UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
X Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from . . . . to . . . .
Commission file number 1-7627
WAINOCO OIL CORPORATION
(Exact name of registrant as specified in its charter)
Wyoming 74-1895085
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10000 Memorial Drive, Suite 600 77024-3411
Houston, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (713) 688-9600
Not Applicable
Former name, former address and former fiscal year, if
changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No . . .
Registrant's number of common shares outstanding as of August 7, 1996:
27,258,502
- -------------------
<PAGE>
WAINOCO OIL CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
INDEX
Page
Part I - Financial Information
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Part II - Other Information 14
Definitions of Terms
mcf = thousand cubic feet
mmcf = million cubic feet
bbl(s) = barrel(s)
bpd = barrels per day
mbbls = thousand barrels
mmcfe = million cubic feet equivalent
Equivalent information is based on British Thermal Units at a ratio of six mcf
of natural gas to one bbl of oil. All dollar amounts are expressed in United
States dollars unless otherwise indicated as Canadian dollars (C$).
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<PAGE>
Page 1
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
WAINOCO OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands except per share)
Six Months Ended Three Months Ended
June 30, June 30,
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Refined products $ 175,341 $ 156,960 $ 100,037 $ 89,018
Oil and gas sales 8,580 14,280 3,595 6,582
Other 1,849 6,474 575 4,766
--------- --------- --------- ---------
185,770 177,714 104,207 100,366
--------- --------- --------- ---------
Costs and Expenses:
Refining operating costs 165,082 153,516 90,701 83,909
Oil and gas operating costs 2,366 5,426 1,185 2,404
Selling and general expenses 4,621 5,786 2,019 2,703
Depreciation, depletion and amortization 8,666 11,384 4,137 5,269
--------- --------- --------- ---------
180,735 176,112 98,042 94,285
--------- --------- --------- ---------
Operating Income 5,035 1,602 6,165 6,081
Interest Expense, Net 8,527 10,071 4,325 4,990
--------- --------- --------- ---------
Income (Loss) Before Income Taxes (3,492) (8,469) 1,840 1,091
Provision for Income Taxes 213 68 103 37
--------- --------- --------- ---------
Net Income (Loss) $ (3,705) $ (8,537) $ 1,737 $ 1,054
========= ========= ========= =========
Income (Loss) Per Share $ (.14) $ (.31) $ .06 $ .04
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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Page 2
<TABLE>
<CAPTION>
WAINOCO OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands except shares)
June 30, 1996 and December 31, 1995 1996 1995
--------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash, including cash equivalents of
$481 in 1996 and $1,000 in 1995 $ 1,556 $ 6,045
Trade receivables 22,674 20,022
Joint operator and other receivables 4,772 2,345
Inventory of crude oil, products and other 28,764 19,736
Other current assets 531 708
--------- ---------
Total current assets 58,297 48,856
--------- ---------
Property and Equipment, at cost:
Oil and gas properties, on a full-cost basis 167,881 164,711
Refinery and pipeline 139,620 137,598
Furniture, fixtures and other equipment 4,574 4,416
--------- ---------
312,075 306,725
Less - Accumulated depreciation, depletion
and amortization 131,132 122,404
--------- ---------
180,943 184,321
Other Assets 4,874 5,205
--------- ---------
$ 244,114 $ 238,382
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 37,501 $ 35,909
Oil and gas proceeds payable 2,073 2,705
Accrued interest 5,229 5,230
Accrued turnaround cost 5,729 882
Other accrued liabilities 3,361 6,615
--------- ---------
Total current liabilities 53,893 51,341
--------- ---------
Long-Term Debt, net of current maturities:
Revolving credit facilities 7,600 -
12% Senior Notes 94,000 92,000
7 3/4% Convertible Subordinated Debentures 46,000 46,000
10 3/4% Subordinated Debentures 7,403 7,377
--------- ---------
155,003 145,377
Deferred Credits and Other 3,997 6,782
Deferred Income Taxes 2,418 2,418
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, $100 par value, 500,000 shares
authorized, no shares issued - -
Common stock, no par, 50,000,000 shares
authorized, 27,313,502 shares issued 57,172 57,172
Paid-in capital 81,767 81,767
Retained earnings (deficit) (101,734) (98,029)
Cumulative translation adjustment (8,143) (8,187)
Treasury stock, 57,500 shares (259) (259)
--------- ---------
Total Shareholders' Equity 28,803 32,464
--------- ---------
$ 244,114 $ 238,382
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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Page 3
<TABLE>
<CAPTION>
WAINOCO OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
For the six months ended June 30, 1996 1995
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Loss $ (3,705) $ (8,537)
Depreciation, depletion and amortization 8,666 11,384
Gain on sale of interest in gas marketing company - (1,780)
Deferred credits and other 445 547
--------- ---------
5,406 1,614
Change in working capital from operations (12,719) (224)
--------- ---------
Net cash (used in) provided by operating activities (7,313) 1,390
INVESTING ACTIVITIES
Additions to property and equipment (7,632) (11,287)
Sales of oil and gas properties 879 13,761
Sale of interest in gas marketing company - 1,824
Net cash received (distributed) as operator of properties 143 (93)
--------- ---------
Net cash (used in) provided by investing activities (6,610) 4,205
FINANCING ACTIVITIES
Long-term borrowings -
Bank debt 12,743 26,300
12% Senior Notes 2,000 -
Repayments of long-term bank debt (5,143) (34,000)
Other (170) (254)
--------- ---------
Net cash provided by (used in) financing activities 9,430 (7,954)
Effect of exchange rate changes on cash 4 (61)
--------- ---------
Decrease in Cash and Cash Equivalents (4,489) (2,420)
Cash and Cash Equivalents, beginning of period 6,045 5,831
--------- ---------
Cash and Cash Equivalents, end of period $ 1,556 $ 3,411
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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Page 4
WAINOCO OIL CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM FINANCIAL STATEMENTS
June 30, 1996
(Unaudited)
1. Financial statement presentation and earnings per share
Financial statement presentation
The condensed consolidated financial statements include the accounts of
Wainoco Oil Corporation, a Wyoming Corporation, and its wholly owned
subsidiaries, including Frontier Holdings Inc. ("Frontier" or the "Refinery")
and Wainoco Oil & Gas Company, collectively referred to as Wainoco or the
Company. These financial statements have been prepared by the registrant
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC) and include all adjustments (comprised of only
normal recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although Wainoco believes that the
disclosures are adequate to make the information presented not misleading. It
is suggested that the financial statements included herein be read in
conjunction with the financial statements and the notes thereto included in
Wainoco's annual report on Form 10-K for the year ended December 31, 1995.
Earnings per share
Primary and fully diluted earnings per share have been computed on the
weighted average number of common shares outstanding and assume the exercise
of stock option shares for the three and six month periods ended June 30, 1996
and 1995. The effect of dilution for the fully diluted computation was
immaterial. No effect was given for the addition of dilutive stock options
for the six months ended June 30, 1996 and 1995 as a loss was incurred. The
primary and fully diluted average shares outstanding for the three months and
six months ended June 30, 1996 were 27,330,233 and 27,256,002 and in 1995 were
27,319,328 and 27,251,760, respectively.
