Document:

<PAGE>                                                            EXHIBIT 10.125
                                 LIMITED WAIVER

                          Dated as of February 9, 2000

          This LIMITED WAIVER (this "Waiver") is among SMART & FINAL, INC., a
                                     ------
Delaware corporation (the "Borrower"), the holders under the Trust Agreement
                           --------
referred to below (the "Holders"), the financial institutions and other entities
                        -------
party to the Revolving Credit Agreement and Synthetic Lease Credit Agreement
referred to below (the "Lenders"), and CREDIT LYONNAIS LOS ANGELES BRANCH, as
                        -------
administrative agent (the "Administrative Agent") for the Lenders and the
                           --------------------
Holders.

                            PRELIMINARY STATEMENTS:

          1.  Reference is made to (i) the Credit Agreement (as amended,
supplemented or otherwise modified from time to time, the "Revolving Credit
                                                           ----------------
Agreement") dated as of November 13, 1998 among the Borrower, the financial
---------
institutions named therein, and Credit Lyonnais Los Angeles Branch, as
Administrative Agent for the Lenders, (ii) the Participation Agreement (as
amended, supplemented or otherwise modified from time to time, the
"Participation Agreement") dated as of November 13, 1998 among the Borrower, the
------------------------
Guarantors party thereto, First Security Bank, National Association, as owner
trustee under the S&F Trust 1998-1, the various banks and other institutions
party thereto as Holders and as Lenders, and Credit Lyonnais Los Angeles Branch,
as Administrative Agent for the Lenders and the Holders, (iii) the Credit
Agreement (as defined in the Participation Agreement) (as amended, supplemented
or otherwise modified from time to time, the "Synthetic Lease Credit
                                              ----------------------
Agreement"), and (iv) the Trust Agreement (as defined in the Participation
---------
Agreement) (as amended, supplemented or otherwise modified from time to time,
the "Trust Agreement").
     ---------------

          2.  The Borrower has requested that the Lenders and the Holders waive
certain provisions of the Revolving Credit Agreement and the Lenders have agreed
to grant such waiver, in each case as set forth herein.

          NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

          SECTION 1.  Waiver.  Effective as of the Waiver Effective Date (as
                      ------
defined in Section 2), the Lenders, the Holders and the Administrative Agent
hereby waive any Default or Event of Default arising from the Borrower's failure
to comply with the provisions of Sections 6.02(a)(v) and 6.02(b)(iii)(A) of the
Revolving Credit Agreement as a result of entering into the Capitalized Leases
described on Schedule I hereto (the "Specified Leases"); provided, however, that
                                     ----------------    --------  -------
such waiver shall be effective only to the extent that (i) the aggregate
principal amount of all Capitalized Leases, other than the Specified Leases,
that are subject to Liens permitted by Section 6.02(a)(iv) of the Revolving
Credit Agreement does not exceed $7,500,000 at any time
<PAGE>

outstanding and (ii) the aggregate principal amount of the Specified Leases does
not exceed $5,000,000 at any time outstanding.

          SECTION 2.  Conditions to Effectiveness.  The amendments set forth
                      ---------------------------
herein shall become effective on the date (the "Waiver Effective Date") on which
                                                ---------------------
the Administrative Agent shall have executed this Waiver and shall have received
counterparts of this Waiver executed by the Borrower, the Required Lenders under
the Revolving Credit Agreement and the Majority Secured Parties (as defined in
the Participation Agreement) and a counterpart of the Consent attached hereto
executed by each Guarantor.

          SECTION 3.  Representations and Warranties.  The Borrower represents
                      ------------------------------
and warrants as follows:

          (a)  Authority.  The Borrower and each other Loan Party has the
               ---------
requisite corporate power and authority to execute and deliver this Waiver and
the Consent, as applicable, and to perform its obligations hereunder and under
the Loan Documents and the Operative Agreements (in each case as modified
hereby) to which it is a party.  The execution, delivery and performance by the
Borrower of this Waiver and by each other Loan Party of the Consent, and the
performance by each Loan Party of each Loan Document and each Operative
Agreement (in each case as modified hereby) to which it is a party have been
duly approved by all necessary corporate action of such Loan Party and no other
corporate proceedings on the part of such Loan Party are necessary to consummate
such transactions.

          (b) Enforceability.  This Waiver has been duly executed and delivered
              --------------
by the Borrower.  The Consent has been duly executed and delivered by each
Guarantor and each Grantor.  This Waiver and each Loan Document and each
Operative Agreement (in each case as modified hereby) is the legal, valid and
binding obligation of each Loan Party party hereto and thereto, enforceable
against such Loan Party in accordance with its terms, and is in full force and
effect.

