices of our common stock on the New
York Stock Exchange (New York Stock Exchange Composite Tape) for each quarter
from January 1, 2000 through March 31, 2002, inclusive, were as set forth
below.
Period High Low
------ ------ -------
2000:
First Quarter............................................... 14.875 8.4375
Second Quarter.............................................. 19.500 13.5000
Third Quarter............................................... 17.750 11.0000
Fourth Quarter.............................................. 16.750 11.3125
2001:
First Quarter............................................... 17.950 12.625
Second Quarter.............................................. 17.650 13.940
Third Quarter............................................... 15.400 9.450
Fourth Quarter.............................................. 15.930 10.900
2002:
First Quarter (through March 31, 2002)...................... 17.590 12.070
Second Quarter (through May 14, 2002)....................... 17.140 14.180
During the last two years, Lyondell has declared $.225 per share quarterly
cash dividends (which were paid in the subsequent quarter). On May 2, 2002, our
Board of Directors declared a dividend of $.225 per share for the second
quarter of 2002, payable June 17, 2002. The declaration and payment of
dividends is at the discretion of our board of directors. The future
declaration and payment of dividends and the amount of the dividend will be
dependent upon Lyondell's results of operations, financial condition, cash
position and requirements, investment opportunities, future prospects,
contractual restrictions and other factors deemed relevant by our board of
directors. Subject to these considerations and to the legal considerations
discussed in the following paragraph, we currently intend to distribute to our
holders of common stock cash dividends on our common stock at a quarterly rate
of $.225 per share. During 2001, we paid $106 million in dividends. During the
first quarter of 2002, we paid $26 million in dividends.
Lyondell's credit facilities and indentures limit Lyondell's ability to pay
dividends under certain circumstances. In addition, pursuant to a settlement
agreement entered into with the Pension Benefit Guaranty Corporation in 1998,
Lyondell may not pay extraordinary dividends (as defined by regulations under
the Employee Retirement Income Security Act of 1974, as amended) without
providing a letter of credit meeting certain specified requirements. In
February 2002, Lyondell provided a letter of credit meeting these requirements.
27
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND SECURITIES PURCHASE UNITS
We may issue stock purchase contracts, including contracts obligating
holders to purchase from us, and us to sell to the holders, a specified number
of shares of common stock at a future date or dates. The price per share of
common stock and number of shares of common stock may be fixed at the time the
stock purchase contracts are issued or may be determined by reference to a
specific formula set forth in the stock purchase contracts. The stock purchase
contracts may be issued separately or as a part of securities purchase units
consisting of a stock purchase contract and either (i) trust preferred
securities or (ii) debt obligations of third parties, including U.S. Treasury
securities, which will secure the holders' obligations to purchase the common
stock under the stock purchase contracts. The stock purchase contracts may
require holders to secure their obligations thereunder in a specified manner.
The stock purchase contracts also may require us to make periodic payments to
the holders of the securities purchase units or vice versa and such payments
may be unsecured or prefunded on some basis.
The prospectus supplement will describe the terms of any stock purchase
contracts or securities purchase units. The description in the prospectus
supplement will not necessarily be complete, and reference will be made to the
stock purchase contracts, and, if applicable, collateral or depositary
arrangements, relating to the stock purchase contracts or securities purchase
units. Material United States federal income tax considerations applicable to
the securities purchase units and the stock purchase contracts will also be
discussed in the applicable prospectus supplement.
PLAN OF DISTRIBUTION
We may sell the offered securities in and outside the United States through
underwriters or dealers, directly to purchasers, including our affiliates,
through agents or through a combination of any of these methods. The prospectus
supplement will include the following information:
. the terms of the offering;
. the names of any underwriters, dealers or agents, and the respective
amounts of securities underwritten or purchased by each of them;
. the name or names of any managing underwriter or underwriters;
. the purchase price of the securities from us;
. the net proceeds to us from the sale of the securities;
. any delayed delivery arrangements;
. any underwriting discounts, commissions and other items constituting
underwriters' compensation;
. any initial public offering price;
. any discounts or concessions allowed or reallowed or paid to dealers;
and
. any commissions paid to agents.
