LAZARD FRERES

S.A.S. AU CAPITAL DE 17.537.500

121, BOULEVARD HAUSS MAN N
75382 PARIS CEDEX 08 - FRANCE
334 961 737 RCS PARIS
TL.
FAX.

+ 33 (0)1 44 13 01 11
+ 33 (0)1 44 13 01 00

www.lazard.com

Petrleos de Venezuela S.A.

Avenida Libertador, Edificio Petrleos de Venezuela
Torre Este, La Campia
Caracas 1060-A
Ladies and Gentlemen:
This letter confirms the retention of Lazard Frres SAS (Lazard) to act as investment
banker to Petrleos de Venezuela, S.A. (PDVSA or the Company) in connection with a possible
sale, directly or indirectly, of all or substantially all of the business or assets of its subsidiary CITGO
Petroleum Corporation (CITGO), to one or more other corporations or business or governmental
entities or persons (each, a Buyer), in one or more transactions, each of which transaction may take
the form, without limitation, of a merger, a sale of assets, equity securities or other interests (each, a
Transaction). By signing this letter, Lazard hereby accepts our appointment as the Companys
investment banker under the terms hereof.
We will act with respect to the foregoing, subject to the following conditions:
1.

We will assist the Company as necessary and requested (i) to analyze the business and
financial condition of CITGO, (ii) to formulate strategy and structural alternatives, (iii) to
assist the Company in identifying, evaluating, contacting and meeting with potential Buyers
and (iv) in connection with negotiations and the consummation of a Transaction.

2.

In connection with our engagement, the Company will furnish or cause to be furnished to us
such current and historical financial information and other information regarding the business
of CITGO as we may reasonably request. The Company will use reasonable efforts to ensure
that the foregoing information will be accurate and complete at the time it is furnished, and
the Company agrees to keep us advised of all material developments affecting CITGO or its
financial position.
Lazard shall be entitled to rely upon information furnished to it by the Company and any
Buyer and information that is publicly available, may assume the accuracy and completeness
of such information and shall not assume any responsibility for independent verification of
any such information. Lazard will not undertake any appraisal of any of the assets or
liabilities of CITGO or of any third party, or give advice on any issues of solvency.

3.

In consideration of our services, the Company agrees to pay us the following fees:
a. A monthly fee of US$100,000, payable upon execution of this letter agreement and on
the first day of each month thereafter during the term of our engagement hereunder;
provided, however, that 100% of the amount of such fees paid pursuant to this clause
(a) shall be credited towards any Transaction Fee, as defined in clause (b) below; and
b. An additional fee (the Transaction Fee), payable upon the consummation of a
Transaction and actual receipt by the Company and its affiliates of the aggregate
consideration in such Transaction, equal to the sum of (i) 0.5% of such aggregate

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consideration up to US$7 billion and (ii) 0.75% of the amount of such aggregate
consideration in excess of US$7 billion.
For purposes hereof, the term aggregate consideration means the total amount of cash and
the fair market value (on the date of payment) of all other property paid and payable
(including amounts paid into escrow) to the Company and its affiliates and its and their
respective equityholders in connection with a Transaction (or any related transaction),
including amounts paid and payable in respect of convertible securities, warrants, stock
appreciation rights, options or similar rights, whether or not vested. In addition, aggregate
consideration shall be increased by the amount of all indebtedness and any other liabilities
directly assumed by the Buyer, and decreased by the amount of all cash and investments
acquired by the Buyer. Aggregate consideration shall also be increased by the aggregate
amount of any dividends or other distributions declared and paid by CITGO after the date
hereof and in connection with or anticipation of a Transaction and received by the Company
within 30 days of closing thereof. If the aggregate consideration is subject to increase by
contingent payments related to future events, the portion of our fee relating thereto shall be
calculated by the Company and us in good faith and paid to us only upon actual receipt of
such contingent payments by the Company. Notwithstanding anything to the contrary in this
letter, no fee shall be paid or payable to Lazard with respect to any sale by CITGO of its
terminal or pipeline assets, or any sale of PDV Chalmette, Inc. or any of its assets.
4.

We acknowledge that neither the Company nor any of its affiliates is under any obligation to
enter into a Transaction. Regardless of whether any Transaction or this engagement is
completed, the Company agrees to reimburse us periodically, upon request, for reasonable
document production charges and all of our reasonable expenses incurred in connection with
this engagement, provided that in no event shall the Company be obligated to reimburse,
without its prior written approval, expenses that, in the aggregate, exceed US$250,000.
Generally these expenses include travel costs, document production and other expenses of
this type, and will also include the fees of outside counsel and other professional advisors, if
any, which may be engaged by us in connection herewith following prior written notice to the
Company. All payments to be made by the Company pursuant to this agreement shall be
made promptly after receipt of invoice therefor.