2. Schedule of major components of inventory
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------- ---------
(in thousands)
<S> <C> <C>
Crude oil $ 5,588 $ 2,517
Unfinished products 5,123 4,016
Finished products 11,309 6,629
Chemicals and in-transit inventory 881 1,060
Repairs and maintenance supplies and other 5,863 5,514
--------- ---------
$ 28,764 $ 19,736
========= =========
</TABLE>
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Page 5
3. Accounting policy for oil and gas properties
Wainoco follows the accounting policy (commonly referred to as "full-cost"
accounting) of capitalizing costs incurred in the acquisition, exploration and
development of oil and gas reserves. No gains or losses are recognized upon
the sale or disposition of oil and gas properties, except for significant
transactions.
Wainoco computes the provision for depreciation, depletion and
amortization (DD&A) of oil and gas properties, by country, on a quarterly
basis using the composite unit-of-production method based on future gross
revenue attributable to proved reserves.
Capitalized oil and gas property costs, by country, are limited to the
present value of future net income from estimated production of proved oil and
gas reserves discounted at 10%, plus the value of unproved properties.
As of June 30, 1996, the present value of future net income from estimated
Canadian oil and gas proved reserves exceeded the limitation on capitalized
property costs. Future price declines, if any, might require Wainoco to
provide additional provisions for DD&A in future periods.
4. Restructuring of operations
In the third quarter of 1994, Wainoco announced its intention to cease all
exploration in the United States and sell its United States oil and gas
assets. During 1995, Wainoco completed the sales process and ended its
production activities in the United States. In the fourth quarter of 1995,
Wainoco accrued restructuring losses of $1.7 million, net of a $.7 million
property disposition gain. With respect to the restructuring loss, during the
six months ended June 30, 1996, the Company paid liabilities of approximately
$1.6 million, reduced related accruals of $93,000 (which together with the
reduction of other accruals resulted in other income of $841,000) and has a
remaining restructuring accrual approximating $.7 million.
5. Nonrecurring transactions
In the first quarter of 1995 the Company received $856,000 in settlement
of a Frontier contract dispute. During the second quarter of 1995 the
Company's Canadian operations sold its interest in a Canadian gas marketing
company for a net gain of $1,780,000. Additionally, during the second quarter
of 1995 the Company's United States oil and gas operations recorded $2,206,000
resulting from the settlement of a breach of contract claim against a former
gas purchaser. All such amounts have been classified as other revenues in the
Consolidated Statement of Operations.
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Page 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Six months ended June 30, 1996 compared with the same period in 1995
The Company had a loss for the six months ended June 30, 1996 of $3,705,000,
or $.14 per share, compared to a loss of $8,537,000, or $.31 per share, for
the same period in 1995. Operating income increased $3,433,000 in 1996 to
$5,035,000, attributable to an increase in refining operating income of
$5,640,000, offset by a decrease in Canadian oil and gas operating income of
$1,411,000.
In 1996, other income decreased $4,625,000 to $1,849,000. Other income in
1996 includes $841,000 associated with the disposition of United States oil
and gas operations due to the reduction of certain accruals. Other income for
the first six months of 1995 included $856,000 received in settlement of a
contract dispute which was included in refining operating income, the sale by
the Canadian oil and gas operations of its interest in a Canadian gas
marketing company for a net gain of $1,780,000, and the United States oil and
gas operations settlement of a breach of contract claim against a former gas
purchaser in amount of $2,206,000.
Refining operating income increased in 1996 versus 1995 due to an increase
in refined product revenues partially offset by an increase in refining
operating costs. Refined products revenues increased $18,381,000 or 12%. The
increase in refined products revenues resulted from a $2.73 per bbl or 12%
increase in average product sales prices. Refined product sales volumes were
flat to 1995 levels. Yields of gasoline and distillates were also relatively
unchanged from the same period in 1995.
Refining operating costs increased $11,566,000 or 8% over 1995 levels
primarily as a result of an increase in material costs offset by a decrease in
refinery operating expense. Material costs increased approximately 10% or
$1.90 per bbl in 1996 due to a general oil price increase. Additionally, the
sweet/sour spread declined 16% to average $2.55 per bbl in 1996, as a result
of the increased competition for Wyoming sour crude oil and the alternate sour
crudes. During the first six months of 1996, the Refinery increased its use
of sour crude by 3% which favorably impacted material costs. Refinery
operating expense decreased $.14 per bbl to $3.21 per bbl in 1996 as a result
of Frontier's recovery in the first quarter of 1996 of approximately $1.3
million of repair costs related to the 1995 gas pipeline explosion. The
repair costs approximating $1.3 million in 1995, and related recovery in 1996,
were both included in refinery operating expense. The strike by approximately
150 union employees which commenced May 8, 1996 and settled July 29, 1996 did
not adversely impact operating costs.
Oil and gas revenues decreased $5,700,000 or 40% in the first six months of
1996 due to the disposition in 1995 of oil and gas operations in the United
States (1995 - $5,038,000, 1996 - $nil), and a 7% decrease in Canadian oil and
gas revenues of $662,000 in 1996.
The decrease in Canadian oil and gas operating income for the six months
ended June 30, 1996 was due to a decrease in Canadian oil and gas revenues
offset by decreased Canadian operating costs versus 1995 and by the gain from
sale of its interest in a Canadian gas marketing company of $1,780,000
reflected in 1995. In 1996, Canadian oil revenue increased 49% over 1995
levels to $2,730,000 as a result of a 39% increase in sales volumes and a 7%
increase in average oil price. The average price increase was attributable to
an increase in the price of crude oil, together with an increase in the
weighting of oil versus liquids in 1996 as a result of commencement of
production from the Company's 1995 oil discoveries. In the first six months
of 1996, Canadian gas revenue decreased $1,559,000 or 21%, attributable to a
22% decrease in sales volume offset by a 2% improvement in gas price over
1995. The gas sales volume decline in 1996 was attributable to production
declines at various areas, operating difficulties encountered due to the
prolonged abnormally cold winter conditions in 1996, and a two week
unscheduled operating interruption encountered by a major third party gas
processor in June 1996.
Oil and gas operating costs decreased $3,060,000 or 56% in the first six
months of 1996 of which $2,603,000 was related to United States oil and gas
operations discontinued in 1995. In Canada, operating costs decreased
$457,000 or 16% in 1996 due to various cost reduction factors including
production curtailment or disposition of abnormally high operating cost areas,
implementation of cost reduction procedures, and inclusion in 1996 of certain
annual joint venture adjustments at areas operated by Wainoco.
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<PAGE>
Page 7
Selling and general expenses decreased $1,165,000 or 20% to $4,621,000 for
the six months ended June 30, 1996 primarily as a result of staff reductions
associated with disposition of United States oil and gas operations in late
1995. The six months ended June 30, 1996 also includes $235,000 of salary and
related expense of certain United States employees who were not retained
subsequent to March 31, 1996.