Sale through Underwriters or Dealers
If we use underwriters in the sale, the underwriters will acquire the
securities for their own account. The underwriters may resell the securities
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. Underwriters may offer securities to the public either
through underwriting syndicates represented by one or more managing
underwriters or directly by one or more firms acting as underwriters. Unless we
inform you otherwise in the prospectus supplement, the obligations of the
underwriters to purchase the securities will be subject to certain conditions,
and the underwriters will be obligated to purchase all the offered securities
if they purchase any of them. The underwriters may change from time to time any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers.
28
During and after an offering through underwriters, the underwriters may
purchase and sell the securities in the open market as may be further described
in any prospectus supplement. These transactions may include overallotment and
stabilizing transactions and purchases to cover syndicate short positions
created in connection with the offering. The underwriters may also impose a
penalty bid, which means that 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 the 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. If commenced, the underwriters may discontinue these
activities at any time.
If we use dealers in the sale of securities, we will sell the securities to
them as principals. They may then resell those securities to the public at
varying prices determined by the dealers at the time of resale. We will include
in the prospectus supplement the names of the dealers and the terms of the
transaction.
Direct Sales and Sales through Agents
We may sell the securities directly. In this case, no underwriters or agents
would be involved. We may also sell the securities through agents we designate
from time to time. In the prospectus supplement, we will name any agent
involved in the offer or sale of the offered securities, and we will describe
any commissions payable by us to the agent. Unless we inform you otherwise in
the prospectus supplement, any agent will agree to use its reasonable best
efforts to solicit purchases for the period of its appointment. We may sell the
securities directly to institutional investors or others who may be deemed to
be underwriters within the meaning of the Securities Act of 1933 with respect
to any sale of those securities. We will describe the terms of any such sales
in the prospectus supplement.
Delayed Delivery Contracts
If we so indicate in the prospectus supplement, we may authorize agents,
underwriters or dealers to solicit offers from certain types of institutions to
purchase securities from us at the public offering price under delayed delivery
contracts. These contracts would provide for payment and delivery on a
specified date in the future. The contracts would be subject only to those
conditions described in the prospectus supplement. The prospectus supplement
will describe the commission payable for solicitation of those contracts.
GENERAL INFORMATION
We may have agreements with the agents, dealers and underwriters to
indemnify them against certain civil liabilities, including liabilities under
the Securities Act of 1933, or to contribute with respect to payments that the
agents, dealers or underwriters may be required to make. Agents, dealers and
underwriters may be customers of, engage in transactions with or perform
services for us in the ordinary course of their businesses.
LEGAL OPINIONS
Except as set forth in the applicable prospectus supplement, Baker Botts
L.L.P., Houston, Texas, will issue an opinion about the legality of any junior
subordinated debt securities, common stock or guarantees we offer through this
prospectus. Any underwriters will be advised about issues relating to any
offering by their own legal counsel. Certain matters of Delaware law relating
to the validity of the trust securities, the enforceability of the applicable
declaration of trust and the formation of the Lyondell Trusts will be passed
upon for us by Richards, Layton & Finger, P.A., Wilmington, Delaware, special
Delaware counsel to the Lyondell Trusts and Lyondell.