5.

No fee payable to any third party, by the Company or any other person or entity in connection
with the subject matter of this engagement, shall reduce or otherwise affect any fee payable
hereunder.

6.

Simultaneously herewith, the parties hereto are entering into an indemnification letter (the
Indemnification Letter). The Indemnification Letter shall survive any termination of this
engagement.

7.

Our engagement hereunder may be terminated by the Company or us upon written notice to
the other party at any time, without liability or continuing obligation to the Company or us,
except that, following any termination of our engagement, we shall remain entitled to any
fees accrued pursuant to paragraph 3 but not yet paid prior to such termination, and to
reimbursement of expenses incurred prior to such termination, as contemplated by paragraph
4 hereof but not yet paid prior to such termination. In addition, in the case of termination by
the Company (other than for Cause) (and without duplication of the preceding sentence), we
shall remain entitled to full payment of all fees contemplated by paragraph 3 hereof in respect
of any Transaction announced or resulting from negotiations occurring during the period

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from the date hereof until twelve months following such termination. For purposes hereof,
Cause is defined as bad faith, gross negligence or willful misconduct on the part of Lazard.
8.

Any financial advice, written or oral, rendered by us pursuant to our engagement hereunder is
intended solely for the benefit and use of senior management and the Board of Directors of
the Company (in their capacities as such) in considering the matters to which our engagement
relates. The Company agrees that, notwithstanding any termination of our engagement, such
advice and the terms of our engagement hereunder may not be disclosed publicly or made
available to third parties without the prior written consent of Lazard, provided that the
Company may disclose such information to its affiliates, officers, directors and advisors who
need to know such information so long as such disclosure is made on a confidential basis.
Notwithstanding the foregoing, nothing herein shall prohibit the Company from disclosing to
any and all persons the tax treatment and tax structure of a Transaction and the portions of
any materials that relate to such tax treatment or tax structure. Lazard will not be responsible
for and will not be deemed to have provided any tax, accounting, actuarial, legal or other
specialist advice.

9.

The provisions hereof shall inure to the benefit of and be binding upon the successors and
assigns of the Company, Lazard and any other person entitled to indemnity under the
Indemnification Letter.

10.

Each of the parties hereto will comply with all applicable securities, anti-money laundering
and antibribery laws, rules and regulations in all jurisdictions (including laws which prohibit
payments to foreign and domestic government officials made to secure or retain business
opportunities).

11.

Lazard has been retained under this agreement as an independent contractor to the Company,
and nothing herein is intended to confer any rights or remedies as against Lazard upon any
person (including the management, Board of Directors and securityholders of the Company)
other than the Company. In addition, it is understood and agreed that this agreement and our
engagement do not create a fiduciary relationship between Lazard and any person, including
the Company, its management, its Board of Directors and its securityholders. As you know,
Lazard, including bankers involved in our engagement hereunder, have in the past advised,
currently are advising and may in the future advise the Bolivarian Republic of Venezuela on a
variety of matters.

12.

Lazard agrees that upon announcement of a Transaction, the Company may include a
statement in the press release relating thereto, in a form reasonably acceptable to Lazard, to
the effect that Lazard has acted as investment banker to the Company in connection with such
Transaction. Lazard agrees that prior to the closing of a Transaction, it will not issue a press
release relating thereto without the prior written consent of the Company, which consent will
not be unreasonably withheld.

13.

In carrying out services hereunder, Lazard may, as it considers appropriate, draw upon the
resources of and involve as agent other members of the Lazard Group and Lazard Capital
Markets LLC and its affiliates. In this agreement, Lazard Group means Lazard Group LLC
and its direct and indirect subsidiaries.
14. This agreement and any claim related directly or indirectly to this agreement (including any
claim concerning advice provided pursuant to our engagement hereunder) shall be governed

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by and construed in accordance with the laws of the State of New York. Any dispute,
controversy or claim arising out of or relating to this agreement, or the breach, termination or
invalidity thereof, shall be settled by arbitration in accordance with the UNCITRAL
Arbitration Rules. The number of arbitrators shall be three. The place of arbitration shall be
Madrid, Spain. The languages to be used in the arbitral proceedings shall be Spanish and
English.
15.