Depreciation, depletion and amortization decreased $2,718,000 or 24% in the
1996 six-month period as compared to the same period in 1995 of which
$2,231,000 related to United States oil and gas operations included in 1995.
In 1996, Canadian oil and gas DD&A decreased $820,000 or 16% as a result of an
11% decline in the average DD&A rate and lower oil and gas revenues in the
first six months of 1996 versus 1995. In Canada, the oil and gas DD&A rate as
a percentage of sales decreased from 54% in 1995 to 48% in 1996, primarily as
a result of oil reserves discovered throughout 1995 and the improved oil price
in 1996 versus 1995.
The interest expense decrease of $1,544,000 or 15% in 1996 was attributable
to the repayment of long term debt in 1995 utilizing the sale proceeds on
disposition of the United States oil and gas properties. Average long term
debt for the first six months decreased from $172 million in 1995 to $152
million in 1996.
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Page 8
RESULTS OF OPERATIONS
Three months ended June 30, 1996 compared with the same period in 1995
The Company had net income for the three months ended June 30, 1996 of
$1,737,000, or $.06 per share, compared to net income of $1,054,000, or $.04
per share, for the same period in 1995. Operating income increased $84,000 in
1996 to $6,165,000, attributable to an increase in refining operating income
of $3,914,000, offset by a decrease in Canadian oil and gas operating income
of $2,299,000 and a decrease in United States oil and gas operating income
from $1,724,000 due to the disposition of those operations.
In 1996, other income decreased $4,191,000 to $575,000. Other income in
1996 includes $110,000 associated with the disposition of United States oil
and gas operations due to the reduction of certain accruals. Other income for
the second quarter of 1995 included a gain of $1,780,000 related to the sale
of a Canadian gas marketing company, and the United States oil and gas
operations settlement of a breach of contract claim against a former gas
purchaser in amount of $2,206,000.
Refining operating income increased in 1996 versus 1995 due to an increase
in the refined product spread to $5.77 per bbl from $4.32 per bbl partially
offset by an increase in refining operating expense. Refined products
revenues increased $11,019,000 or 12%. The increase in refined products
revenues resulted from a $3.72 per bbl increase in average product sales
prices. The Refinery benefited from lower nationwide inventories of light
products which resulted in increased sales prices in the second quarter of
1996, especially distillates which were $6.95 per bbl over 1995. Refined
product sales volumes decreased 3% in 1996 from 1995 levels. Yields of
gasoline and distillates declined 8% and 9% respectively from 1995 levels in
spite of increased crude charges, as available intermediate inventories were
lower in 1996 than 1995.
Refining operating costs increased $6,792,000 or 8% over 1995 levels
primarily as a result of an increase in material costs and an increase in
refinery operating expense. Material costs increased approximately 12% or
$2.27 per bbl in 1996 due to a general increase in oil price. Additionally,
the sweet/sour spread declined 10% to average $2.58 per bbl in 1996, as a
result of the increased competition for Wyoming sour crude oil and the
alternate sour crudes. Refinery operating expense increased $.27 per bbl to
$3.26 per bbl in 1996 due to higher utility and energy costs. The strike by
approximately 150 union employees which commenced May 8, 1996 and settled July
29, 1996 did not adversely impact operating costs.
Oil and gas revenues decreased $2,987,000 or 45% in the second quarter of
1996 due to the disposition in 1995 of oil and gas operations in the United
States (1995 - $1,890,000, 1996 - $nil), and a 23% decrease in Canadian oil
and gas revenues of $1,097,000 in 1996.
The decrease in Canadian oil and gas operating income for the three months
ended June 30, 1996 is primarily due to a significant decline in gas revenue
in 1996, and by the gain from sale of its interest in a Canadian gas marketing
company of $1,780,000 reflected in 1995. In the second quarter 1996,
Canadian oil revenue increased 24% over 1995 levels to $1,229,000 as a result
of a 20% increase in sales volumes and a 4% increase in average oil price.
The average price increase was attributable to an increase in the price of
crude oil, together with an increase in the weighting of oil versus liquids in
1996 as a result of commencement of production from the Company's 1995 oil
discoveries. In the second quarter of 1996, Canadian gas revenue decreased
$1,337,000 or 36%, attributable to a 32% decrease in sales volume and a 6%
decrease in gas price from 1995. The gas sales volume decline in 1996 was
attributable to production declines at various areas and a two week
unscheduled operating interruption encountered by a major third party gas
processor in June 1996.
Oil and gas operating costs decreased $1,219,000 or 51% in the second
quarter of 1996 of which $1,051,000 was related to United States oil and gas
operations included in 1995. In Canada, operating costs decreased $168,000 or
12% in 1996 due to various cost reduction factors including production
curtailment or disposition of abnormally high operating cost areas, and
implementation of cost reduction procedures.
Selling and general expenses decreased $684,000 or 25% to $2,019,000 for the
three months ended June 30, 1996 primarily as a result of staff reductions
associated with disposition of United States oil and gas operations in late
1995.
Depreciation, depletion and amortization decreased $1,132,000 or 21% in the
1996 three-month period as compared to the same period in 1995 of which
$761,000 related to United States oil and gas operations included in 1995. In
1996, Canadian oil and gas DD&A decreased $546,000 or 23% as a result of lower
oil and gas revenues in the second quarter of 1996 versus 1995, while the DD&A
rate as a percentage of sales remained flat at 51% in 1996 and 1995.
The interest expense reduction of $665,000 or 13% in 1996 was attributable
to the repayment of long term debt in 1995 utilizing the sale proceeds on
disposition of the United States oil and gas properties. Average long term
debt for the second quarter decreased from $172 million in 1995 to $154
million in 1996.
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Page 9
OPERATING EARNINGS BY SEGMENT
The following (in thousands) presents the operating income (loss) by
operating segment, by country for the six months and three months ended June
30, 1996 and 1995. Operating income (loss) is income (loss) before net
interest expense and provision for income taxes and does not include
unallocated net corporate expenses of $1,343,000 and $1,246,000 in the six
months ended June 30, 1996 and 1995, respectively, and $431,000 and $624,000
in the three months ended June 30, 1996 and 1995, respectively. In 1995, the
Company completed disposition of the oil and gas assets located in the United
States, and accordingly the segmented information below reflects only the oil
and gas activity conducted in Canada.