29
EXPERTS
The consolidated financial statements of Lyondell Chemical Company as of
December 31, 2001 and 2000 and for each of the three years in the period ended
December 31, 2001, incorporated in this prospectus by reference to the Lyondell
Chemical Company Annual Report on Form 10-K for the year ended December 31,
2001, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The consolidated financial statements of Equistar Chemicals, LP as of
December 31, 2001 and 2000 and for each of the three years in the period ended
December 31, 2001, incorporated in this prospectus by reference to the Lyondell
Chemical Company Annual Report on Form 10-K for the year ended December 31,
2001, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The financial statements of LYONDELL-CITGO Refining LP as of December 31,
2001 and 2000 and for each of the three years in the period ended December 31,
2001, incorporated in this prospectus by reference to the Lyondell Chemical
Company Annual Report on Form 10-K for the year ended December 31, 2001, have
been so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You can read and copy any materials we file with the
SEC at the SEC's public reference room at 450 Fifth Street, N.W., Washington,
D.C. 20549. You can obtain information about the operation of the SEC's public
reference room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a
web site that contains information we file electronically with the SEC, which
you can access over the Internet at http://www.sec.gov, and our electronic SEC
filings are also available from our web site at www.lyondell.com. Information
contained on our web site or any other web site is not incorporated into this
prospectus and does not constitute a part of this prospectus. You can also
obtain information about us at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
This prospectus is part of a registration statement we have filed with the
SEC relating to the securities. This prospectus does not contain all the
information the registration statement sets forth or includes in its exhibits
and schedules, in accordance with the rules and regulations of the SEC, and we
refer you to that omitted information. The statements this prospectus makes
pertaining to the content of any contract, agreement or other document that is
an exhibit to the registration statement necessarily are summaries of their
material provisions, and we qualify them in their entirety by reference to
those exhibits for complete statements of their provisions. The registration
statement and its exhibits and schedules are available at the SEC's public
reference room or through its Web site.
The SEC allows us to incorporate by reference the information we file with
it, which means we can disclose important information to you by referring you
to those documents. The information we incorporate by reference is an important
part of this prospectus, and later information we file with the SEC will
automatically update and supersede that information. We incorporate by
reference the documents listed below, and any future filings we make with the
SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934 until we sell all the offered securities. The documents we incorporate by
reference are:
. our annual report on Form 10-K for the year ended December 31, 2001;
. our quarterly report on Form 10-Q for the quarter ended March 31, 2002;
. our current report on Form 8-K filed on January 11, 2002;
. the description of the common stock, par value $1.00 per share, of
Lyondell contained in Lyondell's registration statement on Form 8-A
dated 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
30
. the description of the rights to purchase common stock contained in
Lyondell's registration statement on Form 8-A dated December 12, 1995,
as such registration statement may be amended from time to time for the
purpose of updating, changing or modifying such description.
We will provide without charge to each person, including any beneficial
owner, to whom a copy of this prospectus has been delivered, upon written or
oral request, a copy of any or all the documents we incorporate by reference in
this prospectus, other than any exhibit to any of those documents, unless we
have specifically incorporated that exhibit by reference into the information
this prospectus incorporates. You may request copies by writing or telephoning
us at the following address:
Lyondell Chemical Company
1221 McKinney Street, Suite 700
Houston, Texas 77010
Attention: Investor Relations
Telephone: (713) 652-7200
You should rely only on the information we have provided or incorporated by
reference in this prospectus or any prospectus supplement. We have not
authorized any person to provide information other than that provided in this
prospectus or any prospectus supplement. We have not authorized anyone to
provide you with different information. We are not making an offer of the
securities in any jurisdiction where the offer is not permitted. You should not
assume that the information in this prospectus or any prospectus supplement is
accurate as of any date other than the date on its cover page or that any
information contained in any document we have incorporated by reference is
accurate as of any date other than the date of the document incorporated by
reference. Accordingly, we urge you to review each document we subsequently
file with the SEC and incorporate by reference as we describe above for updated
information.
31
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth expenses payable by Lyondell Chemical Company
(the "Company") in connection with the issuance and distribution of the
securities being registered. All the amounts shown are estimates, except the
SEC registration fee.
SEC registration fee............................................ $ 0
NASD fee........................................................ 0
Printing expenses............................................... 10,000
Legal fees and expenses......................................... 65,000
Accounting fees and expenses.................................... 25,000
Fees and expenses of trustee and counsel........................ 20,000
Fees and expenses of transfer agent............................. 10,000
Rating agency fees.............................................. 65,000
Miscellaneous expenses.......................................... 25,000
--------
Total......................................................... $220,000
========
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.