          (c) Representations and Warranties.  The representations and
              ------------------------------
warranties contained in each Loan Document and each Operative Agreement (other
than any such representations and warranties that, by their terms, are
specifically made as of a date other than the date hereof) are true and correct
on and as of the date hereof as though made on and as of the date hereof and
will be true and correct on and as of the Waiver Effective Date as though made
on and as of such date.

          (d) No Default.  After giving effect to this Waiver, no event has
              ----------
occurred and is continuing that constitutes a Default or Event of Default under
any Loan Document or any Operative Agreement.

                                      S-2
<PAGE>

          SECTION 4.  General Release of Claims.
                      -------------------------

          (a) The Borrower represents and agrees that it has diligently and
thoroughly investigated the existence of any Claim (as defined below), and to
its knowledge and belief, no Claim exists and no facts exist that could give
rise to or support a Claim.

          (b) As additional consideration for entering into this Waiver and for
the waivers set forth herein, the Borrower and each Guarantor and each of their
respective agents, employees, directors, officers, attorneys, affiliates,
subsidiaries, successors and assigns (individually a "Releasing Party," and
                                                      ---------------
collectively the "Releasing Parties") hereby releases and forever discharges
                  -----------------
each of the Lessor, the Administrative Agent, the Syndication Agent, the Agent
and each Lender (under each of the Revolving Credit Agreement and the Synthetic
Lease Credit Agreement) and each Holder under the Trust Agreement  and all of
their respective agents, direct and indirect shareholders, employees, directors,
officers, attorneys, branches, affiliates, subsidiaries, successors and assigns
(individually, a "Released Party," and collectively, the "Released Parties") of
                  --------------                          ----------------
and from all damage, loss, claims, demands, liabilities, obligations (except for
any such obligations hereafter arising pursuant to the terms of the Loan
Documents or the Operative Agreements, as amended to date), actions and causes
of action whatsoever (collectively "Claims") that the Releasing Parties or any
                                    ------
of them may, as of the date hereof, have or claim to have against each or any of
the Released Parties, in each case whether presently known or unknown or with
respect to which the facts are known (or should have been known) that could give
rise to or support a Claim and of every nature and extent whatsoever on account
of or in any way relating to, arising out of or based upon the Loan Documents,
the Operative Agreements or this Waiver (including clause (a)) or the
negotiation or documentation hereof or the amendments under the Loan Documents
and Operative Agreements effected by this Waiver or the transactions
contemplated hereby, or any action or omission in connection with any of the
foregoing, including, without limitation, all such loss or damage of any kind
heretofore sustained, or that may arise as a consequence of the dealings between
the parties up to the date hereof in connection with or in any way related to
the Loan Documents, the Operative Agreements or this Waiver.  Each Releasing
Party further covenants and agrees that it has not assigned heretofore, and will
not hereafter sue any Released Party upon, any Claim released or purported to be
released under this Section, and the Borrower will indemnify and hold harmless
said Released Parties against any loss or liability on account of any actions
brought by any Releasing Party or its assigns or prosecuted on behalf of any
Releasing Party and relating to any Claim released or purported to be released
under this Section.  It is further understood and agreed that any and all rights
under the provisions of Section 1542 of the California Civil Code are expressly
waived by each of the Releasing Parties.  Section 1542 provides as follows:

          "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR."

                                      S-3
<PAGE>

          SECTION 5.  Reference to and Effect on the Loan Documents and the
                      -----------------------------------------------------
Credit Documents.
----------------

          (a) Upon and after the effectiveness of this Waiver, (i) each
reference in the Revolving Credit Agreement to "this Agreement", "hereunder",
"hereof" or words of like import referring to the Revolving Credit Agreement,
and each reference in the other Loan Documents or any Operative Agreement to
"the Credit Agreement", "the Lessee Credit Agreement", "thereunder", "thereof"
or words of like import referring to the Revolving Credit Agreement, shall mean
and be a reference to the Revolving Credit Agreement as modified hereby, and
(ii) each reference in the Participation Agreement or the Synthetic Lease Credit
Agreement to "this Agreement", "hereunder", "hereof" or words of like import
referring to the Participation Agreement or the Synthetic Lease Credit
Agreement, as the case may be, and each reference in the other Operative
Agreements or in the Loan Documents to "the Participation Agreement", "the
Credit Agreement", "the Synthetic Lease Credit Agreement", "thereunder",
"thereof" or words of like import referring to the Participation Agreement or
the Synthetic Lease Credit Agreement Credit Agreement, shall mean and be a
reference to the Participation Agreement or the Synthetic Lease Credit
Agreement, as the case may be, in each case as modified hereby.