<TABLE>
<CAPTION>
Oil and Gas
Refining Canada Total
--------- --------- ---------
<S> <C> <C> <C>
Six Months Ended June 30,
1996 - Operating margin $ 10,804 $ 6,677 $ 17,481
Selling and general expenses 2,089 1,213 3,302
Depreciation, depletion and amortization 4,452 4,190 8,642
--------- --------- ---------
Operating income $ 4,263 $ 1,274 $ 5,537
========= ========= =========
1995 - Operating margin $ 5,110 $ 8,831 $ 13,941
Selling and general expenses 2,344 1,136 3,480
Depreciation, depletion and amortization 4,143 5,010 9,153
--------- --------- ---------
Operating income (loss) $ (1,377) $ 2,685 $ 1,308
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Oil and Gas
Refining Canada Total
--------- --------- ---------
<S> <C> <C> <C>
Three Months Ended June 30,
1996 - Operating margin $ 9,619 $ 2,592 $ 12,211
Selling and general expenses 1,026 586 1,612
Depreciation, depletion and amortization 2,241 1,872 4,113
--------- --------- ---------
Operating income $ 6,352 $ 134 $ 6,486
========= ========= =========
1995 - Operating margin $ 5,658 $ 5,353 $ 11,011
Selling and general expenses 1,130 502 1,632
Depreciation, depletion and amortization 2,090 2,418 4,508
--------- --------- ---------
Operating income $ 2,438 $ 2,433 $ 4,871
========= ========= =========
</TABLE>
The 1996 segmented operating earnings disclosed above excludes other income of
$841,000 and $110,000 for the six and three month periods ended June 30, 1996
associated with the disposition of United States oil and gas operations, due
to the reduction of certain accruals. The 1995 segmented operating earnings
disclosed above exclude operating income of $1,540,000 and $1,834,000
attributable to United States oil and gas operations for the six and three
months ended June 30, 1995, respectively.
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Page 10
<TABLE>
<CAPTION>
REFINING OPERATING STATISTICAL INFORMATION
Six Months Ended Three Months Ended
June 30, June 30,
---------------- -----------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Raw material input (bpd)
Sweet crude 5,640 5,631 6,177 6,265
Sour crude 29,662 28,779 31,768 30,898
Other feed and blend stocks 4,882 5,047 4,351 5,239
-------- -------- -------- --------
Total 40,184 39,457 42,296 42,402
Manufactured product yields (bpd)
Gasoline 17,318 17,061 16,969 18,485
Distillates 13,369 13,513 14,169 15,573
Asphalt and other 7,844 7,430 9,501 6,754
-------- -------- -------- --------
Total 38,531 38,004 40,639 40,812
Total product sales (bpd)
Gasoline 20,129 20,462 20,317 21,534
Distillates 12,441 12,959 12,756 14,176
Asphalt and other 6,174 5,770 7,837 6,554
-------- -------- -------- --------
Total 38,744 39,191 40,910 42,264
Operating margin information (per sales bbl)
Average sales price $ 24.86 $ 22.13 $ 26.87 $ 23.15
Material costs (under FIFO inventory accounting) 20.20 18.30 21.10 18.83
-------- -------- -------- --------
Product spread 4.66 3.83 5.77 4.32
Operating expenses excluding depreciation 3.21 3.35 3.26 2.99
Depreciation .61 .57 .59 .53
-------- -------- -------- --------
Operating margin $ .84 $ (.09) $ 1.92 $ .80
Manufactured product margin
before depreciation (per bbl) $ 1.45 $ .49 $ 2.51 $ 1.33
Purchase product margin (per purchased product bbl) $ - $ (.23) $ - $ -
Sweet/sour spread (per bbl) $ 2.55 $ 3.04 $ 2.58 $ 2.86
Average sales price (per sales bbl)
Gasoline $ 27.47 $ 25.12 $ 29.89 $ 26.77
Distillates 27.47 22.62 30.19 23.24
Asphalts and other 11.13 10.38 13.66 11.03
</TABLE>
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Page 11
<TABLE>
<CAPTION>
OIL AND GAS EXPLORATION AND PRODUCTION STATISTICAL INFORMATION
Six Months Ended Three Months Ended
June 30, June 30,
---------------------- ----------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Oil and gas revenue (in thousands)
Net oil and condensate sales
Canada $ 2,730 $ 1,833 $ 1,229 $ 989
United States - 4,228 - 1,626
--------- --------- --------- ---------
2,730 6,061 1,229 2,615
--------- --------- --------- ---------
Net gas sales -
Canada 5,850 7,409 2,366 3,703
United States - 810 - 264
--------- --------- --------- ---------
5,850 8,219 2,366 3,967
--------- --------- --------- ---------
$ 8,580 $ 14,280 $ 3,595 $ 6,582
========= ========= ========= =========
Production
Net oil and condensate (bbls)
Canada 174,000 125,000 77,000 65,000
United States - 259,000 - 96,000
--------- --------- --------- ---------
174,000 384,000 77,000 161,000
========= ========= ========= =========
Net gas (mmcf)
Canada 6,456 8,316 2,917 4,312
United States - 496 - 150
--------- --------- --------- ---------
6,456 8,812 2,917 4,462
========= ========= ========= =========
Price
Average oil and condensate sales (per bbl)
before deduction for production taxes
Canada $ 15.71 $ 14.68 $ 15.88 $ 15.27
United States - 16.31 - 16.98
Weighted average 15.71 15.78 15.88 16.29
Average gas sales (per mcf) before
deduction for production taxes
Canada $ .91 $ .89 $ .81 $ .86
United States - 1.63 - 1.76
Weighted average .91 .93 .81 .89
C$/US$
Period end $ .7333 $ .7287 $ .7333 $ .7287
Average .7318 .7204 .7330 .7296
</TABLE>
- --------------------
<PAGE>
Page 12
The following presents Canadian production information which is equivalent
to reporting used by other Canadian oil and gas companies. Gross volumes
represent the Company's working interest plus associated freehold, provincial
and other royalties.
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
---------------------- ----------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Gross volume
Oil (bbls) 195,000 141,000 88,000 75,000
Gas (mmcf) 7,213 9,469 3,269 4,848
Royalty
ARTC oil (bbls) 8,000 7,000 4,000 3,000
ARTC gas (mmcf) 176 206 101 103
Other (mmcfe) (1,107) (1,497) (543) (717)
Net volume
Oil (bbls) 174,000 125,000 77,000 65,000
Gas (mmcf) 6,456 8,316 2,917 4,312
Gross revenue (in thousands)
Oil $ 3,089 $ 2,075 $ 1,405 $ 1,143
Gas 6,592 8,365 2,661 4,150
Royalty
Provincial and other (1,437) (1,505) (656) (754)
ARTC 336 307 185 153
Net revenue (in thousands)
Oil $ 2,730 $ 1,833 $ 1,229 $ 989
Gas 5,850 7,409 2,366 3,703
--------- --------- --------- ---------
$ 8,580 $ 9,242 $ 3,595 $ 4,692
========= ========= ========= =========
</TABLE>
- --------------------
<PAGE>
Page 13
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of 1996, $7,313,000 of cash flows were used in
operating activities primarily by the Refinery operations for an inventory
increase of $9,028,000. These cash flows were provided primarily by net bank
borrowings of $7,600,000 under the Frontier line of credit and the proceeds on
resale of $2,000,000 of 12% Senior Notes. During the first six months of 1995,
$1,390,000 of cash flows were provided by operating activities and $4,205,000
provided by investing activities primarily by the sale of oil and gas
properties. These cash flows together with an increase in borrowings under
the Frontier line of credit of $1,300,000 were used to repay reserve-based
bank borrowings of $9,000,000 in 1995.