II-1
(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 payment by the Company
of 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.
Corporate Resolutions
ARCO Chemical Technology, Inc.
ARCO Chemical Technology, Inc. adopted resolutions in November 2001 that
include provisions for the indemnification of its officers and directors.
Article V of the resolutions reads as follows:
RESOLVED, that the Board of Directors hereby establishes a procedure for
granting rights of indemnification to any director, officer, employee or agent
of the Company and its subsidiaries by authorizing, empowering and directing
the Vice President and Deputy General Counsel of Lyondell Chemical Company to
receive, consider and approve or disapprove, as the circumstances warrant,
requests for indemnification or advancement of related expenses from such
persons to the fullest extent authorized by Section 145 of the General
Corporation Law of the State of Delaware and to determine the terms and
conditions for the payment of such indemnification and the advancement of such
expenses.
Lyondell Chemical Nederland, Ltd.
Lyondell Chemical Nederland, Ltd. adopted resolutions in April 2001 that
include provisions for the indemnification of its officers and directors.
Article IV of the resolutions reads as follows:
RESOLVED, that the Board of Directors hereby establishes a procedure for
granting rights of indemnification to any director, officer, employee or agent
of the Company and its subsidiaries by authorizing, empowering and directing
the Vice President and Deputy General Counsel of Lyondell Chemical Company to
receive, consider and approve or disapprove, as the circumstances warrant,
requests for indemnification or advancement of related expenses from such
persons to the fullest extent authorized by Section 145 of the General
Corporation Law of the State of Delaware and to determine the terms and
conditions for the payment of such indemnification and the advancement of such
expenses.
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,
II-2
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 reasonably 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.
(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,
II-3
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 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
II-4
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.*
Exhibit
No. Description of Exhibit
------- ----------------------
*1.1 Form of Underwriting Agreement.
*4.1 Form of Senior Secured Debt Securities Indenture of the Company.
*4.2 Form of Senior Unsecured Debt Securities Indenture of the Company.
*4.3 Form of Senior Subordinated Debt Securities Indenture of the Company.
*4.4 Form of Junior Subordinated Debt Securities Indenture of the Company.
*4.5 Form of Subordinated Debt Trust Securities Indenture.
***4.6.1 Declaration of Trust of Lyondell Trust I (filed as an exhibit to the
Company's Registration Statement on Form S-3 dated July 31, 1998 and
incorporated herein by reference).
***4.6.2 Declaration of Trust of Lyondell Trust II (filed as an exhibit to the
Company's Amendment No. 1 to its Registration Statement on Form S-3
dated April 2, 1999 and incorporated herein by reference).
***4.6.3 Declaration of Trust of Lyondell Trust III (filed as an exhibit to
the Company's Amendment No. 1 to its Registration Statement on Form
S-3 dated April 2, 1999 and incorporated herein by reference).
*4.7.1 Amendment No. 1 to the Declaration of Trust of Lyondell Trust I.
*4.7.2 Amendment No. 1 to the Declaration of Trust of Lyondell Trust II.
*4.7.3 Amendment No. 1 to the Declaration of Trust of Lyondell Trust III.
Form of Amended and Restated Declaration of Trust of Lyondell Trust
*4.8.1 I.
Form of Amended and Restated Declaration of Trust of Lyondell Trust
*4.8.2 II.
Form of Amended and Restated Declaration of Trust of Lyondell Trust
*4.8.3 III.
*4.9.1 Amended and Restated Certificate of Trust of Lyondell Trust I.
*4.9.2 Amended and Restated Certificate of Trust of Lyondell Trust II.
*4.9.3 Amended and Restated Certificate of Trust of Lyondell Trust III.
Form of Preferred Security (included in Exhibits 4.8.1, 4.8.2 and
*4.10 4.8.3).