          (b) Except as specifically modified above, the Revolving Credit
Agreement, the Participation Agreement, the Synthetic Lease Credit Agreement and
the other Loan Documents and Operative Agreements are and shall continue to be
in full force and effect and are hereby in all respects ratified and confirmed.
Without limiting the generality of the foregoing, the Collateral Documents (as
defined in the Revolving Credit Agreement) and the Security Documents (as
defined in the Participation Agreement) and all of the Collateral described
therein do and shall, to the extent set forth therein, continue to secure the
payment of all obligations and liabilities of the Borrower and/or the Lessor (as
defined in the Participation Agreement), as applicable, under the Revolving
Credit Agreement and the Participation Agreement and/or any of the other Loan
Documents or Operative Agreements, in each case as amended hereby.

          (c) The execution, delivery and effectiveness of this Waiver shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of the Administrative Agent, the Lenders, the Holders, or the
Lessor under any of the Loan Documents or the Operative Agreements, nor
constitute a waiver of any provision of any of the Loan Documents or the
Operative Agreements.

          (d) Each of the parties hereto specifically acknowledges and agrees
that (i) none of the parties to the Revolving Credit Agreement, the
Participation Agreement, any other Loan Documents or any other Operative
Agreement have agreed to any other or future waiver of or amendment to any of
the Loan Documents or Operative Agreements, (ii) neither the granting of the
waiver described herein nor the granting of any prior waivers and amendments
under the Loan Documents and/or the Operative Agreements creates any obligation
whatsoever on the part of any of the parties to any of the Loan Documents and/or
the Operative Agreements to grant any other or future waiver under any of the
Loan Documents or the Operative Agreements, and (iii) except as specifically set
forth herein, each of the parties to any of the Loan Documents

                                      S-4
<PAGE>

and/or the Operative agreements have reserved all rights and remedies under the
Loan Documents and/or the Operative Agreements, as applicable.

          SECTION 6.  Costs, Expenses and Taxes.  The Borrower agrees to pay on
                      -------------------------
demand all reasonable costs and expenses of the Administrative Agent and the
Lenders in connection with the preparation, execution, delivery and
administration of this Waiver and the other instruments and documents, if any,
to be delivered hereunder, including, without limitation, the reasonable fees
and out of pocket expenses of counsel for the Administrative Agent and the
Lenders with respect thereto and with respect to advising each of such parties
as to its rights and responsibilities hereunder and thereunder.  The Borrower
further agrees to pay on demand all costs and expenses, if any (including,
without limitation, reasonable counsel fees and expenses), in connection with
the enforcement (whether though negotiations, legal proceedings or otherwise) of
this Waiver and the other instruments and documents to be delivered hereunder,
including, without limitation, reasonable counsel fees and expenses in
connection with the enforcement of rights under this Section.

          SECTION 7.  Consent of Lenders and Holders Under Operative Agreements.
                      ---------------------------------------------------------
By their execution hereof, the Lenders and Holders under the Operative
Agreements, hereby consent and agree to the terms of this Waiver and to the
amendments and modifications set forth herein for purposes of Section 28.1 of
the Lease (as defined in the Participation Agreement).

          SECTION 8.  Counterparts.  This Waiver may be executed in any number
                      ------------
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which taken together shall constitute but one and the same agreement.
Delivery of an executed counterpart of a signature page to this Waiver by
telefacsimile shall be effective as delivery of a manually executed counterpart
of this Waiver.

          SECTION 9.  Governing Law.  This Waiver shall be governed by, and
                      -------------
construed in accordance with, the laws of the State of California.

                         [Signature Pages Follow]

                                      S-5
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be
executed by their respective officers thereunto duly authorized, as of the date
first written above.

                                 SMART & FINAL INC.,
                                  as Borrower

                                 By: /s/ Richard N. Phegley
                                    --------------------------
                                         Richard N. Phegley
                                    Vice President & Treasurer

                                      S-1
<PAGE>

                                 CREDIT LYONNAIS LOS ANGELES BRANCH,
                                  as Administrative Agent

                                 /s/ Dianne M. Scott
                                 By: Dianne M. Scott
                                 First Vice President and Branch Manager

                                      S-2
<PAGE>

                                 L/C Bank
                                 --------
                                 CREDIT LYONNAIS NEW YORK BRANCH

                                 /s/ Robert J. Ivosevich
                                 By: Robert J. Ivosevich
                                 Senior Vice President

                                      S-3
<PAGE>

                                 Holders and Lenders:
                                 -------------------

                                 CREDIT LYONNAIS LOS ANGELES BRANCH, as a Lender

                                 /s/ Dianne M. Scott
                                 By: Dianne M. Scott
                                 First Vice President and Branch Manager