This agreement and the Indemnification Letter constitute the entire agreement between the
Company and us with respect to the matters set forth herein and supersede all prior and
contemporaneous discussions, agreements and understandings with respect to the matters
covered herein and therein. No waiver, amendment or other modification of this agreement
shall be effective unless in writing and signed by each party to be bound thereby.

If the foregoing correctly sets forth the understanding between us, please so indicate on the
enclosed signed copy of this letter in the space provided therefor and return it to us, whereupon this
letter shall constitute a binding agreement between us.
Very truly yours,
LAZARD FRERES SAS

By______________________________
Matthieu Pigasse
Director General
CONFIDENTIALITY AGREEMENT
This Confidentiality Agreement (the Agreement) is entered into on May [*], 2014, by and
between Petrleos de Venezuela, S.A., a company organized and existing under the laws of the
Bolivarian Republic of Venezuela (PDVSA), represented by Jess Luongo in his capacity as
Director of Refining of PDVSA, and Lazard Frres SAS, a company organized and existing under
the laws of France (Lazard), represented by Matthieu Pigasse in his capacity as Director General
of Lazard. PDVSA and Lazard are individually referred to as a Party and collectively as the
Parties.
WHEREAS, Lazard has requested to have access to certain information in connection with the
evaluation of a possible sale, directly or indirectly, of all or substantially all of the business or assets
of PDVSAs subsidiary CITGO Petroleum Corporation (CITGO) to one or more other
corporations or businesses or governmental entities or persons, in one or more transactions, each of
which transactions may take the form, without limitation, of a merger, a sale of assets, equity
securities or other interests (each, a Transaction), and PDVSA has agreed to furnish, or cause to
be furnished, such information to Lazard and its representatives pursuant to the terms and conditions
set forth herein.
For purposes of this Agreement the term Affiliates shall mean any Person that directly or
indirectly through one or more intermediaries, controls or is controlled by or is under common
control with the Person specified. For purposes of this definition, a Person shall mean any

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individual, partnership, limited liability company, corporation, trust, estate, joint venture, association
or unincorporated organization, or other form of business or professional entity, and control of a
Person shall mean the power, direct or indirect, to direct or cause the direction of the management
and policies of such Person, whether by contract or otherwise.
IN VIRTUE OF THE FOREGOING, the Parties agree as follows:
1.

For the purposes of this Agreement, the term Confidential Information shall mean all
information (whether oral or contained in a written or other tangible medium) furnished
(whether before, on or after the date hereof) by PDVSA or any of its directors, officers,
employees, representatives (including, without limitation, financial advisors, attorneys and
accountants) or agents, or by any of PDVSAs Affiliates or any of the directors, officers,
employees, representatives (including, without limitation, financial advisors, attorneys and
accountants) or agents of any of PDVSAs Affiliates (collectively, the PDVSA
Representatives) to Lazard, or to Lazards Affiliates or the directors, officers, employees,
partners, representatives (including, without limitation, financial advisors, attorneys and
accountants) or agents of Lazard or of its Affiliates (collectively, the Lazard
Representatives) in connection with a possible Transaction, and all analyses, compilations,
forecasts, studies or other documents prepared by Lazard Representatives which contain or
reflect any such information. The term Confidential Information shall also include the fact
that a Transaction is being considered and that Confidential Information has been made
available to Lazard and the Lazard Representatives.

2.

The term Confidential Information shall not include information which: (i) is, was or has
become publicly available other than as a result of a disclosure by Lazard or Lazard
Representatives in violation of this Agreement, (ii) is, was or has become available to Lazard
on a non-confidential basis from a source (other than PDVSA, a PDVSA Affiliate or PDVSA
Representatives) which, to the best of Lazards knowledge after due inquiry, is not prohibited
from disclosing such information by a legal, contractual or fiduciary obligation to PDVSA or
any PDVSA Affiliate, or (iii) was independently developed by Lazard or any Lazard
Representative without reference to or reliance on Confidential Information.

3.