*4.11 Form of Subordinated Debt Trust Security.
Form of Preferred Securities Guarantee with respect to Preferred
*4.12 Securities.
*4.13 Form of Senior Secured Debt Security.
II-5
Exhibit
No. Description of Exhibit
------- ----------------------
*4.14 Form of Senior Unsecured Debt Security.
*4.15 Form of Senior Subordinated Debt Security.
*4.16 Form of Junior Subordinated Debt Security.
*4.17 Form of Warrant Agreement.
*4.18 Form of Warrant Certificate.
*4.19 Form of Stock Purchase Contract.
*4.20 Form of Security Purchase Unit.
***4.21 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
(Commission File Number 001-10145)).
***4.22 Certificate of Ownership and Merger dated July 31, 1998 of the
Company (filed as an exhibit to the Company's Annual Report on Form
10-K for the year ended December 31, 1999 and incorporated herein by
reference).
***4.23 Amended and Restated By-Laws of the Company (filed as an exhibit to
the Company's Annual Report on Form 10-K for the year ended December
31, 2001 and incorporated herein by reference).
*5.1 Opinion of Baker Botts L.L.P.
Opinion of Richards, Layton & Finger, P.A. relating to Lyondell Trust
*5.2.1 I.
Opinion of Richards, Layton & Finger, P.A. relating to Lyondell Trust
*5.2.2 II.
Opinion of Richards, Layton & Finger, P.A. relating to Lyondell Trust
*5.2.3 III.
Opinion of counsel to the Company as to certain tax matters relative
*8 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).
Consent of Richards, Layton & Finger, P.A. (included in Exhibits
*23.3 5.2.1, 5.2.2 and 5.2.3).
**24.1 Powers of Attorney for the Company.
**24.2.1 Powers of Attorney for Lyondell Chemical Nederland, Ltd.
**24.2.2 Powers of Attorney for ARCO Chemical Technology, Inc.
**24.2.3 Powers of Attorney for ARCO Chemical Technology, L.P.
*24.3.1 Powers of Attorney for the Company as sponsor, to sign the
Registration Statement on behalf of Lyondell Trust I (included in
Exhibit 4.6.1).
*24.3.2 Powers of Attorney for the Company as sponsor, to sign the
Registration Statement on behalf of Lyondell Trust II (included in
Exhibit 4.6.2).
*24.3.3 Powers of Attorney for the Company as sponsor, to sign the
Registration Statement on behalf of Lyondell Trust III (included in
Exhibit 4.6.3).
*25.1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of the trustee under the Senior Secured Debt Securities
Indenture.
*25.2 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of the trustee under the Senior Unsecured Debt Securities
Indenture.
*25.3 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of the trustee under the Senior Subordinated Debt Securities
Indenture.
*25.4 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of the trustee under the Junior Subordinated Debt Securities
Indenture.
II-6
Exhibit
No. Description of Exhibit
------- ----------------------
*25.5 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of the trustee under (i) the Subordinated Debt Trust
Securities Indenture, (ii) the Preferred Securities Guarantee of the
Company with respect to the Preferred Securities of Lyondell Trust I,
(iii) the Preferred Securities Guarantee of the Company with respect
to the Preferred Securities of Lyondell Trust II and (iv) the
Preferred Securities Guarantee of the Company with respect to the
Preferred Securities of Lyondell Trust III.
*25.6.1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of the trustee under the Amended and Restated Declaration of
Trust of Lyondell Trust I.
*25.6.2 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of the trustee under the Amended and Restated Declaration of
Trust of Lyondell Trust II.
*25.6.3 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of the trustee under the Amended and Restated Declaration of
Trust of Lyondell Trust III.
- --------
* 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) any
indenture relating to securities offered hereby, (iii) the instruments
setting forth the terms of any debt securities (whether secured or unsecured
or senior or subordinated), preferred stock, guarantee, warrant, stock
purchase contract, security purchase unit, and trust preferred security,
(iv) any required opinion of counsel to the Company or Lyondell Trust I,
Lyondell Trust II or Lyondell Trust III or (v) any Statement of Eligibility
and Qualification under the Trust Indenture Act of 1939 of the applicable
trustee.