                                      S-4
<PAGE>

                                 CREDIT LYONNAIS LEASING CORP., as a Holder

                                 /s/ L. M. Wertheim
                                 By: L. M. Wertheim
                                 President

                                      S-5
<PAGE>

                                 BANK OF AMERICA, N.A., as a Lender and a Holder

                                 /s/ James P. Johnson
                                 By: James P. Johnson
                                 Managing Director

                                      S-6
<PAGE>

                                 UNION BANK OF CALIFORNIA, N.A., as a Lender and
                                 a Holder

                                 /s/ Theresa L. Rocha
                                 By: Theresa L. Rocha
                                 Vice President

                                      S-7
<PAGE>

                                 WELLS FARGO BANK, N.A., as a Lender

                                 By:___________________________________
                                    Title:

                                      S-8
<PAGE>

                                 COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK
                                 N.A. "RABOBANK NEDERLAND", NEW YORK BRANCH, as
                                 a Lender and a Holder

                                 /s/ Edward Peyser
                                 By: Edward Peyser
                                 Vice President

                                 /s/ Hans F. Breukhoven
                                 By: Hans F. Breukhoven
                                 Vice President

                                      S-9
<PAGE>

                                 NATEXIS BANQUE - BFCE, as a Lender and a Holder

                                 /s/ Pieter J. van Tulder
                                 By: Pieter J. van Tulder
                                 Vice President and Manager
                                 Multinational Group

                                 /s/ Christine Dirringer
                                 By: Christine Dirringer
                                 Assistant Vice President

                                      S-10
<PAGE>

                                 HARRIS TRUST AND SAVINGS BANK, as a Lender and
                                 a Holder

                                 /s/ Julia B. Buthman
                                 By: Julia B. Buthman
                                 Managing Director

                                      S-11
<PAGE>

                                    CONSENT
                         Dated as of February 9, 2000

The undersigned, as Guarantors under the "Guaranty" and as Grantors under the
"Security Agreement" (as such terms are defined in and under the Revolving
Credit Agreement referred to in the foregoing Waiver) and as Guarantors under
the "Guaranty Agreement" (as defined in the Participation Agreement referred to
in the foregoing Waiver), each hereby consents and agrees to the foregoing
Waiver and hereby confirms and agrees that (i) the Guaranty, the Guaranty
Agreement and the Security Agreement and all other Loan Documents and Operative
Agreements are, and shall continue to be, in full force and effect and are
hereby ratified and confirmed in all respects except that, upon Waiver Effective
Date (as defined in the foregoing Waiver), each reference in the Guaranty, the
Guaranty Agreement, the Security Agreement and the other Loan Documents and
Operative Agreements to the "Credit Agreement", "Lessee Credit Agreement", "the
Participation Agreement," "the Synthetic Lease Credit Agreement", "thereunder",
"thereof" and words of like import referring to the Revolving Credit Agreement,
the Participation Agreement or the Synthetic Lease Credit Agreement, as the case
may be shall mean and be a reference to the Revolving Credit Agreement, the
Participation Agreement or the Synthetic Lease Credit Agreement, as the case may
be, as amended and modified by said Waiver, and (ii) the Security Agreement and
all of the Collateral described therein do, and shall continue to, secure the
payment of all of the Secured Obligations as defined in the Security Agreement.

                            AMERICAN FOODSERVICE DISTRIBUTORS
                            /s/ Richard N. Phegley
                            By:  Richard N. Phegley
                              Vice President & Treasurer

                            SMART & FINAL STORES CORPORATION
                            /s/ Richard N. Phegley
                            By:  Richard N. Phegley
                              Vice President & Treasurer

                            SMART & FINAL OREGON, INC.
                            /s/ Richard N. Phegley
                            By:  Richard N. Phegley
                              Vice President & Treasurer

                            PORT STOCKTON FOOD DISTRIBUTORS, INC.
                            /s/ Richard N. Phegley
                            By:  Richard N. Phegley
                              Vice President & Treasurer

                            HENRY LEE COMPANY
                            /s/ Richard N. Phegley
                            By:  Richard N. Phegley
                              Vice President & Treasurer

                            AMERIFOODS TRADING COMPANY
                            /s/ Richard N. Phegley
                            By:  Richard N. Phegley
                               Vice President & Treasurer

                            HL HOLDING CORPORATION
                            /s/ Richard N. Phegley
                            By:  Richard N. Phegley
                               Vice President & Treasurer