Lazard agrees that Lazard and the Lazard Representatives (i) shall keep the Confidential
Information confidential and shall not, without PDVSAs prior consent (except that, in the
case of information provided by a PDVSA Affiliate, such information may be disclosed with
such Affiliates consent), disclose any Confidential Information in any manner whatsoever
(except as required by applicable law, regulation or legal or regulatory process, and only after
compliance with Paragraph 4 below), and (ii) shall not use any Confidential Information
other than in connection with its evaluation of the Transaction; provided, however, that
Lazard shall be entitled to reveal the Confidential Information to the Lazard Representatives
(a) who need to know the Confidential Information for the purpose of evaluating the
Transaction, and (b) who have been informed by Lazard of the confidential nature of the
Confidential Information. Additionally, each Lazard Representative shall, unless otherwise
agreed by PDVSA, be required to agree and acknowledge in writing that it will be bound by,
and act fully in accordance with, the terms of this Agreement. Lazard shall direct the Lazard
Representatives to observe the terms of this Agreement, and Lazard shall be responsible for
any breach of this Agreement by any Lazard Representative. Confidential Information
provided shall remain the property of PDVSA and/or its Affiliates, as the case may be.

4.

If Lazard or any Lazard Representatives are required by applicable law, regulation or legal or
regulatory process or requested by a governmental agency, regulatory authority, court or

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arbitral tribunal, to disclose any of the Confidential Information, Lazard shall promptly notify
PDVSA so that in PDVSAs sole discretion, PDVSA or its Affiliates may seek a protective
order or other appropriate remedy or waive compliance with the terms of this Agreement. In
the event that no such protective order or other remedy is obtained, or compliance with the
terms of this Agreement is not waived, Lazard agrees that it shall furnish only that portion of
the Confidential Information which Lazard is required by applicable law, regulation or legal
or regulatory process to deliver and shall exercise reasonable efforts to obtain reliable
assurance that confidential treatment will be accorded to the Confidential Information.
5.

If PDVSA or its Affiliates decide not to pursue or proceed with a Transaction (the Declined
Transaction), upon the request of PDVSA, Lazard and the Lazard Representatives shall
promptly, with respect to all Confidential Information in the possession or control of Lazard
or the Lazard Representatives, (a) destroy or deliver to PDVSA, at Lazards option, all such
Confidential Information in any tangible medium, and (b) delete all such Confidential
Information stored in any intangible medium, in each case at Lazards own expense, followed
by confirmation in writing of such destruction or deletion, provided that, if for any reason
(including, without limitation, document retention policies or regulations, applicable law,
regulation or legal or regulatory process requirements, information retained as part of
electronic back-ups, etc.) Lazard or Lazard Representatives retain any Confidential
Information, such Confidential Information not returned, destroyed or deleted as provided
herein shall continue to be subject to the confidentiality obligations set forth in this
agreement. Any oral Confidential Information relating to the Declined Transaction will also
continue to be subject to the terms of this Agreement.

6.

Lazard acknowledges and agrees that, although PDVSA will make reasonable efforts to
provide Lazard with accurate and complete Confidential Information, each of PDVSA and
the PDVSA Representatives expressly disclaims and does not make any express or implied
representation or warranty as to the accuracy or completeness of the Confidential
Information, and Lazard agrees that no such Person will have any liability relating to the
Confidential Information or for any errors therein or omissions therefrom. Lazard further
agrees that neither Lazard nor any other Person having access to the Confidential Information
is or will be entitled to rely on the accuracy or completeness of any Confidential Information
except pursuant to written representations and warranties of PDVSA under definitive
agreements to implement a Transaction.

7.

Lazard agrees that Lazard and the Lazard Representatives may not use the Confidential
Information for any purpose other than evaluating a potential Transaction.

8.

Lazard agrees that all (i) requests for additional information from PDVSA or its Affiliates,
tours of facilities of PDVSA or of any of PDVSAs Affiliates, or management meetings with
PDVSA or any of its Affiliates in connection with the Transaction, and (ii) discussions or
questions with PDVSA or any of its Affiliates regarding procedures with respect to the
Transaction, will be submitted and directed only to the authorized contact persons listed
below and any other employee of PDVSA or its Affiliates identified to Lazard as involved in
the potential Transaction and not otherwise to employees of PDVSA or its Affiliates.
Authorized contact persons:
PDVSA:

[*]
[title]

Page 7.
[address]
Lazard:

Mr. Francois Funck-Brentano

General Counsel
[address]

The foregoing notwithstanding, any notice, request or other communication required to be

given herein shall be in writing and may be personally served or sent by facsimile or courier
service and shall be deemed to have been given when delivered in person or by courier
service, or upon receipt of a facsimile (promptly confirmed in writing), in each case to the
appropriate addresses and facsimile numbers set forth above, or to such other addresses and
facsimile numbers as a Party may designate by written notice to the other Party.
9.