At June 30, 1996, the Company had $13,112,000 available under its
C$18,000,000 oil and gas line of credit and $12,400,000 under the Frontier
line of credit. The Company had working capital of $4,404,000 at June 30,
1996 compared with $3,593,000 at June 30, 1995. The estimated five-year
maturities of long-term debt are $2,500,000 in 1997, $5,000,000 in 1998,
$2,300,000 in 2000 and $2,300,000 in 2001, assuming that the existing oil and
gas reserve-based credit facility is extended. As of June 30, 1996 , the
reserve-based credit facility is scheduled to convert to a two-year term loan
on December 31, 1997 with payments commencing on March 31, 1998. As of June
30, 1996 there is no outstanding debt on this reserve-based credit facility.
At June 30, 1996, the Company violated fixed charge coverage and tangible net
worth covenants under the reserve-based facility and has obtained bank
waivers. If any of the violations continue, the Company expects to be able to
obtain additional waivers or arrange alternate sources of financing.
Investing activities include proceeds from the sale of Canadian oil and
gas properties of $879,000 for the six months ended June 30, 1996, a decrease
from $15,585,000 in 1995 of which $12,908,000 was attributable to United
States properties and $2,677,000 was related to Canadian properties including
proceeds of $1,824,000 for the sale of its interest in a Canadian gas
marketing company. Additions to property and equipment in the first six
months decreased $3,655,000 from the first six months in 1995. In the first
six months of 1996, capital expenditures in Canada decreased approximately
$1.9 million to $5.1 million primarily as a result of a prolonged spring
breakup and wet weather conditions, expenditures at the Refinery decreased
approximately $1.2 million to $2.5 million, and expenditures related to United
States oil and gas operations decreased approximately $.5 million below 1995
levels. Capital expenditures of approximately $15 million are currently
budgeted for 1996, of which $6.1 million had been incurred as of June 30,
1996. The Company anticipates funding the remaining 1996 capital expenditures
with cash provided by operations, currently arranged lines of credit or other
sources if necessary.
- --------------------
<PAGE>
Page 14
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings -
None, which in the opinion of management would have a material impact
on the registrant.
ITEM 2. Changes in Securities -
There have been no changes in the constituent instruments defining
the rights of the holders of any class of registered securities
during the current quarter.
ITEM 3. Defaults Upon Senior Securities -
None.
ITEM 4. Submission of Matters to a Vote of Security Holders -
The annual meeting of the registrant was held May 16, 1996 with no
significant proposals brought to a vote of the shareholders.
ITEM 5. Other Information -
None.
ITEM 6. Exhibits -
10.01 - Executive Employment Agreement dated April 1, 1996 between
the Company and Joel M. Mann
27 - Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
WAINOCO OIL CORPORATION
By: /s/ Joel M. Mann
---------------------------
Joel M. Mann
Vice President - Controller
Date: August 7, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,556
<SECURITIES> 0
<RECEIVABLES> 27,446
<ALLOWANCES> 0
<INVENTORY> 28,764
<CURRENT-ASSETS> 58,297
<PP&E> 312,075
<DEPRECIATION> 131,132
<TOTAL-ASSETS> 244,114
<CURRENT-LIABILITIES> 53,893
<BONDS> 155,003
0
0
<COMMON> 57,172
<OTHER-SE> (28,369)
<TOTAL-LIABILITY-AND-EQUITY> 244,114
<SALES> 183,921
<TOTAL-REVENUES> 185,770
<CGS> 176,114
<TOTAL-COSTS> 176,114
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,527
<INCOME-PRETAX> (3,492)
<INCOME-TAX> 213
<INCOME-CONTINUING> (3,705)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,705)
<EPS-PRIMARY> (0.14)
<EPS-DILUTED> (0.14)
</TABLE>
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT executed as of the 1st day of April, 1996, by and
between Wainoco Oil Corporation, a Wyoming corporation (the "Company"), and
Joel M. Mann (the "Executive").
W I T N E S S E T H:
WHEREAS the Executive is a principal officer of the Company and an
integral part of its management;
WHEREAS, the Company wishes to assure both itself and the Executive of
continuity of management in the event of any actual or threatened change in
control of the Company;
WHEREAS, this Agreement is not intended to alter materially the
compensation and benefits that the Executive could reasonably expect in the
absence of a change in control of the Company and, accordingly, this
Agreement will be operative only upon a change in control of the Company,
as that term is hereafter defined.
NOW, THEREFORE, in consideration of the premises and covenants herein
contained and other good, valuable and binding consideration, the receipt
and sufficiency of which are hereby acknowledged, it is hereby agreed by
and between the parties as follows:
1. Operation of Agreement.
1.01 This Agreement shall be binding immediately upon its
execution by the parties hereto, but, anything in this Agreement to the
contrary notwithstanding, neither the Agreement nor any provision thereof
shall be operative unless and until there has been a Change in Control of
the Company as defined in paragraph 1.02 below. Upon the date of such a
Change in Control of the Company (the "Effective Date"), this Agreement and
all provisions thereof shall become operative immediately, without the
necessity of any further action on the part of either party hereto.
1.02 For the purpose of this Agreement, the term "Change in
Control of the Company" shall mean a change in control of a nature that
would be required to be disclosed in a proxy statement, governed by the
rules of the Securities and Exchange Commission as in effect on the date of
this Agreement; provided that, without limitation, such a change in control
shall be deemed to have occurred if and when (a) any "person" (as such term
is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of
1934) is or becomes a beneficial owner, directly or indirectly, of
securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities, (b) during any period
of 24 consecutive months, commencing before or after the date of this
Agreement, individuals who at the beginning of such 24 month period were
directors of the Company for whom the Executive shall have voted cease for
any reason to constitute at least a majority of the Board of Directors of
the Company, or (c) during any period after the date of this Agreement, any
event of the nature or type described in Section 7.03(b)(v).
1.03 This Agreement shall terminate forthwith, and without
more, in the event that Executive ceases to be an executive officer of the
Company at any time prior to the Effective Date whether by reason of his
death, Disability, discharge, resignation or otherwise; except that either
party wishing to do so terminate such employment, other than by reason of
death, Disability or discharge for Cause, hereby agrees to give the other
party at least 60 days' prior written notice. Notwithstanding the
foregoing, following the commencement of any discussions with any third
party that ultimately result in the occurrence of a Change of Control, the
Company shall not at the instance or upon the suggestion of such third
party terminate the employment or reduce the compensation of Executive.
This Agreement shall terminate three years from the date hereof; provided,
however, that this Agreement shall be continued in full force and effect
for an additional period of three years following such term, unless the
Company elects to terminate this Agreement at the end of such term by at
least 30 days' prior written notice to Executive; and provided, further,
following the commencement of any discussions with any third party that
ultimately result in the occurrence of a Change of Control, the Company
shall not make such election to terminate at the instance or upon the
suggestion of such third party.