<PAGE>

                                   Schedule I

                               To Limited Waiver
                          Dated as of February 9, 2000

Lessee:  Smart & Final Stores Corporation
         600 Citadel Drive
         Commerce, California 90040

Lessor:  Heller Financial Leasing, Inc.
         500 West Monroe Street
         Chicago, Illinois 60661
         As assignee of and successor in interest to:

         Newcourt Communications Finance Corporation,
         formerly known as AT&T Credit Corporation,
         and also doing business as NCR Credit Corporation
         2 Gatehall Drive
         Parsippany, New Jersey 07954

As separately scheduled within the Master Lease Agreement:

     "Specified Leases"   Principal Amount   Lease Expiration
      -------------------------------------------------------

          #00010           $2,295,724.00      12/31/2004
          #00020              783,017.00      12/31/2004
          #00030            1,128,797.05      12/31/2002
          #00040              128,784.22      12/31/2004
          #00050              382,038.05      12/31/2004
                           -------------    ------------
          Total            $4,718,360.32<PAGE>

                                                                    Exhibit  4.6

                           LYONDELL CHEMICAL COMPANY
                         1999 LONG-TERM INCENTIVE PLAN

               FORM OF NONQUALIFIED STOCK OPTION AWARD AGREEMENT

          Lyondell Chemical Company (the "Company") hereby grants on
___________, ____ (the "Grant Date") to [PARTICIPANT] (the "Optionee"), an
employee of the Company, a right (the "Option") to purchase from the Company up
to but not exceeding in the aggregate [OPTIONS] shares of Common Stock, par
value $1.00 per share, of the Company ("Common Stock") at $___ per share (the
"Exercise Price"), such number of shares and such price per share being subject
to adjustment as provided in Section 11 of the Lyondell Chemical Company 1999
Long-Term Incentive Plan (the "Plan"), and further subject to the following
terms and conditions:

          1.  RELATIONSHIP TO PLAN.

          This Option is intended to be a nonqualified stock option within the
meaning of Section 83 of the Code.  This Option is subject to all of the terms,
conditions and provisions of the Plan and administrative interpretations
thereunder, if any, which have been adopted by the Committee thereunder and are
in effect on the date hereof.  Except as defined herein, capitalized terms shall
have the same meanings ascribed to them under the Plan.

          2.  EXERCISE SCHEDULE.

          (a) This Option shall become exercisable in three cumulative
     installments, with one-third of the Option Shares becoming exercisable on
     February 3, 2001, an additional one-third of the Option Shares becoming
     exercisable on February 3, 2002, and the final one-third of the Option
     Shares becoming exercisable on February 3, 2003. The Optionee must be in
     continuous Employment from the Grant Date through the date of
     exercisability of each installment in order for the Option to become
     exercisable with respect to additional shares of Common Stock on such date.
     For purposes of this Award Agreement, "Employment" means employment with
     the Company or its parent or any of its Subsidiaries.

          (b) This Option shall become fully exercisable, irrespective of the
     limitations set forth in subparagraph (a) above, provided that the Optionee
     has been in continuous Employment since the Grant Date, upon termination of
     Employment due to death, Disability or Retirement, or upon a Change in
     Control.

          (c) This Option shall become fully exercisable, irrespective of the
     limitations set forth in subparagraph (a) above, provided that the Optionee
     has been in continuous Employment since the Grant Date, if, at any time
     prior to February 3, 2003 the Fair Market Value per share of Common Stock
     is greater than or equal to two times the

                                       1
<PAGE>

Exercise Price for at least 5 consecutive trading days.

          (d) For purposes of this Award Agreement, the following definitions
     apply:

              (i)   "Disability" means a permanent and total disability as
          defined in the Company's Executive Long-Term Disability Plan.

              (ii)  "Retirement" means a termination of employment initiated
          voluntarily by the Optionee (i) on or after age 65 or (ii) on or after
          age 55 with 10 years of participation service as credited under the
          Company's qualified defined benefit pension plan.

              (iii) "Change in Control" shall be deemed to have
          occurred as of the date that one or more of the following occurs:

              (a)   Individuals who, as of the date hereof, constitute the
          entire Board of Directors of the Company ("Incumbent Directors") cease
          for any reason to constitute at least a majority of the Board;
          provided, however, that any individual becoming a director subsequent
          to the date hereof whose election, or nomination for election by the
          Company's shareholders, was approved by a vote of at least a majority
          of the then Incumbent Directors shall be considered as though such
          individual was an Incumbent Director, but excluding, for this purpose
          any such individual whose initial assumption of office occurs as a
          result of either an actual or threatened election contest, as such
          terms are used in Rule 14a-11 under the Securities Exchange Act of
          1934, as amended ("Exchange Act") or other actual or threatened
          solicitation of proxies or consents by or on behalf of any Person (as
          defined below) other than the Board;