PDVSA commits to deliver or cause the delivery of Confidential Information solely pursuant
to this Agreement until the earlier of (i) the sixtieth (60th) day following the date of execution
and delivery of this Agreement or (ii) the date of any earlier decision by Lazard or by
PDVSA or any of its Affiliates to terminate the evaluation of a potential Transaction, after
which neither PDVSA nor any of its Affiliates shall have any commitment whatsoever
(except as may be set forth in a separate written agreement) to deliver or cause the delivery of
Confidential Information to Lazard or any Lazard Representatives.

10.

Lazard and PDVSA each acknowledge and agree that this Agreement does not grant any
rights whatsoever to, or obligations whatsoever of, Lazard or its Affiliates in connection with
a potential Transaction, including, without limitation, any rights or obligations to represent
PDVSA or any of its Affiliates or to arrange or enter into any Transaction. PDVSA and its
Affiliates shall have no obligation of any kind whatsoever with respect to a Transaction or to
any arrangements in connection with a Transaction unless and until a definitive agreement
with respect thereto has been executed and delivered.

11.

The Parties are independent entities and nothing contained in this Agreement shall be deemed
or construed as creating a relationship of partnership, association, principal and agent or joint
venture by or between the Parties or any of their Affiliates. Nothing in this Agreement shall
be construed in any way as creating an exclusive relationship between the Parties or any of
their Affiliates. Lazard acknowledges and agrees that the Parties shall have no right or
authority to assume or create any obligation or responsibility on behalf of the other Party or
its Affiliates, or to bind the other Party or any of its Affiliates in any manner whatsoever even
if such actions are taken for the benefit of the other Party or any of its Affiliates. The Parties
further acknowledge and agree that entering into this Agreement or furnishing or receiving
Confidential Information hereunder shall not constitute an offer, acceptance or promise of
any future agreement or to amend any existing agreement.

12.

Lazard acknowledges that in the event of any actual or threatened breach of this Agreement
by Lazard or the Lazard Representatives, PDVSA, on behalf of itself and its Affiliates, shall
have the right (without prejudice to any other rights and remedies otherwise available to
PDVSA and/or its Affiliates), to seek to enjoin Lazard from disclosing the Confidential
Information or from otherwise using the Confidential Information in breach of this
Agreement, and Lazard agrees to the granting of injunctive relief without proof of actual
damages. In the event of litigation relating to this Agreement, the losing Party shall
reimburse the prevailing Party for its reasonable legal fees and expenses in connection with
such litigation.

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13.

This Agreement is for the benefit of Lazard and for the benefit of PDVSA and its Affiliates,
and shall be governed by and construed in accordance with the laws of the State of New York
as at the date hereof, without giving effect to any choice of law rules thereof that would result
in the application of the laws of any other jurisdiction. Other than with respect to injunctive
relief, which PDVSA shall have the right to seek and obtain before any court or tribunal, any
dispute, controversy or claim arising out of or relating to this Agreement, or the breach,
termination or invalidity thereof, shall be settled by arbitration in accordance with the
UNCITRAL Arbitration Rules. The number of arbitrators shall be three. The place of
arbitration shall be Madrid, Spain. The languages to be used in the arbitral proceedings shall
be Spanish and English.

14.

Lazard agrees that no failure or delay by PDVSA in exercising any right, power, or privilege
hereunder, nor any partial exercise thereof, shall operate as a full or partial waiver thereof.

15.

The invalidity or unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provisions of this Agreement, which shall remain in
full force and effect.

16.

Except as otherwise provided in Paragraphs 3 and 5 herein, the rights and obligations of the
Parties under this Agreement shall terminate on the second anniversary of the date of this
Agreement.

17.

This Agreement may be executed in separate counterparts.

18.

This Agreement shall not be assigned or otherwise transferred by any Party (other than by
operation of law) without the prior written consent of the other Party, which consent may be
denied at such Partys sole discretion.

19.

This Agreement contains the entire agreement between Lazard and PDVSA regarding the
matters contemplated hereby and replaces, supersedes and merges all prior communications,
understandings and agreements between the Parties, whether oral or written, expressed or
implied regarding this Agreement which are merged into this Agreement. No modifications
of this Agreement or waiver of the terms and conditions hereof will be binding upon Lazard
or PDVSA, unless approved in writing by Lazard and PDVSA.

Petrleos de Venezuela, S.A.

Signature:
Name:
Jess Luongo
Title:
Director of Refining
Lazard Frres SAS
Signature:
Name: Matthieu Pigasse
Title: Director General