1.04 Except as provided in paragraph 1.03 above, nothing
expressed or implied herein shall create any right or duty (on the part of
the Company or Executive) to have Executive remain in the employment of the
Company at any time prior to the Effective Date, each reserving all rights
to terminate the employment relationship at any time (subject to the notice
requirement contained in paragraph 1.03 above) prior to the Effective Date
with or without Cause.
2. Employment; Period of Employment.
2.01 The Company hereby agrees to continue the Executive in its
employ, and the Executive hereby agrees to remain in the employ of the
Company, or subject to the terms of this Agreement, such other corporate
profit center as shall then be the principal successor to the business,
assets and properties of the Company, for the period set forth in paragraph
2.02 below (the "Period of Employment") in the position and with the duties
and responsibilities set forth in Section 3 below, and upon the other terms
and conditions hereinafter stated.
2.02 The Period of Employment, subject only to the provisions
of Section 6 below relating to death or Disability, shall continue for a
period of three years from the Effective Date.
3. Position, Duties, Responsibilities.
3.01 It is contemplated that at all times during the Period of
Employment the Executive shall continue to serve as a principal officer of
the Company with the office and title of Vice President - Controller of the
Company and continue to have duties and responsibilities commensurate with
those duties and responsibilities imposed on the Executive immediately
prior to the Effective Date.
3.02 During the Period of Employment the Executive shall also
serve and continue to serve, if and when elected and reelected, as an
officer or director, or both, of any subsidiary, division or affiliate of
the Company.
3.03 Throughout the Period of Employment the Executive shall
devote his full time and undivided attention during normal business hours
to the business and affairs of the Company, except for reasonable vacations
and except for illness or incapacity, but nothing in this Agreement shall
preclude the Executive from devoting reasonable periods required for
serving as a director or member of a committee of any organization
involving no conflict of interest with the interests of the Company, from
engaging in charitable and community activities, and from managing his
personal investments, provided that such activities do not materially
interfere with the regular performance of his duties and responsibilities
under this Agreement.
3.04 The office of the Executive shall be located at the
principal executive offices of the Company. The Executive shall not be
required to change the current situs of his employment or residence. The
Executive also shall not be required to be absent therefrom on travel
status or otherwise more than a total of 60 working days in any calendar
year nor more than 20 consecutive days at any one time.
4. Compensation, Compensation Plans, Perquisites.
4.01(a) For all services rendered by the Executive in any
capacity during the Period of Employment, including, without limitation,
services as an executive, officer, director or member of any committee of
the Company or of any subsidiary, division or affiliate thereof, the
Executive shall be paid as compensation:
(i) A base salary at no less than the rate in effect
immediately prior to the Effective Date, with increases (if any) as shall
be made from time to time in accordance with the Employer's regular salary
administration practices;
(ii) An annual performance bonus in an amount no less than
the amount of 30% of the base salary determined pursuant to subparagraph
4.01(a)(i).
(b) Any increase in salary pursuant to clause (i) of
subparagraph 4.01(a) or in bonus or other compensation shall in no way
diminish any other obligation of the Company under this Agreement.
4.02 During the Period of Employment the Executive shall be and
continue to be a full participant in the Company's applicable stock option
plans and any other compensation plans in which the Executive participates
immediately prior to the Effective Date, or equivalent successor plans that
may be adopted by the Company, with at least the same reward opportunities
to Executive that have heretofore been provided. Nothing in this Agreement
shall preclude improvement of reward opportunities in such plans or other
plans in accordance with the present practice of the Company.
4.03 During the Period of Employment, the Executive shall be
entitled to perquisites, including, without limitation, an office,
secretarial and clerical staff, and to fringe benefits, including, without
limitation, the payment or reimbursement of club dues, in each case at
least equal to those attached to his office immediately prior to the
Effective Time, as well as to reimbursement, upon proper accounting, of
reasonable expenses and disbursements incurred by him in the course of his
duties.
5. Employee Benefit Plans.
5.01 The compensation, together with other matters provided for
in Section 4 above, is in addition to the benefits provided for in this
Section 5.
5.02 The Executive, his dependents and beneficiaries shall be
entitled to all payments and benefits and service credit, for benefits
during the Period of Employment to which officers of the Company, their
dependents and beneficiaries are entitled as a result of the employment of
such officers under the terms of employee plans and practices of the
Company in effect immediately prior to the Effective Time, including,
without limitation, the Company's retirement program (consisting of the
Wainoco Retirement Savings Plan, the Wainoco Pension Plan, and the Wainoco
Deferred Compensation Plan), the Company's stock purchase and savings,
thrift and investment plans, if any, the Wainoco Oil Corporation Executive
Life Insurance Plan, its group life insurance plan, its accidental death
and dismemberment insurance, its business travel insurance, its long term
disability, medical, dental and health and welfare plans and other present
or successor plans and practices of the Company, its subsidiaries and
divisions, for which officers, their dependents and beneficiaries are
eligible, and to all payments or other benefits under any such plan or
practice after the Period of Employment as a result of participation in
such plan or practice during the Period of Employment.
5.03 Nothing in this Agreement shall preclude the Company from
amending or terminating any employee benefit plan or practice but, it being
the intent of the parties that the Executive shall continue to be entitled
during the period of Employment to perquisites as set forth in paragraph
4.03 above and to benefits and service credit for benefits under paragraph
5.02 above at least equal to those attached to his position immediately
prior to the Effective Date, nothing in this Agreement shall operate as, or
be construed to reduce or authorize reduction without the Executive's
written consent in the level of such perquisites, benefits or service
credit for benefits. In the event of any such reduction by amendment or
termination of any plan or practice or otherwise, the Executive, his
dependents and beneficiaries shall continue to be entitled to perquisites,
benefits and service credit for benefits at least equal to the perquisites
and to benefits and service credit for benefits under such plans or
practices that he or his dependents and beneficiaries would have received
if such reduction had not taken place.
6. Effect of Death or Disability.
6.01 In the event of the death of the Executive during the
Period of Employment, the legal representative of the Executive shall be
entitled to the compensation provided for in paragraph 4.01 during the
balance of the Period of Employment. The Period of Employment shall be
deemed to have ended as of the close of business on the last day of the
twelfth month following the month in which death shall have occurred but
without prejudice to any other payments due in respect of the Executive's
death hereunder or pursuant to any other agreements or arrangements with
the Company.
6.02 The term "Disability," as used in this Agreement, shall
mean an illness or accident which prevents the Executive from performing
his duties under this Agreement for a period of six consecutive months. In
the event of the Disability of the Executive during the Period of
Employment, the Executive shall be entitled to the full compensation
provided for in this Agreement for the period of such Disability (i.e.,
commencing on the date on which the Disability occurred) but not in excess
of six months. The Period of Employment shall be deemed to have ended as
of the close of business on the last day of such six months' period but
without prejudice to any payments due to the Executive in respect of
disability or any short term illness or accident which prevents the
Executive from performing his duties for a period of less than six months.