** Filed herewith.
*** Incorporated by reference.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(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, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this 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 this registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this registration statement
or any material change to such information in this registration
statement;
provided, however, that the undertakings set forth in paragraphs (a)(1)(i)
and (a)(1)(ii) above 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 this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered
II-7
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 registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
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 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
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 registrant 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
Securities Act and will be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus 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.
(e) The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee under any indenture
relating to the debt securities to act under subsection (a) of Section 310 of
the Trust Indenture Act of 1939 (the "Act") in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Act.
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Lyondell
Chemical 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 May 15, 2002.
Lyondell Chemical Company
/s/ Dan F. Smith
By: _________________________________
Dan F. Smith
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on May 15, 2002.
Signature Title
--------- -----
* Chairman of the Board
______________________________________
William T. Butler
/s/ Dan F. Smith President, Chief Executive Officer and
______________________________________ Director (Principal Executive Officer)
Dan F. Smith
* Director
______________________________________
Carol A. Anderson
* Director
______________________________________
Travis Engen
* Director
______________________________________
Stephen F. Hinchliffe, Jr.
* Director
______________________________________
David J. Lesar
* Director
______________________________________
Dudley C. Mecum II
* Director
______________________________________
William R. Spivey
/s/ Robert T. Blakely Executive Vice President and Chief
______________________________________ Financial Officer (Principal Financial
Robert T. Blakely Officer)
/s/ Charles L. Hall Vice President and Controller
______________________________________ (Principal Accounting Officer)
Charles L. Hall
/s/ Kerry A. Galvin
*By: _________________________________
Kerry A. Galvin
(Attorney-in-Fact)
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Lyondell
Chemical Nederland, Ltd. 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 May 15, 2002.
Lyondell Chemical Nederland, Ltd.
/s/ Morris Gelb
By: _________________________________
Morris Gelb
President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on May 15, 2002.
Signature Title
--------- -----
/s/ Morris Gelb President and Director (Principal Executive
______________________________________ Officer)
Morris Gelb
/s/ Robert T. Blakely Director
______________________________________
Robert T. Blakely
/s/ T. Kevin DeNicola Director
______________________________________
T. Kevin DeNicola
/s/ Karen A. Twitchell Vice President and Treasurer
______________________________________ (Principal Financial Officer and
Karen A. Twitchell Principal Accounting Officer)
/s/ Kerry A. Galvin
*By: _________________________________
Kerry A. Galvin,
as Attorney-in-fact
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, ARCO Chemical
Technology, Inc. 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 Greenville, the State of Delaware, on May 15,
2002.
ARCO Chemical Technology, Inc.
/s/ Francis P. McGrail
By: _________________________________
Francis P. McGrail
President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on May 15, 2002.
Signature Title
--------- -----
/s/ Francis P. McGrail President and Director (Principal Executive
______________________________________ Officer, Principal Financial Officer and
Francis P. McGrail Principal Accounting Officer)
* Director
______________________________________
Eva Chu
* Director
______________________________________
Laura C. Fulton
* Director
______________________________________
Charles L. Hall
* Director
______________________________________
David J. Prilutski
/s/ Kerry A. Galvin
*By: _________________________________
Kerry A. Galvin,
as Attorney-in-fact
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, ARCO Chemical
Technology, L.P. 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 Greenville, the State of Delaware, on May 15,
2002.
ARCO Chemical Technology, L.P.
By: ARCO Chemical Technology
Management, Inc., its general
partner
/s/ Francis P. McGrail
By: _________________________________
Francis P. McGrail
President and Treasurer,
ARCO Chemical Technology
Management, Inc.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on May 15, 2002.