              (b)   The stockholders of the Company shall approve (A) any
          merger, consolidation or recapitalization of the Company (or, if the
          capital stock of the Company is affected, any subsidiary of the
          Company), or any sale, lease, or other transfer (in one transaction or
          a series of transactions contemplated or arranged by any party as a
          single plan) of all or substantially all of the assets of the Company
          (each of the foregoing being an "Acquisition Transaction") where (1)
          the shareholders of the Company immediately prior to such Acquisition
          Transaction would not immediately after such Acquisition Transaction
          beneficially own, directly or indirectly, shares or other ownership
          interests representing in the aggregate eighty percent (80%) or more
          of (a) the then outstanding common stock or other equity interests of
          the corporation or other entity surviving or resulting from such
          merger, consolidation or recapitalization or acquiring such assets of
          the Company, as the case may be (the "Surviving Entity") (or of its
          ultimate parent corporation or other entity, if any), and (b) the
          Combined Voting Power of the then outstanding Voting Securities of the
          Surviving Entity (or of its ultimate parent corporation or other
          entity, if any) or (2) the Incumbent Directors at the time of the
          initial approval of such Acquisition Transaction would not

                                       2
<PAGE>

          immediately after such Acquisition Transaction constitute a majority
          of the Board of Directors, or similar managing group, of the Surviving
          Entity (or of its ultimate parent corporation or other entity, if
          any), or (B) any plan or proposal for the liquidation or dissolution
          of the Company; or

              (c)  Any Person shall be or become the beneficial owner (as
          defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
          indirectly, of securities of the Company representing in the aggregate
          more than twenty percent (20%) of either (A) the then outstanding
          shares of common stock of the Company ("Common Shares") or (B) the
          Combined Voting Power of all then outstanding Voting Securities of the
          Company; provided, however, that notwithstanding the foregoing, a
          Change in Control shall not be deemed to have occurred for purposes of
          this Subsection (iii):

                   (1) Solely as a result of an acquisition of securities by the
               Company which, by reducing the number of Common Shares or other
               Voting Securities outstanding, increases (a) the proportionate
               number of Common Shares beneficially owned by any Person to more
               than twenty percent (20%) of the Common Shares then outstanding,
               or (b) the proportionate voting power represented by the Voting
               Securities beneficially owned by any Person to more than twenty
               percent (20%) of the Combined Voting Power of all then
               outstanding Voting Securities; or

                   (2) Solely as a result of an acquisition of securities
               directly from the Company except for any conversion of a security
               that was not acquired directly from the Company,

          provided, further, that if any Person referred to in paragraph (1) or
          (2) of this Subsection (iii) shall thereafter become the beneficial
          owner of any additional Common Shares or other Voting Securities of
          the Company (other than pursuant to a stock split, stock dividend or
          similar transaction), then a Change in Control shall be deemed to have
          occurred for purposes of this Subsection (iii).

              (d) For purposes of this Section 2(d)(iii):

                  (1)   "Affiliate" shall mean, as to a specified Person,
               another Person that directly, or indirectly through one or more
               intermediaries, controls or is controlled by, or is under common
               control with, the specified Person, within the meaning of such
               terms as used in Rule 405 under the Securities Act of 1933, as
               amended ("Securities Act"), or any successor rule.

                  (2)  "Combined Voting Power" shall mean the aggregate votes
               entitled to be cast generally in the election of the Board of
               Directors, or similar managing group, of a corporation or other
               entity by holders of then outstanding Voting Securities of such

                                       3
<PAGE>

               corporation or other entity.

                    (3)  "LCR" shall mean LYONDELL-CITGO Refining Company Ltd.
               (from and after January 1, 1999, LYONDELL-CITGO Refining LP), a
               Limited Liability Company organized under the laws of the State
               of Texas.

                    (4)  "Person" shall mean any individual, entity (including,
               without limitation, any corporation, partnership, trust, joint
               venture, association or governmental body) or group (as defined
               in Sections 14(d)(3) or 15(d)(2) of the Exchange Act and the
               rules and regulations thereunder); provided, however, that Person
               shall not include the Company or LCR, any of their subsidiaries,
               any employee benefit plan of the Company or LCR or any of their
               majority-owned subsidiaries or any entity organized, appointed or
               established by the Company, LCR or such subsidiaries for or
               pursuant to the terms of any such plan.

                    (5)  "Voting Securities" shall mean all securities of a
               corporation or other entity having the right under ordinary
               circumstances to vote in an election of the Board of Directors,
               or similar managing group, of such corporation or other entity.