7. Termination.
7.01 In the event of a Termination, as defined in paragraph
7.03 below, during the Period of Employment, the provisions of this
Section 7 shall apply.
7.02 In the event of a Termination the Company shall, as
liquidated damages or severance pay, or both, pay to the Executive and
provide him, his dependents, beneficiaries and estate, with the following:
(a) The Company shall continue to pay the Executive the
base salary compensation provided in paragraph 4.01(a)(i) above at the rate
in effect at the time of Termination (which in accordance with the terms of
this Agreement shall be no less than the rate of base salary in effect
immediately prior to the Effective Date). Such base salary shall be paid no
less often than monthly beginning at the end of the month in which
Termination occurred and continuing during the remainder of the Period of
Employment.
(b) The Company shall also continue to pay the Executive
the annual performance bonus provided in paragraph 4.01(a)(ii) above. Such
annual performance bonus compensation shall be paid on an annual basis, so
that a payment will be made in each of the three years of the Employment
Period.
(c) During the Employment Period the Executive, his
dependents, beneficiaries and estate, shall continue to be entitled to all
benefits and service credit for benefits under employee benefit plans of
the Company as if still employed during such period under this Agreement
and, if and to the extent that such benefits or service credit for benefits
shall not be payable or provided under any such plans to the Executive, his
dependents, beneficiaries and estate, by reason of his no longer being an
employee of the Company as the result of Termination, the Company shall
itself pay or provide for payment of such benefits and the equivalent of
service credit for benefits to the Executive, his dependents, beneficiaries
and estate.
(d) The entire Period of Employment shall be considered
service with the Company for the purpose (i) of continued credits under the
Company's retirement programs, as each plan or program was in effect
immediately prior to Termination and (ii) of all other benefit plans of the
Company as in effect immediately prior to Termination.
(e) In the event that the Executive shall at the time of
Termination hold an outstanding and unexercised (whether or not exercisable
at the time) option or options theretofore granted by the Company, the
Company shall, in addition to the amounts provided for above, pay to the
Executive in a lump sum an amount equal to the excess above the option
price under each such option of the Fair Market Value at the time of
Termination of the shares subject to each such option. Solely for the
purpose of this subparagraph (e), Fair Market Value at the time of
Termination shall be deemed to mean the higher of (i) the average of the
reported closing prices of the Common Shares of the Company, as reported on
the New York Stock Exchange - Composite Transactions, on the last trading
day prior to the Termination and on the last trading day of each of the two
preceding thirty-day periods, and (ii) in the event that a Change in
Control, as defined in paragraph 1.02 above, prior to Termination shall
have taken place as the result of a tender offer and such Change in Control
was consummated within twelve months of Termination, the price paid for a
majority of the Common Shares of the Company in the course of such tender
offer.
(f) At the Company's option, the Company may pay
Executive the total of all amounts payable to Executive for the balance of
the Term of Employment pursuant to subparagraphs (a) and (b) of this
Section 7.02 in a lump sum payment. Executive may also elect, at any time
during the remaining Term of Employment, to receive all amounts payable to
him for the balance of the Term of Employment pursuant to subparagraphs (a)
and (b) of this Section 7.02 in a lump sum payment by providing written
notice of such election to the Company. The Company agrees to make a lump
sum payment of the total of such amounts within 30 days of Executive's
notice of election to receive lump sum payment. It is acknowledged and
agreed that no lump sum payment will shorten the Term of Employment of
Executive, or modify or obviate any obligations of the Company other than
the payments otherwise due during the Term of Employment pursuant to
subparagraphs (a) and (b) above.
7.03 The word "Termination," for the purpose of this Section 7
and any other provisions of this Agreement, shall mean:
(a) Termination by the Company of the employment of the
Executive by the Company and its subsidiaries for any reason other than for
Cause as defined in paragraph 7.04 below or for Disability as defined in
subparagraph 6.02 above; or
(b) Termination by the Executive of his employment by
the Company and its subsidiaries upon the occurrence of any of the
following events:
(i) Failure to elect or reelect the Executive to,
or removal of the Executive from, the office set forth in paragraph 3.01
above.
(ii) A significant change in the nature or scope of
the authorities, powers, functions or duties of Executive as contemplated
by paragraph 3.01 above, or a reduction in compensation, which is not
remedied within 30 days after receipt by the Company of written notice from
the Executive.
(iii) A determination by the Executive made in good
faith that as a result of a Change in Control of the Company, as defined in
paragraph 1.02 above, and a change in circumstances thereafter and since
the date of this Agreement significantly affecting his position, he is
unable to carry out the authorities, powers, functions or duties attached
to his position and contemplated by Section 3 of this Agreement and the
situation is not remedied within 30 days after receipt by the Company of
written notice from the Executive of such determination.
(iv) A breach by the Company of any provision of
this Agreement not embraced within the foregoing clauses (i), (ii) and
(iii) of this subparagraph 7.03(b) which is not remedied within 30 days
after receipt by the Company of written notice from the Executive.
(v) The liquidation, dissolution, consolidation or
merger of the Company or transfer of all or substantially all of its assets
unless a successor or successors (by merger, consolidation or otherwise) to
which all or a significant portion of its assets have been transferred
shall have assumed all duties and obligations of the Company under this
Agreement.
An election by the Executive to terminate his employment given under
the provisions of this paragraph 7.03 shall not be deemed a voluntary
termination of employment by the Executive for the purpose of this
Agreement or any plan or practice of the Company.
7.04 For the purpose of any provision of this Agreement, the
termination of the Executive's employment shall be deemed to have been for
"Cause" only if:
(a) termination of his employment shall have been the
result of an act or acts of dishonesty on the part of the Executive
constituting a felony and resulting or intended to result directly or
indirectly in gain or personal enrichment at the expense of the Company, or
(b) there has been a breach by the Executive during the
Period of Employment of the provisions of paragraph 3.03 above, relating to
the time to be devoted to the affairs of the Company, or of Section 8,
relating to confidential information, and such breach results in
demonstrably material injury to the Company, and with respect to any
alleged breach of paragraph 3.03 hereof, the Executive shall have either
failed to remedy such alleged breach within thirty days from his receipt of
written notice by the Secretary of the Company pursuant to resolution duly
adopted by the Board of Directors of the Company after notice to the
Executive and an opportunity to be heard demanding that he remedy such
alleged breach, or shall have failed to take all reasonable steps to that
end during such thirty-day period and thereafter; provided that there shall
have been delivered to the Executive a certified copy of a resolution of
the Board of Directors of the Company adopted by the affirmative vote of
not less than three-fourths of the entire membership of the Board of
Directors called and held for that purpose and at which the Executive was
given an opportunity to be heard, finding that the Executive was guilty of
conduct set forth in subparagraphs (a) or (b) above, specifying the
particulars thereof in detail.