Signature Title
--------- -----
/s/ Francis P. McGrail President, Treasurer and Director, ARCO
______________________________________ Chemical Technology Management, Inc.
Francis P. McGrail (Principal Executive Officer, Principal
Financial Officer and Principal Accounting
Officer of ARCO Chemical Technology
Management, Inc.)
* Director, ARCO Chemical Technology
______________________________________ Management, Inc.
Eva Chu
* Director, ARCO Chemical Technology
______________________________________ Management, Inc.
Laura C. Fulton
* Director, ARCO Chemical Technology
______________________________________ Management, Inc.
Charles L. Hall
* Director, ARCO Chemical Technology
______________________________________ Management, Inc.
David J. Prilutski
/s/ Kerry A. Galvin
*By: _________________________________
Kerry A. Galvin,
as Attorney-in-fact
II-12
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 May 15, 2002.
Lyondell Trust I
By: Lyondell Chemical Company, as
Sponsor
By: /s/ Kerry A. Galvin
----------------------------------
Name: Kerry A. Galvin
Title: Senior Vice President,
General Counsel and Secretary
II-13
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Lyondell Trust
II 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 May 15, 2002.
Lyondell Trust II
By: Lyondell Chemical Company, as
Sponsor
By: /s/ Kerry A. Galvin
---------------------------------
Name: Kerry A. Galvin
Title: Senior Vice President,
General Counsel and Secretary
II-14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Lyondell Trust
III 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 May 15, 2002.
Lyondell Trust III
By: Lyondell Chemical Company, as
Sponsor
By: /s/ Kerry A. Galvin
---------------------------------
Name: Kerry A. Galvin
Title: Senior Vice President,
General Counsel and Secretary
II-15
EXHIBIT INDEX
Exhibit
No. Description of Exhibit
------- ----------------------
*1.1 Form of Underwriting Agreement.
*4.1 Form of Senior Secured Debt Securities Indenture of the Company.
*4.2 Form of Senior Unsecured Debt Securities Indenture of the Company.
*4.3 Form of Senior Subordinated Debt Securities Indenture of the Company.
*4.4 Form of Junior Subordinated Debt Securities Indenture of the Company.
*4.5 Form of Subordinated Debt Trust Securities Indenture.
***4.6.1 Declaration of Trust of Lyondell Trust I (filed as an exhibit to the
Company's Registration Statement on Form S-3 dated July 31, 1998 and
incorporated herein by reference).
***4.6.2 Declaration of Trust of Lyondell Trust II (filed as an exhibit to the
Company's Amendment No. 1 to its Registration Statement on Form S-3
dated April 2, 1999 and incorporated herein by reference).
***4.6.3 Declaration of Trust of Lyondell Trust III (filed as an exhibit to
the Company's Amendment No. 1 to its Registration Statement on Form
S-3 dated April 2, 1999 and incorporated herein by reference).
*4.7.1 Amendment No. 1 to the Declaration of Trust of Lyondell Trust I.
*4.7.2 Amendment No. 1 to the Declaration of Trust of Lyondell Trust II.
*4.7.3 Amendment No. 1 to the Declaration of Trust of Lyondell Trust III.
Form of Amended and Restated Declaration of Trust of Lyondell Trust
*4.8.1 I.
Form of Amended and Restated Declaration of Trust of Lyondell Trust
*4.8.2 II.
Form of Amended and Restated Declaration of Trust of Lyondell Trust
*4.8.3 III.
*4.9.1 Amended and Restated Certificate of Trust of Lyondell Trust I.
*4.9.2 Amended and Restated Certificate of Trust of Lyondell Trust II.
*4.9.3 Amended and Restated Certificate of Trust of Lyondell Trust III.
Form of Preferred Security (included in Exhibits 4.8.1, 4.8.2 and
*4.10 4.8.3).
*4.11 Form of Subordinated Debt Trust Security.
*4.12 Form of Preferred Securities Guarantee with respect to Preferred
Securities.
*4.13 Form of Senior Secured Debt Security.
*4.14 Form of Senior Unsecured Debt Security.