          3.  TERMINATION OF OPTION:  The Option hereby granted shall terminate
and be of no force and effect with respect to any shares of Common Stock not
previously purchased by the Optionee upon the first to occur of:

          (a)  close of business on ___________;

          (b)  with respect to

          (i)  the portion of the Option exercisable upon termination (or which
     becomes exercisable upon termination due to death, Disability or
     Retirement), the expiration of (A) 90 days following the Optionee's
     termination of Employment by the Company for reasons other than for cause
     (as determined by the Committee), death, Disability or Retirement, or (B)
     one year following the Optionee's termination of Employment by reason of
     death, Disability or Retirement; and

          (ii) the portion of the Option not exercisable upon termination for
     any reason other than death, Disability or Retirement, the date of the
     Optionee's termination of Employment; or

          (c)  the date of the Optionee's termination of Employment for any
     reason other than those described in (b) above.

          4.  EXERCISE OF OPTION.  Subject to the limitations set forth herein
and in the

                                       4
<PAGE>

Plan, this Option may be exercised by written notice provided to the Company as
set forth in Section 5. Such written notice shall (a) state the number of shares
of Common Stock with respect to which the Option is being exercised and (b) be
accompanied by a check, cash or money order payable to Lyondell Chemical Company
in the full amount of the purchase price for any shares of Common Stock being
acquired or, at the option of the Optionee, accompanied by Common Stock
theretofore owned by such Optionee for at least six months that is equal in
value to the full amount of the purchase price (or any combination of cash,
check or such Common Stock). For purposes of determining the amount, if any, of
the purchase price satisfied by payment in Common Stock, such Common Stock shall
be valued at its Fair Market Value on the date of exercise. Any Common Stock
delivered in satisfaction of all or a portion of the purchase price shall be
appropriately endorsed for transfer and assignment to the Company.

          The Optionee agrees that he will not exercise the Option granted
pursuant hereto, and that the Company will not be obligated to issue any Option
Shares pursuant to this Award Agreement, if the exercise of the Option or the
issuance of such shares would constitute a violation by the Optionee or by the
Company of any provision of any law or regulation of any governmental authority
or any stock exchange or transaction quotation system. Whether or not the
options and shares covered by the Plan have been registered pursuant to the
Securities Act, the Company may, at its election, require the Optionee to give a
representation in writing in form and substance satisfactory to the Company to
the effect that he is acquiring such shares for his own account for investment
and not with a view to, or for sale in connection with, the distribution of such
shares or any part thereof.

          If any law or regulation requires the Company to take any action with
respect to the shares specified in such notice, the time for delivery thereof,
which would otherwise be as promptly as possible, shall be postponed for the
period of time necessary to take such action.

          Notwithstanding anything to the contrary contained herein, the
Company, acting through the Committee, hereby reserves the right to deliver cash
in lieu of Option Shares upon the exercise of the Option. In such event, the
amount of cash to be paid shall be equal to the number of Option Shares that
would otherwise have been delivered multiplied by the excess of the Fair Market
Value of a share of Common Stock on the date of exercise over $12.9125.

          5.  NOTICES.  Notice of exercise of the Option must be made in the
following manner, using such forms as the Company may from time to time provide:

          (a) by registered or certified United States mail, postage prepaid, to
     Lyondell Chemical Company, Attn: Corporate Secretary, 1221 McKinney Street,
     Suite 700, Houston, Texas 77010, in which case the date of exercise shall
     be the date of mailing; or

          (b) by hand delivery or otherwise to Lyondell Chemical Company, Attn:
     Corporate Secretary, 1221 McKinney Street, Suite 700, Houston, Texas 77010,
     in which case the date of exercise shall be the date when receipt is
     acknowledged by the Company.

                                       5
<PAGE>

  Notwithstanding the foregoing, (i) in the event that the address of the
  Company is changed prior to the date of any exercise of this Option, notice of
  exercise shall instead be made pursuant to the foregoing provisions at the
  Company's current address, or (ii) in the event that the Committee delegates
  the administration of option exercises to a third party administrator pursuant
  to Section 3 of the Plan, notice of exercise shall instead be made pursuant to
  the written instructions given to the Optionee by the third party
  administrator with respect to option exercise.

          Any other notices provided for in this Award Agreement or in the Plan
shall be given in writing and shall be deemed effectively delivered or given
upon receipt or, in the case of notices delivered by the Company to the
Optionee, five days after deposit in the United States mail, postage prepaid,
addressed to the Optionee at the address specified at the end of this Award
Agreement or at such other address as the Optionee hereafter designates by
written notice to the Company.