Anything in this paragraph 7.04 or elsewhere in this Agreement to the
contrary notwithstanding, the employment of the Executive shall in no event
be considered to have been terminated by the Company for Cause if
termination of his employment took place (a) as the result of bad judgment
or negligence on the part of the Executive, or (b) as the result of an act
or omission without intent of gaining therefrom directly or indirectly a
profit to which the Executive was not legally entitled, or (c) because of
an act or omission believed by the Executive in good faith to have been in
or not opposed to the interest of the Company, or (d) for any act or
omission in respect of which a determination could properly be made that
the Executive met the applicable standard of conduct prescribed for
indemnification or reimbursement or payment of expenses under the Code of
Regulations of the Company or the laws of the State of Wyoming or the
directors' and officers' liability insurance of the Company, in each case
as in effect at the time of such act or omission, or (e) as the result of
an act or omission which occurred more than twelve calendar months prior to
the Executive's having been given notice of the termination of his
employment for such act or omission unless the commission of such act or
such omission could not at the time of such commission or omission have
been known to a member of the Board of Directors of the Company (other than
the Executive, if he is then a member of the Board of Directors), in which
case more than twelve calendar months from the date that the commission of
such act or such omission was or could reasonably have been so known, or
(f) as the result of a continuing course of action which commenced and was
or could reasonably have been known to a member of the Board of Directors
of the Company (other than the Executive) more than twelve calendar months
prior to notice having been given to the Executive of the termination of
his employment.
7.05 In the event that the Executive's employment shall be
terminated by the Company during the Period of Employment and such
termination is alleged to be for Cause, or the Executive's right to
terminate his employment under paragraph 7.03(b) above shall be questioned
by the Company or for any other reason, the Executive shall have the right,
in addition to all other rights and remedies provided by law, at his
election either to seek arbitration in Harris County, Texas under the rules
of the American Arbitration Association by serving a notice to arbitrate
upon the Company or to institute a judicial proceeding, in either case
within ninety days after having received notice of termination of his
employment or notice in any form that the termination of his employment
under paragraph 7.03(b) is subject to question or that the Company is
withholding or proposes to withhold payments or provision of benefits or
within such longer period as may reasonably be necessary for the Executive
to take action in the event that his illness or incapacity should preclude
his taking such action within such ninety-day period.
8. Confidential Information
8.01 The Executive agrees not to disclose, either while in the
Company's employ or at any time thereafter, to any person not employed by
the Company, or not engaged to render services to the Company, any
confidential information obtained by him while in the employ of the
Company, including, without limitation, any of the Company's inventions,
processes, methods of distribution or customers or trade secrets; provided,
however, that this provision shall not preclude the Executive from use or
disclosure of information known generally to the public or of information
not considered confidential by persons engaged in the business conducted by
the Company or from disclosure required by law or Court order.
8.02 The Executive also agrees that upon leaving the Company's
employ he will not take with him, without the prior written consent of an
officer authorized to act in the matter by the Board of Directors of the
Company, any drawing, blueprint, specification or other document of the
Company, its subsidiaries, affiliates and divisions, which is of a
confidential nature relating to the Company, its subsidiaries, affiliates
and divisions, or without limitation, relating to its or their methods of
distribution, or any description of any formulae or secret processes.
9. Notices
All notices, requests, demands and other communications provided
for by this Agreement shall be deemed to have been duly given if and when
mailed in the continental United States by registered or certified mail,
return receipt requested, postage prepaid, or personally delivered or sent
by telex or other telegraphic means to the party entitled thereto at the
address stated below or to such changed address as the addressee may have
given by a similar notice:
To the Company: Wainoco Oil Corporation Canada
350 7th Avenue, SW #1700
Calgary, Alberta
Canada T2P 3N9
Attention: Chairman, Compensation Committee
To the Executive: Joel M. Mann
440 Willowpark Drive S.E.
Calgary, Alberta
Canada T2J 0L2
10. General Provisions
10.01 There shall be no right of set-off or counterclaim in
respect of any claim, debt or obligation, against any payments to the
Executive, his dependents, beneficiaries or estate provided for in this
Agreement.
10.02 The Company and the Executive recognize that each party
will have no adequate remedy at law for breach by the other of any of the
agreements contained herein and, in the event of any such breach, the
Company and the Executive hereby agree and consent that the other shall be
entitled to a decree of specific performance, mandamus or other appropriate
remedy to enforce performance of such agreements.
10.03 No right or interest to or in any payments shall be
assignable by the Executive; provided, however, that this provision shall
not preclude him from designating one or more beneficiaries to receive any
amount that may be payable after his death and shall not preclude the legal
representative of his estate from assigning any right hereunder to the
person or persons entitled thereto under his will or, in the case of
intestacy, to the person or persons entitled thereto under the laws of
intestacy applicable to his estate. The term "beneficiaries" as used in
this Agreement shall mean a beneficiary or beneficiaries so designated to
receive any such amount or, if no beneficiary has been so designated, the
legal representative of the Executive's estate.
10.04 No right, benefit or interest hereunder, shall be subject
to anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation, or set-off in respect of any claim, debt or obligation, or
to execution, attachment, levy or similar process, or assignment by
operation of law. Any attempt, voluntary or involuntary, to effect any
action specified in the immediately preceding sentence shall, to the full
extent permitted by law, be null, void and of no effect.
10.05 In the event of the Executive's death or a judicial
determination of his incompetence, reference in this Agreement to the
Executive shall be deemed, where appropriate, to refer to his legal
representative or, where appropriate, to his beneficiary or beneficiaries.
10.06 The titles to sections in this Agreement are intended
solely for convenience and no provision of this Agreement is to be con-
strued by reference to the title of any section.
10.07 No provision of this Agreement may be amended, modified
or waived unless such amendment, modification or waiver shall be authorized
by the Board of Directors of the Company or any authorized committee of the
Board of Directors and shall be agreed to in writing, signed by the
Executive and by an officer of the Company thereunto duly authorized.
10.08 Except as otherwise specifically provided in this
Agreement, no waiver by either party hereto of any breach by the other
party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of a subsequent
breach of such condition or provision or a waiver of a similar or
dissimilar provision or condition at the same or at any prior or subsequent
time.
10.09 In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any
reason, the remaining provisions and portions of this Agreement shall be
unaffected thereby and shall remain in full force and effect to the fullest
extent permitted by law.
10.10 Except as otherwise provided herein, this Agreement shall
be binding upon and inure to the benefit of the Company and any successor
of the Company, including, without limitation, any corporation or
corporations acquiring directly or indirectly all or substantially all of
the assets of the Company whether by merger, consolidation, sale or
otherwise (and such successor shall thereafter be deemed "the Company" for
the purposes of this Agreement), but shall not otherwise be assignable by
the Company.
10.11 This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas (other than the choice of
law principles thereof).
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
WAINOCO OIL CORPORATION
By: /s/ J. R. Gibbs
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ATTEST:
/s/ Julie H. Edwards
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Secretary
/s/ Joel M. Mann
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Joel M. Mann