*4.15 Form of Senior Subordinated Debt Security.
*4.16 Form of Junior Subordinated Debt Security.
*4.17 Form of Warrant Agreement.
*4.18 Form of Warrant Certificate.
*4.19 Form of Stock Purchase Contract.
*4.20 Form of Security Purchase Unit.
***4.21 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
(Commission File Number 001-10145)).
***4.22 Certificate of Ownership and Merger dated July 31, 1998 of the
Company (filed as an exhibit to the Company's Annual Report on Form
10-K for the year ended December 31, 1999 and incorporated herein by
reference).
***4.23 Amended and Restated By-Laws of the Company (filed as an exhibit to
the Company's Annual Report on Form 10-K for the year ended December
31, 2001 and incorporated herein by reference).
*5.1 Opinion of Baker Botts L.L.P.
II-16
Exhibit
No. Description of Exhibit
------- ----------------------
Opinion of Richards, Layton & Finger, P.A. relating to Lyondell Trust
*5.2.1 I.
Opinion of Richards, Layton & Finger, P.A. relating to Lyondell Trust
*5.2.2 II.
Opinion of Richards, Layton & Finger, P.A. relating to Lyondell Trust
*5.2.3 III.
Opinion of counsel to the Company as to certain tax matters relative
*8 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).
Consent of Richards, Layton & Finger, P.A. (included in Exhibits
*23.3 5.2.1, 5.2.2 and 5.2.3).
**24.1 Powers of Attorney for the Company.
**24.2.1 Powers of Attorney for Lyondell Chemical Nederland, Ltd.
**24.2.2 Powers of Attorney for ARCO Chemical Technology, Inc.
**24.2.3 Powers of Attorney for ARCO Chemical Technology, L.P.
*24.3.1 Powers of Attorney for the Company as sponsor, to sign the
Registration Statement on behalf of Lyondell Trust I (included in
Exhibit 4.6.1).
*24.3.2 Powers of Attorney for the Company as sponsor, to sign the
Registration Statement on behalf of Lyondell Trust II (included in
Exhibit 4.6.2).
*24.3.3 Powers of Attorney for the Company as sponsor, to sign the
Registration Statement on behalf of Lyondell Trust III (included in
Exhibit 4.6.3).
*25.1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of the trustee under the Senior Secured Debt Securities
Indenture.
*25.2 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of the trustee under the Senior Unsecured Debt Securities
Indenture.
*25.3 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of the trustee under the Senior Subordinated Debt Securities
Indenture.
*25.4 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of the trustee under the Junior Subordinated Debt Securities
Indenture.
*25.5 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of the trustee under (i) the Subordinated Debt Trust
Securities Indenture, (ii) the Preferred Securities Guarantee of the
Company with respect to the Preferred Securities of Lyondell Trust I,
(iii) the Preferred Securities Guarantee of the Company with respect
to the Preferred Securities of Lyondell Trust II and (iv) the
Preferred Securities Guarantee of the Company with respect to the
Preferred Securities of Lyondell Trust III.
*25.6.1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of the trustee under the Amended and Restated Declaration of
Trust of Lyondell Trust I.
*25.6.2 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of the trustee under the Amended and Restated Declaration of
Trust of Lyondell Trust II.
*25.6.3 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of the trustee under the Amended and Restated Declaration of
Trust of Lyondell Trust III.
II-17
- --------
* 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) any
indenture relating to securities offered hereby, (iii) the instruments
setting forth the terms of any debt securities (whether secured or unsecured
or senior or subordinated), preferred stock, guarantee, warrant, stock
purchase contract, security purchase unit, and trust preferred security,
(iv) any required opinion of counsel to the Company or Lyondell Trust I,
Lyondell Trust II or Lyondell Trust III or (v) any Statement of Eligibility
and Qualification under the Trust Indenture Act of 1939 of the applicable
trustee.
** Filed herewith.
*** Incorporated by reference.
II-18