          6.  ASSIGNMENT OF OPTION. The Optionee's rights under the Plan and
this Award Agreement are personal; no assignment or transfer of the Optionee's
rights under and interest in this Option may be made by the Optionee otherwise
than by will or by the laws of descent and distribution; and this Option is
exercisable during his lifetime only by the Optionee. Notwithstanding the
foregoing, the Option is transferable by the Optionee to (i) the children or
grandchildren of the Optionee ("Immediate Family Members"), (ii) a trust or
trusts for the exclusive benefit of such Immediate Family Members ("Immediate
Family Member Trusts"), or (iii) a partnership or partnerships in which such
Immediate Family Members have at least ninety-nine percent (99%) of the equity,
profit and loss interests ("Immediate Family Member Partnerships"). Subsequent
transfers of a transferred Option shall be prohibited except by will or the laws
of descent and distribution, unless such transfers are made to the original
Optionee or a person to whom the original Optionee could have made a transfer in
the manner described herein. No transfer shall be effective unless and until
written notice of such transfer is provided to the Committee, in the form and
manner prescribed by the Committee. Following transfer, any the Option shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, and, except as otherwise provided herein, the
term "Optionee" shall be deemed to refer to the transferee. The consequences of
termination of employment shall continue to be applied with respect to the
original Optionee, following which the Options shall be exercisable by the
transferee only to the extent and for the periods specified in the Plan and this
Award Agreement.

     After the death of the Optionee, exercise of the Option shall be permitted
only by the Optionee's executor or the personal representative of the Optionee's
estate (or by his assignee, in the event of a permitted assignment) and only to
the extent that the Option was exercisable on the date of the Optionee's death.

          7.  STOCK CERTIFICATES.  Certificates representing the Common Stock
issued pursuant to the exercise of the Option will bear all legends required by
law and necessary or advisable to effectuate the provisions of the Plan and this
Option.

          8.  CERTAIN LIMITS.  Notwithstanding the foregoing, unless otherwise
provided by the Company pursuant to a separate written agreement or plan
covering the

                                       6
<PAGE>

Optionee, to the extent an Optionee would be subject to the excise tax under
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), on
the amounts payable pursuant to this Award Agreement and such other amounts or
benefits the Optionee receives from the Company, any person whose actions result
in a change of ownership covered by Section 280G(b)(2) of the Code or any person
affiliated with the Company or such person, required to be included in the
calculation of parachute payments for purposes of Sections 280G and 4999 of the
Code, the amounts vested pursuant to this Award Agreement shall be automatically
reduced to an amount one dollar less than that which, when combined with such
other amounts, would subject the Optionee to such excise tax.

          9.  WITHHOLDING.  No certificates representing shares of Common Stock
purchased hereunder shall be delivered to or in respect of an Optionee unless
the amount of all federal, state and other governmental withholding tax
requirements imposed upon the Company with respect to the issuance of such
shares of Common Stock has been remitted to the Company or unless provisions to
pay such withholding requirements have been made to the satisfaction of the
Committee.  The Committee may make such provisions as it may deem appropriate
for the withholding of any taxes which it determines is required in connection
with this Option.  The Optionee may pay all or any portion of the taxes required
to be withheld by the Company or paid by the Optionee in connection with the
exercise of all or any portion of this Option by delivering cash, or by electing
to have the Company withhold shares of Common Stock, or by delivering previously
owned shares of Common Stock, having a Fair Market Value determined in
accordance with the Plan equal to the amount required to be withheld or paid.
The Optionee must make the foregoing election on or before the date that the
amount of tax to be withheld is determined.

          10.  SHAREHOLDER RIGHTS.  The Optionee shall have no rights of a
shareholder with respect to shares of Common Stock subject to the Option unless
and until such time as the Option has been exercised and ownership of such
shares of Common Stock has been transferred to the Optionee.

          11.  SUCCESSORS AND ASSIGNS.  This Award Agreement shall bind and
inure to the benefit of and be enforceable by the Optionee, the Company and
their respective permitted successors and assigns (including personal
representatives, heirs and legatees), except that the Optionee may not assign
any rights or obligations under this Award Agreement except to the extent and in
the manner expressly permitted herein.

          12.  NO EMPLOYMENT GUARANTEED.  No provision of this Award Agreement
shall confer any right upon the Optionee to continued employment with the
Company or any Subsidiary.

                                       7
<PAGE>

          13.  GOVERNING LAW.  This Award Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of Texas.

                              LYONDELL CHEMICAL COMPANY

Date:____________________     Signed:_________________________________

                              Name:___________________________________

                              Title:__________________________________

                                       8

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